CETA, EWSETA & INSETA Audit Outcomes: AGSA briefing
Meeting Summary
The Standing Committee on Public Accounts met on a virtual platform to be briefed by the Auditor-General of South Africa (AGSA) on the annual reports and financial statements of the Construction Education and Training Authority(CETA), the Energy and Water Sector Education and Training Authority (EWSETA), and the Insurance Sector Education and Training Authority (INSETA).
The Committee raised serious concerns about financial mismanagement, repeated non-compliance with financial regulations, and a lack of accountability within these entities. The Chairperson commented that management appeared ineffective, boards failed to exercise proper oversight, and the Ministry had not taken sufficient action to ensure that these entities achieved their objectives and managed public funds responsibly. Members criticised AGSA’s reporting, arguing that financial irregularities were being downplayed, and called for detailed, itemised reports on irregular expenditure. They questioned why there was no integration between the Sector Education and Training Authorities (SETAs), which led to the duplication of funding and learners. They also raised concerns about the absence of consequence management, noting that disciplinary action was rarely taken against those responsible for financial mismanagement.
Several key issues were raised regarding the misuse of funds allocated to service providers. A Member proposed lifestyle audits of service providers, pointing out that many appeared to be living extravagantly despite failing to deliver services. They questioned whether the Committee was getting value for money, given the limited number of learners trained, compared to the high level of youth unemployment. They raised concerns about upfront payments to service providers without tangible deliverables, citing an instance where R15 million had been paid for a project that never materialised. A forensic investigation was suggested to track the flow of funds and uncover potential corruption.
The Chairperson noted a broader pattern of financial mismanagement across the SETAs, the National Skills Fund, and the National Student Financial Aid Scheme, describing it as an ongoing failure of governance. AGSA confirmed that financial oversight structures existed in theory, but project management units within these entities were failing to enforce accountability, allowing service providers to operate without sufficient oversight.
The Committee expressed frustration over the lack of responsiveness from the accounting authorities of these entities. AGSA reported that recommendations were often ignored, and financial irregularities remained unresolved. A Member argued that the Minister should be held accountable for the ongoing failures, and that both the Minister and the relevant board members should be summoned to explain why these issues had not been addressed. The Chairperson confirmed that the SETAs would appear before the Committee on 26 February, and questioning should focus on obtaining clear answers rather than lengthy presentations.
The Committee resolved to take urgent action, including requesting the Minister to provide clarity on systemic failures and to outline measures to improve governance. Given the severity of the financial irregularities identified, the Special Investigating Unit would be invited to observe proceedings. The meeting was adjourned with an understanding that further engagements would follow to ensure accountability and structural reform within these entities.
Meeting report
Opening remarks
The Chairperson said the primary reason for inviting the Auditor-General of South Africa (AGSA) to present on the Sector Education and Training Authorities (SETAs) was the Committee’s recognition of the higher education sector as a crucial area of focus. South Africa faced a high unemployment rate, particularly among young people. He emphasised that to secure employment that provided a living wage, individuals needed to acquire skills. It was therefore imperative that SETAs and other higher education institutions were properly governed and managed, and that the financial resources allocated to them were used appropriately.
He said the Committee had considered audit outcomes for various institutions and, given the impracticality of examining all of them, had decided to focus on those with concerning, or highly concerning, audit results. The objective was to collaborate with the AGSA and these institutions to ensure tangible remedial action was implemented and that accountability was enforced. He also expressed the hope that such efforts would ultimately make AGSA’s work easier over time. He thanked AGSA for their availability.
Ms Zamahlangu Mditshwa, Deputy Business Unit Leader, AGSA, expressed appreciation for the opportunity to engage with the Committee regarding the SETAs. She concurred with the Chairperson on the importance of focusing on the education portfolio, particularly the SETAs, as this could assist in steering improvements in the right direction. The discussion would include addressing the high unemployment rate, an issue AGSA had been examining through their work. The presentation would include data analytics on the SETAs, offering a holistic overview, as well as insights from analyses conducted on technical and vocational education and training (TVET) colleges. She said that AGSA had begun assessing the higher education portfolio with the aim of achieving better results.
She explained that AGSA’s work in this area was ultimately aimed at addressing youth unemployment. She emphasised the need to redirect some of the focus of the SETAs to achieve measurable improvements in this regard. Beyond the SETAs, AGSA was also considering the broader higher education landscape, including TVET colleges and, to some extent, universities, to assess whether the sector was responding effectively to South Africa’s needs. She noted that the Committee had invited AGSA to discuss certain entities that required particular attention. Among these were the Construction Education and Training Authority (CETA), the Insurance Sector Education and Training Authority (INSETA), and to some extent, the Energy and Water Sector Education and Training Authority (EWSETA), as these entities had shown little progress in improving their audit outcomes.
Challenges at the CETA
Ms Mditshwa said that the CETA entity had received qualified audit opinions for the past three years, primarily due to issues related to commitments. She explained that in the SETA environment, commitments referred to discretionary grant expenditures and accruals, which were linked to projects aimed at skills development. AGSA had repeatedly raised concerns about inefficiencies in project management within the higher education portfolio. She explained that funds were allocated to skills development providers to train learners in specific courses, but AGSA had found that project oversight was inadequate. SETAs often failed to monitor progress on the ground to ensure that the allocated funds were being used effectively.
She commented that this lack of oversight made it difficult for financial departments to account accurately for these projects. As a result, CETA had struggled with commitments, as it was unable to determine whether contractual obligations were still in place and whether the associated expenditure had been incurred and accounted for correctly. AGSA had recommended that CETA strengthen its project management unit to ensure better alignment between project implementation and financial reporting.
Ms Mditshwa also highlighted that AGSA had identified material irregularities within CETA. It had issued two material irregularities against the entity, explaining that these related to financial losses resulting from non-compliance. She stressed that AGSA expected accounting authorities to conduct investigations into these irregularities to determine their root causes and implement corrective measures. Consequence management was a crucial aspect of this process, requiring disciplinary action where wrongdoing was identified and, where necessary, efforts to recover lost funds. However, AGSA had encountered significant delays in CETA’s response to these irregularities, which undermined accountability. She concluded by stating that AGSA remained concerned about CETA’s slow progress in implementing the recommendations provided, as this continued to hinder efforts to enforce accountability.
