ATC200717: Report of the Portfolio Committee on Higher Education, Science and Technology on Consideration of the Sector Education and Training Authorities (Setas) and the National Skills Fund (Nsf) 2020 – 2025 Strategic Plans and 2020/21 Annual Performance Plans and Budgets, Dated 17 July 2020

Higher Education, Science and Technology

18. REPORT OF THE PORTFOLIO COMMITTEE ON HIGHER EDUCATION, SCIENCE AND TECHNOLOGY ON CONSIDERATION OF THE SECTOR EDUCATION AND TRAINING AUTHORITIES (SETAs) AND THE NATIONAL SKILLS FUND (NSF) 2020 – 2025 STRATEGIC PLANS AND 2020/21 ANNUAL PERFORMANCE PLANS AND BUDGETS, DATED 17 JULY 2020

 

1. INTRODUCTION AND MANDATE OF THE SETAS AND THE NSF

The Portfolio Committee on Higher Education, Science and Technology (hereinafter referred to as the Committee), having considered the 2020 - 25 Strategic Plans and 2020/21 Annual Performance Plans(APP) and budgets of the Education, Training and Development Practices Sector Education and Training Authorities (ETDP-SETAs), the Media, Information and Communication Technologies SETA (MICTSETA), the Manufacturing, Engineering and Related Services SETA (MerSETA) and the National Skills Fund (NSF), reports as follows:

 

1.1. Mandate of the Committee

Section 55(2) of the Constitution of the Republic of South Africa stipulates that “the National Assembly (NA) must provide for mechanisms (a) to ensure that all executive organs of state in the national sphere of government are accountable to it; and (b) to maintain oversight of (i) national executive authority, including the implementation of the legislation; and (ii) any organ of state”. Rule 227 of the Rules of the National Assembly (9th edition) provides for mechanisms contemplated in section 55(2) of the Constitution.

The Committee derives its mandate from section 29 of the Constitution of the Republic of South Africa and it oversees the implementation of the following legislation: Higher Education Act, 1997 (Act No.101 of 1997), National Student Financial Scheme Act, 1999 (Act No. 56 of 1999), Continuing Education and Training Act, 2006 (Act No. 16 of 2006), National Qualifications Framework Act, 2008 (Act No. 67 of 2008), Skills Development Act, 1998 (Act No. 97 of 1998), Skills Development Levies Act, 1999 (Act No. 9 of 1999) and the General and Further Education and Training Quality Assurance Act, 2001 (Act No. 58 of 2001). The Committee oversees the implementation of the above mentioned legislation.

1.3. Purpose of the Report

The purpose of this report is to account for work done by the Committee in the 2020 - 25 Strategic Plans and 2020/21 Annual Performance Plans(APP) and budgets of the ETDP-SETA, MICTSETA, MerSETA and the NSF in accordance with Section 27(1) of the Public Finance Management Act, 1999 (Act. No 29 of 1999), and as referred by the Speaker of the National Assembly (NA) to the Committee in terms of Rule 338 for consideration and reporting.

The 2020 - 25 Strategic Plans and 2020/21 APPs and budgets of the ETDP-SETA, MICTSETA, MerSETA and the NSFwere considered against the background of key government policy documents, including, amongst others, the National Development Plan (NDP), the 2019 – 2024 Medium Term Strategic Framework (MTSF), the National Skills Development Plan and the 2020 State of the Nation Address (SONA). The convened briefing sessions with the four Entities to consider their Strategic Plans and the APPS on 22 May 2020.

 

The Committee could not meet with the Office of the Auditor- General of South Africa (AGSA) to receive a briefing on the audit outcomes of the 2020/21 APPs of the Entities. The AGSA could not confirm the final 2020/21 APPs for the entire Higher Education Portfoliodue to lockdown, which resulted in the withdrawal of the auditing teams from audits.

