Information Systems (ISETT) and Service SETAS’ Annual Reports: briefings

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Employment and Labour

10 November 2005
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Meeting report

LABOUR PORTFOLIO COMMITTE
11 November 2005
INFORMATION SYSTEMS (ISETT) AND SERVICE SETAS’ ANNUAL REPORTS: BRIEFINGS

Chairperson:

Ms O Kasienyane (ANC)

Documents handed out:

ISETT SETA 2004/05 Annual Report PowerPoint Presentation
Service SETA 2004/05 Annual Report PowerPoint Presentation
Department of Labour State of Skills South Africa 2005

 


SUMMARY
The Information Systems, Electronics, and Telecommunication Technologies (ISETT) Sector Education and Training Authority (SETA) delegation outlined their structures and progress towards meeting the National Skills Development Strategy (NSDS) goals. The SETA had experienced an accreditation backlog, and various steps had been taken to address this situation. The delegation further discussed the ISETT SETA’s 2004/05 financial statements. Unfortunately, the ISETT SETA had received a ‘disclaimer of opinion’ report from the Auditor-General.

In the ensuing discussion, Members were alarmed about the disclaimer of opinion report. Indeed, certain Members were appalled by the state of the ISETT SETAs financial statements and about the accreditation backlog. Members also asked about the high-level Information and Communication Technology (ICT) internship programme; why the ISETT SETA had not marketed itself through radio stations; why so few small-, medium- and micro-sized enterprises (SMMEs) were receiving skills development support from the ISETT SETA; and why there were so few disabled people in the learnership programmes.

The Services SETA delegation then explained they were responsible for promoting skills development in 37 service-related subsectors. They discussed the Services SETA’s organisational structure, and the progress made towards reaching the objectives of the NSDS. It was highlighted that the Services SETA had also undertaken skills development training for domestic workers as part of its National Skills Fund (NSF) project. The delegation then discussed the details of the Services SETA’s 2004/05 financial statements. This included highlighting that it had received an unqualified report from the Auditor-General. Nonetheless, the Services SETA faced a number of challenges, which included the loss of many SMMEs as skills development levy (SDL) contributors; increasing casualisation in the services sector; and financial constraints.

During the discussion that followed, Members enquired why the Services SETA believed that project management was not a scarce skill; why they had stated that SETAs were not a solution to unemployment; why they appeared to be unwilling to accredit training providers that lacked computer skills; and why there were so few African training providers in the services sector.

MINUTES

Information Systems, Electronics, and Telecommunication Technologies SETA briefing
Mr O Mopaki, head of ISETT SETA, noted that they were responsible for promoting skills development in the ISETT sectors. There were 4 613 employers and approximately 212 000 employees in their sectors. He then outlined the scarce skills required, including Information and Technology (IT) technical support; IT systems development; telecommunication technology; electronics development and maintenance, project management; computing; and entrepreneurial skills.

Mr Mopaki then discussed progress had made towards meeting the NSDS targets by 31 March 2005. They had:
- ensured that 95% of the workers in the ISETT sectors had at least an NQF Level 1 qualification;
- ensured that 127 675 sector employees were scheduled to undertake structured skills development programmes;
- ensured that 13 companies had committed to implement the Investors in People (IIP) Standard;
- provided 104 large enterprises in the sectors with skills development grants;
- provided 152 medium-sized enterprises with skills development grants;
- registered 15 learnership qualifications for the sectors;
- provided skills development support for 4.5% of the small enterprises in the sectors;
- registered 6 731 formerly unemployed people in learnerships. Twenty-three percent had successfully completed the learnerships.

Mr Mopaki noted that ISETT SETA had also implemented a high-level ICT skills internship programme. Through this, 470 unemployed Bachelor of Science (BSc) university graduates had been placed in high-level ICT skills internships. About 93% of these interns were black individuals, while 43% were women.