CETA audit outcomes
Ms Nnana Shai, Senior Audit Manager, AGSA, delivered a presentation on the audit outcomes of CETA, emphasising that all stakeholders had a role to play in the accountability ecosystem. Her presentation covered an overview of the audit outcomes of CETA, EWSETA, and INSETA, as well as detailed findings on CETA’s financial reporting quality, performance planning and reporting, compliance with legislation, annual irregular expenditure, and material irregularities. She also elaborated on the definition and process of material irregularities, insights and data analysis related to CETA, and key recommendations made to the entity.
Ms Mditshwa said that when AGSA was preparing its submission to the Committee, she was concerned about effectively conveying the key insights, given that the focus was on a single entity. She explained that AGSA had conducted data analytics on all 21 SETAs collectively, allowing for a comprehensive overview of efficiencies in the use of funds and processes. This broader analysis identified various leakages, including payments made to deceased learners and to individuals whose identity documents could not be verified in the Department of Home Affairs (DHA) system.
She highlighted that AGSA had identified inefficiencies within CETA, which reflected a broader issue across SETAs. She observed that SETAs were operating in silos, allowing service providers to exploit the system by enrolling the same learners in multiple SETAs. As a result, some learners received funding from multiple SETAs simultaneously, which was inefficient given the country’s fiscal constraints. She emphasised the need for a deliberate and equitable distribution of limited resources to reach the most deserving South Africans. She expressed concern that certain learners were effectively becoming "professional learners," receiving ongoing funding without contributing to the intended skills development objectives.
She also addressed the issue of irregular expenditure within SETAs, noting that many exceeded their prescribed expenditure thresholds. She explained that these thresholds were established to ensure that levy funds were allocated primarily to skills development, rather than to administrative costs. However, many SETAs were prioritising administrative expenses over service delivery, which led to irregular expenditure. She pointed out that several SETAs had sought ministerial approval to exceed their thresholds over the years, demonstrating a persistent focus on administrative functions at the expense of skills development initiatives.
Regarding CETA, AGSA often encountered significant resistance from the entity during the audit process. In the current year, it has not been included in the Budgetary Review and Recommendations Report (BRRR) submission to the Portfolio Committee, as its audit has not been finalised on time due to disputes over the audit findings. She highlighted that this was a recurring issue, with CETA frequently challenging audit outcomes before ultimately addressing the findings later in the financial year. This resistance delayed the implementation of necessary corrective actions, leading to repeated audit findings from year to year.
She said AGSA had identified material irregularities within CETA, yet the entity was slow to address them. She explained that material irregularities referred to financial losses resulting from non-compliance, requiring investigations, disciplinary action where applicable, and efforts to recover lost funds. However, CETA had shown reluctance in responding to AGSA’s communications regarding these irregularities, often requiring AGSA to escalate matters to the Minister for intervention. This resistance delayed the accountability process and hindered meaningful improvements.
She cautioned that delayed audit finalisation had broader implications for parliamentary oversight and accountability. She emphasised that when audits were not completed on time, the necessary parliamentary processes and interventions were also delayed, ultimately undermining efforts to enhance governance and efficiency within CETA and other SETAs. She reiterated AGSA’s commitment to working with stakeholders to ensure improved accountability and performance within the higher education and training sector.
See attached for full presentation
Discussion
The Chairperson sought clarity on the stability of SETA’s management.
Ms Mditshwa confirmed that, over the past three years, the board and chief executive officer (CEO) had remained unchanged, while there had been frequent changes at the chief financial officer (CFO) and executive management levels, resulting in instability.
The Chairperson inquired about AGSA’s engagement with CETA’s leadership.
Ms Mditshwa confirmed interactions at various levels, including the CFO, executive management, the CEO, and the audit committee. She commented that audit outcomes had remained unchanged despite consistent leadership. Regarding ministerial engagement, she confirmed that AGSA had engaged both the previous and current Minister of Higher Education on the audit outcomes of SETA.
The Chairperson requested further clarification on the identified discrepancy between finance and operations.
Ms Mditshwa explained that there was a lack of coordination between project management and finance. Project managers were responsible for tracking project progress, while finance handled financial reporting. However, a disconnect between the two resulted in financial statements that did not accurately reflect project statuses. For example, financial records listed commitments for completed projects due to inadequate communication between the units. This lack of synergy led to discrepancies in financial reporting and inefficiencies in project expenditure management.
The Chairperson said he had one final question regarding the 233 learners. He explained that he would ask a few questions and make some statements, requesting that they be considered holistically before a response was given. He assumed that SETAs did not conduct training themselves, but instead engaged service providers, whether private or government-affiliated. He questioned whether it was possible that some service providers worked for several SETAs, and whether the duplication of learners resulted from these service providers, or their affiliates, shifting learners between SETAs. He suggested that this might be a way to ensure learners continued receiving stipends, as training often included a stipend. He then asked whether any investigations had been conducted to determine if this was the case, or if the issue was merely due to poor data management.
Ms Mditshwa confirmed that this was indeed the case. Repeated investments in the same learners occurred because some SETAs used the same service providers. As a result, a single service provider could be working for both CETA and EWSETA, leading to overlaps. She emphasised that this was why they had recommended the implementation of an integrated system. Such a system, would contain all learner data and allow SETAs to identify duplicate funding allocations when awarding funding. However, she said that due to the current lack of integration, some service providers were servicing multiple SETAs while using the same learners.
Mr D Skosana (MK) raised a question regarding the CEO of CETA, Mr Malusi Shezi. He recalled that The National Education, Health and Allied Workers Union (NEHAWU) had alleged around June that the CEO had been suspended, yet the CEO had later appeared before the Portfolio Committee. He asked the Chairperson whether he was aware of the matter. He also referred to a previous statement by the Chairperson of the CETA board, Mr Thabo Masombuka, who had said that such a process took time and that a CEO could not simply be suspended overnight. He sought clarity on whether the issue had been resolved, explaining that the discussion about stability at CETA had prompted his question. He had been under the impression that the CEO had been suspended, and wanted confirmation before proceeding with further questions.
The Chairperson then sought clarification from Mr Skosana, asking whether he was specifically questioning whether, in AGSA’s understanding, the CEO was still in office, or had indeed been suspended.
