Food and Beverages Manufacturing Industry Sector Education and Training Authority & Banking Sector Education and Training Authority: 2009/10 Annual Reports

Meeting report

Food and Beverages Manufacturing Industry Sector Education and Training Authority (FoodBev SETA ) 2009/10 Annual Report
Mr Ravin Deonarain, Chief Executive Officer, Food and Beverages Manufacturing Industry Sector Education and Training Authority (FoodBev SETA) described the economic characteristics of the food and beverages manufacturing industry sector, which was diverse. Its products were price sensitive; there was intense competitiveness amongst brands and the sector was capital intensive and technology driven. There were high volumes of production. The manufacturing sector output constituted 28% of the gross domestic product.  Food and beverages manufacturing contributed 18% of the manufacturing sector. The gross domestic product contribution of the food and beverages manufacturing sector was 5% of the gross domestic product. The sector accounted for 2% of employment in the total economy.   Mergers and acquisitions within the industry were largely due to brand acquisition. There was dominance within the industry by large companies and multinationals with a large number of small food manufacturers also present.

7 500 Companies were registered with FoodBev SETA . FoodBev SETA received its 10th unqualified audit report for 2009/10; it had an expenditure rate of 96%, which showed that a healthy amount of money was reinvested in the industry.  A R7 million surplus was shown on FoodBev SETA’s financial statement, which would be ploughed back into grants. Challenges to the FoodBev SETA included the failure of companies to complete learner programmes which the FoodBev SETA had provided, resulting to an increase in the disbursement rate and a reduction in the cash-on-hand.

Mr Deonarain explained FoodBev SETA’s performance on the National Skills Development Strategy (NSDS) targets as against the service level agreement.  FoodBev SETA’s skills development supported 80% of large firms’, 60% of medium firms’ and 40% of small levy-paying firms’ employment equity targets, the overall equity profile of firms and sectors showed a 125% impact by large and medium firms and 132% by small firms in relation to their targets. The number of small black economic empowerment (BEE) firms and BEE co-operatives supported by skills development increased by 150% in relation to FoodBev SETA’s target of 32. Adult Basic Education and Training (ABET) level 4 had been achieved by 700 000 workers, and 125 000 workers were assisted to enter approved learning programmes. Of the latter group, 50% had successfully completed the programmes.  The approved learning programmes included learnerships, skills programmes, internships, apprenticeships and work experience. Skills development also supported 2 000 non-levy paying enterprises, non-governmental organisations (NGOs), community-based organisations (CBOs) and community-based co-operatives. Learners in critical programmes covered by the sector agreements and national priorities from local Further Education and Training (FET) and Higher Education and Training (HET) institutions were assisted to gain work experience. FoodBev SETA trained and mentored 10 000 young people to form sustainable new ventures; at least 70% of the new ventures still in operation after twelve months. Each province had at least two provider institutions accredited to manage the delivery of a new venture creation qualification. Significant improvements were made in the quality of the service delivered by skills development institutions.

Mr Deonarain added that customer satisfaction was measured on a yearly basis.  It was a measure of how FoodBev SETA was doing in servicing the industry. The last four years of the customer satisfaction rate was positive showing that FoodBev SETA’s customers were generally happy with its services.

Highlights for FoodBev SETA were that it exceeded targets for the financial year and achieved an unqualified audit report for the tenth year in a row.  Strong focus was placed on artisan development, processing and packaging operations as well as leadership and management development.  With the world cup 2010, FoodBev SETA made an agreement with the city of Johannesburg to train food and beverage vendors in two fan parks, Sandton and Soweto.  The training involved food take, food hygiene and customer services. The service agreement with the Department of Higher Education and Training (DoHET) was annually rated, the performance rate of 4.80 on a 5-point scale, was achieved. Potential internal strengths and weaknesses were identified, with emphasis that improvement would be made on advertising campaigns.  Potential external opportunities and threats were also identified.  The food and beverage manufactures’ employees were mostly situated in Gauteng, which hosted 53% of the companies; Western Cape had 29% of the companies and Kwazulu Natal nine percent.  For the training, companies were needed; thus the focus of the FoodBev SETA was in these provinces, although projects were still launched in other provinces. In terms of youth unemployment projects, the following were spent on each: entrepreneur development R1 500 000, young entrepreneur support (mentorship and business plans) R750 000, community based organization grants R1 800 000, internships and work experience grants R9 600 000. 

