National Skills Fund and National Skills Authority 2010/11 Annual Reports

Meeting report

National Skills Authority 2010/11 Annual Report and Financial Statements
Mr Eddie Majadibodu, Chairperson, National Skills Authority, briefed the Committee on the establishment and functions of the National Skills Authority (NSA). He noted that in the 2010/11 financial year if had been necessary to manage the shift of the functions, in respect of the Sector Education and Training Authority function, from the Department of Labour (DoL) to the Department of Higher Education and Training (DHET). This had presented a new window of opportunity to review the skills development system, and align it with the national priorities of government.

Mr Majadibodu advised that the main function of the NSA was to advise the Minister on the National Skills Development Policy (NSDP), National Skills Development Strategy (NSDS), NSDS Implementation guidelines, National Skills Fund (NSF) Funding Allocation Strategic Framework and Criteria, and the Skills Development Act and Regulations, excluding the Quality Council for Trades and Occupations. The NSA reported to the Minister on the progress of the NSDS and liaised with the Sector Education and Training Authorities (SETAs) and the Quality Council for Trades and Occupations (QCTO) in accordance with the Skills Development Act.

Mr Thabo Mashongoane, Director, NSA, briefed the Committee on the Annual Report. In the 2010/11 financial year, the NSA had provided advice to the Minister on NSF matters, SETAs, skills development and the Skills Summit. In respect of the NSF, it had advised that the figure for administration should be capped between 2% and 10%. The NSF strategic plan should also put emphasis on the allocation framework. It had recommended that the lifespan of the SETAs should be extended by one year, for the 2010/11 period. The poor performing SETAs should be placed under administration.

The NSA had actively participated with a number of important role players in a Skills Summit held in conjunction with the DHET. This resulted in a declaration of commitment by stakeholders.

He noted that NSA also conducted investigations, and two investigations were currently under way. The investigation into alleged mismanagement at the CHIETA SETA was done, and the new Council had been requested to conclude the implementation of the recommendations by the end of November 2011. The investigation done by the Standing Committee on Public Accounts (SCOPA) was referred back to the DHET, after the findings made public in the preliminary report.

Discussion
Mr S Makhubele (ANC) said that there was a need to find a way for the NSA to move forward, as this was not clear from the presentation. There was a need for the entity to move beyond merely stating that if it had more capacity, it could do different things, and to state what could be done with what was available. He noted that it was problematic if the NSA sought to rely on funding that was not guaranteed.

Mr Majadibodu replied that the NSA had been told already that it must find a different path. During 2009, it was said, in a workshop, that the NSA was “like a body without a soul”, and it was clear that a new proposal was needed to reposition the NSA. He noted that this meeting was not an appropriate one to present the proposals.

Mr A Mpontshane (ANC) commented that there was a problem of lack of skills, coupled with high unemployment rates in the country. He asked if there were specific plans in place to produce a set number of skilled people in the country, in specific fields, and if this did form part of the mandate of the NSA.

Mr A van der Westhuizen (DA) thanked the NSA for the insightful presentation. He said that he believed that the NSA should be a body that brought together labour market experts who were able to identify the skills needed in South Africa. The NSA appeared to be comprised of government officials, who may have a tendency to give the advice that the Minister wanted to hear. He asked if NSF believed that there was a need for independent people to advise the Minister. He also asked why the Auditor-General (AG) had expressed unhappiness about the strategic plan of the NSF. He noted the comment that the administrative portion of the NSF fund should be increased. He wondered if it was necessary for the NSF to have such high expenses. He also asked what had determined the recommendation around a 10% capping.

Mr Majadibodu said that he would treat some questions as suggestions. NSA was not opposed to approaching people from the labour market to seek advice. He said that the role of government officials is to implement policies. The NSA, in principle, would have no objection to having broader independent thinking, and there was a need to reach a balance.
 
Mr Mashongoane added that the composition of the NSA was purely constituency-based. The NSA comprised two skills experts from the Department as well as representatives from universities and private providers. The five representatives from National Economic Development and Labour Council (Nedlac) were also viewed as “government” representatives.

