National Skills Fund on its plans to address unemployment among young people

Meeting report

Opening Statement by the Minister
Minister for Higher Education and Training, Mr Blade Nzimande, told the Committee that he appreciated their invitation to brief them on the National Skills Fund (NSF). He always looked forward to the Committee's ideas and constructive criticism about what he and the Department of Higher Education and Training (DHET) were doing. He reminded Members that when the DHET was established in 2009, a Presidential proclamation had transferred the Sector Education and Training Authorities (SETAs) and the NSF to the DHET. The proclamation took effect on 1 November 2009. Since then, a lot of work had been done on the NSF, especially attending to its backlog. When the DHET took over the Fund, it found that the NSF was involved in thousands of little projects. The most important work the DHET had to do was to review the NSF's operations, with the intention of aligning them with the priorities of the new DHET. The DHET was concerned that the NSF was functioning like an “ATM or a Father Christmas”. The NSF was still in a bit of a “lacuna”. The NSF's levy fund was still guided by the National Skills Development Strategy II (NSDS II), which came to an end at the end of March 2011. The DHET had been trying to realign the priorities of the NSF and the SETAs while they were trying to develop the NSDS III. A lot of work had been done on the NSF despite this. The DHET's aim was for the NSF to become a development fund focused on skills development. The DHET inherited a fund that had a huge amount of unspent and uncommitted funds. The NSF did not have the capacity to monitor the spending of its funds; hence it was qualified by the Auditor-General all the time. This was a huge challenge that would be resolved in a year but the DHET was trying hard to reprioritise the Fund and to build its capacity. The DHET was convinced the Fund would be using the money in a manner that would have a huge impact on the country. The Fund also lacked proper systems for accountability and monitoring, which left the NSF vulnerable to corrupt activities. One of the major explanations for the NSF's under-spending of funds was that the public was very reluctant to use public institutions. The one unintended consequence of the establishment of the levy for implementing public institutions was there was a whole private industry of training providers. Some of these institutions were doing very good work, while others were “fly-by-night” providers. The aim of the NSDS III was to direct funds away from short courses, as they wanted to direct them towards professions, occupations and trades. The DHET had a huge opportunity to make a difference using the NSF over the next few years.

National Skills Fund briefing
Mr Mvuyisi Madikama, Chief Director: NSF (DHET), noted the NSF was established in 1998, through the Skills Development Act. The NSF's mandate was derived from the National Skills Development Strategy I (NSDS I) and NSDS II. It was the NSF's duty to fund projects identified in the NSDS as national priorities, to fund projects related to the achievement of the purpose of the Act, and to administer the Fund within the prescribed limit as regulated from time to time. The Director-General of the DHET was the accounting officer of the NSF and mandated to control the Fund, keep proper records of the Fund and prepare its annual financial statements. The NSF was to be managed in accordance with the Public Finance Management Act.

Mr Madikama stated that under-spending had characterised the NSF since its establishment. This had resulted from protracted processes of change-over from one phase of the NSDS to the next, the effect of the Presidential Proclamation that transferred skills development responsibilities from the Department of Labour (DoL) to the DHET, and from general capacity constraints of the skills development delivery machinery available to skills levy institutions such as the NSF and the Sector Education Training Authorities (SETAs). This constrained the spending ability of these institutions over the years. The NSDS III had identified this as a critical area of focus.

The Skills Development Levy had been introduced in 1998 and considerable financial resources had become available in the country for skills development. However, there had been a non-allocation of these new-found financial resources for physical capacity building of dedicated institutions for skills development such as community skills centres. As a direct result of this vacuum, the country saw saturation of short skills development providers in tens of thousands across the country, with offerings, most of which have led many young people “around in a circle”.