Mr Skosana confirmed that this was precisely what he was asking. The discussion about stability at CETA over the past three years, coupled with the fact that there had been an acting CFO, had led him to seek clarity on the matter.
Ms Mditshwa responded that, to their knowledge, no information had been brought to AGSA’s attention indicating that the CEO had been suspended. She explained that ordinarily, AGSA would receive formal communication from the Accounting Authority regarding such matters. However, in this instance, no such communication had been received. She said that as of the conclusion of their audit, the CEO had remained in office at CETA, and that there had been no formal indication of a suspension.
Mr Skosana expressed concern over AGSA’s lack of awareness regarding the suspension. He understood there was an issue involving R35 million, and questioned how AGSA had not detected this. He suggested that either Parliament was being misled, or AGSA had overlooked the matter. He elaborated that the issue involved allegations of procurement irregularities related to R35 million, which was why he raised the question. However, for the sake of progress, he would move on, but intended to revisit the matter later.
Shifting focus, he raised concerns about stipends for trainees. He pointed out that there had been widespread complaints that the R250 stipend was insufficient for transport costs. He explained that many trainees had to travel over 50 kilometres due to spatial planning, particularly those from disadvantaged backgrounds, and that their transport expenses exceeded R50 per day. He hoped that this concern had been documented, and emphasised the need to address these issues within the SETAs. He also mentioned that allegations had surfaced regarding R600 million, but noted that this was not reflected in the day’s presentation. He concluded by stating that he would reserve his remaining five minutes.
The Chairperson then sought further clarification from Ms Mditshwa, asking whether she was stating that the CEO had not been suspended, or simply that AGSA had not been formally notified of such a suspension.
Ms Mditshwa confirmed that AGSA had not received any formal notification regarding the CEO’s suspension. She welcomed the clarification, and reiterated that if a suspension had taken place, AGSA had not been formally engaged on the matter.
The Chairperson then inquired whether AGSA had identified any irregularities. He also asked Mr Skosana to specify the alleged financial mismanagement in the 2023/24 financial year.
Mr Skosana responded by referring to an issue involving R45 million, which had allegedly been part of a questionable procurement deal concerning office rentals. However, he remarked that the presentation had given the impression that nothing was wrong.
The Chairperson asked him to elaborate, seeking to understand whether the concern was specifically related to office procurement. He also wanted to ensure that the rest of the Members had a clear understanding of the discussion.
Mr Skosana confirmed that an office had been procured, and that concerns had been raised regarding the R45 million spent on office rental.
The Chairperson asked when this issue had been raised, and whether it had been discussed in Parliament that year.
Mr Skosana clarified that the issue had first emerged around August. At the time, the CEO had appeared before the Portfolio Committee while questions regarding his suspension remained unresolved. He reiterated that the allegations of procurement irregularities amounting to R45 million had been the reason behind the CEO’s alleged suspension.
The Chairperson asked whether there was any knowledge of the issue and stated that, if clarity was needed from Mr Skosana, he could be asked directly.
Ms Mditshwa responded that it was not something that AGSA would have identified during the audit process, making it difficult to engage on the matter. However, she assured the Committee that she would follow up to determine whether an investigation had been conducted regarding the issue. She explained that if such an investigation had taken place, AGSA would request access to it to incorporate the findings. She reiterated that, from AGSA’s perspective, the matter had not been picked up.
The Chairperson then asked for clarification on what she meant by stating that the issue had not been detected.
Ms Mditshwa explained that it had not formed part of AGSA’s audit findings. She said that ideally, such a matter would have been categorised as an irregularity and included in the irregular expenditure findings. However, based on her recollection, AGSA had not identified any issues related to office rental in the irregular expenditure findings. Nonetheless, since the matter had been raised, she had taken note of it and would follow up to determine whether it warranted further investigation.
The Chairperson then proposed a way forward, stating that additional details would be gathered to ensure that AGSA’s inquiry was more specific. He acknowledged that the Committee would not receive all the necessary answers at that moment, and suggested that a more precise response be provided at a later stage.
Mr Skosana agreed, stating that he had simply sought to confirm whether Ms Mditshwa was aware of the matter. He remarked that it appeared she was not, and further questioned whether there was also no awareness regarding allegations that the CEO had taken the board on a trip that had incurred R4 million in travel expenses. However, he would return to the issue at a later stage. He expressed concern that such matters were not being included in the reports, and that this troubled him.
Ms Mditshwa then addressed the issue of international travel, saying that it had been brought to AGSA’s attention and had been reviewed. According to the information AGSA received, international travel was suspended following a media article on the matter. As a result, AGSA examined the expenditure and found that no expenditure had been incurred until the end of the financial year. She clarified that, as far as AGSA was aware, the travel had remained a planned activity but had ultimately been halted by the board. However, she assured the Committee that AGSA was monitoring the situation to ensure that due processes were followed and that no irregularities had arisen from it.
Ms V Mente-Nkuna (EFF) then made a request to AGSA, aligning her concern with Mr Skosana’s inquiry. She said that when AGSA presented findings and elaborated on them, the explanations regarding what contributed to the findings -- whether they related to unauthorised, irregular, or fruitless and wasteful expenditure -- were often unclear. She commented that in cases such as the one raised by Mr Skosana, the matter might already be reflected under irregular expenditure. However, due to the lack of emphasis on key transactions, it was difficult to attribute specific issues to the overall financial irregularities.
She suggested that AGSA provide a list of the top five or ten transactions contributing to each finding, to offer greater clarity. She cited an example involving students appearing in three different SETAs and receiving payments from both a SETA and the National Student Financial Aid Scheme (NSFAS). While the issue had been noted, there was no clear attribution of how it factored into the broader scenario. She requested that AGSA assist by specifying the main contributing companies or transactions.
She then referred to a previous discussion on CETA, where it had been mentioned that a company had been paid despite failing to deliver products or services. She asked for more details regarding the transaction, including the financial year in which it had occurred and the cost involved, noting that the Committee had not been provided with concrete figures. She expressed concern that, without specific references, it would be difficult for the Committee to address these issues when engaging with the Department or the SETAs.
She also raised concerns about material irregularities that had remained unaddressed over the past three years. Despite AGSA repeatedly flagging the same irregularities -- such as the R4 million expenditure, which had been carried over from 2021/22 to 2023/24 -- the issues had still not been resolved.
