Services SETA & CETA governance and management: follow-up meeting; with Minister

Higher Education, Science and Technology

26 November 2019
Chairperson: Mr P Mapulane (ANC)
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Meeting Summary

Two Sector Education and Training Authorities (SETAs), the Services SETA and the Construction SETA, appeared before the Committee to respond to allegations of corruption and mismanagement within their entities.

The Services SETA provided explanations dealing with several issues raised by the Auditor-General (AG) arising from the audit of its 2018/19 financial performance. This included irregular expenditure amounting to R934 million, allegations of bursary overpayments to learners, high expenditure of R56 million on consultants, R20 million being spent on advertising, improper conduct by the Board chairperson, and irregularities in supply chain management.

The former Chief Executive Officer (CEO) of the Construction SETA (CETA) responded to allegations that she had been responsible for an unauthorized 15% pension fund and salary increase for CETA staff, saying this was the first time she had had the opportunity of defending herself. She referred to eight revisions to the legal opinion on the matter, a signed letter by the board chairperson authorising the CEO’s pension adjustment being ignored, and four staff members involved receiving bonuses amounting to nearly R2 million. She said the matter was less about pensions and more about a conspiracy to access CETA millions by some cabal.

The National Education, Health and Allied Workers’ Union (NEHAWU) told the Committee that in April 2018, an email was circulated to the staff forum and the entire staff. The email included an attached document containing a multi-agreement which included 100% pension benefits, as well as all other benefits which had been agreed upon by the CETA. This document had been signed by the human resources (HR) manager, although the chief financial officer (CFO) had said she did not know anything about it when questioned by staff.

In September, when it had emerged that the pension benefits had not been approved, the board announced a “stop-stop and recover” strategy, and the multiple legal opinions favoured the employer. The staff had received letters indicating that they had a debt arising from benefits previously paid to them, but they had disputed this.

Members expressed much concern over the presentations, and were outraged at the state affairs at the entities concerned. There was a unanimous call for further independent investigations to take place.

Meeting report

Services SETA: Matters raised by Portfolio Committee on 30 October

Ms Amanda Buzo-Gqoboka, Chief Executive Officer (CEO): Services Sector Education and Training Authority (SSETA), provided the Committee with an explanation for the R934 million in irregular expenditure incurred in the 2017/18 and 2018/19 financial years. Of this amount, R838.6 million had been incurred during 2017/18, but was identified during the 2018/19 audit.

R17 million of irregular expenditure incurred during 2018/19 was due to actual expenditure exceeding the initial budget approved by the Minister of Higher Education and Training. The amount was made up of mandatory grants.

As the matter had been raised by the Auditor General (AG) only in the 2018/19 financial year, the irregular expenditure finding had not been anticipated, and discussions on the issue had commenced with the Department of Higher Education, Science and Technology (DHEST), the Auditor General South Africa (AGSA) and National Treasury (NT). A cumulative amount of R919 million was still awaiting condonation.

(See presentation slides for details)

Ms Buzo-Gqoboka said consequence management against the officials who contributed to the irregular expenditure had been applied, although officials involved were not longer in the employ of the SSETA.

There had been allegations of bursary overpayments to learners. Management had made payments and reconciled with the education institutions to properly allocate the amounts against various students funded by the SSETA before AGSA’s audit. AGSA had reviewed the reconciliation and communications with the institutions, and confirmed through inspection that the finding on overpayments had been resolved, but remained in the report as an internal control finding. The amounts had to be re-allocated to students not reflected on the invoice after payment was made, using the reconciliations. It was confirmed that no learner amounts were overpaid and the error was administrative.

There had been high expenditure amounting to R56 million on consultants. The high drivers of the costs were in relation to systems/applications and information communication technology (ICT) infrastructure support, insurance brokerage, risk assessments, business continuity plan and implementation, production of digital content and animations, litigation, investigations, legal opinions by senior counsel, Commission for Conciliation, Mediation and Arbitration (CCMA) representation, disciplinary hearings, human resources change management plan, and implementation strategy.

There had been high expenditure amounting to R20 million on advertising. The expenditure incurred was related to the branding of SSETA provincial offices, promotional material for events, including career exhibitions (banners, exhibition stand, gazebo), external media adverts (including advertorials), and the printing of statutory documents (annual reports, annual performance plan, strategic plan, sector skills plan). The reflection for this note should have been branding, marketing and promotional material.