Mr Mopaki stated that the SETA had fully accredited 19 training providers. Added to this, nine other training providers had been provisionally accredited. There were a further 450 training providers that had been assisted to apply for accreditation. Many of these 450 training providers were already providing skills training under the auspices of larger accredited institutions. Accreditation had been a major challenge for the SETA. Indeed, there were very few black training providers. Hence, most of the accredited training providers were white-owned institutions. About 54 assessors and six moderators had been accredited.

Mr Mopaki then highlighted that the SETA had conducted an extensive marketing campaign. It had used various media, including roadshows, exhibitions, print media adverts, media releases, brochures, publications and a website. However, the SETA needed to make greater use of radio stations. The SETA had implemented learnership projects in Limpopo, North West, Free State and Northern Cape provinces to ensure that it had a presence in the rural areas. Added to this, the SETA had established partnerships with all provincial premiers’ offices.

Mr Mopaki discussed the details of the SETA’s 2004/05 financial statements. The SETA had had a total income of R266 million in 2004/05; most of which had been received through the SDLs. During 2004/05, SETA’s total expenses had been R245.3 million. The SETA thus had R168.6 million in cash or cash equivalents. However, it had committed R100 million to grant payments and R68.6 million to learnership programmes.

Unfortunately, the SETA had received a ‘disclaimer of opinion report’ from the Auditor-General. The major issues, which resulted in the disclaimer, were problems with SETA’s treatment of Value-added Tax (VAT); unrecorded liabilities; grant overpayments; problems with the accounting procedures; certain fundamental errors around revenue recognition; problems with the opening balance; and problems around recording fixed assets. The SETA had taken various steps to address these, and was hoping to achieve a qualified audit report in 2005/06, and thereafter unqualified audit reports.

Key challenges in 2005/06 included funding issues; implementing the ICT learnerships in remote rural areas; financial constraints; and achieving a clean audit report.

Discussion
The Chairperson and Mr L Maduna (ANC) enquired why the ISETT SETA’s high-level ICT internship programme focused only on BSc graduates. There were other unemployed graduates that also needed assistance. Mr Mopaki replied that there was a shortage of previously disadvantaged people in management positions in the ICT subsector. The ISETT SETA had confronted the ICT companies about this problem. The companies, however, had responded that there was a shortage of suitably qualified black people to fill the top management positions. In order to address this, the ISETT SETA had undertaken a drive to identify black BSc graduates that could be trained to become managers in the ICT sub-sector. The internship programme would be expanded to include a broader spectrum of graduates.

Prince N Zulu (IFP) asked what qualifications the SETA provided to the BSc graduates that had successfully completed the internship programme. He also asked about the types of skills training that the interns received. Mr Mopaki responded that the SETA had initially designed a generic internship programme, which all employers would have to use to train the interns. In 2003, a study had been undertaken around ICT employment and the complexity of the job descriptions within the ICT field. The study pointed out that it would be impractical to implement a generic internship programme. As a result, they had allowed companies to train the interns in the same manner as they would train their own staff. If the SETA had imposed the generic training programme on the companies, there would have been a danger that the companies would not have employed the interns on completion of their internships.

Mr B Mkongi (ANC) asked how many of the BSc graduates, who had enrolled in the ICT internship programme, were under the age of 35. Mr Mopaki replied that that 90% of the learners were under the age of 35.

Mr G Anthony (ANC) was concerned about SETA’s financial statements, and the disclaimer of opinion report from the Auditor-General. It was concerning that public money had been provided to an entity that had problems with its accounting systems. He asked whether the SETA’s accounting problems stemmed from a lack of capacity. In addition, he queried how the ISETT SETA was addressing the problems that it had faced around its audit report.

Mr C Lowe (DA) commented that the ISETT SETA’s 2004/05 financial statements were "appalling". Accounting system seem to have collapsed. It was impossible to determine whether ISETT SETA’s accounting records and financial statements were accurate or inaccurate. The situation was unacceptable and the Chief Executive Officer (CEO) should be held responsible for the poor financial statements.

