National Skills Authority & Sector Education and Training Authorities: overview; SETA financial performance 2008/09; National Skills Fund: efficiency challenges

Meeting report

The Chairperson welcomed the Director General (DG) of the Department of Higher Education and Training (DHET) and her delegation. Recent speeches had emphasised the critical issue that was education. The DHET had a role to play in skilling the nation. A year of action was to be the theme of the year. There was massive unemployment and a mismatch of skills. It was very difficult for learners to enter university.

Ms Mary Metcalfe (DG, DHET) said that she was the only representative from the Department. The gentleman accompanying her was an advisor to the Minister, Mr Gwebs Qonole.

The Chairperson was not comfortable to proceed under these circumstances. A substantial amount of information would be downloaded and engagement was needed. The Committee needed to speak with people responsible for actual operations and the Sector Educational and Training Authorities (SETAs). This meeting had been set for a thorough engagement with SETAs.

Mr G Boinamo (DA) echoed the concerns of the Chairperson.

Mr W James (DA) had faith in the DG being able to answer all the questions which Members might pose.

The Chairperson sit it was not a question of faith. Detailed answers were needed. He had unquestioned faith in the DG.

Ms F Mushwana (ANC) said that the meeting should proceed until problems were encountered. Time frames were needed for answers to any questions which Ms Metcalfe could not provide and DHET could perhaps provide written answers.

Ms M Kubayi (ANC) echoed the sentiments of the Chairperson. It was common practice for Department leaders to bring other officials.

The Chairperson asked the DG to continue. The Committee had seen much of this presentation already.

Presentation by Department of Higher Education
Ms Metcalfe fully anticipated that she could answer any questions. This was a new presentation.  She had acted as Chairperson of the National Skills Authority (NSA) since 1 November 2009. A strategic planning session had been held. This had been well attended. Membership of the NSA comprised five members from various constituencies in the country, which were selected by NEDLAC. Five Government Departments were represented, and there were five persons to represent the skills providers. The Minister could make additional appointments.

The DG said that one of the functions of the NSA was to advise the Minister. A stakeholder structure was needed which would be subject to Parliamentary review. There was some confusion amongst the public about the roles of Government and the NSA. The DHET played an executive role while the NSA played an advisory role. The function of the NSA was less to conduct operations and more to advise the Minister on investigations being conducted by DHET. The NSA had not had the capacity to advise the Minister previously but this was now being addressed.

Ms Metcalfe said that a strategic plan had been drawn up in December 2009. The NSA had to be strengthened. There had to be an alignment between the Human Resources Development Strategy (HRDS) and the National Skills Development Strategy (HSDS).

The DG said that a new Chairperson for the NSA would be announced the following day. The organisation should have its own executive officer. This appointment would be made once the job description was completed.

Ms Metcalfe said that the SETAs had a legal function to develop sector skills plans. This had not been done equally over the various sectors. Learning programmes would be established and skills plans had to be approved. The Department wished to promote learnership programmes, specifically those for the training of artisans. There was a clear link between the workplace and learning plans. The SETA system had been established during 2005. Some of them had been extended and some had been amalgamated. The NSDS 2 would be effective until the end of the new financial year. There were currently 23 SETAs. These were aligned to the standard industrial classification codes. Quality was a concern. Service level agreements were in place.

The DG proposed that the Committee should engage with those sectors that fell within the domain of other Ministerial portfolios. Meetings had been held which had reached agreement that there had to be an alignment to Government priorities. At this stage there were still uneven qualifications.

Ms Metcalfe turned to the financial performance. Generally the SETAs had performed well so she said that she would only concentrate on the under-performing ones. The Minister could intervene if they were not complying with approved policies. Most had met the criteria but some were under performing. They had all tabled their annual reports for 2008/09. Some had requested roll-overs of unspent funds but National Treasury (NT) had concerns in this regard. Amendments to legislation might be needed.

The DG focussed on four SETAs. The Energy SETA (ESETA) had submitted its Annual Report (AR) late. The Auditor-General had issued a disclaimer as he could not determine if this SETA was compliant or not.

