Skills Development Amendment Bill: briefing

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Employment and Labour

18 August 2003
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Meeting report

LABOUR PORTFOLIO COMMITTEE
19 August 2003
BRIEFING BY DEPARTMENT ON SKILLS DEVELOPMENT AMENDMENT BILL [B46-2003]

Acting Chairperson:
Mr D Olifant (ANC)

Documents handed out:
Skills Development Amendment Bill Power Point Presentation
Skills Development Amendment Bill [B46-2003]

SUMMARY
The Director General explained that although the current model worked, there were problems that required attention.  The Bill sought to address these.  It would give the Minister power to intervene on the remuneration and equity profile of SETA board members and to merge and change the scope of SETAs.  The Bill amends the Act to bring it into line with the PFMA.  Annual service level agreements will be made obligatory for SETAs.  Amendments will deal with exploitative private employment agencies.

Members asked the Department about the Minister’s new powers, about skills development programmes (including ABET, learnerships and apprenticeships) and about gaining access to SETA documents.

MINUTES
Department on Skill Development Act

Adv R Ramashia (Director General, Department) gave the briefing.  He stated that prior to 1994, education and training had been racist and sexist which led to skills problems and challenges.  There was a problem because one had to address the lack of a basic education in numeracy and literacy to be able to train people.  Competition for skilled people had led to high skills costs.  The majority of firms had been excluded from the training arrangements, so there had not been enough expansion of the skills base.  The low skills level led to a low value-adding bias because a higher one could not be supported. 
South Africa scored poorly on skills in the competitiveness report.

The Skills Development Act was introduced to develop the skills of the South African workforce, to increase the levels of investment in education and training in the labour market and to improve the return on that investment, and to encourage employers to support the enhancement of skills.  New institutions were introduced, including: the NSA (National Skills Authority), 25 SETAs (Sector Education and Training Authorities), the SDPU (Skills Development Planning Unit), and employment services at Labour Centres.  There was unanimous agreement on the levy/grant scheme, with a 1% payroll levy implemented as a compromise.  20% of this levy was set aside for the National Skills Fund for the unemployed.

The model has worked but there are challenges to be met.  There have been isolated instances of fraud and corruption.  Not all SETA boards are playing an optimal role – unions and companies often send junior officials to the boards.  Certain Government departments were also guilty of this at times.  Such junior officials could not take strategic decisions which hampered the boards.  Not all SETAs met their 2002/3 targets as per their business plans.  Two SETAs received qualified Audited Statements for 2002/3.  The Department wanted accountable people on SETA boards.  They would provide training for some union representatives to assist in this.

Adv Ramashia explained that the Department was not engaged in a fundamental review of the Skills Development Act.  The Amendment Bill was introduced to sharpen the current instrument.

The Skills Development Act did not give the Minister power to respond to problems or to criticism of excessive wages, poor equity profiles, etc.  The Minister thus ended up responding to issues over which he had no control.  The amendment would give the Minister the power to intervene in cases of mismanagement.  The Act allowed the appointment of an administrator to take over the SETA, but did not provide for interim corrective action before considering the extreme step of appointing an administrator.  The Bill would correct this.  There will also be certain technical amendments to improve operation.

SETAs would be obliged to address equity on their boards and in their staff composition.  The Minister will gain the power to merge and change the scope of SETAs.  Before doing so, the Minister must consult the NSA (National Skills Authority) and the affected SETAs.  This is thus not a carte blanche power.  The Minister will be given the power to set national norms and standards on payment and performance when needed.  These may be regulated according to a new schedule to the Act, Schedule 3.

The Bill amends the Act to bring it into line with the PFMA.

Annual service level agreements will be made obligatory for SETAs.  This will define performance targets and enable the Department to deal with poor performance and failure to meet targets.  A new standard for good practice in skills development – the Investors in People standard – is introduced.  This recognises organisations that have demonstrated a commitment to developing and recognising their people.  The proposed amendment will empower the Minister to recognise a standard as a nationally recognised standard.  Further, the Director General will be empowered to support the standard with funds from the National Skills Fund.

The Minister is given power to influence the use of SETA administration funds.  He will have a discretionary power to determine salaries and allowances of board members if he deems it necessary.  A limit will be imposed so that no more than two percent of the money allocated to the National Skills Fund may be used for administration.

Amendments will deal with exploitative private employment agencies.  Agencies must already register with the Department, but there is confusion around the power of the Director General to deregister agencies.  The amendments will clarify this.  The Amendment Bill will introduce a new concept – an intermediate agency for learnerships.  These will allow an employer to contract a dedicated agency to perform the function of an employer in learnership agreements and contracts.  There will be a consequential amendment to the Mine Health and Safety Act.