Mr Mopaki responded that the SETA had been in existence for five years. During those five years, the SETA had only received ‘matters of emphasis’ from the Auditor-General. However, the 2004/05 financial statements were indeed poor for several reasons. The current Chief Financial Officer (CFO) had only been in the position for a year. The CFO had experienced various problems, but he had failed to inform the management team or board members about these. As a result, the problems with the financial statements had only been identified very late in the 2004/05 financial year. Due to this, the CFO had been suspended. Mr Mopaki added that he took full responsibility for the poor financial statements. Indeed, it was the board’s prerogative to decide whether or not to take disciplinary action against him.

Mr Lowe pointed out that the CEO and the CFO had received salaries in excess of those of Cabinet Ministers. In addition, both the CEO and CFO had been awarded bonuses. Indeed, the CEO had received a R174 000 bonus, while the CFO had received a R85 000 bonus. He enquired how the CFO and CEO could justify their high salaries, and bonuses, in the light of the SETA’s poor financial records. Mr Mopaki explained that the performance bonus for the CFO had been split into two portions. The first portion of the bonus related to the SETA’s financial deliverables. Obviously, the CFO had not received the first portion of the bonus. However, the second portion of the bonus related to SETAs service delivery. Indeed, the SETA had performed well in terms of service delivery. As a result, the CFO had received the second portion of the bonus.

Mr Lowe asked why the SETA had spent R2 million on consultancy fees.

Mr Anthony observed that the SETA was not marketing itself through radio stations, an important communication vehicle for reaching remote rural areas. Mr Mopaki replied that the SETA would be using radio stations in the future.

Prince Zulu observed that the SETA had identified a shortage of scarce, critical skills, but they needed to quantify these shortages. Mr Mopaki responded that SETA had undertaken a study to quantify the scarce and critical skills were needed in the ISETT and non-ISETT sectors.

Mr Maduna enquired why so few SMMEs were receiving skills development support from SETA. Did they have any initiatives to increase the involvement of SMMEs in skills development. Mr Mopaki replied that the SMMEs in the ISETT sectors differed from SMMEs in other sectors of the economy. Their SMMEs tended to be owned by highly qualified, and highly skilled, individuals. These SMMEs would then hire people that were highly qualified in the ICT field. As a result, they were not making use of the SETA’s skills development support. Nonetheless, he was concerned about the implications of exempting SMMEs from SDL payments. The larger companies were already arguing that as they paid most of the levy income, they should receive most of the skills development support. Exempting the SMMEs from paying SDLs would strengthen the larger companies’ argument.

Mr Maduna then complained that there were few disabled people in SETA’s learnership programmes. Mr Mopaki responded that little progress would be made if the SETA relied on employees to train disabled people in ICT skills. As a result, the SETA had established a project, in partnership with a non-governmental organisation (NGO) in KwaZulu-Natal, which was focused on offering ICT skills development training to disabled people. The SETA was examining rolling out this programme to the other provinces. ‘Centres of Excellence’ would be created to offer ICT training to disabled people. This would ensure that there were enough skilled disabled people to take up employment opportunities at ICT companies.

Mr Maduna enquired whether the SETA co-operated with the SA Local Government Association (SALGA) to ensure that local government employees received ICT skills training. Most of the municipalities had a shortage of employees that were properly trained in ICT skills. Mr Mopaki replied that the Local Government SETA was responsible for training local government employees. Nonetheless, the SETA, in partnership with SALGA, had provided ICT training to 100 local government employees.

Mr Lowe pointed out that only 23% of the learners had completed the SETA’s accredited learnerships. He felt this needed to be improved. Mr Mopaki responded that there was a 4% drop-out rate in the SETA’s learnership programmes. The figure of 23% represented the number of people that had already completed the learnership programme. There were still people that were in the process of undertaking the learnerships.

