Sector Education and Training Authorities 2005/6 Annual Reports: Committee Planning Session

LABOUR PORTFOLIO COMMITTEE
29 May 2007
SECTOR EDUCATION AND TRAINING AUTHORITIES 2005/6 ANNUAL REPORTS: COMMITTEE PLANNING SESSION

Chairperson: Ms O Kasienyane (ANC)

Documents handed out:
Portfolio Committee Labour SETA Hearings Planning presentation
SETA Scorecard Guideline
SETA Scorecard [please email [email protected]]

SUMMARY
The Department of Labour briefed the Committee on the forthcoming meetings to be held with Sector Education and Training Authorities to discuss their Annual Reports for 2005/2006. He gave a full background and history to skills development, the decisions and the legislation, and the setting up and focus of the SETA system. Since 2003 they had been required to have service level agreements with the Department and start achieving specific targets. A score card system was then set up and a guideline for the system, and the scorecard itself, was established. The activity between 2004 and 2007 was summarised It was noted that the various initiatives and the critical skills list had now been amplified by development of the National Industrial Policy Framework and set up of Employment Services of South Africa to balance the supply and demand of labour and to match skills. He noted how the employment and labour agencies would henceforth fit into the system. He tabled the performance management system and explained that service level agreements would be used for  assessment. He set out and explained the scoring system. Members of the Auditor General's office highlighted their role. Financial management was key to the issues. Finally the Department listed the SETAs that would appear, indicating their problems and the areas upon which the Members should focus. Questions by members addressed the autonomy of the SETAs. the lack of financial accountability, how the Skills Development Act would be implemented, and the need to formulate a strategy for a standardised financial management.

MINUTES
Planning in preparation for Sector Education and Training Authorities (SETA) reports
Dr Prinsloo, Acting Senior Executive Manager, DOL, briefed the Committee in preparation for the briefings on and consideration of the Annual Reports for 2005/06 of the various Sector Education and Training Authorities (SETAs).

Mr Prinsloo gave the background to the SETAs. In 1998 the Skills Development Act (SDA) and the strategy was passed through parliament to set the theme for the development of the SETAs. However the SETAs only became established in 2000. The forerunner to the current National Skills Development (NSD) was established in 2001. Thus only three years after the Act was passed was there a framework and institutions for implementing the Act. During those three years a debate over the need for a new skills development landscape ensued between organised business, organised labour, the State and the community. It was then decided that SETAs needed to be run by organised business labour within their sectors. A major assumption behind all this was that organised labour and business would attend to these issues and would not n need to be monitored and measured on their performance. Therefore the 1998 Act did not have a requirement for service level agreements between the SETAs and the Department of Labour (DOL). The assumptions were not realised. In 2003 there was an amendment to the Act that now required the SETAs to have service level agreements with the DOL and to start achieving specific targets. A set of regulations was established between 2003 and 2005, that established service level agreements. Only in 2005 did DOL finally have some legislation which could be used to set up these formal level agreements. A score card system was then set up and a guideline for the system, and the scorecard itself, was established. These were tabled.

Dr Prinsloo highlighted the activity between 2004 and 2007. The second NSDS was established, the SETAs were reviewed in 2005, the Joint Initiative for Priority Skills in South Africa (JIPSA) was formulated in 2006, and the scarce and critical skills list. In 2007 the National Industrial Policy Framework was formulated to focus on the industrial needs of South Africa, and Employment Services of South Africa (ESSA) was set into use to work  to balance the supply and demand of labour. It addressed the skills mismatches in the country,  and the situation of trained and educated individuals who were not being employed. A typical mismatch situation would be an individual who gets career guidance, decides on a career and then gets a qualification without any regard to what was needed by the economy, and therefore fail to get any employment opportunity. 

Dr Prinsloo tabled a list of steps taken to try to address this situation. The critical skills list was the starting point, and this was then researched and  developed by the SETAs to inform the career guidance given to the individual, and the training that was offered. DOL monitored these lists. Occupations that used those critical skills would be identified. All available employment vacancies would be compiled in a central database that would be accessible to everyone in the country, especially those in the rural areas.

Discussion
Mr O Mogale(ANC) asked for clarification on how the system would impact on the labour agencies and labour brokers. He asked how the strategy would be implemented, and if there was capacity to implement and monitor  the ESSA projects. He asked what would happen if companies did not favour using the labour agencies.

Dr Prinsloo responded that the private sector labour brokers and temporary employment services were going to be affected by this regulation and had already approached the DOL. However, DOL had conducted international research that had shown that governments that have used these employment agencies effectively had done so through partnerships between the private sector and the public sector. This was the approach DOL would follow. Agencies would be informed that their business was going to change thorough the implementation of this new system, and would be assured that their employment creation capacity was very important and would not be hindered, although some of the employment conditions did need improvement. One of the suggestions regarding their regulation was that all labour brokers, regardless of the type, would have to register with DOL who would then access and assess their records on their past recruiting and placement.