 

2. OVERVIEW OF THE KEY POLICY FOCUS AREAS RELEVANT FOR THE DEPARTMENT AND THE ENTITIES

2.1.Key government policies

2.1.1. The National Development Plan (NDP) Vision 2030

The NDP identifies the decent work, education and the capacity of the state as particularly important priorities. The NDP envisages that by 2030, South Africans should have access to education and training of the highest quality. The education, training and innovation system should cater for different needs and produce highly skilled individuals. The further argues that graduates of the post-school system should have adequate skills and knowledge to meet the current and future needs of the economy and society. Chapter nine of the NDP outlines policy priorities for the entire education and training sector and these priorities should be achieved by 2030.For the SETAs and the NSFAS, the National Development Plan (NDP) has set a target of producing 30 000 artisans per year by 2030.

2.1.2. The White Paper for Post-School Education and Training (WPPSET)

The White Paper articulates a vision for an integrated system of post-school education and training, with all institutions playing their role as parts of a coherent but differentiated system. The White Paper sets out strategies to expand the current provision of education and training in South Africa, to improve its quality, to integrate the various strands of the post-school system. There are interventions set in the White Paper for implementation by different sectors of the Post-School Education and Training. Flowing from the White Paper, the Department has developedthe National Skills Development Plan (NSDP)Draft National Plan for Higher Education, which will be an implementation plan with measurable targets for each sub-system of the sector.

2.1.3. National Skills Development Plan (NSDP)

The NSDP aims to ensure that South Africa has adequate, appropriate, and high-quality skills that contribute towards economic growth, employment creation, and social development. The NSDP is set to become the key policy to inform the work of the SETAs and the NSF until 2030 and has been crafted within the policy context of the NDP, and the White Paper. The SETAs and the NSF will focus on addressing the eight NSDP outcomes as follows:

  • Outcome 1: Identifying and increasing production of occupations in high demand;
  • Outcome 2: Linking education and the workplace;
  • Outcome 3: Improving the level of skills in the South African workforce;
  • Outcome 4: Increasing access to occupationally directed programmes;
  • Outcome 5: Supporting the growth of the public college system;
  • Outcome 6: Skills development support for entrepreneurship and cooperative development;
  • Outcome 7: Encouraging and support worker initiated training; and
  • Outcome 8: Supporting career development services.

 

2.1.4. 2019 – 2024 Medium-Term Strategic Framework (MTSF)

In 2019, the new Administration has identified seven priorities derived from its electoral mandate and the 2019 State of the Nation Address (SONA) to focus its interventions for the 2019 – 2024 MTSF period. The 2019 – 2024 MTSF is a five-year strategic plan of government, and forms the second five-year implementation phase of the NDP. The post-school education and training sector contributes to Priority 2: Education, Skills and Health. This priority contributes to pillar 2 of the NDP pillars, which is Capabilities of South Africans.

In implementing Priority 2: Education, Skills and Health, Government has developed the new 2019 – 2024 MTSF. The Strategy has four Outcomes that are relevant to the SETAs and the NSF These are: 

  • Expanded access to PSET opportunities;
  • Improved success and efficiency in the PSET system;
  • Improved quality of PSET provisioning;and
  • A responsive PSET system.

Though the Department of Higher Education and Training and Training leads the operationalisation of the Priority, entities play a critical role in delivering the programmes and the Department reports on the overall performance. The skills levy institutions contribute to the following MTSF outcome indicators and targets: 

Table 1: Priority 2: Education, Skills and Health outcomes relevant to the SETAs and the NSF interventions

 

PRIORITY 2: EDUCATION, SKILLS AND HEALTH

Outcome

Outcome Indicator

Target by 2024

 

 

 

 

 

Outcome 1: Expanded Access to PSET opportunities

Annual registrations for SETA supported Work-based learning (WBL) programmes

 

190 000

Targets in the SLA between DHET and SETAs to improve performance are met

100%

Number of learners entering artisanal

programmes annually

36 375

Allocated grants paid on time to employers

100% allocation

disbursed on time

Number of learners registered for SETA-supported skills learnerships annually

 

 

116 000

Number of learners registered for SETA-supported internships annually

 

18 000

Number of learners registered for SETA-supported skills programmes annually

 

150 000

 

 

Outcome 2: Improved success and efficiency  of the PSET system

Number of artisans certificated annually

 

26 500

Number of learners Completing SETA – supported learnerships annually

 

53 000

Number of learners completing SETA supported internshipsannually

 