The DHET was in the process of reviewing the NSF's skills development projects. This was necessary to determine the NSF's strategic fit to the goals of the NSDS III and DHET plans for the future, and its alignment with the DHET's vision of an integrated post school education system. Based on the internal review outcomes, the NSF has had to re-negotiate with implementation agencies for re-costing and alignment of projects to the goals of the NSDS III, and negotiate a reduction of budget through elimination of other budget items considered excessive to the real thrust of the required training. Currently, the NSF was involved in wrapping up NSDS II processes, which included closure of current projects that have run their full period, the production of closure reports, the transfer of unutilised funds and developing an NSF six-year funding report of the NSDS II. The NSF was also preparing for the implementation of NSDS III by developing criteria and regulations for NSDS III implementation, by consulting with the National Skills Authority (NSA) about the funding framework, criteria, procedures and regulations, and by working with the DHET to develop an appropriate structure to support the new NSDS strategy.

The NSF continued to interact the Provincial Skills Development Forums (PSDFs) through the National Skills Authority, especially in relation to strategic projects run through provincial governments and SETAs. The NSF had set aside funding of R900 000 to cater for the PSDFs operational requirements.

In terms of key interventions for skills and employment, the Minister made R150 million available to National Student Financial Aid Scheme (NSFAS) to fund full cost studies in critical skills and for rural students in all institutions of higher learning in the country. A further R100 million was allocated to a contracted agency, Career Wise, to fund, through bursaries, the full cost of study of first year and continuing students in critical skills required by the country. A further R94 million was earmarked for allocation to the National Research Foundation to fund students in post graduate, masters, doctoral and high-level research programmes. The NSF has further committed R200 million to the Extended Public Works Programme (EPWP) targeted at training 40 000 beneficiaries. Currently, the NSF supported 268 community-based organisations by training 1935 learners in various skills that included organisation management and technical skills. The NSF facilitated the provision of skills development support to 367 community-based co-operatives. It had 29 active Memoranda of Agreement with service providers across all the provinces. The NSF gave skills development support to emerging entrepreneurs in rural areas through the Basic Employment Skills Development (BESD) programme. The continuation of the BESD programme was under review in light of the new strategy, NSDS III. The NSF, under the Industry Support Programme, supported the Department of Trade and Industry (DTI) by providing training incentives to newly established businesses and by helping businesses to expand. The NSF was seized with preparations for the new NSDS III, to ensure the current and future funding obligations are guided by a framework and criteria that speaks to the new NSDS. All processes were expected to be concluded by 15 April 2011.        

Key strategic issues included the establishment of a strong monitoring and evaluation capacity, broad communication of the NSF funding framework and applicable criteria to facilitate the implementation of the NSDS III, building appropriate capacity within the NSF to disburse grants in an efficient manner, addressing skills for priority government programmes, and developing strong partnerships to increase the capacity of the system to deliver on skills.

The NSF had a projected income of R2 billion for the current financial year ending 31 March 2011 and its budgeted expenditure amounted to R3 billion, which represented a budget deficit of R1 billion. This deficit was approved by the National Treasury due to the availability of surplus funds in the NSF coffers from previous years. In recognition of the Fund’s under-spending in previous years, the NSF had revised its 2010/11 budget to fall in line with expected spending, a process that was still underway within the DHET. Overall, to date, the NSF had total funds amounting to R6 billion, before accounting for commitments. The NSF was not ready to expend all their surpluses in one go due to the limited skills development and training infrastructure in the country. However, the NSDS III provided a welcome opportunity for the NSF to foster a wide range of partnerships to facilitate processes of skills development in the country, in a manner that would ensure the skills development levy was spent in the most productive and efficient manner.

Discussion
Mr A van der Westhuizen (DA) said the picture that he had was funding from the NSF had dried up over the last year. The NSDF targeted the funding of African black people for training. However, public providers did not cater for certain kinds of training that private providers did, which meant certain types of training would still be reserved for the privileged. The Committee wanted the disadvantaged to become network engineers, skin and health therapists etc. The NSDS put strong emphasis on public institutions. He asked if this was correct.

The Minister admitted that some of the NSF's funds had dried up over the last year. Some of the projects the NSF had funded were good, but the others were not quite up to scratch. However, the DHET could not just cut projects, as it could negatively affect communities. The DHET was still evaluating which projects they would be continuing with and which they would not be. He hoped to discuss this at another meeting with the Committee.