Mr E Maduma (ANC) requested whether there would be any monitoring of the labour brokers' compliance with the Labour Relations Act (LRA).

Dr Prinsloo responded that the monitoring of the labour brokers would be done through the SDA. A Skills Development Bill would be tabled in November 2007, with the aim of amending Sections 32, 33 and 34 of the SDA, relating to offences and penalties for breaches of the SDA. Regulation of  temporary employment services fell under Section 23 of the SDA Act.  DOL would be expanding its inspectorate division to monitor the compliance of these agencies with the Basic Conditions of Employment Act (BCEA) and other legislation.

Mr. Mogale asked how far the DOL had gone towards the implementation of the  aspects in phase 1 of the ESSA project.

Dr Prinsloo responded that Phase 1 of the ESSA project had already commenced in all provinces, starting with the major labour centres. DOL would expand to other labour centres as it employed more people.

Mr Maduma aired his concern about the capacity of the labour centres in the mining sector. He asked if these labour centres would have the capacity to handle the huge amounts of people that would be approaching them instead of going directly to the mines, especially since the labour centres would hold  lists of all vacancies in a particular sector.

Dr  Prinsloo responded that this had been considered and would be addressed through the use of technology. Registration of vacancies from the large companies would be done electronically and by use of human resources information systems already in place. Many problems would be handled through improvement of communication between the stakeholders. Placement of the job-seekers could also be handled through the use of cell phone technology and DOL was currently exploring  opportunities to implement the system. The system was structured to handle people through the agencies, who would communicate and send this information to the companies. Companies could contact individuals, regardless of their location, and make plans for interviews and placements. Follow- up would be done on whether placements were effected.

Continuation of Briefing
Dr Prinsloo indicated the development process of the performance management system, which was now included in the score card and the scorecard guide. This was essentially a South African based SETA management system. Though the concepts were borrowed from elsewhere, it had nonetheless been contextualized and tailored to the South African environment.

The performance management system was tabled, indicating how time lines were used. Scorecards were measured between March and September, using the success indicators. The scorecards included direct references to the work by the Auditor-General (AG) to ensure that the Department did not duplicate this, and the AG would be implementing performance management assessment of all government agencies.

Between July and September the Service Level Agreements (SLA) would be set up for the following financial year. The Annual National Skills Development Conference would be held on 4 and 5 October this year. It was strategically placed as DOL would have just finished the performance assessment of the SETAs, and would be able to advise on the following year's SLA.

The key result areas used for measurement were set out, as endorsed by the National Skills Authority (NSA). The first area was the National Skills Development Strategy (NSDS), which included 16 indicators. In 2005 and 2006 only seven could be measured, but in the 2007 year the SETAs would be measured on 13 out of 16 Key Performance Areas, as the baseline information was now available.

The scoring system was explained and the background to the scores achieved was also highlighted. The measurement scale had been tightened as the NSDS2 and the Service Level Agreements were in place. The new measurement rating scale indicated the difference between compliance and performance and SETAs would in future be measured on performance.

Only two SETAs had achieved a score of 5. The DOL and NSA were concerned about what to do with those SETAs scoring under 3. It was decided that SETAs would be measured on year 2, in mid-September, and the consistency of performance would be looked at. Consistently poor performance would lead to action. Section 14(a) of the Act stipulated that if a SETA was not performing the Minister could give instructions what must be done within a certain period. If the SETA did not comply the Director General could take over the SETA.

Discussion
Mr O Mogale asked what DOL considered  as poor performance according the measurement rating scale, what scores were expected and whether any individual would be accountable for the performance?

Dr Prinsloo responded that a score of 3 was regarded as acceptable and indicated that the SETA was doing as expected. Any score below 3 indicated under performance and would be warranting some form of action. A score of 4 or 5 was regarded as good and recommendations would be given as to what further could be done. The performance system was an Organisational Performance Management System and not a Human Resource Management System, so the measurement was not of any individual but of the SETA board. The SETA board was responsible for the performance management of single individuals and also for the appointment and monitoring of the Chief Executive Officer (CEO).

Mr. Mogale commented that measures to dismiss CEOs or individuals not performing should be considered all the same.

The Chairperson aired her concern over the autonomy of the SETAs, believing that they need to be accountable.

Ms M Strydom, Senior Manager, Auditor General (AG), commented on some of  the findings made in the auditing process and the SETA Annual Reports. The AG had experienced some problems in its analysis of the SETA reports, as each SETA had its own set of rules. DOL should regulate the SETA boards and the staff appointed to these boards. Currently it was not possible to compare these SETAs and the boards set their own remuneration schemes according to their own policies. It was therefore difficult to hold members of the board accountable, since their actions were based on the policies and constitutions they set themselves.

The Chairperson commented that there was need for some form of guideline over the way the SETA boards draft their constitutions.

Dr Prinsloo highlighted to the Committee that discussions had taken place between the Director- General of Labour and the AG over these issues. It was deemed necessary to have some form of standardisation in the Constitutions of these SETAs. With regards to the autonomy of the SETAs, the system allowed for the SETAs to set up their own constitution . Most SETAs were performing well and only a few had been performing poorly.