Ms Mditshwa responded by first addressing the issue of material irregularities. She acknowledged Ms Mente-Nkuna’s concerns and said that AGSA could include more details in the briefing documents. She explained that while the presentation had provided a summary, the briefing documents contained more comprehensive information regarding AGSA’s findings.
She referred to the material irregularities at CETA, explaining that the briefing document detailed a case where a service provider had been contracted to assist the entity in gathering data for learners. The contract had been valued at R85 million, with R15 million having already been paid. The service provider, identified as South African Women in Construction (SAWIC), had been tasked with compiling a database for SETAs, conducting artisan recognition of prior learning, and preparing learners for qualification through the annual performance report (APR) process. However, AGSA found that the project had been closed without meeting the deliverables.
As a result, the payments made to the service provider yielded no benefit to the entity. Consequently, AGSA deemed this a non-compliance with section 57 of the Public Finance Management Act (PFMA), which requires entities to ensure the efficient use of resources. She assured the Committee that this level of detail had been included in the briefing document.
Regarding irregular expenditure, she acknowledged the request for further details on the key contributors. She said that AGSA could include additional information in the briefing documents, specifically listing the names of service providers linked to irregular expenditures. While AGSA had already provided some additional details in the briefing documents for Members’ reference, further information could be added if required.
Ms Mente-Nkuna referred to slide 32, which dealt with INSETA’s irregular expenditure. The details mentioned that board members’ fees were deemed irregular due to irregularities identified during the appointment process of some board members. She expressed particular interest in the irregularities, questioning whether the board members were unqualified, and why they had been paid despite being irregularly appointed.
The Chairperson said that the Committee would address INSETA in detail later, and was currently concluding discussions on CETA.
Ms Mditshwa requested permission to speak, noting that the issue of board members applied to all SETAs.
The Chairperson granted her permission to proceed.
Ms Mditshwa explained that irregular expenditure had been identified across many SETAs. Approximately three to four years ago, a compliance assessment had been conducted during the appointment of board members. There were specific steps that the Minister was required to follow before appointing board members, including verifying their qualifications, conducting background checks, and performing criminal record checks. However, it was found that irregularities occurred in the appointment process for some board members across various SETAs. Since the Minister had appointed all SETA board members simultaneously, these irregularities affected multiple SETAs. Consequently, all payments made to those board members had been classified as irregular expenditure. She clarified that for INSETA, the irregularity stemmed from the fact that the verification process had not been conducted before the board members were appointed, constituting non-compliance with legislation. Therefore, the payments made to those board members were deemed irregular expenditure, and similar findings had been made across other SETAs.
The Chairperson proposed that since a consolidated report had been prepared using data analytics, a separate session should be arranged for its presentation. This would enable the Committee to examine the report holistically, rather than focusing only on individual SETAs. He added that the Minister and the Director-General could then be called to account to the Committee, allowing for further oversight.
Ms H Neale-May (ANC) queried whether this situation could have created a "cottage industry" for service providers, suggesting that some providers might be operating under different company names across various entities while ultimately being linked to a single main provider. She also sought clarity on SAWIC, noting that the project had been intended as a flagship initiative. She expressed interest in obtaining a list of the service providers responsible for the project, and asked whether any of the funds paid to them had been recovered.
She said she observed a pattern of blatant disregard for compliance with regulations, commenting that the same officials had been in place for the past three years without any apparent accountability. She highlighted that similar concerns had arisen in multiple state-owned entities (SOEs) and SETAs, and emphasised the need to address the issue of consequence management. She questioned how the situation could be rectified when officials repeatedly disregarded payment regulations, exceeded the terms of memoranda of understanding, and failed to adhere to contracts.
Ms Neale-May also inquired about the skills audit, asking whether the qualifications of officials responsible for payments had been assessed. Given that these officials were handling millions of rands, she stressed that they should be highly qualified for such responsibilities. She also raised concerns about project managers, questioning their competence, as the lack of administrative oversight and record-keeping suggested poor implementation. She noted that the same issues had persisted over the past three years, and suggested that the system itself might be flawed. She concluded by expressing her anticipation of the consolidated report, which she believed could provide further insight into these concerns.
Ms Mditshwa responded to the question regarding the service provider for SAWIC, and said details could be found on page 8 of the briefing note previously shared. She indicated that SAWIC, in implementing the project, had appointed NM Training and Consulting as an implementing agent, with names included in the aforementioned briefing note.
Regarding the recovery of funds, she reported that funds have not been recovered to date. This was indicative of delays in addressing material irregularities. The conclusion had been reached that the entity was not adequately addressing this particular material irregularity. She urged the completion of investigations to facilitate the recovery of funds from the relevant service provider or other responsible party. The process of recovering the funds had not yet been undertaken by the entity, leading to a recommendation for the Committee to assist in monitoring and ensuring prompt attention to the material irregularity, thus ensuring the recovery of funds lost by the institution.
Concerning skills audits and qualifications, Ms Mditshwa said that employee-related costs were audited to ensure appointees possessed the necessary qualifications for their roles. This process was routinely reviewed. A recommendation consistently made within the SETA space, including CETA, concerned consequence management for non-performance. While qualifications were generally not identified as a primary issue, the key problem was whether individuals were fulfilling their designated responsibilities. This underscored the need to enhance the capacity of project units, as deficiencies had been observed, particularly in project management skills. While necessary qualifications were not generally a problem, it was recommended that there be adequate consequence management to ensure a culture of everyone doing what they were meant to be doing which would ultimately assist in getting the entity to actually move and do what they were meant to be doing.
She acknowledged the Chairperson's request for a consolidated report and affirmed a willingness to engage further, allowing a comprehensive overview of identified issues within the SETA space.
The Chairperson addressed Ms Mditshwa, noting a tendency to use phrases such as "not necessarily," which could introduce ambiguity. He emphasised that it was crucial for the Committee to know definitively whether actions had been taken or not. He urged her to be more direct in her explanations to help clarify compliance levels.
Referring to INSETA, the Chairperson relayed his understanding that payments made to board members were irregular due to appointments not complying with legal requirements, thereby rendering those appointments invalid. He sought confirmation of his understanding and requested that Ms Mditshwa use straightforward language and stick strictly to the facts. It was important for her to state clearly that the Minister should have followed specific steps in appointing board members and that this process had not been followed, rendering both their appointments and subsequent payments irregular.
