National Skills Fund investigation: Minister update

Public Accounts (SCOPA)

13 September 2022
Chairperson: Mr M Hlengwa (IFP)
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Meeting Summary


SCOPA met with the Department of Higher Education and Training to receive an update on the forensic investigations at the National Skills Fund. This exercise arose at the behest of the Committee after it had received the Auditor General South Africa (AGSA) audit report on the repeated disclaimers for the National Skills Fund. The Committee requested the Department to utilise request the Special Investigating Unit (SIU) to investigate the NSF. The Minister remained adamant about procuring these services from a forensic investigator (NEXUS) but also committed to working closely with the SIU during the investigation.

The forensic investigation was completed in March 2022, but it had not been submitted to the Committee, despite the Minister’s commitment to do so at the inception of this process. The Department’s rationale for not submitting the Report to the Committee was based on internal legal advice. SCOPA members were extremely dissatisfied that the Report had not been provided to the Committee. The presentation was grossly insufficient as it merely outlined what the Department was going to do and did not include the Report findings and recommendations for Members to engage with it productively. Members reiterated that the Report be provided to the Committee.

SCOPA argued that the investigation request was initiated by this Committee. The Department internal legal unit had advised the Minister not to share the Report due to the sensitivity of making public the names of implicated NSF officials or service providers appearing in the Report. It had advised engagement with law enforcement agencies and establishing an independent legal panel to verify and for charges to be instituted against implicated persons. Members felt this process risked becoming a never-ending process that will lead nowhere. They did not see the necessity of establishing an independent legal panel. They failed to understand the Department's concern about exposing implicated persons. Members cited the Zondo Commission and Public Protector’s reports where implicated persons take a report on review if they do not agree with the contents.

The Minister assured the Committee that he was acting at the behest of legal advice as one did not want to subject the Department to litigation by making names public at this sensitive stage. However, he would go back and consider the request of the Committee. The Committee then issued a firm directive instructing the Ministry to submit the Report within 10 days. Thereafter the Committee would engage with the Department, Auditor General and SIU in person on this matter.

Meeting report

The Chairperson noted that this meeting was initially scheduled two weeks before and he conveyed the Committee’s strong disquiet about how it had been informed about the non-availability of the Minister on the morning of the meeting. The invitation letter was sent in good time, which was acknowledged, but there was no indication that the Minister was going abroad. The Committee was robbed of an opportunity to utilise that day for something else. Members were not pleased with how that postponement was done.

Ms N Tolashe (ANC) agreed with the remarks of the Chairperson.

Minister’s Remarks
Dr Blade Nzimande, Minister of the Department of Higher Education, Science and Technology apologised to the Members and the Committee for the way his Office handled the postponement of the meeting. He did not understand why the apology was given only on the day of the meeting and he promised to investigate and act accordingly. He knew that he was travelling abroad and would not have committed to being at the meeting knowing that he was unavailable. He will report back to the Chairperson on the issue.

On 25 August, he briefed the Committee on consequence management processes and corrective actions taken on the allegations of malfeasance at the NSF. The former NSF accounting authority, who was also the DHET Director General, was subsequently suspended and his contract came to an end on 6 September 2021. The NSF Chief Executive Officer, Mr Mvuyisi Macikama was placed on precautionary suspension on 1 August 2021 and decided to resign from the NSF on 30 June 2022. There is now an Acting CEO since 12 August 2021.

As part of the process going forward in the wake of receiving the forensic investigation report, the Department will act. One of those actions is the established independent legal panel to investigate how we deal with what comes out of the Report as clear shortcomings on the part of NSF leadership in this saga. It is pointing to very serious acts of omission and commission. The legal panel will advise on how this must be dealt with. If we need to act against those who have already left the entity; it will be done so.

Though it is not part of the process, he had appointed a ministerial task team that looked at the NSF functionality and operating model and it has submitted a report. This will also be presented to the Portfolio Committee on Higher Education soon. What the Auditor General had found at the NSF reflected a state of dysfunctionality in the structures and the operating model of the NSF. This work is ongoing and he has handed this matter over to the new Director General, Dr Sishi.