The improper conduct of the Board chairperson, as contained in the National Skills Authority (NSA) report, had been raised in an NSA report to the Minister. The Minister’s meeting with the AA on 15 February had looked at several issues that affected the SSETA, including the relationship between the Accounting Authority (AA) members and the chairperson of the AA.The meeting with the Minister had resolved that the Board and the chairperson should find each other and improve the working relationship. Issues of conflict were addressed and debated at the meeting. It could be confirmed that there had been no issues of conflict after 15th February. Synergies hade been developed and trust levels had increased amongst the members.

Based on allegations of irregularities in supply chain management (SCM) as contained in the NSA report, the SSETA received an instruction from the Minister of Higher Education and Training in January to submit a comprehensive report and an action plan addressing the NSA report and the veracity of allegations received by the Department through various forms of communication. The SSETA had submitted a comprehensive report, together with an action plan, on 4 February to the then Minister, which had been given to the Committee. The final investigation report had been submitted to the DHEST for the Minister’s consideration, and SSETA awaited further instructions.

The Services SETA had conducted a research study titled, “A tracer study project on the impact of learnerships and internships in South Africa.” The aim of the study was to contribute to a better understanding of the role and effectiveness of youth skills development initiatives in South Africa and the contribution these made to facilitate youth transition to the world of work.

The key findings were:

  • The majority of learners and interns find employment within six months after completion.
  • Most learners and interns still find training valuable, as it gives them an edge in the labour competitive market.
  • Most learners and interns were critical of the quality of individual support, mentorship or coaching they received during training, and where team work was not emphasised, trainees tended to feel isolated and secluded from the environment in which they were gaining their experience.
  • The biggest challenges facing learnerships and internships include the stipend, both in terms of its perceived adequacy and when and how it was disbursed; and the quality of personal support, especially weaknesses in mentoring, and weak guidance and counselling services.

Ms Buzo-Gqoboka said the SSETA was not aware of an allegation of the purging of whistle blowers. However, because of this allegation, they had improved the whistle blower process and established an ethics committee. Whistle blower workshops had been conducted to ensure the safety and confidentiality of the whistle blower hotline.

(See presentation slides for additional questions which were noted by SSETA)

Construction Education and Training Authority (CETA): Certification

Mr Raymond Cele, Chairperson: Construction and Education Training Authority (CETA), said that the Services SETA had experienced an increase in the certification of learners. Upon review of this situation, an increase in capacity (human, systems and physical resources) had been embarked on as a solution.

As a result of the expansion experienced, 10 134 certificates due for printing in the current financial year had already been addressed.  Measures had been put in place to meet the increasing monthly demand. An additional two members of staff had been assigned to assist in the processing of certificates and statement of results (SoRs). A full review of the division was being conducted to ensure the demand was met.

Sonja Pilusa: Response to pension and salary increase allegations

The presentation dealt with an alleged unauthorized 15% pension fund and salary increase by former CETA CEO, Ms Sonja Pilusa, for CETA staff. Ms Pilusa emphasised that this was the first time she had received the opportunity to respond to the allegations which had been levelled against her.

Ms Pilusa said that CETA had appeared before the Portfolio Committee on Higher Education and Training, Science and Technology on 30 October 2019 to present their Annual Report. During this session the CETA, represented by Mr Webster Mfebe, had made allegations that she had been solely responsible for the irregular expenditure that the CETA had incurred for the 2018/19 financial year.

Ms Pilusa said she had resigned from the CETA as its CEO on 12 June 2018. She had refused to withdraw all tender-related allegations against the Chairperson. Months after her departure, she had received a call from a police investigating officer regarding a pension fund case lodged by the CETA against her. She had then referred the matter to her attorneys, and had requested that there be an independent investigation that was commissioned by the executive authority of CETA, the Minister of Higher Education and Training.

She stressed that only the CETA chairperson, Mr Raymond Cele, had been physically present at the meeting in Durban. Mr Cele had signed a letter which authorised changes to CETA’s contribution toward the CEO’s pension. There was a conflict of interest, as Mr Cele was both accuser and judge in the same matter. She added that another member had been linked electronically to the meeting and was thus an interested party who should also be answerable to an independent investigation.

Ms Pilusa pointed out that three of the current AA members who were part of the previous AA who took the decision on the pension contributions, had not been at the Durban meeting. Four people who were AA members then but were not now, and who were at the Durban meeting, had never been interviewed by the CETA on this matter, according to information at her disposal. Two of those members had deposed affidavits in a case between the CETA and NEHAWU, stating that changes to pension contributions were in fact approved at that meeting.

