INSETA & ETDP SETA on their 2009/10 Annual Reports; Department of Higher Education & Training: Mid-year 2010/11 Expenditure progress and funding bids in 2011 MTEF budgeting process

Higher Education, Science and Innovation

13 October 2010
Chairperson: Ms M Kubayi (ANC)
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Meeting Summary

INSETA was pleased to inform the Committee that it had received an unqualified audit report although it did have some irregular expenditure. The Committee felt that the INSETA’s briefing document had overly summarised its Annual Report and that it lacked specifics and detail. It hampered the Committee’s efforts to interrogate the performance of the SETA. Members asked wide ranging questions most of which pertained to efforts by INSETA to address transformation in the industry. Facts and figures on learnerships and on training were queried. Assistance to black insurance brokers in the industry and rural development efforts were questioned. Members felt there was an urban bias in the efforts of INSETA.

The Education and Training Development Practices (ETDP) SETA said there was a lack of science and technology teachers. There was also a serious shortage of management in the sector. Hence the SETA knew exactly where to direct its efforts. The SETA was confident in its efforts and performance was always above 100% and targets were always met. Huge amounts of detail were provided to members in the form of tables and graphs. The SETA had obtained an unqualified audit report even though it too had aspects of irregular expenditure. Members were interested in the bursary awards that the SETA had made and the basis on which they were made.

The Director General of the Department of Higher Education and Training spoke on the Department’s 2010/11 mid-year performance, looking at budget versus the expenditure as from 1 April 2010 to 30 September 2010. She briefed the Committee on MTEF Allocation projections up to 31 March 2012, and spoke about her Department submission of bids for additional funding to improve access for post-school education and training - through a ministerial letter - as part of the 2011 MTEF budgeting process

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Meeting report

Insurance Sector Education and Training Authority (INSETA)
The delegation comprised of Mr Rama Govenden, Chairperson; Ms Margie Naidoo, Deputy Chairperson; Ms Sandra Dunn, Chief Executive Officer; Ms Tumi Peele, Learning Division Manager; Mr Jay Mngoma, INSETA Councillor and Mr Marius Gerber Financial Consultant: Deloittes. INSETA’s purpose was to grow the pool and quality of scarce and critical skills in the insurance sector, enhancing the sector and supporting the country’s transformation. Mr Rama Govenden, Chairperson, said good advances had been made but key challenges remained.

Mr Marius Gerber, Financial Consultant: Deloittes, noted INSETA had obtained an unqualified audit report from the Auditor-General with the proviso that there had been irregular expenditure (tender process not followed in the appointment of Regional Advisors). The finding had highlighted the importance of ensuring that INSETA management abided by the Supply Chain Management Policy. Other findings by the Auditor-General were that the reported indicators were not reliable as there was inadequate supporting documented information. There was also no effective internal audit function for a period as there were no auditors for seven months. Levy income was resilient despite global conditions. There was even an 8% increase in levies received. Through close management of spending INSETA ended the year with an admin surplus of R3.4m. R107m was allocated to discretionary projects in year ten. Mandatory grant payout sat out at 91%.

Ms Sandra Dunn, Chief Executive Officer, spoke about INSETA’s financial and operational viability. INSETA had a strong focus on governance and was fully resourced. It was in a position to deliver to both national and sector strategies. The financial projections for the next three years were positive and sustainable. Levy income was resilient despite global conditions. INSETA had a proven track record in delivering on its core mandate. INSETA’s operational delivery was within 10% of the administration budget. Industry stakeholders supported the strategies that INSETA was pursuing in order to enhance skills development in the insurance sector. Some of the 2009/10 highlights were INSETA initiated the first pilot articulation project between further education and training colleges (FETs) and universities (HETs) in association with the University of the Western Cape. The purpose of the project was to enable employees who complete a Diploma in Wealth Creation to advance to a second year BCom diploma. This type of offering was the first for the sector. INSETA partnered with the South African Actuaries Development Programme in a bid to address challenges faced by the acute shortage of black actuarial skills in South Africa. A pilot disability programme was also introduced which was aimed at raising the profile of workers who were making remarkable differences in the insurance sector as well as organizations supporting the advancement of people with disabilities. INSETA was meeting most of its targets in terms of delivery against the National Skills Development Strategy. From year six to ten, 54 121 learners had successfully achieved learnerships, internships, bursary programmes and skills programmes.