Ms Metcalfe said that the Public Service SETA (PSETA) had governance problems. The Minister had launched an investigation in terms of Section 14 A of the Act. The PSETA had also presented its Annual Report late and had received a disclaimer from the Auditor-General. An action programme had been requested. This SETA had changed its Chief Executive Officer (CEO) twice in recent months.

The DG continued that the Construction Educational and Training Authority (CETA) had accounting difficulties. Some of its expenses had been labelled unauthorised and fruitless by the Auditor-General. A new governing board had been installed in March 2009. There was a current investigation and the Minister would be advised.

Ms Metrical told the Committee that the SETA for the Media, Advertising, Publishing, Printing and Packaging (MAPPP) was the fourth under-performing body. Its Chairperson had been suspended and there had been two investigations into their affairs. Their finances had led to a qualified Auditor-General report. They had exceeded their budget.

The DG explained that in terms of Section 9 of the Act the Minister could amalgamate SETAs as an interim measure. Section 14 gave him the authority to withhold funding where appropriate. Section 15 provided for the Minister to appoint an administrator. This action could have serious consequences. It would be applied in cases where there had been years of under performance. She would recommend at the meeting the following day that the Minister should take action.

Ms Metcalfe said that efficiency was a challenge. The NSF had mandated the development of the NSDS. The first version had been published in 2001 and NSDS 2 in 2005. The Skills Development Act set key objectives for finances and administration, the NSA and compliance with the Public Funds Management Act (PFMA). The NSF funded projects identified in the NSDS or in legislation. The NSF had to fund its own activities. It was only allowed to spend 2% of its funds on administration. The DG might determine a higher proportion of administrative spending. The DHET was preparing regulations urgently. The NSF should not be funded by the fiscus.

Ms Metcalfe said that the DG was the Accounting Officer. An Acting Chief Financial Officer (CFO) was monitoring the finance of the Fund. From 2011 the DHET would act as Accounting Officer. An Executive Officer would be appointed. This function lay currently with a Chief Director of DHET. PFMA requirements were being met. There was a challenge in aligning the activities of the SETAs with the priorities of the DHET. Finances raised through the levy system would be used to achieve this alignment.

The DG had concerns with the procedures and mechanisms of the fund. Functions had been transferred from the Department of Labour (DoL). A stronger integrated technology (IT) base was needed. While there was a national macro body, representation was needed at provincial level. Better alignment was needed to the priorities of the DHET. The NSF would address institutional limitations. A CEO had to be appointed. Capacity had to be increased. An improved modelling system was needed. The Department would deal with the question of under spending.

Discussion
The Chairperson thanked the DG for the thorough presentation. It was clear that certain areas were inter-related.

Ms Mushwana asked how the problem of non-compliance was being dealt with. She asked if requirements were being identified in the workplace. She asked if there was a commitment to developing permanent jobs.

Ms Metcalfe replied that the legislation was clear. The powers of the Minister were spelt out. Each SETA should have its own CEO and accounting officer as well as its own Board. The powers of the board might need some work as they had limited powers at present. The Committee should look at this. In terms of financial responsibilities the legislation was also clear. A certain percentage of funds could be used for administration and other tasks. This was determined by the PFMA. In cases of non-compliance the Minister would send written instructions detailing what was wrong and what steps should be taken to correct the situation. The Minister could withhold funds and take over the administration.

Mr Boinamo asked how people with disabilities would benefit. There was a feeling that the SETAs were not producing market-related jobs.  He asked if there were any plans to integrate the SETAs into the related industries.

Ms Metcalfe replied that there was a link between SETAs and job opportunities. Various institutions were conducting the training. The SETAs themselves could not provide job opportunities but could only create the climate for this. NSDS 2 specified targets for persons with disabilities. Each SETA should report on this as well as the NSF.

Ms N Vukuza (COPE) noted that the DG had alluded to a year of action. She would like to see the total SETA landscape. They were at the border gates now, and this was the reason for the extra year being given. There were benefits to be had by placing the SETAs under the DHET. She asked why they should continue to exist, and what the original intention was. She asked if the system could be regarded as a pass or a failure. Internal control was the key. She asked what had happened to those officials guilty of misconduct.