Ms Pilusa explained that two other people who were AA members then, but were not members of the current AA, had been absent from that meeting. She highlighted that the rest of the current AA members were not AA members then, which meant they had been deliberating and concluding on a matter they knew nothing about. The matter of the pension fund and/or any allegations attendant thereto had never been presented to her, and she believed this was a malicious attempt to besmirch her name.

Ms Pilusa said that one of the first legal opinions given was by Werksmans, and over a few months there had been eight different revisions of one legal opinion on the same matter from the same law firm. This legal opinion had ignored the signed letter of the CEO’s pension adjustments by the Chairperson of the CETA. Another reason why she had requested an independent investigation was because the four staff members who ordinarily would be charged with the former CEO in this matter were seemingly bought with hefty bonuses amounting to just less than R2 million, the lowest being R253 000. Furthermore, the matter at hand was less about pensions and more about a conspiracy to access CETA’s millions by some cabal.

On the pension fund matter, Ms Pilusa said that the CETA encouraged staff to save for their retirement, and allocated a further 7.5% from the CETA’s own pocket over and above the contribution from staff towards their pension fund. For years, the CETA appointed staff on the understanding that the appointees would pay 7.5% towards their pension fund and the CETA would pay another 7.5%, but CETA deducted the full 15% from the person's salary and made no contribution towards its staff’s pension fund. Individual employees would raise this matter, but it would be routinely dismissed by the finance manager.

NEHAWU  on CETA issues

A representative of the National Education, Health and Allied Workers’ Union (NEHAWU) said salary and benefit negotiations had been done through a staff forum in February 2018. The chief negotiator had been the chief financial officer (CFO) who, with other members of management, had communicated to staff that they had worked hard to reach an agreement over the benefits. The board chairperson had encouraged the staff to commit financially. During a farewell function, the board encouraged staff members in a speech to buy houses and cars, and send their children to upmarket schools.

On the 12 April 2018, an email was sent to the staff forum, which had forwarded the email to the entire staff. The email included an attached document containing the multi-agreement which included 100% pension benefits, as well as all other benefits which were agreed upon by the Construction SETA. This document was signed by the human resources (HR) manager. Following this communication, staff had received two letters. The first was the annual increment, and would have been a percentage according to specific occupational levels. The second letter stated that there would be 100% pension benefits by the employer to the pension fund. The NEHAWU representative said that a meeting took place where staff thanked management for the salary payments they had received, and the CFO had also thanked the staff for their hard work. The NEHAWU representative reported that the CFO had said she “had just seen the money”, while staff questioned whether the money they had received was an irregular expenditure, and wanted to know where it came from. The NEHAWU representative commented that this was rather worrisome, as there had been ongoing court battles with the CETA in relation to what had actually happened to the pension fund.

The CEO at the time stated that she was undergoing constructive dismissal due to affording staff 100% pension benefits. The NEHAWU representative said that the board had arrived the following day and a staff meeting was called. The board addressed staff, saying that there had been attempts to create divisions between the staff and the board. The board then stated that the CEO had left because it was not in agreement with her wanting to reduce the requirements of the CEO position, which was to be filled in October of the same year.

Regarding the pensions alleged not to have been approved, on 8 September 2018 the board had announced a “stop-stop and recover,” and the multiple legal opinions favoured the employer. The staff were also sent on consultative processes, and legal opinions were sought by the CETA for the CETA and its staff forum. Staff were given an opportunity to present to the board in early October 2018, but when they met with the board, they stated that they disagreed with the board resolution and the legal opinion. The staff were told that their presentation to the board should only concern the implementation of “stop-stop and recover”.

The NEHAWU representative said that the staff had felt defeated, because the legal opinion was not relevant and they wanted to get another opinion, as the legal opinion sought by the CETA for the staff forum would have been biased and subjective for the employer. They had questioned who had set the terms for the legal opinion to be sought initially. They had found a document from the National Treasury which was titled, “Investigation report”. In terms of the deliberations over the past 18 months, at some point it had been reported that there was no need for an investigation, as this matter had not been part of the board resolutions of 8 March 2018.

The NEHAWU representative questioned why there was a document which had been sent to the National Treasury which reported irregular expenditure, if there was no need for an investigation. This document had contained a legal opinion by Werksmans Attorneys, and this same legal opinion was sent to the National Treasury and indicated that it was a legal investigation report.

In 2019, CETA management wrote to the board saying that there was a need for an investigation, and NEHAWU wanted to point out that this would not have been said if there had indeed been an investigation in 2018. There had been conflicting statements from the management of CETA and the board regarding the issue of an approved pension signed by the chairperson. The board said that the minutes of a meeting which took place on the 8 March 2018 did not specify a 100% contribution to the pension fund. However, the staff had received letters on 12 April 2018 stating that there would be a 100% pension contribution. The NEWHAWU representative said that this money had been paid to staff for more than five months. NEHAWU felt the board was not being fair to the staff.