Mr Jay Mngoma, INSETA Councillor, alluded to an INSETA document which addressed the development of small enterprises. He proceeded to point out challenges faced. The sustainability of new venture creations was a concern. The issue was about what approach would provide sustainable development for SMMEs. Adult Basic Education and Training (ABET) was also highlighted. Training for black insurance brokers entering the industry should make provision for tax savings. Young people entering the industry had to be technically competent. The employment of unemployed youth required greater attention. The youth should be capacitated in such a manner to make them attractive to the industry. Youth should be knowledgeable about the insurance industry. He noted that 60% of entry level market businesses came from rural areas. INSETA’s focus going forward included accelerating and enabling regulation compliance, management and leadership development as well as a greater emphasis on operational efficiency and effectiveness.

In concluding, Ms Dunn said that INSETA was awaiting an announcement by the Minister whether it would be re-licensed.

Discussion
Ms M Kubayi (ANC) asked about the INSETA document that was being developed with a focus on small enterprises. She said that this assisted the transformation of the insurance sector.

Mr Mngoma said that “before regulation” there had been a huge investment in human development. The area of skills development still resided with people in the insurance industry, that is, insurance companies and brokers. The insurance sector was a regulated sector. Barriers of entry in specific sectors for small enterprises had been identified. When most young black persons enter the industry they had no point of reference. Young persons had to acquire business etiquette. A formalised programme was in place to assist young entrepreneurs. INSETA was also involved in rural development.

Mr Govenden added that transformation was part of INSETA’s agenda. The key focus was to optimise learnerships and to get learners employed. The idea was to make the industry more representative by increasing the number of blacks in the industry. There were gaps in the industry regarding critical skills. The question was how to up the numbers in skilled areas. Employment equity in the industry was a concern to INSETA.

Mr K Dikobo (AZAPO) was glad to hear that INSETA was involved in transformation. INSETA had in the past given the impression that it was not involved with transformation. He asked how many black actuaries were being trained. If 54 000 learners were involved in learnerships from year 6-10. What were the figures for the current year? Given that INSETA was reaching out to the provinces, how many provincial offices did it have?

Ms Dunn replied that the figures for black actuaries that had been trained would be forwarded to the Committee. Ms Peele added that 64 actuary students had been placed with three universities. The placements were from first to third year. A mentoring programme was in place to assist first year students as the dropout rate was high.

She said that finding employment for learners who had completed learnerships was a challenge. 42% of learners had obtained employment in 2009. In 2010 there were 741 learnerships in KZN, Gauteng and Western Cape. The problem was that in other provinces many of the service providers were small.
The Annual Report learnership figures were for one year and not five years.

Ms Dunn said that there were projects in all provinces. It was a bit fragmented. Most jobs were available in metropolitan areas. INSETA did not have regional offices but it did have regional advisers.

Ms Peele pointed out that there were regional advisers in five of the provinces but in some instances one adviser covered more than one province.

Mr Dikobo commented that the issue was about the accessibility of INSETA. It was about the physical presence of the SETA.

Mr S Makhubele (ANC) said that it was the appointment of the regional advisers that had led to the irregular expenditure.

Ms W Nelson (ANC) responded that the Committee was biased towards rural skills development. How did it help people of the North West if the SETA was located in Johannesburg? She asked what the situation was currently regarding the regional advisers. She noted that a total of R7m had been spent on consultancy fees and service providers.

Mr Gerber said that the intention was not to hide the irregular expenditure. Procurement in the public sector was ‘technical’ hence the irregular expenditure. Regional advisers had in essence been appointed on the basis that they were seen as staff. Appointments had taken place using recruitment agencies. However, the ‘technical’ requirement was that regional advisers should have been appointed by way of tender.

Mr Mngoma said that most black businesses were at entry level markets. Most of the businesses came from peri-urban or rural areas.

Ms Kubayi asked in which provinces were the provincial offices.

Ms N Gina (ANC) felt that the briefing document was not detailed enough. Information had been over summarised. What was INSETA’s future plans regarding disabled and intellectually challenged persons. 

Ms Dunn responded that there were programmes for intellectually disadvantaged learners. Companies take on individuals in order to sensitise workplaces. A pilot project was initiated where six learners were placed in three different companies in jobs that were of a repetitive nature.

Ms W Nelson (ANC) responded that an unqualified report was fine but she asked what INSETA’s plan was to skill young persons. How much transformation work had already been done? She was concerned about INSETA’s discretionary grants. Issues of rural development came up strongly. How many students had INSETA put through universities and how many had qualified? Of those who qualified, how many had obtained jobs? What difference had INSETA made to the industry ten years on?