Mr Lowe further stated that the SETAs needed to ensure that learners found employment on completion of their learnerships. He enquired how many of SETA’s learners found employment or became self-employed.

Mr Mkongi asked whether SETA had a programme to provide skills development to recently matriculated people. This would assist these people to find employment or enrol in learnerships. Mr Mopaki responded that SETA offered National Qualification Framework (NQF) Level 4 qualifications. These were the equivalent to matriculation level subjects. Most of the recently matriculated SETA learners would begin their post-school studies at the NQF Level 4. Once they had completed the NQF Level 4 courses, they would progress to the NQF Level 5 courses.

Mr Mopaki added that there were approximately 300 000 people matriculating from the school system every year. However, most of these people lacked strong backgrounds in mathematics and science. This meant that very few matriculants were able to study IT at the universities or technology institutes. Added to this, many of the IT university students dropped out before the completion of their degrees or diplomas. As a result, the universities were not meeting the IT needs of the economy. The SETA aimed to address this. Indeed, SETA offered matriculants who could not go to university, an opportunity to develop IT skills.

Mr Mkongi and Ms L Moss (ANC) were pleased that the SETA had embarked on partnerships with most of the premiers’ offices. However, ISETT SETA had not forged partnerships with the Western Cape and Northern Cape premiers’ offices. Mr Mopaki responded that the SETA’s regional manager was working towards establishing a partnership with the Western Cape’s Premier’s office, and the City Of Cape Town.

Ms L Moss (ANC) asked whether the SETA had a programme to develop IT skills amongst school learners. The SETA should be involved in providing computer literacy skills to primary and secondary school learners. Mr Mopaki responded that the SETA had entered into a successful partnership with Telkom and MTN to provide computers to schools. Through this partnership, 819 schools had received operational computers. The SETA was involved in training teachers to enable them to instruct the learners on how to use these computers. Nonetheless, one needed to guard against companies dumping old computers at schools without offering teachers, or learners, any form of training. Some companies were dumping computers with outdated software, but such computers were of no use to the learners.

Ms Moss enquired whether the SETA had set itself a timeframe in which to address its training provider accreditation backlog. Mr M Mzondeki (ANC) asked whether the delays in accreditation had been caused by a capacity problem within the SETA. Did the SETA have a strategy to address the training provider accreditation backlog?

Mr Mopaki replied that, due to problems around the accreditation, the SETA had suspended its Accreditation Manager. In order to address the accreditation backlog, the SETA was now offering assistance to training providers. It would be making templates available, which could be used by training providers to apply for accreditation. The SETA would also be providing certain well-established training service providers, such as Vodacom, with provisional accreditation pending the submission of their portfolios. The SETA would fast-track the accreditation of smaller training providers already providing training under larger accredited institutions. Nonetheless, it would be difficult to provide concrete timeframes for addressing the backlog.

The Chairperson noted that the Committee would be monitoring the progress that the SETA was making towards addressing its many problems.

Services SETA briefing
Mr I Blumenthal (Services SETA Chief Financial Officer) provided background information and noted that they covered 37 service related sub-sectors. The Services SETA itself consisted of four chambers, which were the Business Services Chamber; the Management Services Chamber; the Commercial and Industrial Services Chamber; and the Client Care Services Chamber. In 2004/05, it was estimated that there were 100 000 employers and approximately 2.5 million employees in the services sector. Approximately 90% of the companies that contributed SDLs to the Services SETA were SMMEs. The fact that SMMEs were being excluded from paying the skills development levy would negatively impact on the Services SETA. Indeed, the number of companies paying the SDL in 2006 was expected to decline to 8 091 companies. Due to this, the Services SETA would no longer be able to offer skills development support to SMMEs that were no longer paying the SDL. The Services SETA had not been not established to service the mass of unemployed people in South Africa; but it was rather the SDL paying companies and their employees.