The Chairperson further emphasised the need for directness in reporting. He advised against ambiguous phrases such as "it would have been done," stating that if an action was completed, it should be reported as such; if it was not done, it should also be stated clearly. He expressed a desire for collaborative clarity in language so all parties could remain aligned.
Mr P Atkinson (DA) referred to the lack of substantial improvement in audit outcomes over the preceding three years. He requested a report from the SETAs detailing their compliance with audit outcomes and addressing organisational delinquencies. Given the persistent nature of these issues, he inquired about previous reports presented to SCOPA in the 6th Parliament, and whether any action had been taken. He suggested investigating the actions of the previous SCOPA to determine if their efforts could be continued.
He expressed concern that SETAs represented a "Ground Zero" for South Africa's economic and unemployment challenges. He noted that the number of people trained was disproportionately small in relation to the funds allocated to SETAs and service providers. He suggested investigating the cost per person trained and examining potential duplication across SETAs, where the same individuals may be used for training across multiple entities. While acknowledging it was beyond the scope of the current meeting, he argued for a review of training strategies to better serve those most in need of employment opportunities, as the current system was failing to make a significant impact on the economy.
Ms Mditshwa responded to a question regarding the actions of the previous SCOPA, stating that, to their recollection, this was the first time that CETA had been asked to engage with SCOPA on CETA-related matters. She said that within the higher education portfolio, SCOPA had previously engaged with the National Skills Fund (NSF) and NSFAS, as these were the entities that had been the primary focus of the Committee. Consequently, CETA had not yet had the opportunity to engage with SCOPA or present recommendations for implementation. She emphasised that this was their first engagement with SCOPA on CETA, and they intended to put forward recommendations where they believed the Committee could assist.
She acknowledged the concerns raised regarding duplication and the associated costs, as well as their implications. She reiterated the importance of deliberate fiscal management, particularly given the country’s limited financial resources. She commented that this was a key issue that had been communicated to the portfolio, stressing the need for efficient resource utilisation. She further highlighted inefficiencies arising from duplication, such as learners being trained and funded by multiple SETAs, which was an inefficient use of resources. She suggested that these issues could be more comprehensively addressed in a holistic report on the SETAs.
Mr Atkinson said that this was the first SCOPA to engage with SETAs, and said that the Committee had an obligation to take the matter forward.
Mr K Madlala (MK) began by supporting the request for AGSA to use more direct language in its reporting. He said that various teams under AGSA had been engaged on this issue, and there was a need for an "all hands on deck" approach, adopting a sense of urgency rather than continuing with "business as usual." He expressed concern that, despite three consecutive years of undesirable audit findings and repeated recommendations, the tone of reporting remained academic and moderate. He stressed that the Committee’s approach should ensure meaningful action and results, particularly in addressing challenges within SETAs and other institutions.
He then raised concerns regarding the presentation. He referred to a statement indicating that management was making efforts to implement recommendations. He questioned the extent of these efforts, given that they had not resulted in improved audit outcomes.
Turning to slide 10, he sought clarification on the reported 92% achievement in workplace-based learning. He expressed confusion over the figures in the table, stating that he could not determine how the 92% figure had been derived. He questioned whether the percentage was related to the figures in the table, as he did not believe that the reported numbers supported such a high achievement rate. In particular, he highlighted that there had been zero reported achievements for indicator 3.4, which concerned the number of learners who had completed workplace learning programmes and were subsequently absorbed into employment. Given that the target for this indicator had been 1 281, he found this concerning and requested confirmation on whether he had interpreted the data correctly.
Mr Madlala also inquired whether SETAs assigned different weightings to various targets, distinguishing between critical targets and those that were of lesser importance to core operations.
Lastly, he addressed slide 12, which reported irregular expenditure amounting to R652 million for the 2023/24 financial year. He described this figure as deeply concerning, and suggested that the Committee consider adopting a stricter approach to addressing such issues. He acknowledged that there were thresholds within which irregular expenditure could be deemed acceptable, but argued that when figures reached such high levels, it suggested deliberate misconduct. He urged the Committee to take decisive action to address these concerns.
Ms Mditshwa addressed the first question regarding management's efforts to implement recommendations. She explained that the issue had been ongoing since it was first raised in 2022. Since then, management had introduced certain measures to address the qualification concerning commitments. However, while some progress had been made in eliminating commitments that did not meet recognition criteria, these efforts had not been sufficient to resolve the issue. She emphasised that the root cause lay in project management, where a thorough understanding and proper accounting for each project was required. Although some issues had been addressed, the measures taken had not been enough to reverse the qualification, indicating remaining gaps in the process.
Regarding the slide on targets, she clarified the distinction between the 8% and 92% figures. She explained that the overall annual performance report assessed all targets, with 92% being achieved and 8% not met. The table on the right specifically focused on Programme 3, which was central to the organisation’s mandate. By zooming in on this programme, the aim was to highlight the significant targets that had not been achieved. She acknowledged that while the overall achievement rate appeared high, the missed targets were substantial in terms of qualitative impact.
She pointed out that one such target was the number of learners who had completed workplace-based learning programmes and had subsequently been absorbed into employment. The target had been set at 1 281, yet no learners had been placed in employment. She emphasised that despite a high overall target achievement rate, certain unfulfilled targets directly impacted South African citizens and service delivery. While there was no direct correlation between the overall 92% figure and the listed unachieved targets, the intention was to highlight the importance of these specific indicators.
Ms Mditshwa also addressed the question of how targets were weighted. She said that qualitative significance was considered when assessing targets, particularly in relation to the organisation’s core mandate. For example, an administrative programme would not be given the same level of scrutiny as service delivery targets, as administration, while necessary, did not directly impact the organisation’s primary objectives. The focus was placed on key service delivery aspects to ensure that the most critical indicators were prioritised.
Turning to slide 12, she acknowledged the concern regarding irregular expenditure, which stood at R652 million for the 2023/24 financial year. She explained that the figure on the left represented annual irregular expenditure, while the accumulated total indicated that irregular expenditure had not been adequately investigated or addressed. She noted that if proper processes had been followed, such as investigations, consequence management, and potential recovery of funds, the closing balance should have decreased rather than increased.