11 000

Number of learners completing SETA supported skillsprogrammes annually

 

128 000

 

 

 

Outcome 3: Improved quality of the PSET system

Good governance standards for all institutional types are in place

Good governance standards for all institutional types

approved and implemented by 2021

Percentage of PSET institutions (SETAs) that meet standard of good governance

95% of PSET institutions (SETAs) that meet standard of good governance

Outcome 4: A responsive PSET system

SETAs develop credible sector plans, which include forecasting

 

 

TVET Colleges Community Colleges curriculum to align with industry needs

SETAs fund programs identified through research that meet the needsof emerging and small enterprises in TVET and CETC

Number of hubs established to promote

Number of hubs established to promote

Number of artisan learners trained in 30

centres of specialisation per annum

 

700

 

2.1.5. 2020 State of the Nation Address (SONA)

The February 2020 State of the Nation Address (SONA) key focus is on inclusive growth and addresses critical priorities for the Higher Education and Training sector. These include, youth employment through appropriate skills development and capabilities, curriculum development, student accommodation and the establishment of two universities and nine Technical and Vocational Education and Training (TVET) colleges.

 

3. OVERVIEW AND ASSESSMENT OF THE SECTOR EDUCATION AND TRAINING AUTHORITIES (SETAs)’ 2020 – 2025 STRATEGIC PLAN AND 2020/21 ANNUAL PERFORMANCE PLANS

The Sector Education and Training Authorities are established in terms of the Skills Development Act, 1998 (Act no 97 as amended) and listed in terms of the PFMA, as Schedule 4A public entity. The Skills Development Act mandates the SETAs to promote skills development for the education and training sector. The SETAs are funded through the 1 per cent levy income paid by employers to the South African Revenue Service (SARS).

Their mandate is derived from the Skills Development Act (No. 97 of 1998) and its subsequent amendments. Its responsibilities include the following:

  • Develop a Sector Skills Plan (SSP) within the framework of the NSDS;
  • Establish and promote learnerships through:
  • Collect and disburse the skills development levies in its sector; approve workplace skills plans and allocate grants in the prescribed manner to employers, education and training providers and workers;
  • Fulfil the functions of an Education and Training Quality Assurance (ETQA), as delegated by the Quality Council for Trades and Occupations (QCTO); and
  • Monitoring education and training in the sector.

 

3.1. Education, Training and Development Practices SETA

3.1.1. Overview and assessment of the 2020/21 Medium-Term Expenditure Framework

Table 2: Reflects the budget summary indicating allocations across the MTEF

ETDP SETA

 

Estimate of expenditure from current year

Next year's budget

Following year's budget

R million

2019/20

2020/21

2021/22

2022/23

TOTAL

1 065 479,0

1 066 694,4

1 130 327,9

1 187 315,8

Projected inflation rate

-

4,4%

4,6%

4,6%

Inflation factor

100,00

104,40

109,20

114,23

R million

2019/20

2020/21

2021/22

2022/23

Nominal amounts

1 065 479,0

1 066 694,4

1 130 327,9

1 187 315,8

Inflation-adjusted

1 065 479,0

1 021 737,9

1 035 076,1

1 039 447,1

Source: ETDP SETA Annual Performance Plan 2020/21

Over the MTEF, the budget of the ETDP SETA amounts to R3.38 billion. For the 2020/21 financial year, the ETDP SETA has a total revenue amounting to R1.06 billion. The budget is made up of R523.3 million for Levies; R12.9 million for Penalties and Interest, R91.2 million for Investment income and R439.2 million in contributions from the Department of Basic Education (DBE). The ETDP SETA overall budget is projected to grow to R1.13 billion for 2021/22 and R1.18 billion for 2022/23. However, when considering inflation, the budget is estimated to only grow to R1.03 billion for 2021/22 and R1.04 billion for 2022/23, which is not a substantive increase over the MTEF period.