National Skills Fund investigation: progress report
Dr Nkosinathi Sishi, DHET Director-General, presented a work-in-progress report of the investigation (see document) which covered the background of this investigation; progress thus far; summary of report observations; report recommendations which will give effect to stage eight of the management plan; critical developments to be noted; and NSF 2021/22 financial results.

The Chairperson said that it was quite rare that he would find himself after a presentation, confused and more in the dark about the information received.

Mr B Hadebe (ANC) agreed. In the opening remarks, the Minister indicated that he has received the Report, but he would be providing the Committee with an executive summary and action plan thus far. The DG indicated that ordinarily he would be presenting the actual report but given the sensitivity at this stage and the legal advice, he is not able to provide the Report. The Report was completed on 17 March 2022. It has been almost six months since then. The Report findings and recommendations are final as per this presentation, and nothing will change in this regard unless challenged in court. The Minister indicated that upon studying the Report, he forwarded it to the DG. Was the Report forwarded to the DG for final determination? What is being considered a final determination? When was this Report handed to the DG? Are there any elements where DHET is not happy with the Report? Is the Minister seeking a review or challenging the Report? Some of the recommendations have already been implemented as the action plan highlighted. Why are we not having a Report now? He was expecting an explanation on this 'sensitivity' and 'determination'. Slide 8 indicates pending the Minister is still studying the Report for final determination, yet the Minister had already done this and forwarded it to the DG on slide 13. He asked for clarity. What are these sensitive issues that obliterate DHET from presenting the Report to the Committee?

The Chairperson said it was difficult to engage without the Report.

Ms V Mente (EFF) said that she did not understand this new culture of leniency with the Committee. The AG had indicated that there was maladministration and no value for money and there was no cooperation from the NSF during the audit. The AG could not access the information of the entity. Members asked that all of this be investigated by the SIU, but the Minister insisted that the investigation be done privately. It was allowed with reservations. Thirteen months later Members still do not know what is going on. Members are seemingly expected to deliberate on nothing because nothing was presented today for Members to engage with. The Chairperson should guide the Members and be fair. South Africans want to know what happened to the funds that were meant for their children. We cannot continue with this meeting without the Report. Reports in South Africa can be challenged within three months, if not done within three months, it is too late. This is not a report but "what they think we need to know". Members can investigate and read the Report and interact with the Department productively. South Africans are not going to hear what happened to the funds that the NSF officials have stolen. Members cannot continue without the Report and be told that they cannot receive it because of sensitive information.

Mr S Somyo (ANC) shared the same confusion after the presentation. He could not find any basis to interact with the presentation because the information was vastly limited and the Report was not provided to the Committee. He proposed that before any engagement with the Minister, the Report must first be submitted to the Committee. At the last engagement with the Minister, the Ministry was to engage with the SIU that following Friday after the meeting to collaborate on the investigation that would take place. Funds had been used for these private forensic investigators. The SIU has referral powers and it would have been a seamless process to engage with the SIU from the get-go. Members feel that they are back to stage one. He was worried that the Minister is taking responsibility for this investigation as that takes it away from what is termed the accounting framework of the Skills Fund. The Minister was looking at the new accounting framework that will differ from the current framework.

The DG said that there is some engagement with other law enforcement agencies to implement the Report. At the same time, the Minister is applying his mind as far as the Report is concerned.

Mr R Lees (DA) said that the issues confronting Members are all shared by all, but it is not something unique to this Ministry. This is something that has become pervasive with the current Executive and he experienced it frequently with the Written Questions. The questions just do not get answered and information is not provided. There is the question of the Minister of Public Enterprises who repeatedly refuses to give this Committee information on the SAA deal with Takatso, a deal that is over a year old. We are all experiencing the same as Members. Parliament is treated somewhat with disdain. We do not get the information we need to do the proper oversight we are obliged to do, and that we failed to do in the State Capture period. The Zondo Commission was very critical of the role played by Parliament. Some of us cannot do what we must do because we do not have majority – but the fact is that it is an obligation on all of us regardless of party allegiance.

