REPORT OF THE PORTFOLIO COMMITTEE ON HIGHER EDUCATION AND TRAINING ON THE ANNUAL REPORT 2013/14 OF THE NATIONAL SKILLS FUND (NSF) AND NATIONAL SKILLS AUTHORITY (NSA), DATED 19 NOVEMBER 2014

The Portfolio Committee on Higher Education, having met with the National Skills Fund and National Skills Authority, reports as follows:

1. Introduction

The Portfolio Committee convened a meeting with the NSF and NSA on 29 October 2014 to consider their Annual Report 2013/14. This report provides a brief summary of the presentations made by the NSF and NSA including observations and recommendations made by members.

2. Background

The National Skills Fund (NSF) was established in terms of section 27 of the Skills Development Act of 1998 specifically to; fund identified projects in the National Skills Development Strategy (NSDS) as national priorities, fund projects related to the achievement of the purpose of the Act as the Director-General determines and to administer the fund within the prescribed limit as regulated from time to time. The NSF is funded primarily from 20% of levies collected from eligible employers in terms of the Skills Development Levies Act. This funding is used primarily to fund projects, pay the South African Revue Service (SARS) for the costs of collecting levies from employers and to pay for the administration cost of NSF. The Director-General of the Department of Higher Education and Training is the accounting Authority of the NSF and is mandated to control the Fund, keep proper records of the Fund and prepare its annual financial statements.

The National Skills Authority (NSA) is a statutory body that was first established in 1999 in terms of Chapter 2 of the Skills Development Act of 1998, the Presidential Proclamation No 44 of 2009 and, subsequent proclamations assigned the responsibility for skills development to the Minister of Higher Education and Training. The NSA is structured into four sub-committees that deal with specific matters and make recommendations to the Executive Committee (EXCO) and board. The board is the main decision-making body while EXCO takes decisions between board meetings. The mandate of the NSA is to; review the skills development legislative framework, develop framework to mobilise business, government, labour and community to take full ownership of the NSDS, support the development of a post-school education and training system that encourages society to build a developmental state and encourage research, development an innovation that promote beneficiation and business enterprise development. The main role and function of the NSA is to advise the Minister and liaise with Sector Education and Training Authorities (SETAs) on NSDS.

3. List of delegation

3.1 Attendance by Committee Members

Present: Mr D Kekana (ANC) Whip, Ms J KIlian (ANC), Ms S Mchunu (ANC), Ms M Nkadimeng (ANC), Ms Y Phosa (ANC) Chairperson, Mr E Siwela (ANC), Prof B Bozzoli (DA), Mr Y Cassim (DA), Mr S Mbatha (EFF) and Mr M Tshishonga (AGANG).

3.2 Parliamentary support staff

Mr A Kabingesi: Committee Secretary, Ms M Modiba: Content Advisor, Ms T Majone: Committee Assistant, Mr L Komle: Researcher and Ms N Magazi: Executive Secretary.

3.3 Department of Higher Education and Training (DHET)

Mr Z Mvalo: Acting Deputy Director-General Skills Development, Mr T Tredoux: Chief Financial Officer (CFO), Mr F Toefy: Chief Director, Ms N Rasmeni: Parliamentary Liaison Officer Office (PLO) of the Minister, Ms P Sekgobela: PLO Office of the DG, Mr S Mlangeni: PLO Office of the Deputy Minister and Ms B November: Intern Office of the Deputy Minister.

3.4 National Skills Fund (NSF)

Mr E Mashabane: Director, Mr W Minnie: Chief Financial Officer, Ms S Theron: Director and Ms K Hlongwane: Director Provincial Operations.

3.5 National Skills Authority (NSA)

Mr E Majadibodu: Chairperson, Mr T Mashangoane and Ms S Mangubewa: Deputy Director.

3.6 Office of the Auditor-General South Africa

Ms N Mafahla: Audit Supervisor, Ms C Smit: Manager

3.7 Other guests:

Mr D Stupan: Director CNC Advocacy and Ms N Maponopono: Monitor Parliamentary Monitoring Group (PMG).