Ms Mditshwa concurred with the Committee’s concerns, stating that the accumulation of irregular expenditure demonstrated a lack of enforcement of consequence management. She stressed that addressing this issue was critical in creating a culture where irregular expenditure was minimised within the entity. She supported the view that the Committee should ensure greater accountability in this regard.
The Chairperson said that based on the available information, it was evident that the entity's management was ineffective, the board had failed to exercise proper oversight over management’s performance, and the Ministry had not demonstrated sufficient interest in ensuring that the entity achieved its outcomes and managed its financial resources appropriately. The facts were clear, and this was his conclusion. While the ensuing discussions would provide further details, the key question for the Committee was what immediate steps should be taken regarding both the SETA and the Minister. In his view, direct engagement with the Minister should be prioritised as soon as possible.
Mr T Kubheka (MK) expressed concern over the manner in which the AGSA team had presented its audit findings, particularly in comparison to previous audits conducted under Adv Mothibi. He said that Adv Mothibi’s team was known for its direct and candid approach, where findings were clearly articulated without any attempts to downplay issues. However, in this instance, he felt that the AGSA team was overly cautious, failing to highlight key issues in a straightforward manner, which he felt was unacceptable.
He further emphasised that, as previously noted, the board had shown a lack of interest in holding management accountable, and this should be explicitly reflected in the audit findings. The Committee must not allow the audit process to become a mere formality, where incomplete or diluted information is presented and accepted without scrutiny. Instead, the Committee required detailed, itemised data, particularly regarding irregular expenditures. He supported Ms Mente-Nkuna’s call for tabulated and itemised information, as a broad summary was insufficient.
Mr Kubheka also raised concern about the lack of integration between SETAs, which led to duplication of student records and inefficiencies. He requested clarity on the obstacles preventing the integration of SETAs, as this issue needed to be addressed.
He also questioned the AGSA’s findings on wrongdoing within the entity. Despite identifying various irregularities, AGSA’s report did not specify the actions taken against those implicated. He demanded clarity on whether any cases had been opened, whether any individuals had faced disciplinary action or criminal charges, or whether those responsible had been allowed to leave without consequences.
Ms Mditshwa acknowledged the concerns raised by Committee Members regarding the language used. She assured the Committee that there was no intention to downplay any findings, and that AGSA would strive for greater clarity and directness in its reporting.
Regarding the lack of integration among SETAs, she explained that the primary issue was the absence of an integrated system. Each SETA operated in isolation, and there had been no significant incentive for collaboration. AGSA had recommended to the Minister that an integrated system be established to address inefficiencies. Some progress had been noted, particularly through the efforts of the Media Information and Communications Technologies (MICT) SETA in developing a learner management system, and AGSA would continue to monitor this development to assess its impact.
On the issue of material irregularities, she confirmed that in cases where financial mismanagement was identified, there had been little to no consequence management. No disciplinary action was taken for the first identified material irregularity because the individuals responsible had already left the institution. In the second case, AGSA remained dissatisfied with how the irregularity was being addressed, as no meaningful disciplinary measures or corrective actions had been implemented.
She reiterated that AGSA had consistently recommended a stronger culture of consequence management within the institution. Despite identifying irregular expenditures over multiple years, there was little evidence of accountability. Ideally, once investigations revealed the individuals responsible for financial irregularities, appropriate disciplinary processes should follow. However, in the case of this SETA, such processes had not been adequately pursued.
In summary, Ms Mditshwa confirmed that there was a clear lack of consequence management within the entity, as disciplinary processes were either absent or ineffective. In cases where individuals were implicated, they had either left the institution before action could be taken, or the necessary steps to enforce accountability were not followed.
Mr Kubheka said that AGSA's concerns aligned with his own regarding the lack of consequence management. As a result, he had no further comments or questions.
Mr F Essack (DA) remarked that the report was highly detailed and required significant analysis. He referred to slide 14, which addressed the 'War on Leaks' project, noting that the entity involved had failed to comply with section 57(b) of the PFMA. He highlighted that several entities had repeatedly failed to comply with the PFMA, and raised concerns about potential financial losses due to ongoing arbitration with a service provider. He questioned the timeline for resolving the matter, and whether the Committee should intervene directly.
Regarding slide 15, he expressed deep concern about the purchase of the Cape House building in Maclaren Street, Marshalls Town. He noted that the building had incurred refurbishment costs exceeding its market valuation, yet it had remained unused since 2015, while additional costs were being incurred for rental premises. He described this as a significant waste of taxpayers' money and questioned what actions the Committee should take to address such urgent issues.
He further emphasised that billions were being squandered without clear accountability. He sought clarity from AGSA on its recommendations, particularly regarding whether the matter should be referred to the Special Investigating Unit (SIU) or the relevant Ministry. He stressed the need for urgency in addressing these concerns, highlighting that financial mismanagement should not be tolerated.
Mr Essack also raised concerns about the double payment of value-added tax (VAT), questioning how such basic accounting errors could occur and be approved for payment. He requested AGSA’s response on this issue, and sought clarity on the process of recovering these funds.
Mr M Blose (EFF) welcomed the presentation, and reassured AGSA that Members of the Committee were not being overly critical of its team. He said that the Committee sought to look beyond the numbers to understand the broader context and impact of the findings.
He observed that the SETAs had long lacked accountability, describing their operations as a “free-for-all,” where entities acted with impunity. He found it particularly concerning that this was the first time AGSA was reporting these issues to SCOPA, reinforcing the notion that these entities had not felt the need to account to anyone.
Mr Blose emphasised that the corruption within the SETAs had a severe impact on young people, as funds intended for skills development and training were being misused. He asserted that the absence of an integrated system across SETAs was a deliberate strategy to exploit loopholes for corrupt practices. He pointed out that certain service providers were repeatedly awarded contracts across multiple SETAs, suggesting collusion and systematic corruption.
He linked these governance failures to broader socio-economic issues, particularly unemployment and the lack of skills development, arguing that those entrusted with these responsibilities were neglecting their duties.
Addressing AGSA’s findings on material irregularities, he questioned what happened when recommendations were ignored. He called for consistency in governance, highlighting the importance of stable leadership. However, he noted that in many cases, long-serving officials were complicit in corruption and maladministration.
He further questioned AGSA on the practical steps taken when recommendations were not implemented. He also raised concerns about continued state funding for entities that repeatedly failed to address financial mismanagement. He suggested that SCOPA should consider halting financial allocations to non-compliant entities.