Mr Deonarain said that there was a need to improve the image of the FoodBev SETA.

Mr Willie Prinsloo, Chairperson, FoodBev SETA stated that the FoodBev SETA had made good progress in the past 10 years.  An improvement in the FoodBev SETA’s public image could make it more effective.

Discussion
The Acting Chairperson agreed that the image gained by SETAs was negative which was justifiable and non-justifiable in different instances. It was clear that the public did not understand the role of SETAs and wanted to know why this situation existed. It was everybody’s responsibility to clear up this issue in order for the public to know what SETAs did and how. The Chairperson also asked if the money spent by FoodBev SETA resulted into effective service delivery in order to change the lives of South Africans.

Mr Deonarain stated that the role of FoodBev SETA was to provide people with an employable skill, train unemployed persons, and give graduates and technikon leavers work experience. After arranging a learnership the responsibility was with the company concerned to employ the individual. Thus FoodBev SETA’s main role was to provide an employable skill. Many individuals had matric and a higher education qualification but lacked work experience and had difficulties in finding employment; thus experience became important when looking for employment. SETAs had to work via companies in their industry and provide grants to the companies for interns and thus enhance employment skills. FoodBev SETA served the nation at large but its direct customers were the companies. Companies needed to offer apprenticeships, internships, and learnerships in order to gain work experience for individuals. Thus FoodBev SETA contributed to companies’ resources and mandates in regard to these programmes.

Ms F Mushwana (ANC) asked about the location of FoodBev SETA in Gauteng, and if there was a plan to assist the rural areas.

Mr A van der Westhuizen (DA) stated that the quality assurance task in the rural areas could constitute a challenge and asked if FoodBev SETA could explain how it would be overcoming this challenge.

Ms W Nelson (ANC) asked if FoodBev SETA had a strategy to attract students from rural areas for training despite its focus in Gauteng.

Mr G Radebe (ANC) asked if FoodBev SETA had considered the issue of rural development.

Mr Prinsloo said that rural development was an issue that could not be addressed by one single SETA and that there should be more co-ordination between SETAs and companies in order to address this issue effectively.

Ms N Gina (ANC) was concerned about FoodBev SETA’s statement that as an individual SETA it could not do much on the issue of rural development unless all the SETAs acted together. She asked if FoodBev SETA had challenges in this respect and what it did to promote rural development.

Mr Khotso N-Potele, Skills Development Projects Manager, FoodBev SETA, replied that FoodBev SETA followed up closely on rural development and on its alignment with Government on national priorities. There were a few projects on rural development; one of these included a bakery. FoodBev SETA selected youth for empowerment by working closely with municipalities and the Department of Labour in various provinces. FoodBev SETA was also linked closely with local communities and bodies and also worked closely with the National Youth Action Plan to execute the projects.

Mr Mushwana said that FoodBev SETA had stated that it did not provide training, but was there a plan to advocate workshops and inform people of what it did in order to ensure that people could participate.

Mr A Mpontshane (IFP) asked how Foodbev SETA could not be responsible for training if it assisted workers to achieve better levels of skill. Moreover, how could FoodBev SETA facilitate the process of providing skills if it did not provide training?

Mr Deonarain answered that FoodBev SETA had to facilitate training; thus it designed learnerships and the structure of the programme which was then registered with the DoHET. FoodBev SETA gave accreditation to the training providers when certain requirements were fulfilled. This was how provision of training was ensured. FoodBev SETA also provided grant incentives to companies to undertake training and gave them incentives to take on unemployed people.

Mr Van der Westhuizen asked FoodBev SETA to explain the effect of the short term licence. He asked if the possible mergers with other SETAs created uncertainty and what impact they had on FoodBev SETA’s functions.  He asked if FoodBev SETA was still operating in a volatile environment where it was uncertain where the targets should be placed.  How many certificates had been issued for a full qualification?

Mr Deonarain replied that FoodBev SETA had received only a one year extension of its licence. This created uncertainty. This resulted in high turnover of its staff: good, experienced people were leaving. The lease on its building expired in October; this caused problems with the landlord. Long term planning was difficult. Hopefully there would be a decision by the end of the month. FoodBev SETA was trying to provide the country with more people with employable skills.