Mr Gerber said that 80% of the discretionary grants were payable to employers. Employers were required to spend those funds. 85% of bursaries were awarded to blacks.

Ms Dunn said that finding employment for learners who had completed learnerships was a challenge: 42% of learners had obtained employment in 2009.

Mr S Makhubele (ANC) agreed that the briefing document did not give specifics. It was too general. When statements were made that targets had been met, figures should be given. Percentages should be shown. INSETA’s actual performance was not apparent. He felt that things remained unchanged in the industry. Black insurance brokers still did not have access to resources. It was all good and well to skill individuals but such persons should not remain where they were, they should move ahead. He asked to what extent INSETA harmonised relations between big and smaller businesses. The big brother scenario should not be perpetuated. Regulations should not be cast in stone and always able to be redefined. Regulations should assist in making the insurance environment more professional. There should be room for flexibility.
He asked about the capacitating of colleges and how INSETA was taking the process forward. INSETA had concluded MOUs with colleges but it seemed that colleges lacked the capacity to implement what was contained in the MOUs. What was happening with the Recognition of Prior Learning (RPL)? How were persons being uplifted within the industry? Progress should be at a faster pace.

Ms Dunn said that the Committee’s comments about specific information being needed were taken onboard, especially information about targets compared to what had been achieved. During internships, learners obtained workplace skills training as well. INSETA had a project to capacitate FET colleges. It capacity built assessors and moderators. FET college moderators partnered with small training providers. This addressed the problem of reaching rural areas and provinces where there were no proper training providers.

Mr Mngoma said that the issues raised by Mr Makhubele were included in INSETA’s documentation. INSETA had realised that SETAs were not a “one size fits all”. Each sector was different. The insurance sector was a highly regulated environment. The issue of skills development would always sit with professionals in the sector. Key sector stakeholders were the industry they represent. INSETA engaged with the industry and worked with training providers. He was confident that INSETA would deliver on the issues raised. INSETA represented a pressure group as well.

Ms Dunn said that INSETA subscribed to Recognition of Prior Learning. There was an assessment through an RPL approach. INSETA had a RPL project over two financial years. INSETA supported the RPL.

Mr A Van Der Westhuizen (DA) said that SETAs tend to have a high staff turnover. He asked the INSETA delegation how long each of them had been in their current job. He asked why there were such huge gaps between what was targeted and what was actually achieved. Of the 180 learnerships that had been completed, how many were full qualifications? What support did INSETA provide towards training of related industries such as marketing and call centres.

Ms Peele had been in her current job for three years; Mr Gerber five years, Mr Govenden from September 2010, Ms Naidoo was a Council member for eight years. Mr Mngoma was Council member for 1 year three months and Ms Dunn had been CEO for eleven months.

Ms Dunn noted that the 180 learners had full qualifications and were employed. A total of 517 unemployed persons had completed learnerships.

Ms F Mushwana (ANC) asked what the targets that INSETA had met were.

Ms Kubayi said that the Committee had a general sense of discomfort just like the previous meeting with INSETA. A clean audit without specifics on deliverables meant nothing to members. Why was there irregular expenditure when INSETA received an unqualified audit report? Her understanding was that INSETA was audited by Deloittes. The audit report was then passed to the Auditor-General. Why was Deloitte part of the INSETA delegation? Was Deloitte part of INSETA’s structure? She made reference to USP versus ETR (Education Training Report) and asked how many organisations submitted WSPs (Workplace Skills Plans). What were the gaps? Did INSETA keep track of learners who had participated in learnerships? What were these learners up to now? Were they absorbed in the industry? She commented that the briefing document lacked specifics. The Committee needed to get a sense of what was happening.

Ms Dunn replied that as far as keeping track of learners, most learners obtained employment in the industry. Some did move beyond the sector. For example some were employed by SAPS.

Mr Govenden said that comments that the briefing document lacked specifics were noted. It was not the intention of INSETA to hide anything. Comments by members were taken on board. Decisions had been taken years ago to outsource services of INSETA. The internal audit was outsourced to Deloittes and project management was outsourced to Price, Waterhouse and Coopers (PWC).The Council of INSETA had taken the decision to perform the project management function in house and hence a projects department was created. Information technology and finances had been done by Deloittes for seven years for all SETAS.
 
Mr Gerber said that WSPs from 700 employers had been received. Levies to INSETA were from 50 groups of companies. INSETA supported small companies and WSPs were provided to them.