The bulk of the budget, R720.7 million or 67.6 per cent is allocated to Programme 3: Learning Programmes and Projects, which funds work-based learning placements, internships, learnerships, skills development, bursaries, supports the growth of the TVET and CET colleges, supports training interventions for cooperatives, NGOs, NPOs, CBOs, and entrepreneurship. Of the R720.7 million, R666.71 million is for discretionary funds for skills development projects and R54.05 million for discretionary grants administration. Operational administration costs amount to R211.42 million and of this, R112.0 million is for salaries and benefits. Mandatory grants to employers is apportioned an allocation of R135.82 million.  An allocation amounting to R3.66 million is transfer contribution to the QCTO.

3.1.1.1.The impact of COVID-19 on the revenue of the ETD-SETA

The skills development levy (SDL) contribution four-month holiday to respond to the socio-economic impact of COVID-19. The contribution will impact on the revenue of the ETDP-SETA. The Entity had projected a revenue amounting to R1.06 billion for the 2020/21 financial year. Due to SDL four-month holiday, the SETA will experience a shortfall amounting to R397.71 million, which will result in a reduced total budget amounting to R668.97 million.

The SETA indicated that the provincial departments of education may not be in a position to make contributions due to nationwide budget re-prioritisations to cater for the additional critical needs of the departments to provide essential COVID-19 equipment and services.

3.1.2. Overview and assessment of the Annual Performance Plan (APP) 2020/21

The work of the ETDP SETA is divided into four programmes, namely, Administration; Research and Skills Planning; Learning Programmes and Projects and Quality Assurance. There are 39 targets for 2020/21.

3.2.1.1. Programme 1: Administration

The programme aims to ensure effective organisational management and administration. This programme relates to achieving best practice governance, leadership and management under the PFMA and Treasury Regulations, King IV Principles, Skills Development Act mandate, the ETDP SETA Constitution and Code of Ethics, Accounting Authority (AA) committees’ terms of reference, approved Delegation of Authority Framework, and strategic and operational policies. The Programme has three output indicators and three targets set for 2020/21. During the year, the programme will conduct strategic and operational risks assessments; enhance competencies and capabilities of its human capital by training 56 staff and allocate 72 per cent of the discretionary grant budget at developing high, intermediate and elementary skills.

 

3.2.1.2. Programme 2: Research and Skills Planning

The programme aims to obtain accurate information on the supply of, and demand for, skills to address the skills gaps in the ETD sector. The programme has two sub-programmes, namely: Research and Workplace Skills Plans and Annual Training Reports. There are three output indicators and three predetermined targets under this programme.

One of the priorities of the 2019 – 2024 MTSF is for the SETAs develop credible sector plans, which include forecasting. This is also in line with the National Skills Development Plan (NSDP) Outcome 1: Identify and increase production of occupations in high demand. During the 2020/21 financial year, the programme will dedicate efforts to identifying and reporting on occupations in high demand. The programme will conduct four research projects to identify interventions and workplaces that provide priority occupations in the ETD sector.The SETA will also approve 800 workplace skills plans (WSPs)and Annual Training Reports.

3.2.1.3. Programme 3: Learning Programmes and Projects

The programme aims to provide services for the implementation, monitoring, evaluation and reporting on learning programmes. The programme has four sub-programmes, Implementation of learning programmes as per the NSDP outcomes (for both unemployed and unemployed); Partnership projects; Monitoring, Evaluation and Reporting and Career development services. The programme incorporates both the MTSF four outcomes: Expanded access to PSET opportunities, improved success and efficiency of the PSET system, improved quality of PSET provisioning and a responsive PSET system; and the eight outcomes of the NSDP.

For the 2020/21, the programme has 31 predetermined targets. During the year, focus will be directed at funding placements of TVET college and universitystudents for work-integrated learning locally and internationally; placements of unemployment learners/ students in internships and completion from these placements. The programme will also conduct an evaluation of the implemented interventions.

In linking education and the workplace and to increase access to intermediate and high level skills, the programme will fund enrolment and completion of unemployed learners in learnerships projects; enrolment and completion of unemployed learners in skills programmes; awarding bursaries(new and renewals) for high and intermediate level skills required by the ETP sector; enrolment and completion of learners in the Recognition of Prior Learning (RPL) programmes; and organise career development events.