Ms Nelson asked if the bursaries awarded could be tracked, if the students completed their studies, and were they currently within the industry. She also asked if the learnership students were tracked, how many were employed. and how many remained unemployed.

Mr Radebe asked what FoodBev SETA’s capacity was for the realisation of employment. He asked what the reasons for youth unemployment were, what FoodBev SETA’s response was, and what happened to matriculants after their examinations.

Ms Mushwana asked if the origin of learnerships could be tracked by province. She asked if FoodBev SETA could influence companies on whom to employ on a long-term basis.

Mr Deonarain answered that FoodBev SETA’s employment rate of people completing the learnership with a company was between 55% and 60%. FoodBev SETA had a huge resource problem in tracking the 40% who remained employed. FoodBev SETA planned to conduct studies. Such studies were planned for the next year. FoodBev SETA was not really in a position to guarantee employment. Obtaining jobs was an issue for Business South Africa. FoodBev SETA was only a minor component within the corporate world and was not really in a position to tell a multinational corporation whom to employ.

Dr J Klopper-Lourens (DA) asked what criteria were used in the performance scorecard and wanted an explanation of the provincial spread. Did FoodBev SETA focus only on the unemployed youth?

Mr Deonarain answered that the provincial spread showed where a factory or company was located.  

Mr Rajendra Rajcoomar, Chief Financial Officer, FoodBev SETA, replied hat the performance scorecard criteria included financial, actual performance and governance criteria.

The Acting Chairperson asked what FoodBev SETA’s interaction with the FETs was, and in which provinces. She also asked what the guidelines regarding the remuneration of board members were as she had observed the existence of inconsistencies.

Mr Deonarain answered that FoodBev SETA had been working with FET colleges for seven to eight years, and used them as its training providers. Two FET colleges were involved with the training, on site mentoring, monitoring and evaluation.

Mr Hannes Hoon, Director, Department of Higher Education and Training (DoHET) added that the remuneration of board members was managed within the approved SETA constitution. Some SETAs saw their board members as part of the industry and believed that board members were thus obliged to support the SETA. Other SETAs had specific policies in regard to remuneration of their board members and their audit committees reviewed board members’ remuneration. The DoHET had requested all SETAs to submit their policies on remuneration of board members in order to formulate a prescript of how board members should be remunerated.

The Acting Chairperson asked FoodBev SETA to explain the surplus indicated on its financial report.

Mr Radebe asked what the relevance of the surplus was because a surplus could not exist within an organisation that was under the Government, which saw the surplus as under-expenditure.

Mr Rajcoomar answered that the surplus of R7 000 000 derived from deducting expenditures form its income. What needed to be kept in mind was that a lot of the learnership programmes and apprenticeships were run over more than one financial year and could start at various times through the year.  Thus the surplus existed because grants were not all paid up front; the grants were disbursed only when certain criteria and milestones had been reached. The surplus thus derived from the fact that 90% of the funds were committed to the grants. Budgets were due 18 months before the commencement of the financial year, but as the year continued, quarterly reviews were done to assess the actual income and to regulate surplus funds – with a view to using them to develop programmes within the sector.

Mr Deonarain added that the FoodBev SETA did not work with a certain amount of funds; it received an income in the form of a levy received from companies, which was variable at about between five and seven percent per month. FoodBev SETA consequently budgeted conservatively.

Ms N Magazi (ANC) asked if FoodBev SETA had data on its impact.

Mr Deonarain answered that FoodBev SETA was planning to undertake impact studies within the next financial year to estimate its impact upon the community and the number of learnerships employed. The mechanisms for this research had not been worked out yet. Research that was currently undertaken was around scarce skills within the industry in order to know on what skills FoodBev SETA should concentrate resources. FoodBev SETA provided the tools to enable skills development; it accredited training providers and provided funding, framework of training and a training programme.

Mr Van der Westhuizen noted that the income from the National Skills Fund (NSF) had dropped considerably. The Committee was under the impression that NSF had much money with no need for the reserves and it did not have the long term commitment that FoodBev SETA had. He asked FoodBev SETA to explain this and asked what can be done to resolve the matter.

Mr Deonarain replied that FoodBev SETA applied for NSF funds and was awarded an amount of R30 million.