He said the most vulnerable 18-20 year olds were black Africans and coloureds. This was the government's priority. The situation was worse for black Africans, but coloured people were not far behind. This problem had to be dealt with. The government wanted to focus on black Africans as well as coloureds.

On the issue of public and private providers, the government had a duty to build a high quality, post school public education and training institution. This was a priority. This was the purpose of the Further Education and Training (FET) colleges. The government was willing to work with the private sector regarding skills training and work. But, the public sector had to play a leading role. The private sector had to be brought in to help the public sector “bring up” its capacity. The government was not anti private providers; it was pro public providers.

Mr S Makhubele (ANC) noted there was a lack of infrastructure at skills development centres. This also spoke to the impact on rural development. The DHET also had to consider the possibility that the NSF should focus on infrastructure for skills centres as well. The sooner this matter was dealt with, the better. The DHET had to ensure progress could be made in each and every province. He wanted to know how many people the NSF had assisted overall.

The Minister agreed the NSF had to support capacity building for initiatives or projects the Fund thought were important. This was a task it had to accomplish, as it had not happened in the past. The DHET also wanted to form a pact with the premiers of provinces to say that they needed to support provincial skills development initiatives, but with tighter frameworks. If the NSF had to fund infrastructure for certain projects, it would require money from the fiscus. However, money received from the fiscus may not be sufficient given the desperate situations in the country's rural areas. If the government could fund a skills centre with a hundred people in one rural area, it would make a great difference in that locality.

The Minister added he was unable to answer how many people the NSF had assisted. He stated this was not going to be an easy question to answer because the DHET was still in the process of gathering information about the number of projects the NSF was involved in.

Mr Madikama added that the NSF's Annual Report would show what the yearly targets were for assisting people and if they were met. However, it was more important to look at the overall impact the Fund had on the country over the past five years.

Ms N Vukuza (COPE) noted that the Minister had alluded to the fact the DHET had many things to do to sort out the NSF. He needed to tell the Committee what he was dealing with so Members could understand what was happening. The Committee needed an organogram of the NSF. It was worrying the NSF had so many concerns, yet there was only one person from the DHET to attend to the Committee's queries. She noted the Minister had said that the DHET was “closing in” on NSDS II priorities. However, the Committee needed to know what the “big five” priorities were regarding the NSF and the NSDS.

The Minister replied that he and the DHET would have to come to the Committee, a few months from now, to do a presentation on skills development. The Human Resources Development Strategy spoke to the government's micro-policies, IPAP 2, the New Growth Plan etc. The question was which institutions the DHET had to drive these policies and what funding levers were available to them. The NSF had funding from the DHET as well as its levy money.He wanted to have a discussion with the Committee at some point about the NSDS III and what its goals were. However, today's discussion had to focus on what the Committee had asked him to present, which was the NSF. He was not being defensive, but that was the reality of the situation.

The good thing about the NSDS I and II was it allowed the NSF to respond to good community initiatives for training. The NSF would continue to encourage and fund such initiatives. The issue was the Fund’s lack of capacity to monitor and evaluate their funds.

The Minister informed the Committee he had to leave the Committee early because he had to attend a Cabinet meeting. The Chairperson thanked him for his contribution to the discussion.

Mr G Radebe (ANC) noted it was a concern that people did not want to use public institutions. He asked what the DHET's plans were to motivate people to use public institutions. It was crucial the government enhance the capacity of these institutions. In terms of service providers appointed for the Eastern Cape, Kwazulu-Natal and Mpumalanga, from where were they? Many service providers were white. Every time BEE providers applied to do certain jobs, they were told they lacked capacity. He noted the Department of Labour (DoL) would continue to monitor the NSF. He wanted to know what the DHET's relationship with the DoL was like. He suggested the Committee find the time to visit institutions that the NSF had funded.