Ms Kubayi said that government expenditure on consultants should be cut down. President Zuma had made an announcement to this effect.  The expenditure on outsourcing should be weighed against the cost of performing functions in-house. INSETA should furnish the Committee with information on FET college work, with a report on the Black Brokers Forum, information on the RPL issue and how much was spent on it and lastly a report on an analysis of work done by regional advisers.

INSETA was thanked for their briefing. The ETDP SETA was asked to keep its presentation brief due to time constraints.

Education and Training Development Practices (ETDP) SETA
The ETDP SETA was represented by Ms Nombulelo Nxesi, CEO; Mr K Mudumela, Chairperson of the Board; Mr E Cotton, Acting Chief Financial Officer and Mr B Malgas, Chief Operating Officer.

Ms Nombulelo Nxesi, CEO, said the ETDP SETA had a diverse scope of coverage which included 17 Standard Industrial Classification codes representing 12 major constituencies. Some of the constituencies were the Department of Basic Education, the Department of Higher Education, FET institutions as employers, trade unions and political parties as employers. Ms Nxesi stressed that the ETDP SETA did not have core services that were outsourced. In education there was a lack of science and technology teachers. There was also a serious shortage of management in the sector. The Committee was given a tabular breakdown of performance on NSDS objectives. The problem with Adult Basic Education Training (ABET) was that employers did not release workers for the training. Ms Nxesi felt that ABET should be offered during working hours. A summary of ETDP SETA achievements percentage wise for the last 5 years was also given. Ms Nxesi said that performance was always above 100% and targets were always met. Employment Equity targets were also met. The target for blacks was 85% and what was achieved was 98%. Women had a 54% target, 73% was achieved. Income and expenditure trends were elaborated upon by way of graphs and tables. The ETDP SETA Board had taken a decision that the ETDP SETA had to open provincial offices in the nine provinces. There were currently offices in three of the provinces.

Mr B Malgas, Chief Operating Officer, spoke on skills development. A breakdown of skills development figures in the provinces was provided. The ETDP SETA constituencies also benefitted through provincial skills development programmes. The programmes implemented included Early Childhood Development (ECD); ABET learnerships, Occupationally Directed Education, Training and Development (OD-ETD), internships, bursaries awarded and workplace experience. The skills programmes included mentoring and coaching, material and curriculum development, leadership and management, project management, financial management, ICT training, finance for non-financial managers, skills development facilitators (SDFs) and assessor training. A provincial imbizo was held in response to the national call to maximise the participation of learners in FETs and higher education institutions (HEIs). The aim was to provide secondary schools with information on the national scarce and critical skills to enable them to make informed career choices. The ETDP SETA participated in various provincial skills development initiatives such as the Provincial Development Stakeholder’s Consultative Forum, the Expanded Public Works Programme, the Provincial Growth and Development Strategy and the Provincial Skills Development Committees.

Mr E Cotton, Acting Chief Financial Officer, continued with a breakdown of financials. A breakdown of the ETDP SETA 2009/10 Budget was provided. Changes in income trends from the previous financial year were more or less an increase of 17%. Investment income had however decreased by 40%. The Committee was given graphical illustrations of expenditure per funding source and commitments against cash. He noted that the SETA did not secure sufficient WSPs which would have allowed more funds to be paid out. The number of organisations in the sector was increasing which meant that there was an increase in the payment of levies to the ETDP SETA. With the increase in income was an increase in expenditure as well.

Ms Nxesi concluded by highlighting the SETA’s achievements which were a clean audit, exceeding targets, creating access to higher education to rural learners by way of career imbizos. She did however point out its challenges as well which was the accreditation of training providers in rural areas, reaching out to persons with disabilities and to small levy paying organisations. It was recommended that the Committee work closely with SETA, familiarise itself with the work of SETA and impress it upon employers to open access to workplaces for experimental learning and employment opportunities.

Discussion
Mr Van Der Westhuizen asked how many staff members the SETA had. He also asked what the full value of its bursary commitments was.

Ms Nxesi replied that the staff complement should be 104 but it currently sat at 89.

Mr Makhubele understood the SETA to have been involved in a court action regarding tenders. He asked why the SETA had not awaited the decision of the Court before it continued with its tender processes.
How did the SETA identify projects?

Ms Nxesi replied that when a particular tender process had been completed, a particular provider had issues about it. It led to court action and the SETA had lost. Procurement processes were found to be fine, the judge ruled on the price. The SETA had to pay the legal fees of the winning party as well as a cost order was awarded against it.

Ms Mushwana pointed out that the change in discretionary expenditure was 16%. Why was it so?

Mr Cotton said that the core business of the SETA was the paying of grants.