The Acting Chairperson stated that a full engagement with FoodBev SETA was needed. One needed to be specific on targets and what needed to be achieved. She asked if FoodBev SETA could quantify the employed and unemployed in regards to learnerships in order to determine what had been achieved and what had not.

Mr Deonarain replied that companies were taking too long to complete the learnerships.  FoodBev SETA had implemented two approaches. Letters were sent to the management of a company. Grants were paid, but if the programme was found insufficient, FoodBev SETA sent an invoice and a letter to question every payment of the grant funding.

The Acting Chairperson asked if FoodBev SETA had any representatives in any of the provinces within its industry.

Mr Deonarain answered that FoodBev SETA did undertake visits to the companies across the country because it was not financially feasible to run offices in each of the provinces.

The Acting Chairperson stated that FoodBev SETA thus only had contact with the industry but not with young people who were unaware of FoodBev SETA.

Mr Deonarain answered that unfortunately this was the case. SETAs were implementation organisations and not strategy makers.

Ms Liezl Gerryts, Corporate Services Manager, FoodBev SETA, stated that between 50% and 80% of all planned training was implemented by companies and at the companies’ request the minimum requirement was set at 60%. 10% of all FoodBev SETA’s companies complied with the work skills plan(WSP) and annual training reports (ATR) to ensure that what was reported in the ATR was what was actually implemented and could be backed up by documentation.

The Acting Chairperson asked if it made sense for all the SETAs to be based in Gauteng and if their head offices could be spread over the country. The access of SETAs to the public, specifically in the rural areas, was an issue to be seriously considered.

Mr Hoon replied that the SETAs needed to indicate their accessibility, performance and presence within all the provinces. They must also report on their direct or indirect presence within specific provinces.

Banking Sector Education and Training Authority (BANKSETA) 2009/10 Annual Report
Mr Max Makhubalo, Chief Executive Officer, Banking Sector Education and Training Authority (BANKSETA) stated that BANKSETA supported transformation and staff development. He briefed the Committee on BANKSETA’s progress on the National Skills Development Strategy (NSDS). On prioritising and communicating critical skills for sustainable growth, development and equity, BANKSETA achieved 135% in regards to the targets set. This included career guidance projects where banking as a career was popularised among school leavers and university students.  Also BANKSETA developed a sector skills plan identifying critical skills needed within the sector. BANKSETA achieved almost five fold on promoting and accelerating quality training for all in the workplace, incorporating mandatory grants, small and medium enterprises support, aiding the ABET programme as well as learnerships and skills programmes for employees inside the banks. In promoting employability and sustainable livelihoods through skills development BANKSETA achieved 166%.  This included support for non-levy paying enterprises (NLPEs), NGOs, CBOs and co-operatives (co-ops) through building a better business programme. BANKSETA achieved 118% on assisting designated groups in terms of the Equity Act, including new entrants to participate in accredited work, and integrated learning and work based programmes to facilitate the acquisition of critical skills in order to enter the labour market or obtain self-employment. On improving the quality and relevance of the provision of training and support through funds, BANKSETA achieved 225%. Support was given to Provincial Centres of Excellence and Skills Resource Centres as well as to providers to deliver the New Venture Creation Programme.

Mr Makhubalo continued that BANKSETA was experiencing major problems in recruiting matriculants with a pass in accounting or mathematics. A customer satisfaction survey was conducted by an external company; BANKSETA received a score of 4.1 out of 5. BANKSETA had a staff compliment of 29, with three African males in management positions. Its staff was dominated by women from all races and on all levels of employment. BANKSETA had received an unqualified audit opinion from the Auditor-General; it spent 91% of allowed administration funds. Its 80% levy income decreased by 0.4%. Discretionary grant expenditure increased, while the mandatory grants pay-out was consistent at 96%.  Total revenue, including 80% levy income, NSF income, and investment income decreased. Total expenses, including administration expenses, NSF expenses, grants and project expenses, increased, thus leaving BANKSETA with a deficit of R51.714 million.

Mr Makhubalo added that BANKSETA had its accreditation from the South African Qualifications Authority (SAQA) as an Education and Training Quality Assurance body [ETQA] and had thus introduced a full time monitoring and site visit resource for the first time from 05 January 2009.  It launched a new BANKSETA ETQA operating model which included new processes and work flows, new policies, new templates and new checklists on 01 September 2009.  BANKSETA also registered a first Quality Council for Trades and Occupations (QCTO) curriculum and qualification for the occupation of bank worker.