Mr Madikama answered that a strategy had been developed for the NSF. The NSF was guided by the priorities outlined in the strategy. One of the strategies was to encourage the Department of Public Works (DPW) to use public institutions when training people. This applied especially to the programmes of the Extended Public Works Programme (EPWP). The DPW had called a meeting with principals of colleges where they discussed what skills training was available in each college across the country. 80% of the training needed by the DPW would be provided by these colleges. However, a meeting was held with the DPW afterwards, where they complained that some of the colleges were not offering the required skills programmes. They said the problem could be resolved if they called upon privately owned entities to offer the training. The DHET agreed the situation called for outside capacity. However, the intention was to build capacity with public colleges so the institution was able to engage in that particular skills programme.

He said the service providers working in the Eastern Cape, Kwazulu-Natal and Mpumalanga came from those areas.

Mr Madikama said it had been over a year since the NSF had been transferred to the DHET from the DoL. The DoL was still part of some of the projects that the NSF was involved in. The DoL had to create capacity that would ensure ongoing interactions with the beneficiaries of the programmes. In the engagements for the NSF transfer, due to the way the Fund was structured, it meant that it had to be transferred as it was since the DHET did not have the capacity to oversee the Fund. It was agreed the DoL was properly capacitated to facilitate ongoing engagements with beneficiaries of the Fund.

Ms W Nelson (ANC) asked what the DHET was doing to curb fly-by-night institutions, as there were young people walking around with certificates that were not even worth the paper they were written on. Was there a programme out in the public that informed people about the scarce skills that were needed in the country? This would allow people to decide which skill they would like to go into and this would show them which subjects were required for that respective field.

Mr Madikamaanswered that there were a variety of short courses available to the public. The DHET had specific requirements that had to be met by service providers. The DHET also required contact numbers of people using those providers. This allowed the DHET to see if the funds given to the provider were being used for its intended purpose. The major control mechanism to curb fly-by-night institutions was that the courses outlined in project proposals had to be accredited by the relevant SETAs.

Mr Madikama said the NSF had a database that contained quite a number of training providers. There were other databases in the skills environment and in the SETAs that contained the names of service providers. There was a “generally communicated” list of the skills needed in the country.

Dr J Kloppers-Lourens (DA) noted that under-spending had characterised the NSF since its establishment. When was this going to be rectified or changed? Was it going to be an ongoing problem? She asked if the Fund budgeted for career guidance and if they expected people to write aptitude tests for career guidance.

Mr Madikama replied that the transfer of the NSF from the DoL to the DHET resulted in certain delays such as development of a framework for the NSF that was in line with the DHET's strategy. At the moment, the NSF was delayed by the launch of this strategy. Going forward, it was important to implement this new strategy. The Minister had “opened a window” that would allow the NSF to keep funding programmes and institutions while the new strategy was being implemented.

Mr Madikama addressed the matter of career guidance. The new NSF strategy identified the problem of a lack of career guidance for young students. Currently, the situation was the guidance of young people in an uncoordinated fashion, and sometimes there were large sections of the country that were neglected. This was more of a departmental matter. Both the NSF and skills institutions were called upon to make a contribution to resolving this matter, which included establishing a reasonable mechanism to ensure an integrated career guidance approach. This called for interactions with the Department of Basic Education, the DPW as well as the SETAs.

Mr Madikama said that there were a number of learnerships the NSF funded. These institutions had their own selection criteria that eliminated learners not suited to their learnerships.

Mr van der Westhuizen asked if the DHET could tell the Committee about any cases of corruption that were found in the NSF.

Mr Madikama replied that the cases were mainly about procurement processes for tenders and cases of irregular expenditure as well as wasteful expenditure.

The Chairperson stated that the Committee wanted a consolidated database of service providers the NSF had funded, specifically those accredited by the SETAs and other accreditation institutions. This would allow Members to see which service providers were in actual fact fly-by-night institutions receiving millions of Rands from the government. The DHET also had to communicate with Parliament to tell them when they would be able to give a presentation on the NSF programme that clearly responded to the NSDS priorities.

The meeting was adjourned.