Ms Metcalfe replied that some wonderful work was being undertaken to make the year of action a success. The concept of the SETA was that of being an administrative authority and structure. The aim was to bring various bodies into a single structure. The SETA could determine what skills were needed. Regarding the suspension of officials from the NSF, she said that the DG of the DoL had not considered himself the accounting officer. There had been serious consequences.

Mr D Radebe (ANC) asked who the accounting officers were. There was cooperation after previous experiences. He asked when the CEO of the NSF would be appointed. If this was to be the year of action then results were needed.

Ms Kubayi asked why there was no Chairperson for the NSA. She noted that the DG had served in this position in an acting capacity. She asked about the mandates for the SETAs. They needed to deal with the industries to which they were linked. She asked if there was any tool to measure the workplace skills programmes (WSPs). She asked how regularly checks were carried out. Money must be used to address the actual needs. The Tourism SETA was another problem as they had already gone through six CEOs. There were also issues of non-compliance with the Health and Welfare SETA. The Committee also needed to see how the SETAs were responding to their mandates, not just their financial compliance. She asked if the NSF mandate took the change of model into account. She thought that the operational function should be increased to the level of a Deputy DG. It was hard to understand why they needed a CEO rather than an internal appointment. She asked if employers and trainers were getting the necessary support.

Ms Metcalfe replied that there had been much input from WSPs, but not enough. There must be a link to the HRDS and their should be engagement with each SETA. There was a perception of general under performance, but the waters were being muddied. Many SETAs were in fact performing excellently. She undertook to send an analysis of the performance of each SETA. Many were exemplary. In the case of the Health and Welfare SETA, a new CEO had been appointed. This had led to a huge improvement in performance. The Auditor-General still had reservations over their financial performance. Mr Feroze Patel had done good work as an acting Executive Officer. The last permanent Chairperson of the NSA was Dr Makghele. Her appointment as acting Chairperson was an attempt to bring the NSA closer to the DHET. A new appointment would be announced very shortly. This was the best thing to do.

The DG said that the WSP was not an advanced mechanism to determine skills. A review was needed of employer and labour perceptions, but the DHET did not have the manpower to do this. Without this being addressed, money would continue to be pumped into areas where those skills were not needed. Every sector must promote skills development although the level might differ.

Mr S Makhubele (ANC) asked if the skill development unit was in place. He asked when the process of realignment would take place. Some SETAs had experienced financial problems for three years. He asked if the audit function was in-house or outsourced. He asked if the suspensions of SETA members were related to financial statements. He asked if the service level agreements were renewed annually. There was a general outcry about ineffective sector boards. The boards were not taking charge. He said that some people were repeating the same training for years. Skills development should be driven by the QCTO.

Ms Metcalfe replied that service level agreements were a specific responsibility of the Directors General of the DoL and DHET. Her Department had sought clarity from the State Legal Advisor. As from 1 November 2009 responsibility for the SETAs had passed to the DHET. Vote 15 still fell under the Minister of Labour, and staff responsible to the Minister of Higher Education and Training were still located within the DoL. She would provide a copy of the documentation to the Committee. The law made provision for the appointment of a CEO for the NSF. The DG was the Accounting Officer and had to appoint an Executive Officer. Before, the DoL had managed the executive functions for the NSA and NSF. A person within the Department fulfilled this role. This had blurred responsibility and capacity. Some separation was needed. The NSF was way behind where it should be and was hugely inefficient. The system of dual accounting was challenging.

The DG said that the skills development planning unit had been absorbed into a more general planning unit. This had a significant consequence on the NSA. She wanted to see this resuscitated. There should be alignment between the Department's research capacity and skills development programme. The HRDS should inform industrial, rural and long-term policy. A short-term strategy over a five year period should direct the SETAs on how to use money to achieve their plans. NSDS 3 would be presented at the April meeting of the NSA. This would lead to intensive consultation with each sector. The DHET would engage labour and business. The Minister would host a round table discussion between the parties. The human resources development council would receive a draft strategy in March.

Ms Metcalfe said that the audit policy was based on the King 3 principles. All the boards should have an input. The overall audit was conducted by the Auditor-General. The suspension of the MAPPP chairperson and the financial statements revealed interesting patterns.