Regarding financial recoveries, he referred to slide 12, which mentioned commitments to repay funds. He sought clarification on whether service providers had made firm commitments to repay the money and what mechanisms were in place to ensure recovery.
In conclusion, Mr Blose stressed the need to acknowledge that corruption was deliberate and systematic, rather than a result of mere errors. He urged the Committee to hold those responsible accountable, rather than rationalising their actions.
Ms Mditshwa said that the questions related to the 'War on Leaks' project and the building-related project fell under EWSETA, and these would be addressed in an upcoming presentation, which would provide further details on the material irregularities raised. She preferred not to discuss these matters before the presentation, but indicated that any remaining questions could be addressed thereafter.
The Chairperson agreed with this approach.
Ms Mditshwa continued, explaining that regarding the material irregularity at CETA, one of the key issues had been a double payment of VAT. The entity was in the process of recovering the funds from the service provider, and an investigation had been conducted. However, no disciplinary action was taken because the responsible individual had already left the institution. This lack of consequence management left a gap in addressing the irregularity.
She further explained that the recovery process had been delayed. A court process had been initiated, and summonses were issued to the service provider. However, the sheriff has been unable to locate the service provider, resulting in delays. While the entity was actively pursuing the recovery, the extended timeline raised concerns, especially given that the service provider was previously engaged with the entity.
Regarding material irregularities, she emphasised that when AGSA's recommendations were not implemented, the matter was escalated to other oversight bodies, including the Portfolio Committee and the Minister, to expedite the resolution process. AGSA had recommended that various stakeholders intervene to ensure the recovery of lost funds. Despite these recommendations, CETA's accounting authority had been unresponsive, indicating a lack of urgency in addressing these issues.
The Chairperson expressed appreciation for the presentations, and said that a follow-up meeting would be scheduled to consolidate reporting before engaging with the Minister. He remarked that AGSA did not need to provide SIU-level detail, as it was evident that CETA was largely unaccountable. He criticised the board for failing to hold management accountable, and said that the Ministry, despite changes in leadership, had not addressed the issue with sufficient urgency. He emphasised that the Committee must act swiftly to ensure that the situation had improved by the time AGSA conducts its 2024/25 audit. The Minister must demonstrate that she took these issues as seriously as the Committee did. He concluded that further details from AGSA were unnecessary, as the Committee now needed to intervene.
Mr Skosana asked whether CETA had been placed under administration during the past three financial years.
Ms Mditshwa confirmed that CETA had been placed under administration, but not within the past three years.
EWSETA and INSETA overall audit outcomes
Ms Shai provided an overview of the audit outcomes for EWSETA and INSETA, the quality of financial reporting, performance planning and reporting, and compliance with key legislation. She also addressed irregular expenditure and material irregularities, including an explanation of the 'War on Leaks' project and the Cape House building inquired about earlier. She also shared insights from data analysis, identified root causes, and made recommendations to the accounting authority.
Regarding INSETA, she covered similar areas, including audit outcomes, financial reporting quality, compliance with legislation, irregular expenditure, insights from data analysis, and recommendations to the accounting authority. She emphasised the need for the Committee to monitor and follow up with the executive authority and accounting authorities on CETA, EWSETA and INSETA.
Ms Mditshwa said she would not dwell extensively on EWSETA and INSETA, but noted that they faced challenges similar to those of CETA. She stressed that both entities required urgent attention from all stakeholders, particularly regarding closing identified gaps. She highlighted EWSETA as having significant material irregularities that needed to be addressed to prevent a recurrence.
See attached for full presentation
Discussion
The Chairperson expressed broader concerns about governance and financial management across the SETA environment. He noted a recurring pattern of systemic issues, including management's failure to take government and financial management systems seriously. He observed that financial statements were corrected only once the audit process began, which suggested inadequate or absent monthly and quarterly financial reporting. He also raised concerns about the ineffectiveness of audit committees, despite these entities receiving public funds annually. He pointed to the worrying reliance on service providers whose capabilities appeared uncertain. He highlighted a disconnect between policy objectives, organisational management, procurement oversight, and the actual delivery of skills training.
Drawing comparisons to issues previously observed in the National Skills Fund, he acknowledged that the fund was not a SETA in the same sense, but encountered similar governance failures. He invited AGSA to comment on whether his observations were accurate, whether he had overstated the issues, and to provide further insights into the broader skills development sector.
Ms Mditshwa agreed with the Chairperson’s assessment, and noted the similarity between the SETAs and the NSF, as their processes were fundamentally the same. She explained that when conducting a holistic review of the SETAs, the NSF was included because of this alignment in processes. She highlighted that funds were often transferred to service providers, with a significant over-reliance on them, particularly within the NSF. She pointed out that in many cases, the project units within these institutions were failing in their responsibilities, leading to a reliance on service providers to execute tasks that should have been managed internally. This resulted in a flawed approach, where service providers were paid and expected to handle implementation and reporting, instead of the institutions ensuring proper oversight.
She emphasised that within the SETAs, the focus should be on project units, as these were the structures meant to oversee service providers and ensure that funds allocated for skills initiatives were utilised effectively. Ideally, project management should involve a continuous follow-up process to track how transferred funds were spent and whether the intended objectives were being met. However, the reality was that service providers were often left to operate independently, with minimal oversight, mirroring the challenges observed in the NSF.
Ms Mente-Nkuna raised concerns about a growing practice in South Africa, where departments and entities were paying service providers in advance to initiate projects. In many cases, proper qualification requirements for service providers were not followed, leading to upfront payments without any deliverables being produced. Referring to AGSA’s investigations, she questioned whether such patterns had been identified, and expressed concern over instances where large sums, such as R15 million, had been paid without a single deliverable.
She pointed to a case in EWSETA, detailed on slide 24, where the entity was notified on 10 November 2023 of an issue, but had not managed to recover any funds. She warned that, in such cases, sending law enforcement agencies like the SIU to investigate would not necessarily result in financial recovery, but it would help to expose individuals exploiting state funds. She also referred to another case involving the purchase and refurbishment of a building that remained unoccupied. She questioned why key executives, including the CFO, CEO, and board chairperson, were unaware of the situation despite it being a board-approved resolution. She sought clarity on why the entity was taking so long to provide a reasonable explanation for these transactions.