Mr Eugene Ebersohn, Chairperson, BANKSETA Board, said that in terms of the DoHET and Department of Labour’s requirements, BANKSETA had consistently performed well and had been one of the top performance SETAs. It had also constantly looked after the needs of the sector, while obtaining, for ten years, an unqualified financial audit report.  Thus BANKSETA’s finances were healthy, with most funds spent on discretionary projects.  From a business and labour perspective the BANKSETA was in good hands and the Board was proud of its accomplishments.

Discussion
Mr Van der Westhuizen asked why the CEO was awarded a 41% remuneration increase while the country was struggling financially.

Mr Ebersohn answered that the remuneration committee was a sub-committee of the Board and consisted of all the independent board members.  Remuneration at BANKSETA was based on benchmarking against market rates.  With uncertainty about what was happening within the SETA landscape, and with mention of possible mergers between SETAs, a retention problem existed.  BANKSETA was not immune to this problem. The staff complement remained at 29 which was seen as a problem by the Board.  Thus the Board had introduced a retention bonus; the increase in the CEO’s remuneration included this retention bonus. 

The Acting Chairperson asked when the CEO had joined the BANKSETA and at what percentage the retention bonus was given.

Mr Ebersohn answered that the CEO had joined BANKSETA in 2007. The 41% increase that the CEO had received partly included the retention bonus; the annual increase that the CEO received was in line with what was received throughout the sector.

Ms Berna Botha, Chief Financial Officer of BANKSETA, answered that the retention bonus was shown separately from the rest of the guaranteed package at R202 000.

The Acting Chairperson asked at what percentage the retention bonus was paid.

Mr Makhubalo added that a retention methodology was used; a composite of skills and how well an individual was performing was worked into a composite number. A maximum of up to 30% of the base salary could be awarded, but nobody received so much.

The Acting Chairperson stated that to pay this amount for everybody for retention including the increases and annual bonuses while the country was in financial difficulties was hard to understand. She asked if it would have been difficult to replace staff and if it was really worth it. Did BANKSETA battle to get people to come into the SETA?

Mr Ebersohn replied that the figure within the annual report was not only for the retention bonus but also consisted of performance bonuses that were contract based, thus only a small percentage of the amount went to the retention bonuses. Factors played a role in giving the retention bonuses, including the ability of the BANKSETA to replace somebody at short notice. Many people within the BANKSETA came from the banking environment and it was thus very difficult to replace someone at a senior level. With a staff complement of only 29, if only one or two people left a capacity problem would be created. This resulted in a risk in terms of people employed and a risk in having to replace someone with only a one year contract available.

Mr Van der Westhuizen asked what had happened so dramatically that BANKSETA had a turnaround from a surplus to a deficit.

Mr Ebersohn replied that more money was spent in the sector and that the more money spent, the better it was for the sector; this had contributed to the deficit.

Mr Radebe asked what BANKSETA meant by customer focus and how effective this was.

Mr Makhubalo answered that BANKSETA had sub-committees of the board for every learnership, for learnership development and in ETQA to ensure that the programmes responded to the real needs of the sector, and also to ensure that individuals’ skills could be developed.  Thus needs were identified and the progress could continue as planned. He added that the percentages achieved were calculated by putting what was achieved against the targets and multiplying that by 100 over one. The reason for the high percentages in specifically skills development was that BANKSETA, where money was saved, opened a funding window in order for additional people to be trained; also an additional of 500 learners were taken up out of the banks’ own funding.

Mr Radebe asked where exactly the co-operatives were trained in the rural areas and how effective the project was, and about BANKSETA’s communication strategy in reaching the disadvantaged areas. Who would be able to gain access to its services?

Mr Makhubalo replied that the co-operatives were trained in Limpopo, Mpumalanga and KwaZulu-Natal. The names and areas as well as who was trained and what the training entailed could be made available to the Committee. BANKSETA used local newspapers and radio in order to reach the remote areas; it also employed a mobile training facility, and that was equipped to provide training within these remote areas.

Ms Mushwana (ANC) asked if any incentives were used when encouraging learners to work in the bank sector, as the salaries of bank clerks were of great concern.  As to BANKSETA’s statement of promoting and accelerating quality training for all in the workplace – whom did the all encompass and did it include municipalities?