Mr G Radebe (ANC) asked what the terms of reference were, in terms of reporting to the Minster, and how often this occurred. He thought that too much money was spent on organising conferences and the implementation of knowledge gained was not seen in practice.

Mr Majadibodu replied that the Minister approached the NSA on certain issues and gave it a specific mandate. The NSA would also attend to ad hoc investigations. There was a requirement for the NSA to meet with the Minister on a monthly basis.

Ms W Nelson (ANC) asked when last a skills audit was done in the country, and on what it had been based.

Mr Majibodou said that the NSA did not have a national, well co-ordinated skills audit, but some work was done on this in the first draft of the NSA reports.

Ms Nelson asked what advice was being given by the NSA on experiential training. She pointed out also that there were no places for students from technikons to acquire their workplace-based training, after completing their theoretical studies, and wanted to know what advice was being given by the NSA on this point.

Mr Majadibodu said that the NSA had asked the Minister to try to open up work places, so that people could become trained and could gain entrepreneurial skills.

National Skills Fund Annual Report 2010/11
Ms Percy Moleke, Deputy Director General, Department of Higher Education and Training, introduced the presentation on the National Skills Fund (NSF) Annual Report. He noted that he would be assisted by the Chief Director and Chief Financial Officer.

Mr Mvuyisi Macikama, Chief Director, DHET, explained that the first reporting period of the new Department was the 2010/11 financial year, since it had been established during the macro re-organisation process of National Government in 2009/10. In this reporting year, there were many transitions in the department. The NSA had already cited some, including the transition from the National Skills Development Strategy 2 to a new Strategy 3, and the relicensing of the SETAs, which had a direct impact on the work of the NSF. There was development on the third phase of the National Skills Development Strategy.

The key strategic objectives and achievements of the NSF were outlined. It should support projects identified as national priorities in the context of the NSDS (2) and (3). He stated that, in terms of performance, 6 979 undergraduate bursaries were awarded to support studies in critical skills. Post graduate bursaries awarded benefited 1 200 people for critical skills support. A partnership with the National Research Foundation (NRF) resulted in the award of a further 856 post graduate bursaries. The variance in figures from the previous year was the result of a scaled down programme focused on Masters and Doctoral fellows. There was support given to strategic projects that targeted skills for macro-economic policy initiatives of South Africa. 4 399 people benefited from learnerships and internships, in projects implemented through provincial governments. The scarce skills artisan programme benefitted 4 000 people.

Mr Macikama noted that the NSF had established a partnership with Department of Public Works (DPW) and had committed R200 million. 7 158 learners received training, and a total of 6 859 people were placed during this period. The provision of grants for the training of youth on life skills through the Further Education and Training (FET) system, which was intended to benefit 500 000 youths, was postponed due to the delay in the launch of the NSDS (3).  A total of 520 workers benefited from skills interventions through the Training Layoff Scheme.

The Acting Chairperson stated that it was important for the NSF to report on the beneficiaries of the funds as this was problematic in South Africa.
 
Mr Macikama said that he had endeavoured to give an explanation for the low figures in the report.

Mr Theuns Tredoux, Chief Financial Officer, DHET, then presented the financial report and highlights from the report of the Auditor-General (AG). He noted that the NSF functioned within the framework of the DHET Corporate Services. There was joint financial management of its funding by the Chief Financial Officer of the DHET and the NSF.

The NSF faced some key accounting challenges. Firstly, it was using the modified cash accounting system as opposed to the accrual basis of accounting. The NSF was regarded as a public entity, although it was not actually listed as one, and therefore it should have been using the accrual basis. The services of PriceWaterhouseCoopers had now been secured to assist the NSF in its conversion from the cash basis to the accrual system of accounting.