Whilst we are disappointed with the presentation, it is not unique, and it is an issue that must be taken up in a broader sense than the NSF. He hoped that SCOPA would be able to do that in a non-partisan way.

The Chairperson said the DG was citing something along the lines of a legal opinion. Why has the Report not been sent to the Committee because this investigation is at the insistence of this Committee – “yithi abavusi benyamazane”. There is nothing to juxtapose the presentation against. Somehow, Members must hope and pray, in some form of faith that they are receiving a roadmap that is consistent with the Report. This is unprecedented – receiving legal advice or opinion. The Report should be running in tandem with the audit outcome that Members received because it directly arises from the disclaimed audit opinion. SCOPA felt that disclaimers are an indication of rot and create a conducive and enabling environment for corruption and therefore the DHET must investigate. The Report is six months out and the Committee has been chasing after the Department just to have this meeting. Even getting here has not been without meanders. When the meeting eventually happens, it was deliberate to allow the Department to expose its modus operandi in handling this matter. Why is the Report not handed over to the Committee? What is expected of the Members after this presentation? Members are none the wiser because all that has been said would be an introduction to why the investigation was needed in the first place.

DHET response
Dr Sishi noted the comments from the Members. He thought the Minister had apologised for the difficulties in communication correspondence on the postponement of the last meeting. DHET is not going to give the Committee challenges about accounting. We never thought that not providing the full report now to the Committee that there will never be another opportunity to do so. The Department thought what is important is it to show that once the Report was received, it started a system and course of action to hold the people responsible accountable. There will be another occasion that this information will be provided in full, given that by that stage, people would have been charged already noting the concern of the legal team on the protection of information. The investigation cites certain documents that were required but were not availed. The process has unveiled those documents and related information. Third parties could not provide these documents.

Mr Hadebe interjected and said that specific questions were asked. Members asked why the Report was not submitted. We cannot manage what we cannot measure. The Report is detailed and has final recommendations and findings. Members need the Report to measure if what is being implemented is heading in the right direction.

Ms Mente was not happy that DHET assumed that the Committee wanted to hear what it was doing since the Report came out. Perhaps there was a miscommunication on the objective of the meeting which was for Members to be informed about the forensic investigation, its findings and recommendations as well as the actions the Department has since instituted in response to the Report. We are not meeting to be told what DHET thinks must happen. We cannot be told about what it is doing about the Report without being told what is in the Report.

The Chairperson said that at the last meeting they were informed that when the Report is received, the Committee will receive it. In planning and calling for this meeting, there has been no miscommunication on the Committee’s part.

Minister response
Minister Nzimande replied that this matter must be dealt with on its own merits and demerits. When Members start generalising, they enter the political ring and you are likely to be taken in all sorts of directions. To characterise what is presented as being typical of what Ministers in this Cabinet are doing is a generalisation. If there are things that Members are not happy about in this report, let us deal with that as other Members have done. He did not accept the generalisation.

When the Minister received this report from NEXUS, he immediately handed it over to the DG and said he must act on this Report. The difference between this DG and the previous one was that the former was implicated in the sense that those things happened under his watch. This is a new DG who was not even involved in the previous matters picked up by the AG. Certain actions are required to be taken only by the DG. The Minister cannot appoint an independent group of legal experts to investigate the Report. This is done by the DG; hence he handed it over to him. The innuendo and suggestion that there was some personalised or selective approach in this matter did not arise with that explanation, hopefully. There are certain things he cannot do as a Minister, which are administrative in nature.