Mr Makhubalo replied that municipalities were under the local government SETA; BANKSETA focused only on individuals placed within banks and the micro finance sector. The salary that the banks offered was the result of negotiation between representative unions and employers - the BANKSETA did not get involved. However, BANKSETA paid each learner R2 500 per month in order to provide lunch, airtime and transport money in the course of the training. Unfortunately in many instances the responsibility of being the sole provider for their families fell upon the learners.

Mr K Dikobo (AZAPO) raised the issue of recognition of prior learning (RPL) and asked why local universities were not used. He also asked what the relationship between BANKSETA and local institutions of higher education was.

Mr Makhubalo replied that universities mostly regarded RPL as competition. Universities did not accept the agreement that when enough experience was gained within a sector, it could be seen as equivalent to a degree. BANKSETA had good relationships with historically disadvantaged universities and assisted them as much as possible in terms of the training of financial market reporters and in terms of bursaries given to train chartered accountants. BANKSETA had an overall good relationship with the universities of South Africa specifically in terms of the funding provided for doctor of philosophy (PhD) programmes.

Ms Nelson asked if BANKSETA believed that the targets were set extremely low because achievement reached was exceptionally high.

Mr Makhubalo answered that the targets were determined via a global number set by the Department of Labour; these numbers were then divided between the SETAs. Thus the Department determined the targets. However, he suggested that perhaps the SETAs should be allowed to set their own targets.

The Acting Chairperson focused on the importance of strategic plans and stated that consistency was needed. She asked few Africans were found at top level management within the banking industry.

Mr Makhubalo answered that BANKSETA provided learnerships on the basis of the ability of the sector to train individuals and according to the projected number that could be absorbed within the banks. There were still 71% of trainees working inside banks, including previously disadvantaged young people. A lot more people of colour were inside the banking sector than in any other sector, thus the sector had done more than any other sector given the environment. Even if the will existed to transform top management levels, the reality was that of the 28 000 chartered accountants in the country, only 2 000 were African. Many South African chartered accountants could be found abroad.

Mr Van der Westhuizen noticed that the FoodBev SETA stated that SETAs did not offer training whereas BANKSETA offered training.  He wanted this to be clarified and asked if BANKSETA was operating outside its mandate by offering training or if this was part of its community effort.

Mr Makhubalo replied that BANKSETA facilitated training and had a committee of experts to define what training should be provided and to ensure that training took place. It provided funding for training to be conducted through other institutions. A mobile training solution was also provided to conduct training in computer skills and customer services. All SETAs could not do the same, as the environments of the SETAs differed.

Ms Gina asked where the centres of excellence were situated, what their progress was and how many were being trained in this regard.

Mr Makhubalo answered that the centres of excellence were situated within three towns in the Eastern Cape. Trainers were paid to help the teachers and train them. Training was focused on mathematics, accounting and English.

Ms Magazi asked if the training of accountants within South Africa was efficient but if it was necessary to improve the number of matriculants with qualifications in accounting and mathematics in order for them to enter the programmes. It was difficult to recruit accountants and financial mangers with good qualifications.

Mr Dikobo asked if BANKSETA had no provincial offices and if so if there was any intention to expand offices to other provinces in order to improve accessibility.  As to retention and performance bonuses, he asked BANKSETA to account for the amount of each separately and to send this information to the Committee in writing.

Mr Makhubalo answered that it would not be financially feasible to have offices within all the provinces. Offices could be opened, rent could be paid, more staff could be employed or the money could be used for the development of skills. BANKSETA provided bursaries to accounting students, offered learnerships and funded PhD studies.

The Acting Chairperson asked what amount went into bursaries by percentage to support the industry in producing more people with the necessary skills. She also asked how BANKSETA supported the individuals who showed interest to ensure that they developed within the industry.

Mr Hoon replied that SETAs were required to act as the implementation agencies of the Department in order to implement the requirements of the Skills Development Act 2009. The purpose of the Act was to implement national sector and workplace strategies and to improve the skills of the South African work force. SETAs must insure that this happened. Section 10 of the Act was to prescribe the functions of the SETAs. These functions included developing sector skills plans, implementing the plans, creating learnerships, and registering learnerships.

The meeting was adjourned