4. Summary of presentations

4.1 National Skills Fund

Mr W Minnie: CFO led the presentation which highlighted the following key issues:

The main highlight of the entity for the period under review include the disbursement of R3.1 billion towards skills development and for the implementation of NSDS goals. Of the total R3.1 billion, R2.5 billion was allocated for training of 77 000 learners, R528 million was allocated for key skills infrastructure development and R25 million for establishing a credible skills planning mechanism and strengthening the PSET system.

In relation to programme 1, Skills Development Funding, the total targets for the period under review were 21 of which 12 were achieved, 6 partially achieved and 3 not achieved. The key achievements for this programme include; R495 million for 25 850 TVET college learners, R1.2 billion for 29 136 undergraduate bursaries and 1 026 postgraduate bursaries, R101 million for rural development projects benefiting 3 156 learners, R317 million for national priority projects benefiting 8 178 learners, R106 million for expansion of medical and veterinary facilities at University of Pretoria, R199 million for TVET college campuses and R92 million for strengthening of TVET college sector.

In relation to programme 2, NSF Operations, the entity experienced delays in appointment of a service provider to assist the entity in establishing itself as a fully compliant schedule 3A Public Entity. The NSF received and unqualified audit with matters of emphasis from the Auditor-General.

In relation to its financial performance for the period under review, the entity had a total revenue of R4 billion and the total expenses amounted to R3.2 billion. The assets of the entity include; Public Investment Corporation (PIC) investments of R5.7 billion, funds in the bank R1.1 billion and funds advanced to skills development projects of R2.3 billion. The current commitments of the entity stood at R11.3 billion, current available reserves R8.4 billion and over commitment of R2.8 billion.

4.2 National Skills Authority

Mr T Mashangoane: Director led the presentation which highlighted the following key issues:

In relation to its progress and achievements; the NSA advised the Minister on NSDS III, conducted the National Skills Conference in 2011 and 2013, advised the Minister on reconfiguration of the SETA landscape, advised the Minister on legislation review and SETA regulations, two investigations were conducted on scope creep by Service SETA and allegations of mismanagement at Chemical Industries SETA.

In relation to administration and management support, the NSA secretariat is responsible for supporting the work of the entity’s committees and managing day-to-day operations. In strengthening the NSA, the entity agreed with the Department to have a dedicated allocation for the use of NSA activities and the new NSA board is scheduled for orientation and capacity building workshop in November 2014. The urgent focus areas of the NSA include; SETA panel review process, appointment of SETA Council members and dealing with recommendations of the White Paper on Post-School Education and Training on NSA.

In relation to its budget and funding, the NSA receives a budget allocation from the DHET through voted funds and in the main, these funds are for administration activities such as personnel expenses for staff and administration and logistics. The NSA Secretariat is housed within the Skills Development branch of the Department. Other NSA activities such as the skills conference, provincial consultations are funded from the NSF allocation. For the period under review, compensation of employees was R2.7 billion, good and services R1.7 billion and expenditure R7.4 billion.

5. Observations

The following formed part of the observations:

5.1 National Skills Fund

· The Portfolio Committee commended the entity’s key achievement in funding the national skills development priorities as identified in the NSDS III, National Growth Path, Industrial Policy Action Plan (IPAP) 2013/14-2015/16, and Medium Term Strategic Framework 2009-2014. The funding of infrastructure development for the post-school education and training institutions to expand access and success to education and training was also commended, though the delay in the building of the TVET College campuses was not well received.

· The Portfolio Committee was seriously concerned that 60% of vacancies at the entity were not yet filled and this inadequate capacity might impact on project monitoring and evaluation given the increase in the number of projects that have committed funds.

· It was raised with concern that the Annual Report 2013/14 of the entity was inaccurate in relation to its financial statements and the targets for the period under review were unreliable and vague.