Perhaps the DG and the Department legal team may elaborate. In this Report, names of people are mentioned, many of whom are found to be in the wrong. He asked the Department how this would be dealt with. The investigation says that some of the lapses are not about the providers who had been found guilty but the result of inaction by the NSF management. The Report mentions people’s names in a negative light. Perhaps down the line these people may be found to be guilty through due process. The advice received from the DHET legal team was that if people’s names are mentioned in the way some are mentioned, it could be found that they are not the ones who carry the ultimate blame due to shortcomings at the NSF. Hence, we are going through detailed internal processes to look at what the Report says about some officials and where the gaps are.

The whole thing of not presenting the Report was we needed to take the step of handing it over to the law enforcement agencies. Engagements with the Hawks have already commenced. The law enforcement agencies would then make further investigations where necessary and decide whether to prosecute or not, based on the evidence gathered. He was advised that bringing the Report to the Committee may negatively expose the Department legally if due process is not conducted first. This platform is public. We may find that law enforcement agencies may need to do further investigation. Once all these processes have been completed, it will be obvious who is wrong and right. SCOPA has its responsibility but where you mention people’s names one must be careful not to compromise DHET and subject it to litigation. Today, the Department thought to inform the Committee about the processes undertaken, which included engagement with law enforcement agencies who will charge when they are ready to charge. DHET is also taking its internal actions. There is nothing that DHET is hiding or that it does not want to cooperate with SCOPA about. It is not a reflection of a general trend or that this is personalised around the DG who has left. That is incorrect because that DG was involved.

Minister Nzimande said he has no interest in hiding anything about this investigation and what is happening in the NSF because he is equally concerned about this entity. This is money for young South Africans to be assisted to obtain skills to make sustainable livelihoods for themselves. He asked that the DHET Chief Director for Legal Services be allowed to explain the risks facing the Department in releasing this Report publicly.

Discussion (continued)
The Chairperson said that the Chief Director’s explanation may be obtained. The Zondo Commission Report is public and due processes will follow accordingly where it should. The point is moot that people’s names are being mentioned. There were disclaimed audit outcomes at the NSF and this Committee called for an investigation. Members wanted the use of the SIU and this was facilitated. However, a separate investigation took place and it produced a report. The investigation was at the Committee’s insistence. The Committee does not agree with the sentiment about people’s names. The Zondo Commission has released its reports in tranches and nothing has been redacted from that report. Where due process must take place, it does take place. If people want to have the Report reviewed, they can do so. This is common practice even with the Public Protector’s reports.

Mr Somyo suggested that the Minister still did not answer the question of where the Report is and should rather indicate when he would be tabling it to the Committee. The Minister came to the Committee and said that he is taking responsibility for the entirety of the investigation, its finalisation and all matters related to what was raised by SCOPA. There was no innuendo from Members on this point. The focus must be on what the Minister said to the Committee.

If indeed the investigation has been finalised, what mandate have you given to those whom you say must implement? We agreed that the conflation of a DG acting as the accounting authority for an entity while at the same time looking at the operations of the entity is problematic.

Mr Hadebe said that the presentation noted the Report has final findings and recommendations. The Minister speaks of names of officials that are implicated yet he also said that they may not be responsible for some of the actions. The concern is that it stated 'final findings and recommendations'. He asked if the Minister seeks to suggest that rules of natural justice were not followed in arriving at these findings as it relates to the audi alteram partem rule. As such the Report further recommended investigations of the implicated officials. If that is the case, what is termed final findings and recommendations calls for serious concern. He asked if any recommendations were being challenged or if the Department wanted further clarity on some of them. He did not think a forensic investigation team would make the blunder of not hearing the other side and arrive at a conclusion that would impact negatively on the integrity of individuals. These individuals might hold senior positions in the Department and currently continue to play an active role in perpetuating that which is wrong and needs to be stopped.

Ms Mente said the Minister has now confessed to not trusting his process. SCOPA had advised to take this matter to the SIU. He refused and said that he had procured the services of a reputable firm to undertake this. When the conclusion is reached, the Minister implicates himself in saying that there are names of people whom he thinks had nothing to do with the matter. Why were the services of the forensic investigators rendered if the Minister is aware of who did what? If this is a reputable firm with a licence to investigate, it would not mention anyone linked to this investigation as a person of interest who has flouted the rules and regulations of this country. The Minister seems to admit that he does not trust the firm, that it is not reputable and that the names the firm found to be implicated are wrong. Therefore it is a matter that will never find its conclusion.