Mr Kubayi asked how the awarding of bursaries was determined. Which provinces received most of the bursaries? She remarked that there seemed to be an urban bias. She also raised the issue of irregular expenditure as a result of cancelled flights.

Ms Nxesi replied that bursaries were awarded in those provinces where the need existed. The SETA worked hand in hand with its constituencies in the awarding of bursaries in provinces. Bursaries were awarded to employed and unemployed persons.

Mr Malgas said that there was a bursary funding model. A total of R40m was allocated to bursaries.

Mr Nxesi said that flights had been cancelled because cheaper flights were available. It was more complicated and was not just about cancellation of flights.

Department of Higher Education and Training mid-year 2010/11 performance
Ms Mary Metcalfe, Director General: Higher Education and Training, explained what had been spent so far of the 2010/11 budget of R32 142 billion which included a large amount of direct charges and transfers. The budget allocated was R32 144 926 and total expenditure was R21 953 503 (see document for detail). She
explained expenditure for each of the five programmes: Administration; Human Resource Development, Planning and Monitoring Coordination; University Education; Vocational and Continuing Education and Training; Skills Development. Expenditure according to Economic Classification was provided for: Compensation of employees, Goods and services, ,Transfers and subsidies, Machinery and equipment. Finally she outlined the amount that was transferred to each of its agencies.

The Director-General said that the projections for adjustments estimates were not yet finalised. The expectations were that additional funds would not be received for the examinations function for this financial year.

Virement will be applied to address projected over-expenditure on the examinations function and projects such as the FET intervention project.


The Department submitted bids for additional funding in the 2011 MTEF budgeting process to improve access for post-school education and training. Discussions were underway with the Department in the Medium Term Expenditure Committee Workgroup for Education, responsible for the whole of the education sector, including Basic Education and provincial education. From the discussions in the workgroup, it was anticipated that some funding would be made available for the  Higher Education and Training sector, although very limited. Any additional funding would be submitted as a proposal by the National Treasury to the Medium Term Expenditure Committee (MTEC) for final recommendations to be presented to the Minister’s Committee on the Budget (MinComBud). MinComBud would after considerations of the proposals by the MTC, submit recommendations to the Cabinet. A summary of the bids for additional funding would be submitted to National Treasury. Other steps to be taken included a request to the National Treasury for a review of the equitable share to address enrolments at FET Colleges. The Minister of Higher Education and Training would also be meeting the Minister of Finance to discuss key areas. These included the need for additional resources in the current MTEF for existing programmes; steps to allocate resources from the NSF and skills levy funding to address the provision of critical and scarce skills; and also the requirement to increase the investment in education and training over time.

Discussion
The Chairperson thanked the Director General, but she said there were a few concerns about the expenditure trends of the Department. She asked the Committee to engage and give recommendations.

Mr Van der Westhuizen asked the DG how they managed to keep the institutions running.

Mr Makhubela asked whether the funds that were allocated were put to good use or not. He also wanted clarity on the household allocation in terms of the overall budget of the Department.

Ms Mushwana said that the DG should explain why there was a lot of under-spending in the Department.

The Chairperson also emphasised the issue of under-spending in the Department and stressed that there were other various issues which needed more scrutiny in the DG’s report, but because they were pressed for time, it was impossible to do so at this meeting.

The DG tried to answer some the members concerns by referring members to the budget book where she explained that under the MTEF allocations, the universities would be receiving their application letters that confirm their budgets as from 16 November. In terms of colleges, the DG explained that there was a slight difference because the provinces had a responsibility to let the FET Colleges know that they would receive their budget allocations at the end of October, and if there were additional funds the FET Colleges would have to explain their plans. She was confident about the task teams in the provinces that would assist with the process of informing the FET Colleges to plan their budgets.

In terms of the sustainability of the funds allocated to National Student Financial Aid Scheme (NSFAS), the DG stressed that the NSFAS should account to the Committee for their expenditure and under-spending. She further explained that the Ministerial Committee made recommendations where under-spending had occurred in government institutions but the process took too long. She also explained the Higher Education Initiative which was introduced by the European Union to help Universities to be self sustaining, that would not require follow up funding. She stressed that under-spending was unusual in terms of the normal budgetary systems, because the amount spent in the previous financial year became one’s baseline for additional funding.

The Chairperson thanked the Director -General for her analysis, but because of time the Committee was unable to engage further with her report. Members were asked to to go through the report in order to engage with the members of the Department at the 19 October meeting.

The meeting was adjourned.



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