Mr James asked if the DG was satisfied that enough was being done to deal with delinquent SETAs. He asked how the Department could be used to fund Further Education and Training colleges (FETs).

Ms Metcalfe replied that the time had come to take decisive action with some of the SETAs. The Minister would issue final written instructions. The wording of the legislation was muddying the waters. The executive had the responsibility to act whereas the NSA would advise the Minister if these actions were correct. She agreed that the FETs should have closer relationships with SETAs. This was being done particularly regarding artisanship training. Some SETAs were better resourced than others. Certain SETAs, such as that for Agriculture, nevertheless functioned well despite a shortage of resources. The use of the NSF to bolster the FETs was also an important question. This should be guided by current strategies with reference to the purpose of the Act. The DHET needed the support of key constituents. They wanted to align funding. Funding should be more orientated towards the delivery arm.

Mr G Lekgetho (ANC) asked where the 23 SETAs and their accounting officers were to be found. The physical address and contact telephone numbers should be included in the presentation.

Ms Metcalfe replied that SETAs were not always located with the appropriate industry. She would provide a list of the geographical locations. The goal of the SETA was to serve a particular industry. Service providers should be close to the industry.

The Chairperson said that the impact of the mandate given to the SETAs on society had to be considered. The issue was the response to the skills crisis. In 2009, there had been 550 000 students sitting the matriculation exams, but only 300 000 had passed. Many had failed to obtain university entrances. Programmes were not being delivered even though budgets were being under spent. The NSF had no capacity in the provinces. This was a grave area of concern.

Mr Fransman said that the Committee had visited Limpopo. They had sent a document to Parliament. He had believed that all the SETAs were in a bad condition, but had been converted on this point. He was starting to understand the problems. The analysis of performance had to be on all aspects, not just financial. He asked what the situation was with the other nineteen SETAs not addressed in the presentation. A SWAT analysis was needed. The Department might deal with the SETAs, but as Members of Parliament they had to account to their constituents. The skills forums were not present in the provinces. Junior officials were in charge of whatever operations were in the provinces. They should deal with the real issues right now.

The Chairperson said that R500 million would be spent on a project to train unemployed matriculants. He asked how many learnerships had been created, and how many graduates of such learnerships had gained employment. The Mining Qualification Authority contributed 50% to levy payments which distorted the picture. Training providers benefited from this, but those set up by the big companies would benefit the most. Opportunities were not based on vacancies but were skewed towards the big industries. The question for Government was how to develop Small, Medium and Micro Enterprises (SMMEs) and Broad Based Black Economic Empowerment (BBBEE) companies.

Mr Fransman acknowledged that he did not expect to hear that level of detail at the current meeting. He did not disagree with the high level of the presentation, but the real issue was in operations. He assumed that there were big problems there.

Ms Metcalfe agreed with the need to drill down. A strategic perspective was needed. They needed to be analytical. There was a skills crisis. Close to 40% of young adults were regarded as NEAT (Not in Education and Training). Previous separations had created this schism. Private providers had become a massive industry. Public education was a separate matter. The DHET had been established to provide systems to address this need.

The DG said that the second strategic question was one of putting capacity on the ground. Clause 23 of the National Skills Development Act provided for skills development forums in the provinces, but these were not working. One organisation had been transferred to the DHET but the rest remained under the control of the DoL. There must be a measurable and connected structure. The new structure could still resort under the DoL. The Committee had to ask where the plans for rural development were. She had met with the Department of Rural Affairs and Land Reform, and would work together on this. They had to move away from the urban bias.

Mr Makhubele asked how large the under-expenditure was.

Ms Metcalfe replied that it was a moving target. The income was a percentage of the employment bill within that sector. It would be necessary to look at income and committed funds. The DHET would present the current figures when the Minister presented his budget.

Mr Makhubele said that facilities at higher learning institutions and student accommodation had to be addressed. A database was needed for all service providers.

The Chairperson said that the Committee had visited Giyani. They had reported to Parliament on their reactions. If the right people were assigned to tackle the problem then things would happen. They needed to pull the family of skills together. When problems occurred it was not the DHET that came under fire but the movement. Active responses were needed. The Committee wanted a report on the Minister's initiatives and the capacitation of the NSF. This should cover both exiting and future plans. There must be some dead wood.