She did not agree on the need for an independent legal panel. After this panel, there is going to be another process – this is open ended. SIU undertakes investigations and brings reports to SCOPA and when a department acts, we are aware of what SIU has done and the names in the report. Those implicated officials who want to review a report can do so. Now the Minister is taking the Report on the review, a report that he instructed to be done by a reputable firm. Is the Minister saying that he has no confidence in the Report? Is he saying that the Report contains names of people that should be protected? If those people are working in the NSF and they are implicated, there is no need to do all of this.

Minister response
Minister Nzimande replied that firstly he did say that he was taking responsibility for the process. The reason he said so at the time was that he had a conflicted DG. He did not have a conflicted DG now. The matter of whether the DG can be the accounting authority of the NSF is subject to another process. The Ministerial Task Team is looking at the NSF operating model. The outcome of this process will be presented to the Committee. The previous DG was conflicted because these things happened under his watch and the Minister had to take responsibility for the process.

He had instructed the new DG to study the Report and come up with a process for implementing what is contained in the Report. This included preparing to engage with law enforcement agencies as internal staff may be implicated. He asked the DG to get the internal auditors to investigate because the AG does not audit everything – just as the forensic investigators who chose 10 projects to look at based on the audit concerns raised by the AG.

As the Minister he has the right to say what things need to be done; it is not a vote of no confidence in the firm. He has a right to protect government and DHET. If names are mentioned, he must ask about the implications. He did not say the names are mentioned wrongly. The very same report points to the fact that the problem was not only on the service providers but also the NSF. In some instances, it was found that the problem was more the NSF officials than the service providers. He must also protect the Department from being litigated against for picking these things recklessly. He must do that as a Member of the Executive and he will not apologise for that. He must implement these matters and he is not hiding anything, but he must take responsibility where can ensure that he protects the Department.

This may be taken to the Hawks and it may say it is not ready to charge and it requires further investigation. Surely, let it be so. No one will stand against that. As for the independent legal panel, this is to get proper legal advice. We are a constitutional state characterised by due process. He must satisfy himself that the actions will not necessarily expose the Department to negative litigation. He did not say that there must be service providers who must not take responsibility. He is not protecting anyone or any service providers.

Ms Mente said that the advocate must clarify the matter of the independent panel providing a legal opinion on the opinion of a forensic firm with the licence to investigate and make findings.

DHET Chief Director of Legal Services input
Adv Miki Kutta said that it was not correct that the external independent panel is going to give a legal opinion. It will be an indication of what charges should be preferred for each of the named individuals in the Report. Secondly, the Report has not been shared with the implicated individuals. Thus she advised that the Report should not be made public as they are wary of these individuals finding their names in the public domain when they have not been allowed to state their side.

In the Report there are gaps when comes to the investigations that still need to be conducted. For example, in one incident the service provider could not provide all the bank statements needed. Due to time constraints, the Report had to be finalised without those statements. Those bank statements might give something different. Therefore, it is not advisable to give this Report out at this moment. It did not mean that the Committee will not have access to it. All implicated individuals should be allowed to see the Report and provide their side of the story before it can be distributed. However, if the Committee felt strongly that it should get access to the Report before the individuals are given that opportunity, the Committee cannot be stopped from doing so.

The Chairperson clarified that this was not about a wide-spreading of the Report. The investigation arose out of the Committee’s determination. Secondly, what is the legal basis of the advice [not to release a report to the Committee] because this sets a precedent? Thirdly, it is not about the feelings of the Committee, it is about being asked to consider due process that is now in a vacuum. Fourthly, people who must be given a fair chance to be heard. This Report is six months old and it is on the back of disclaimed audit outcomes. The gravity of the situation must not be lost here. He was waiting for citing of the legal basis for this kind of advice, but he did not hear it. We are not operating based on feelings.