Discussion
Mr C Redcliffe (DA) stated that there had been criticism that the SETA system was too complicated.  The criticism came from mostly from SMMEs which should be the greatest providers of jobs in the economy.  Would this be addressed?

Adv Ramashia replied that the matter had been discussed in the lead up to the Growth and Development Summit.  The difficulties appeared to be administrative in nature and blockages would be addressed.  This would allow more training at SMMEs.  The problem could be handled without legislative action.

Ms Bird added that there was assistance through employment and skills development agencies.  The Department was looking at a subset of agencies which would act as employer in learnership projects.  The agencies would help by employing young people and introducing them to small businesses as learning opportunities.

Mr Redcliffe asked what best practice would be used when the Minister used the discretionary power to set the salaries of board members.

Adv Ramashia replied that there was a body of experience on setting salaries and the Department would look at best practices in that experience.  He gave the example of the Minister for Finance, who is empowered to indicate the amount that chairpersons and members of certain statutory bodies should be paid.  The remuneration of the employment equity and working conditions bodies could be set, but the SETAs fell outside Government and so did not fall under that authority.  Market forces would be allowed to influence the setting of salaries.  The Minister would consider the size of the SETA, the qualifications required and so on – typical human resources criteria.

Mr Redcliffe asked to what extent there would be intervention on salaries.  Would the rates relate to companies in the private sector?  He asked for a sense of what was being considered.

Adv Ramashia replied that he could not answer this question ahead of time.  The Department wanted the power to regulate the remuneration and would look at scales at the appropriate time.  He cited a case in the media of a municipal manager who earned more than the Minister for Finance and yet was only responsible for an area with fewer than ten thousand people in it.  This was a problem of design.  There were standards for Provincial and National government, but it was a free-for-all at municipal level.  The Minister for Public Service and Administration was looking into regulating remuneration at municipal level to address this.  Similarly, SETA remuneration was a free-for-all.  Once the Department had the power, they would look at the environment to develop standards.  The Department did not want to take away fiduciary responsibility from the SETAs.

Mr Redcliffe asked when the annual reports for the last financial year and business plans for 2002 of the 25 SETAs would be available.

Mr S Morotoba (Senior Executive Manager: SETA Co-ordination, Department) replied that the annual reports for the SETAs would be tabled by 27 August.  They had received their audited financial statements at the end of July.

Mr S Mshudulu (ANC) asked how the ABET programmes could be monitored and supported.

Ms A Bird (Deputy Director General: Employment and Skills Development Services and Human Resource Development, Department) replied that the Department had set a national target of at least 70% of workers achieving basic literacy and numeracy by March 2005.  SETAs had to provide quarterly reports on their progress towards this target.  The Department prepared annual reports based on these.  Twenty percent of the skills levy went to the National Skills Fund.  The Fund has been used to support ABET.  Grants had been made to community development projects.  The Department tended not to support stand-alone ABET programmes, preferring to support those that are part of community development projects.  The Department had funded large strategic projects, with over R1 billion allocated to 19 such projects, including ABET.  Over half a million people were going through ABET programmes.  Quarterly monitoring reports were available on the Department’s website.

Mr Mshudulu asked if the SETA programmes could be monitored more closely using Information Technology.  It would be better not to have to wait for the media to point out problems.

Mr Morotoba replied that the current quarterly monitoring report was based on an information technology network.  This dealt with over 220 000 companies from which the SETAs got information.

Mr Mshudulu asked if the Department could provide copies of the service level agreements to the Committee so that they could contribute on this.

Adv Ramashia replied that there were existing service level agreements with SETAs, but these were voluntary and there was little the Department could do to enforce them.  The Department thus wanted legislation to require that SETAs enter into and hold to agreements.  There is a serious skills deficit and the Government was relying on SETAs to deal with the matter.

Mr Morotoba added that the Department had been piloting service level agreements for two years.  They had used memoranda of understanding because there was no legal basis for the agreements.  The memoranda contained the obligations and targets.  The Department could make these available.  They are published on the SETA websites.

Mr Redcliffe asked if there was a single site with links to the SETA sites or if the SETA websites’ URLs could be made available.

Mr Morotoba referred Mr Redcliffe to the Department’s website.  If one looked under ‘legislation’ and from there under ‘skills development’ one would find the publications the Director General had mentioned.  There was also a contact list of the SETAs, with their addresses given.  He would look at providing an example of a service level agreement and business plan to the Committee.

Mr Mshudulu asked if a print out of employment agencies could be made available to Labour Centres.  Agencies were being used by large employers as scapegoats for lack of transformation.