Mr Blumenthal noted that the Services SETA believed that inadequate research had been conducted around scarce skills. Indeed, some skills identified, such as project management, were not actually scarce. There were many people over the age of 40 with project management skills. However, due to the emphasis on youth employment, many such people were being excluded from employment opportunities. As a result, the Services SETA would be conducting a more comprehensive study of scarce skills during 2006.

Mr Blumenthal outlined some of the SETA’s achievements in terms of meeting the NSDS goals. These included ensuring that 100% of companies that had submitted Workplace Skills Plans (WSPs) received grants; ensuring that 22 000 people were placed in learnerships; enrolling 15 000 workers in skills development programmes; training 441 skills development facilitators; training 1 800 SMME advisors; accrediting 1 089 training providers; developing 11 EAP toolkits; and ensuring that 12 companies implemented the IIP Standard.

Mr Blumenthal then outlined the achievements of the SETA’s NSF Project for domestic workers. Through this project, 2 428 domestic workers had been trained and certified. A further 15 090 domestic workers had embarked on skills development programmes. In addition, approximately 2 000 domestic workers had received training on issues surrounding HIV/AIDS.

Mr Blumenthal highlighted some of the SETA’s other accomplishments, which included surpassing the target for learnerships for disabled people. He added that the SETA had conducted an extensive marketing campaign, in radio and print media. However, the print media in South Africa was very costly. Learners who had graduated from SETA’s accredited courses, were also registered on the European Union’s database, which was also beneficial for the export of South African service products. Indeed, international reciprocity had assisted with the growth of the call centre industry in South Africa.

Mr Blumenthal discussed the details of the SETA 2004/05 financial statements. The total income of the SETA for 2004/05 was R485.8 million. Of this, R396.5 million had been received through the SDLs. The total expenditure of the SETAs amounted to R583.7 million. Hence, the SETA had a deficit of R97.85 million, which had been covered by its reserves. The SETA had R90.7 million in cash or cash equivalents. Nonetheless, the SETA had committed R166.5 million to projects and learnerships. The SETA had received an unqualified report, with no ‘matters of emphasis’, from the Auditor-General.

Mr Blumenthal noted that the ‘casualisation of the workforce’ in the services sector was a challenge. It received funds on behalf of temporary employees and casual workers, but was often unable to ensure that these workers received skills development training. In order to address this, the Services Sector would be focusing on skills development of casual workers in the next five years. The SETA had also faced a challenge around financial resources. Indeed, the SETA had rejected 51 884 applications for learnerships due to financial constraints. When the SETA’s had originally been established, they had believed that they would receive some fiscal funding, but this had never materialised. The SETA was experiencing various other challenges in 2005/06, which included the need to implement the international accounting standards and the need to standardise its reporting template.

Discussion
Mr Mkongi observed that the Service SETA delegation had questioned whether project management was a scarce skill as many people over 40 possessed such management skills. He felt few black people had project management skills.

Mr Blumenthal replied that the SETA had been contacted by many people with project management skills. However, these people were unable to find employment because they were white and over the age of 40. He would provide evidence to the Committee in the course of 2006, which would highlight that project management skills were not scarce. He noted that in the past, few black people had received project management training. This was being addressed. Hence, the majority of the people that were being trained in project management skills were black.

Mr Mkongi and Mr Lowe asked whether Parliament could assist the SETAs to address the problem of the SMME SDL payment exemptions. Mr Lowe enquired whether the SETA had discussed its concerns around SMME exemptions with the Minister. It would be beneficial for the SMMEs to be exempt from the SDL. However, the SMMEs would then not benefit from skills development. This was unfortunate as the SMMEs needed skills development support. Mr Blumenthal responded that Parliament could address the problem of the SMME SDL exemptions by reversing the decision to exempt SMMEs from paying SDLs. The exemption of SMMEs should never have been extended without proper consultation.