The Chairperson said that the Committee had met in November. This was during the transfer period. A letter had been sent to both the Department and himself regarding the situation in the MAPPP. He asked what had happened since early November. A meeting with the relevant structures was needed on this issue. He asked if it was a case of the old guard re-inventing itself.

Mr Fransman said that it was a question of how analysis should take place. There were 23 SETAs as well as the NSF and DHET. He asked what their capacity was. The Committee had prepared an in-depth questionnaire. He asked the DG to distribute these to the various CEOs. The Committee would engage with the DHET on their strategic plan on 25 February 2010.

Ms Metcalfe replied that it had been a useful engagement. The strategic plan would be a critical vehicle. It might be lacking in some areas. She had not seen the Giyani report. If there was a problem within MAPPP then evidence would be needed to pursue the matter. The Minister would take action. She apologised for not bringing officials from the Department with her, especially those working in the particular areas. The DHET had serious budgetary challenges. She suggested that the Committee investigate the use of video link-ups which would allow for greater participation by members of DHET. She asked if there was any precedent for such an arrangement.

The Chairperson undertook to investigate this suggestion. They had requested that the operational people attend this meeting. The Committee was selective with its requests. He excused the DG from the meeting.

Mr Fransman said that the reality was that the SETAs had underspent. A draft programme was needed. He felt that the DG was shielding those operational people responsible for the underspending.

Committee Annual Report 2009 & Programme 2010
The Chairperson asked the Committee to deal with their Annual Report. The Members had engaged in deep discussion after every visit they undertook in 2009. He felt that more narrative was needed in the report.

Ms Vukuza said that the Committee had underspent by R247 000 in 2009.

The Chairperson replied that there had been many requests for visits but only a minimal number of visits had taken place. Most of the overseas visits undertaken by other Portfolio Committees had been on the invitation of overseas organisations.

Ms Kubayi suggest a study tour which the Committee should undertake during the first quarter of the year. The conference that she referred to was to be held from 6 to 12 March.

The Chairperson pointed out that these dates fell within the current financial year, which would end in March.

Ms Vukuza said there was a need to landscape the Committee's own programme of interventions. The suggestion made by Ms Kubayi might be pre-empting this planning process.

The Chairperson said that the Committee had a plan for the year as well as a five year plan.

The Chairperson requested Members to provide input for the Annual Report by the following week, when the report would be adopted. In considering overseas visits the Members should restrict their options to destinations which could be reached by direct flights from South Africa.

Ms Kubayi said that if the visit she proposed came to pass then not all of the Members of the Committee would be able to attend.

The Chairperson said that in that case the Committee Whip would determine the criteria for inclusion in the travelling party.

Ms Mushwana said that the Three Line Whip issue could not be determined.

The Chairperson said that the reason for overseas visits should be to gain international experience. The Chair of Chairpersons had requested a stabilisation in the situation. They could make a case for the visit now. They also needed to make two or three visits to the provinces. Some issues had stood over in the draft programme.
 
Mr James welcomed the decision to visit the Cape Peninsula University of Technology. Accommodation was a key issue at that institution.

The Chairperson took note of this. He asked if there were any other institutions which the Committee should visit.

Mr Radebe suggested the Tshwane University of Technology. There was a looming crisis there and early intervention was needed.

Mr Makhubele said that they had missed the meeting on 3 February. The Committee needed to meet with the South African Students' Congress (SASCO).

Ms Kubayi suggested that the Committee should not meet with political bodies. They should rather interact with national bodies to avoid any compromises.

Ms Mushwana said that the Committee had decided to meet with the students the previous year. This meeting should still take place.

The Chairperson said that he would not write to them again. The students were too busy to meet with the Committee. They were planning their strategy. This was disappointing. The Committee would meet with the stakeholders that it had identified. He wished to have detailed briefings with each SETA. This would be after the Minister's budget speech.

Ms Kubayi pointed out that they had not yet been able to meet with Prof Jansen of the University of the Free State.

The Chairperson said that he would write to the DHET about this.

Adoption of minutes
The Committee adopted the minutes of 3, 4, 11 and 18 November 2009 and 2 February 2010.

The meeting was adjourned.