Adv Ramashia agreed that agencies should be monitored at Labour Centre level.  The powers granted in the Bill might be delegated to provincial Directors or to Labour Centre heads because of the proliferation of these agencies.  The Department was asking for the instrument to deal with the agencies – how the instrument was used would depend on the experience on the ground.

Mr G Oliphant (ANC) stated that when the Skills Development Act was passed, they were looking at an unparalleled programme of skills development.  The Department was doing well, but he was disappointed in some SETAs.  They could not lose focus on what had to be achieved and have matters descend into a powerplay between the Department and the SETAs.  He asked what powers the Minister had over SETAs that were not performing.

Adv Ramashia agreed that the last thing needed was a turf battle since the country faced a serious skills problem.  The Department would be able to flesh out how to avoid a battle.  They wanted to ensure that SETAs that were not performing started to perform.  It had been a good approach to have SETAs run by social partners.  There was a weakness in this though in that the Minister carried political responsibility for the SETAs but had no influence over them.  The Department were asking that they be able to influence and monitor SETAs so that they could account for them.

Mr Morotoba added that Section 15 of the Skills Development Act allowed taking control of a SETA if it did not perform.  There were three conditions that allowed this.  The Administrative Justice Act requires that the affected people in such take-overs are heard.  The new provision would allow for intermediate interventions before taking the final step.

Mr Oliphant noted that there were over 37 000 learners and over 10 000 apprentices in skills development programmes.  It was important that the impact was felt in communities – a ‘buzz’ was needed.  There should be clear guidelines available to unemployed persons on what to do to get into the programmes.

Adv Ramashia agreed that generating a ‘buzz’ was important.  The Department was going to train people that work in Labour Centres to become community development workers.  This was part of the move away from people having to come to the Government for services.  These officials would go into communities and liase with NGOs and other stakeholders.  The Department would continue to market these programmes and asked that members provide information about them in their constituency offices.

Ms Bird added that generating the ‘buzz’ depended on employers buying into the scheme.

Mr Oliphant asked what commitment Government and Government Departments were making, especially those that had sent junior officials to SETAs.  The Committee needed information.  What is the format for the service level agreements?

Adv Ramashia replied that Department had recommended to Cabinet that Departments with SETAs allocated to them send senior people to sit on the boards.

Mr Oliphant asked about the standard to be recognised – is there experience of such standard recognition?

Ms Bird replied that the
UK had extensive experience applying the standard.  The UK government had found that UK companies were not investing in their staff so devised the standard.  It requires companies to have a commitment to training and to provide an account of what they are doing about training.  Companies were helped to reach the standard and then assessed against it.  Assessors spoke to managers and ordinary staff.  Certain South African companies already met the standard, such as BMW.  The Financial Services and Transport SETAs met the standard.  The Director General would allocate funds for the standard from the National Skills Fund.  Companies would contribute significantly to the funding, but the Department would have to cover residual costs.

Mr Oliphant asked what the two percent set aside for administration represented.

Ms Bird replied that it was the norm for funds to provide for their own administration.  Usually, five percent of the funding was set aside for this, so two percent is a low figure.  It would be two percent of the twenty percent of the skills levy.  The administration costs thus represented up to R12 million per year.

The Acting Chair noted that there was ABET, learnerships and apprenticeships.  ABET was clear and understandable.  At what point, though, does a person in a learnership programme get recognition and what level of recognition does the person receive?  Do learnership programmes lead to qualifications or were they a step into apprenticeships?

Ms Bird replied that there had been confusion about the distinctions.  The term ‘learnership’ had been adopted because it resonated with ‘apprenticeship’.  Learnerships focus on new areas.  For example, one of the learnerships was a national certificate in tour guiding, another was a national certificate in dispute resolution – a learnership in the legal field.  Some apprenticeships had been translated into learnerships to allow an incremental approach.  A three year commitment (necessary for an apprenticeship) might be too much for a small business.  Instead, businesses could commit to learnerships of one year, with a national certificate at the end of each year and the apprenticeship spread over three levels.  There was no clear division.  Whether a learnership led to an apprenticeship depended on how the programme was registered.

The Chair noted that learnerships had been implemented in his constituency.  He was concerned that there was no system that bound the employer.  What happened after level 2?  Was there any obligation to take the person further?  A one year certificate was no guarantee of employment, especially when competing with an apprenticeship.

Ms Bird responded that employers refused to take on learnerships if they were required to employ the person at the end.  They were prepared to commit to the training programme.  The Department had to strike a balance here.  They were starting a venture creation learnership to guide people into self-employment.  They would encourage employers to take on the learners, but had this available as a fallback.

The Chair stated that deliberations on the Bill would begin on 16 September.  There had been no requests for public hearings on the Bill.  The Committee would be receiving input on the UIF Amendment Bill.

The meeting was adjourned.

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