Mr Tredoux noted that the total revenue of the NSF was R2,1 billion, of which R15 million was an allocation from the fiscus. Its total expenditure was R633 million, and he outlined that the majority of this consisted of grant disbursement. The total of all NSF projects was R564 million. Other costs were employment costs, operating expenditure and management fees, bank charges and SARS collection fees (see attached presentation for figures and full details). He noted that most of these related to administrative costs, and they accounted to R70 million. This resulted in a net surplus of R1.476 billion.

Mr Tredoux noted that although the contract commitments were not included in the presentation slides, they were reflected in the financial statements of the NSF, and amounted to R6,6 billion. The total commitment on existing and approved projects is R1.185 billion. There was R5.4 million available for disbursement.

Mr Tredoux noted that although the NSF received an unqualified audit opinion, there were certain key matters highlighted, although these did not affect the final opinion. Most of the irregular expenditure was able to be condoned. There was an investigation into this, and this would be concluded by 30 November 2011, after which the necessary steps would be taken. The salary of one official, Mr Macikama, was highlighted as an “irregular expenditure” because he was seconded from a private institution. There had been restatement of corresponding figures. The AG also noted that there was material under-spending of the budget. It was also noted that the NSF is not listed as a public entity.

Discussion
Mr Radebe asked for clarity on the processes for youth skills development, and asked if the career information hotline was free or came at a cost.

Mr Macikama replied that the Youth Skills Development programmes were being run in different provinces, and the main focus was on the unemployed young people.
 
Dr J Kloppers-Lourens noted Members were in possession of the Annual Report, and she thought that written responses were needed on some crucial questions. She asked how the targets had been determined, and why they were so low. She noted that the Adult Basic Education and Training (ABET) now appeared to be referred to as “Adult Education and Training” (AET). She asked for confirmation whether the programmes broadcast by the SABC were really broadcast in all languages.

Mr Macikama replied that under the new NSDS 3, there were constraints around the annual engagement. The entire system has actually managed to exceed the targets it set for itself. AET was regarded as a major intervention. He confirmed that the SABC programmes were broadcast in all languages, except English and Afrikaans.

Mr van der Westhuizen said that his party, the DA, had had concerns about the management of the NSF for many years. He thought that the report of the NSF in the previous year had been particularly poor. He believed that there was a need for political responsibility on this point. The NSF was supposed to be a fully-functional part of the DHET, but he believed that DHET and the NSF were failing the country and its youth. Skills development should contribute to job creation. The best way to “kill off” jobs was to take taxpayers’ money, and then not to spend it properly, and this was precisely what was happening with the NSF. The SETAs received far more applications for learnerships than they could fund. It was very wrong that Community Based Organisations (CBOs) should be  dependent on churches and foreign donors for skills development, when there was money available from government. He asked when the problems highlighted by the AG would be corrected, and whether a political decision by Parliament was needed in order to do so.

Mr Macikama said that there was a huge skills gap and that it was not right for young people to collect short course certificates which did not actually result in them acquiring skills.

Mr C Moni (ANC) asked if this meant that strategic plans were modified or adapted after approval.

Mr Makhubele said that spending seemed to be problematic, as billions of rands were carried over to the next financial year. The NSF appeared to be incapable of spending money, and mechanisms must be found to unlock this.

Mr Makhubele asked who ran the Career Advice Service (CAS), and whether this was allied to the South African Qualification Authority (SAQA) or NSF. He noted his concern that no monitoring and evaluation reports were submitted, and that NSF apparently did not have the required capacity for this. The Department of Labour did have capacity and infrastructure, before the transition, and he wondered if the NSF could not call on this infrastructure.

Mr Macikama replied that SAQA and NSF did engage on the matter of the Call Centre, but it related to only a very small part of the engagement, and related to R20 million. Site visits were undertaken and projects were approved at regional offices.
 
The Acting Chairperson agreed with Dr Kloppers-Lourens that the Committee needed further written responses. She suggested that a specific training project be started for FET Colleges, to focus on training and producing academics. He said that new academics were needed and that there were many untrained lecturers teaching in FET Colleges.

He noted that the Committee had a very good relationship with the AG.
 
The meeting was adjourned.