Regarding the discovery of the approved pension benefits signed by the chairperson, the staff had addressed the acting CEO following the board meeting in early October 2018, and had asked who had approved the pension benefits. The acting CEO had postponed the meeting and they had reconvened on 23 October 2018. The acting CEO had then unpacked both letters which the staff had received in relation to the annual increment and the 100% pension benefit. Both letters were signed, and according to NEHAWU and staff who had looked at previous reports, the signature on the letters belonged to the chairperson.

The NEHAWU representative said that it had referred to these letters as a game changer, and had questioned why they were having these meetings. The staff received their salaries on the 25th of each month, and the day after the meeting they had received their salaries without any deductions, and the deductions were reflected only in November.

Regarding the staff refusal and the escalation to the Department of Higher Education and Training (DHET), the board had resolved that the staff should return to consultative processes on the implementation of “stop-stop and recover”. The staff forum had refused to do this, deeming it fruitless expenditure as it had been done in September 2018 and they had been given only ten minutes to speak on an issue which was important to them.

Ms Naledi Pandor, who was Minister at the time, responded to the matter being escalated to the Department, and said it was a labour matter which should be referred to the relevant courts.

On 24 November 2018, CETA management had invited staff to a meeting in Gauteng. The first session of the meeting was between the executive and junior managers, and the second session of the meeting involved the entire staff. At this meeting, staff were told that the deductions would be implemented from the end of the month. Management then told staff that if they continued to disagree, they would fire “twenty people in one go to make an example”. The staff then received letters from the CETA stating that they had a debt which was from benefits previously paid to them. The staff did not sign this letter, and made it clear that they were not agreement that they owed this debt.

On the 14 December, staff received a letter on the change in the amendment of the rules of the pension fund. Staff had 30 days to object to the change, which would come into effect from February 2019. The NEHAWU representative emphasised this, as the staff felt the HR manager had failed them, as this change had already been effected a month earlier, but the letters had been sent only in December 2018.

The board had not responded to a letter from CETA management saying that they would not deduct 15%. The board and management had given conflicting statements, and NEHAWU believed the board had not been informed of all details in the matter, but had taken a resolution. NEHAWU said that staff morale was very low, and called for an investigation into the pension matter.

Discussion

Mr W Letsie (ANC) said that there was still an acting CEO, which meant that there was no intention to stabilise this institution. He asked that SETA provide the Committee with the correspondence between the entity and the previous minister. The Committee had not been provided with the information which they had asked for last month, and he did not understand why this was the case. In terms of the findings on supply chain management, he asked about the action plan of the entity and the time frames for resolving the issue. CETA had said, the last time they held a meeting, it had been outside of their premises as the situation was out of control. He was sure this brought with it tax implications for the citizens of this country. What was it that CETA would like to do to stabilise the situation? Was it only because of the dispute over pensions with the unions?

Mr Letsie commented that it was a pity the presentation had not included legal opinions from three other law firms, and asked what the legal costs had been. He asked why this had been done, and if it was because the previous firms had not favoured the chairperson in its reports. Was the current legal opinion that they had received the one that spoke to what they initially wanted? There were serious allegations of bonuses paid to people who had co-conspired, and he had through an annual report showing that salaries decreased in 2017/18,19, as well as the amount for the Unemployment Insurance Fund (UIF), but the bonuses had increased from about R4 million to R6 million. Was this where the R2 million that the former CEO had spoken about could be located?

At the Services CETA, there were issues with the appointment of members who did not meet the requirements in terms of the qualifications that they hold. Another allegation was that the CEO herself did not qualify, based on the advertisement for the post, which required a Master’s or equivalent, and the CEO had only an LLB. If this was true, he did not understand why both accounting authorities should be retained.

Mr B Nodada (DA) commented that in South Africa there was a continuous culture of non-accountability, and this culture resulted in repetitive actions that were against the law -- and sometimes legislators encouraged this type of behaviour. They had a responsibility as legislators, Members of Parliament who play an oversight role, to make sure that the establishment of the SETAs to begin with were actually developing skills, because the kinds of issues being discussed today would ultimately affect the person who was trying to develop a skill. They must not take this lightly, and had to be extremely firm as lawmakers as to what they recommend and resolve as a Committee. Commenting that there were different sides to the story, he recommended that before a resolution was reached, a forensic investigation take place, based on the allegations which were levelled against the chairperson and the board in relation to the pension fund and the laws broken in relation to this particular issue. Secondly, they needed to look at the impact of the irregular expenditure and whether the processes which were followed when bonuses were allocated, had been done lawfully. There must be specific time lines which the Committee would be able to monitor.