Continuation of Briefing
Dr Prinsloo continued to note the implementation of the NSA procedure for SETA Governance and Performance Management that would be taking place based on the 2006/2007 scorecard results. The broader SETA review process was tabled and he indicated that DOL was going to review the whole SETA landscape, through research, but that caution had to be taken not to disrupt the momentum of the SETAs when they were reviewed. Financial management was crucial. Although different skills development systems could be run, there should be only one standardised financial management systems,and DOL was looking at having a centralised financial management system.

The next sections of the presentation focused on the particular SETAs that would appear before the Committee and some of the problems faced by them in the past.

Discussion
Mr C Lowe(DA) commented that the most important issue was the financial management, as it might the source to all the problems being experienced, and this must be monitored properly.

Dr Prinsloo noted that it would be difficult to create a centralised financial management system, as the funds given to the SETAs were levies from the private sector. The AG's office held the view that these were public funds. SDA already had provisions that allowed the Minister to monitor the financial management systems of the SETAs and this was under consideration as to how it could best be implemented.

Ms Strydom commented that the financial management of the SETAs was of grave concern to the Auditor-General. SETAs were public entities and should have a financial officer. When they were established it was not envisaged that there would be large amounts of money transactions, but the volume transferred to each SETA was large and necessitated new financial systems. It was also necessary to have generic financial systems.

Report on specific SETAs
Dr Prinsloo said that the SETAs for Transport, Tourism, Media and Advertising would appear before the Committee on 19 June, and tabled those areas on which they had performed poorly.

Mr Mogale asked for more clarity as to why the Transport SETA  failed to know about the money invested in Fidentia. He was concerned that the SETAs had been given autonomy and were not accountable to anyone.

Ms E Muller, Office of the Auditor-General, commented that the AG was waiting to receive the Annual Reports from the SETAs on 31 May and noted that the investigations were still ongoing, so it was unknown whether the money was still in existence. The SETA would need to decide whether the money was a valid asset and how they would reflect it in their balance sheet. The AG would then We assess the validity of that asset and also make financial forecasts on the upcoming financial year. The SETA had however indicated that if they did indicate the invested amount  as an asset they were likely to run into financial problems in March 2008.

Dr Prinsloo referred to the Tourism and Hospitality SETA, which was performing well and was now collaborating with the Department of Environmental Affairs and Tourism. This had made a significant difference to the SETA from previous years, though it had a few problems.

The Media and Advertising SETA was of grave concern to the DOL. The AG had submitted an extensive report on this SETA's problems. There were numerous investigations being conducted and the NSA would be advised on this SETA as part of the legislative process. Some of the problems facing this SETA,were tabled, but the key problem  issue was governance. He recommended that the Committee focus on the SCOPA report when it met with the SETA.

Ms Strydom commented that the AG had been facing problems over the auditing since the SETA had  split part  its operations between Gauteng and Cape Town. This made it difficult to assess its financial processes. The CEO of the SETA had been suspended since 1 March.

Mr. Mogale asked whether there was a prima facie case against the CEO, and why he had been suspended. He asked for further clarification on the R2.8 million spent on consultancy fees.

Dr Prinsloo responded that there was a case against the CEO, though he did not have the full details. The Board has however not informed the DOL that the CEO had been fired. There were issues concerning integrity and honesty in this SETA board.

Ms Strydom added that the R2.8 million was spent on a turn around process to get the MAPPP SETA re-registered by  South African Qualifications Authority (SAQA) as it had been de-registered. It did receive accreditation after 3 months of the turnaround process. No anomalies were found on the spending of this money. However the AG had serious problems with regard to their constitution, in particular because it was silent on the issue of disciplinary action against the board members.

Dr Prinsloo noted that the ISETT SETA was struggling, though it had improved quite significantly of late. The Committee should focus on the SCOPA report, though the SETA appeared to have rectified all the problems.

Dr Prinsloo noted that the Energy SETA was of concern to the DOL as it covered a very important sector. The committee should focus on the areas identified in his presentation.

Dr Prinsloo said that the ETDP SETA, in addition to the problems mentioned, had to find a means to ensure that this assisted other SETAs. The main weaknesses was the size of the board.

Dr Prinsloo noted that the Construction SETA had been facing financial problems, due to the high labour demand in the sector. It was however improving.

Dr Prinsloo noted that the MERSETA had been improving dramatically and needed advice on improving. The PSETA had been having conflicts with the Department of Public Service and Administration. This SETA was re-registered in 2004, and was currently facing problems of leadership as well as not having enough financing. The question was whether it was vital and was needed. The Safety and Security SETA was facing the problems and had recently lost its CEO. Focus should be given to  this SETA's financial report. The LG SETA had done really well despite losing their CFO. The HWSETA was of concern as it lost their CEO and CFO. They had nonetheless a good board that had managed to turnaround the situation.

The meeting was adjourned.