Ms Mditshwa agreed with Ms Mente-Nkuna’s observations, affirming that the pattern of making payments before services were rendered was prevalent across the SETAs and the NSF. She cited the 'War on Leaks' project as a prime example, where payments were made regardless of whether the promised services were delivered. She explained that this practice was often embedded in the structuring of memoranda of agreement (MOAs) and service level agreements (SLAs) with service providers, which allowed for upfront payments before service delivery. This often led to financial losses, as there were inadequate safeguards to ensure that the services were completed as planned.
She emphasised the need for legislative interventions to prevent such occurrences, as well as stronger consequence management mechanisms to ensure accountability once funds had been transferred. She acknowledged that, in most cases, once money had been paid to service providers, recovering it became extremely difficult. She cited past cases where material irregularities were identified in the NSF and SETAs, but service providers had failed to return the funds.
On the issue of material irregularities at EWSETA, Ms Mditshwa confirmed that the SETA had requested an extension to provide feedback. She explained that responses to material irregularities required input from the accounting authority, rather than just the CFO, and the SETA had requested time to convene a board meeting before submitting its response. While she acknowledged the need for a detailed response, she expressed concern about the slow pace at which entities were addressing material irregularities.
She stressed that delayed accountability processes could lead to cases where implicated individuals left the organisation before disciplinary measures could be taken. She reiterated that the SETA had committed to providing a detailed response on the 7th, outlining how they intended to handle the material irregularities. However, she agreed that swift action was necessary to ensure accountability and avoid prolonged delays in implementing corrective measures.
Ms Mente-Nkuna requested that the back office break down the request to the entity, particularly concerning the two transactions under discussion. She said the responses provided to AGSA appeared to be a cover-up, as the delay in obtaining information suggested an attempt to conceal details. She further enquired whether AGSA had identified instances where MOAs lacked provisions for accountability. She acknowledged that in some cases, MOAs might be structured to support service providers from disadvantaged backgrounds, aligning with efforts to level the economic playing field. However, she emphasised that such agreements should include mechanisms for regular follow-ups, such as monthly inspections and quarterly audits, to ensure accountability. She questioned whether such oversight mechanisms were included in the MOAs, and why it had taken a full year before the lack of deliverables was identified.
Ms Mditshwa responded that MOAs typically contained accountability provisions, specifying requirements such as proof of expenditure before further payments, evidence of training, or attendance registers. However, the core issue lay with the project units, which were responsible for monitoring and ensuring compliance with the MOA terms. Ideally, project units should conduct monthly inspections to track progress, and quarterly reviews to assess whether the project was aligned with its objectives. These oversight measures should allow institutions to track developments, such as learner dropouts, and adjust expectations accordingly. However, in practice, project units were not consistently fulfilling these responsibilities, resulting in situations where payments were made despite the absence of deliverables. This failure led to material irregularities, such as those identified at CETA. While the MOAs were structured to enforce accountability, the lack of proper implementation by project units was the root cause of the problem.
Ms Mente-Nkuna proposed a forensic investigation into the two transactions, suggesting that it would provide valuable insight into the flow of funds.
The Chairperson noted that the affected entities were expected to appear before the Committee on either 27 or 28 February. While he agreed with Ms Mente-Nkuna’s concerns, he expressed uncertainty about whether to address the issue on an individual basis, or through a broader proclamation covering all entities with similar irregularities.
Ms Neale-May said that from a broad perspective, the assessment and analysis presented were accurate and aligned with the Chairperson's view. She expressed concern regarding the funds allocated to service providers, noting that many of them appeared to lead extravagant lifestyles, often driving luxury SUVs worth over R1 million. She suggested that lifestyle audits be conducted on these service providers to track financial flows and potentially recover misused funds.
She further aligned herself with Ms Mente-Nkuna’s concerns regarding reporting and accountability. Addressing AGSA, she questioned the role of National Treasury in monitoring these expenditures, given that monthly reports were submitted to the Treasury. She highlighted that some SETAs had been non-compliant for three consecutive years. If she were the Minister, she would advocate a pause in funding until the challenges were thoroughly assessed.
Ms Neale-May pointed out that with 32.1% youth unemployment, training only 600 learners per programme nationally was insufficient. She questioned whether the country was receiving value for money, stating that the current system was ineffective and required fundamental restructuring. Given the recurring patterns of non-compliance and mismanagement, she recommended a blanket forensic investigation into all affected entities, including NSFAS and the SETAs.
Ms Mditshwa acknowledged the concerns raised, stating that while the matter was primarily for the Committee to deliberate, she noted the question regarding Treasury’s role. She suggested that the Committee engage National Treasury for its perspective on addressing these systemic failures.
Mr Skosana concurred, stating that when the Minister appeared before the Committee, questions should be primarily directed at her, with the relevant boards and CEOs present for accountability. He emphasised the need for further scrutiny, particularly regarding stipends.
The Chairperson confirmed that the SETAs would appear before the Committee on 26 February, following Eskom’s governance update and financials on 25 February. He proposed that the meeting with the SETAs focus on direct questioning, rather than lengthy presentations, given the information already available to Members.
Ms Mente-Nkuna supported this approach, provided that the entities submit the necessary documentation in advance. She suggested that the Committee allocate specific SETA focus areas to individual Members to streamline questioning.
The Chairperson agreed, instructing the Secretariat to ensure that detailed questions were sent to the SETAs beforehand. He also proposed that the Minister appear shortly after the SETAs to account for the broader systemic issues affecting SETAs, the NSF and NSFAS.
He also requested the SIU to be present on 26 February to observe proceedings. He acknowledged AGSA’s efforts, despite the challenge of making recommendations that entities failed to implement. He reiterated the Committee’s appreciation for AGSA’s work in enabling effective oversight.
The meeting was adjourned.
Audio
No related
Present
-
Zibi, Mr SS Chairperson
RISE Mzansi -
Atkinson, Mr P
DA -
Blose, Mr MB
EFF -
Essack, Mr F
DA -
Kubheka, Mr TTS
MK -
Madlala, Mr KB
MK -
Mente-Nkuna, Ms NV
EFF -
Neale-May, Ms HE
ANC -
Skosana, Mr DM
MK -
Skosana, Mr GJ
ANC
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