Mr Mkongi and Mr Maduna observed that the SETA was unwilling to accredit training providers that were not computer literate. The majority of SETA’s accredited training providers were from historically advantaged backgrounds and possessed computers. Many of the previously disadvantaged training providers, who were not accredited, did not have access to computers. The SETA needed to address this. As a result, Mr Mkongi and Mr Maduna asked what the SETA was doing to develop the capacity of training providers who were not computer literate. Mr Blumenthal agreed that the problem of service providers lacking IT skills needed to be addressed. The Education and Training (ETDP) SETA was tasked with providing such IT skills development training to the SETA’s service providers.

Mr Anthony observed that the delegation had stated that the SETAs had been falsely represented to communities as the ‘answer to unemployment’. The participants at the Growth Development Summit (GDS) had stipulated that one of the tasks of the SETAs was to increase South Africa’s skills base in order to address unemployment. In addition, one of the goals of the Skills Development Act was to ensure that unemployed people received skills development training to enable them to find employment.

Mr Blumenthal replied that the GDS agreements stipulated that there needed to be a confluence of a number of factors to address the problem of unemployment. Skills development alone could not address unemployment. The participants at the GDS seldom made public the other factors needed to address unemployment. The GDS partners needed to deliver on their commitments. Nonetheless, the SETA was providing skills development training, and learnership opportunities, to thousands of unemployed people.

Mr Maduna enquired whether the SETA had deployed training providers in the remote rural areas. Mr Blumenthal replied that the SETA had a rural outreach initiative. Indeed, 49 schools in the rural areas were ‘feeder schools’ to the SETA programmes. At these schools, the learners acquired credits that assisted them in enrolling in the SETA’s learnership programme. However, it was not viable for the SETA to have a presence in an area where there were no services sector companies.

Mr Maduna asked whether the SETA had a programme to train unemployed people to become self-employed. The SETA could not merely focus on the employers and employees in the services sector. Mr Blumenthal responded that the SETA undertook national job campaign summits to make people aware of the employment opportunities that existed in the services sector. Added to this, the SETA regularly appeared on talk radio programmes. Callers could phone into these programmes to get advice on how to start up their own businesses.

Mr Lowe observed that the SETA had accredited very few black training providers. Did the SETA have any specific plans to address this problem? Mr Blumenthal replied that there were already many ‘coloured’ and ‘Indian’ training providers in the services sector. However, there were too few African training providers. Indeed, there needed to be a drive to specifically promote African training providers in the services sector.

Mr Mzondeki asked how the Committee could assist the SETAs to source more funding.

Mr Mkongi observed that the SETA’s regional boards seemed to alternate the positions of chairperson and vice-chairperson between black and white individuals. Mr Blumenthal responded that this was merely a co-incidence. Most of the people that represented business on the regional boards tended to be white; while most of the people that represented organised labour on the boards tended to be black. The positions of chairpersons and vice chairpersons had to alternate between labour and business. As a result, these positions tended to alternate between white and black individuals.

The Chairperson asked how the SETA monitored the performance of its accredited training providers.

Dr F Prinsloo (Department of Labour Executive Manager: SETA Performance Management) noted that over the past two months, all the SETAs had presented their 2004/05 Annual Reports to the Committee. The key issue that had arisen was the financial control audits of the SETAs. In 2004/05, four SETAs that received audit qualifications, and one SETA that had received a disclaimer report. The Department had taken steps to address this problem. It had employed two chartered accountants on a consultancy basis, to assist with the problems that surrounded some of the SETA’s Annual Reports. In addition, the Department was striving to ensure that the SETAs had a presence in all the areas of the country. The Department was working towards ensuring that the SETA boards became more involved in the management of the SETAs.

The meeting was adjourned.
ISETT SETA 2004/05 Annual Report (not released to the public as it has not yet been signed off by the Minister)
 

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