· Inaccurate and untimely financial and performance reporting resulting in non-compliance with laws and regulations was highlighted as serious concern that need to be addressed by the entity.

· The Portfolio Committee noted with concern that the NSF is not a legal persona.

· It was raised with concern that though the Skills Development Act provided for the discretion of the Minister and the Director-General on funding of some projects, there was a need for objectivity.

· The Portfolio Committee was concerned that though the NSF was listed as a Schedule 3A Public Entity in 2012, it relied on the Department’s supply chain management policies, Information and Communication Technology (ICT) systems, Human Resource Policies and other policies.

· In relation to achievement of targets, the Portfolio Committee was concerned with the under-achievement in the targets set for the period under review.

· Given the financial reserves that are managed by the entity, the Portfolio Committee was concerned with inadequate record and information management system for financial and performance reporting.

· The Portfolio Committee was of the view that the entity should contribute more in funding needy students in universities and Technical and Vocational Education and Training (TVET) Colleges to supplement the current National Student Financial Aid Scheme (NSFAS) budget shortfall.

· It was noted with concern that though the NSF operated as a disbursement agency, the tracking of learners or beneficiaries for its projects was solely outsourced to the institutions which received the NSF grants. Furthermore, NSF could not account on the progression of the beneficiaries or learners funded.

· The Portfolio Committee commended the Department for the new SETA grant regulations which would allow unspent SETA surpluses to be re-directed to the NSF for other priority projects.

5.2 National Skills Authority

· The Portfolio Committee was seriously concerned with the delays in the appointment of the new board of the NSA by the Minister.

· It was noted with concern that the NSA did not have adequate financial reporting though it received funds from the NSF and Department.

6. Conclusion

The meeting with the NSF and NSA provided members with insight into the activities and functions of these entities. The NSF is an important role player in the funding of skills development projects and other priorities that are meant to develop and uplift the livelihoods of the country’s citizens. The Fund’s disbursement towards skills development of R3.1 billion during the year under review was commendable and it benefited 77 000 learners for training. The listing of the NSF as a public entity presented the organisation with challenges since it was a directorate located within DHET. The entity did not have adequate capacity at the time of its listing to operate independently from the DHET and a service provider had to be appointed to assist with setting up of the organisation. Unfortunately, there were delays in the appointment of the service provider and this impacted negatively on achievements of targets planned. Nevertheless, the entity reported that it has a transformation project called “Siyaphambili” which will be completed by 2016. Through this project, the entity has identified action plans to deal with all its challenges and to develop its way forward.

In relation to the NSA, the Portfolio Committee commended the Authority for its continued advice to the Minister in particularly on skills development matters and SETAs. The Authority is still a directorate in the Skills Development Branch of the DHET although it has a chairperson and the board. The Skills Development Act does not compel the Authority to report on its financial statement separately and this was a concern that was noted by the Portfolio Committee. Furthermore, the Act does not make provision for the Authority to be established as a public entity and its advisory role is constrained by its dependence on the Department for all its activities.

7. Recommendations:

The Portfolio Committee recommends to the Minister to consider the following:

7.1 National Skills Fund

· The delinking process of the NSF from the DHET should be fast tracked;

· The Minister should consider the review of the Skills Development Act to make the NSF a legal persona;

· The entity should develop an action plan to respond to all the findings raised by the AG in the 2013/14 Annual Report;

· The filling of vacant posts should be prioritised to improve monitoring and evaluation of skills development projects;

· Reprioritisation of funds from unspent historically accumulated reserves and the uncommitted funds from SETAs’ discretionary funds should be facilitated to cover the NSFAS budget shortfall for higher education institutions, in particular the student historic debt;

· The entity should develop clear performance indicators to track and report on the success of learners in the funded skills development projects; and

· The Department should fast track the building of the TVET College campuses.

7.2 National Skills Authority

· The research capacity of the Authority should be expanded.

Report to be considered.