Mr Nodada highlighted that the CEO of the Services SETA had said that there was no crisis at the entity, but pointed out that the entity could not say that R1.1 billion accounted for irregular expenditure, and at the same time maintain that there was not a crisis. No individual had been identified to take responsibility for the irregular expenditure which had been incurred. Were there any action plans or time lines for the way forward? The Accounting Authority had condoned the irregular expenditure of R63.5 million, but had never provided a reason for this. If those individuals responsible were no longer at the SSETA, what mitigating factors were in place to ensure that they were held accountable? An investigation had been initiated regarding supply chain findings -- was there any particular outcome to this investigation? Was there a report?

Dr W Boshoff (FF+) commended NEHAWU for their concise presentation. He commented that the issue with the SETAs was that a huge bureaucracy had been created in an instant, and now they were left with a system-wide image problem with them. A colleague had told him that the SETAs were a mess, and he agreed with the earlier suggestions of a thorough investigation taking place. The SETAs as a whole should be investigated, and those which were successful should be identified and looked at to consider what they did differently from those which were less successful. One could then look at how to get some uniformity within the entire SETA group in order to ensure universal success, which would do wonders for skills development in South Africa. While skills training was doing well, the administration of it had not instilled much confidence.

Mr B Yabo (ANC) said that when people were tasked with running public entities for the benefit of ordinary citizens of the country, they should do it with integrity. He also recommended that there be an investigation into the SETAs, and commented that the Committee would not want to find that there were cabals which existed within them to the point where they were treated as personal slush funds. Another overarching cautionary statement he wanted to issue was in relation to those charged in the entities who happened to have relationships with the Committee, who had been elected to represent the people. These individuals should not deem themselves as being powerful because of these relationships, and added that the Committee would come for them as if it did not know them. They were disrespecting the very people who had empowered them to take care of their issues, and they are disrespecting themselves. This administration was serious about dealing with people who undermined their people.

A point for clarification was the overlap of boards which had been changed, and where old board members had remained on the new boards while others were removed. What had constituted the decision to keep old members who may have failed on the previous board?

Dr Blade Nzimande, Minister of Higher Education, Science and Technology, said there was a matter he needed to clarify and take responsibility for. He had instructed his office about what needed to be done with the report which they had received, and this had included sending a copy to the Construction SETA with specific instructions to implement the recommendations. However, this had been misunderstood by the Minister’s office. An issue with the SETAs was the acquisition of buildings, and his office understood that this report being sent to the chairperson of the Construction SETA was to be given priority over all other issues. He had looked into this issue concerning his office, and had signed the report in question and sent it to the chairperson. He took responsibility for this misunderstanding, and committed to sending the report to the Chairperson of the Committee as well. The Minister added that his explanation should not distract from any recommendations the Committee would want to make. He wanted to commit to having a dedicated session with the Portfolio Committee on the SETAs.

The Chairperson said that there was unanimity on having a thorough investigation into the meeting that took place in Durban, and what had taken place subsequent to that.

Mr P Keetse (EFF) said he wanted to emphasise the role of Parliament, as he sensed there was a general feeling that the entity had relegated Parliament to being a toothless bulldog. This was a trend which could be seen over the years, up until now. It had been evident in all the presentations made today. If the SETAs were involved in certain things they felt the Minister would defend, they should know he could easily be removed and replaced by President Cyril Ramaphosa. This meant that CETA’s issues needed to be critically scrutinised.

He added that some apprentices, mainly in Polokwane and some other parts of the country, had not been paid for the past three or four months. This meant that these people were without a stipend. He urged that this be paid to the relevant people on time, despite the fact that it was a small amount.

Ms N Mkhatshwa (ANC) said it was very depressing to go through processes such as these. While their responsibility as Parliament was to hold people accountable, it was a waste of time, as what they should be doing was enhancing the value of the SETA certificate, and reviewing the curriculum in the CETA sector. The Committee was dealing with people who could not do the right thing. She felt like a broken record since coming into Parliament in May, as she constantly needed to speak about social cohesion, social connectedness and moral decay. An investigation needed to take place. A great pool of young people had entered Parliament who were “tired of listening to this nonsense”.

The meeting was adjourned. 

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