Mr Hadebe reiterated his point that Members were told that the Report contained final findings and recommendations. Are there names implicated in these findings and recommendations where people have not been allowed to state their case? Are there recommendations that suggest that further investigations must be conducted on certain names for the Department to finally arrive at a correct, proper and legally sound determination? Are there such recommendations because Members are under the impression that these recommendations and findings were final?

Mr Somyo said the issue is that the investigation is final; when is the Report going to be submitted to the Committee?

Ms Mente said this report will be subject to many processes. If a person’s name is in that Report, the Department is going to take action with a disciplinary committee (DC) and equally open criminal cases where applicable. They will prove at that level that they are innocent. It is not up to the Department to decide that certain names must not come out. This determination of who exactly must be reported and who must not be reported is problematic. The Committee must get the Report and juxtapose what has been said with the Report. When the investigation was commissioned, we did not expect to deal with this kind of response.

She proposed cutting this matter short by asking the SIU to take this matter forward. There is a forensic firm that has already done the investigation so the SIU has a starting point. We do not need an independent panel to advise on which charges must be made. The Minister earlier said that the Department was in discussion with law enforcement already – but now there is an independent panel that must advise which charges must be made. We are going to talk the whole day. Members will not engage with a selective report. Some names cannot be touched, how was that determined?

The Chairperson asked if there was a legal opinion that guided this advice.

The Minister replied that the legal advice he received was from the Department. He asked the Department what the legal implications of the Report were. It recommended an independent legal panel to assist in implementing this Report and this is the process that is undertaken.

The Committee invitation received by the Department did not ask for the Report but for an update. If it had asked for the Report, this matter could have been dealt with differently. However, if Members want the Report, the Department will go back and look into that request and consider everything that must be considered and revert to the Committee. The invitation said that the Committee needed a briefing document.

This Report is the final report from the forensic investigators, which also recommends that certain matters must be subject to further investigation by law enforcement agencies. The Report did point out that the forensic firm did engage some of the people who are implicated but DHET is not aware of the extent to which the investigations might have gone. This is not a vote of no confidence in the process. We are saying that we need to take this matter further as part of implementing this report. The Ministry is confident in NEXUS as it has worked with it before on forensic investigations in the past. It is the Report that is final; not the process.

The Chairperson said that the Committee was told that when the Report is ready, it will receive it. He asked the Minister to submit the Report within 10 days. The Committee will study it and engage and be updated further when Members have the context of what the Report says.

Mr Hadebe requested a physical meeting on this.

Members agreed with the suggestion.

Ms Mente requested that the SIU and the AG be present in that physical meeting.

The Chairperson agreed to the suggestion and said a suitable date will be decided on and permission sought from Parliament to have a physical meeting. Once the Report has been received, it will be studied. The Committee has a vested interest in the Report because it arose from the audit disclaimers, which were of serious concern to the Committee. Action must be taken but we need to move from a position of being informed. Once investigations are ongoing, we are unable to track if they will move with the necessary speed. For example, when the Department of Public Works handed over a report, we found that the implicated people redacted their names. People became players and referees. The UIF also could not tell the Committee who is who and after a while, we found that the one presenting was implicated in the schedule. It boils down to ensuring a transparent process and assisting the Committee in its oversight responsibility to ensure people are not both players and referees.

Mr Somyo suggested the submission of the Report be within seven days.

The Minister concluded by saying that he was committed to cooperating with the Committee. In some instances he has been outraged at the nature of the AG’s report and the NSF audit disclaimer. During engagements he would not like that an impression is created that the Ministry does not want to cooperate. He is as equally concerned about getting to the bottom about NSF monies. We are a country with a shortage of skills and high unemployment.

The Chairperson said the Committee may be able to meet on 27 September. Once a venue has been confirmed, the Committee will communicate with the Department.

The meeting was adjourned.


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