In improving the level of skills in the South Africa workforce, the programme will facilitate through funding enrolment and completion of workers in skills development programmes; award bursaries to workers; and establish partnerships with TVET colleges, CET colleges and higher education institutions. Focus will also be on funding cooperatives for skills development and support Community-Based Organisations and Non-governmental Organisations with training interventions.

3.2.1.4. Programme 4: Quality Assurance

The aim of this programme is to develop quality occupational qualifications, which are responsive to occupations in high demand. The programme has two sub-programme, namely: Qualifications Development and RPL Assessment Centres. It contributes to the improved quality of PSET provisioning. There are two output indicators and two targets set for 2020/21.

During the year, the programme will develop one occupational qualifications and establish and maintain three RPL assessmentcentres.

3.2. Manufacturing, Engineering and Related Services SETA

3.2.1. Overview and assessment of the 2020/21 Medium-Term Expenditure Framework

The table below summarises the budget for over the medium term 2020/21 to 2022/23 taking into account projected inflation.

Table 3: Reflects the budget summary indicating allocations across the MTEF

 

Estimate of expenditure from current year

Next year's budget

Following year's budget

R million

2020/21

2021/22

2022/23

Total Revenue

1 913,2

2 022,9

2 142,9

Projected inflation rate

4,4%

4,6%

4,6%

Inflation factor

104,40

109,20

114,23

R million

2020/21

2021/22

2022/23

Nominal amounts

1 913,2

2 022,9

2 142,9

Inflation-adjusted

1 832,6

1 852,4

1 876,0

 

The SETA’s budget over the MTEF amounts to R6.07 billion. For the 2020/21 financial year, the MerSETA has a total revenue amounting to R1.9 billion. The budget is made up of R1.52 billion or 79.5 per cent for Levies; R20 million or one per cent for Penalties and Interest, R371 million or 19.4 per cent of Investment income and R1.2 million or 0.1 per cent for other income. The MerSETA overall budget is projected to grow to R2 billion for 2021/22 and R2.1 billion for 2022/23. However, when considering inflation, the budget is estimated to only grow to R1.85 billion for 2021/22 and R1.87 billion for 2022/23 which is virtually not a substantive increase over the MTEF period.

MerSETA’ s levy income is projected to grow at an average of one per cent (below the inflation rate). The economic challenges impacting the performance of the manufacturing sector have impacted the growth of the levy income. The MerSETA financial incentives and non-financial services framework (business funding model) is part of the MerSETA’ s response to supplementing its stagnating levy income.

 

Table 4: Reflects the targets and budget summary for 2020/21

PROGRAMMES

Budget
2020/21

% Total programme Budget

APP Targets 2020/21

R million

1. Administration

  210,9

12,5%

3

2. Skills Planning

  89,0

5,3%

8

3. Learning Programmes and Projects

 1 382,4

81,9%

43

4. Quality Assurance

  5,9

0,3%

18

Total

 1 688,2

88,2%

72

Projected Net Surplus

  225,0

11,8%

 

TOTAL REVENUE

 1 913,2

100%

 

Source: MerSETA Annual Performance Plan 2020/21

Expenditure for the year is projected at R1.68 billion, with a projected surplus of R224.90 million. The bulk of the budget, R1.3 billion or 81.9 per cent is allocated to Programme 3: Learning Programmes and Projects with 43 targets. The second largest spending programme is Administration with the total budget of R210.9 million, of which R142.71 million is for compensation of employees.

3.2.1.1.The impact of COVID-19 on the revenue of the MerSETA

The skills development levy (SDL) contribution four-month holiday to respond to the socio-economic impact of COVID-19. The contribution will impact on the MerSETA projected administration costs and the discretionary grants, given that the SETA will only receive levies for eight months.  The SETA noted that there will be no salary increases for the year, and this will contribute to the saving of 5.7 per cent on salaries versus the budget. The SETA will effect cost containment measures in its spending. However, admin expenses as a percentage of the levy income will be high at 21.4 per cent, which is higher than the legislated limit.

3.2.2. Overview and assessment of the Annual Performance Plan (APP) 2020/21

The work of the MerSETA is divided into four programmes, namely, Administration; Skills Planning; Learning Programmes and Projects and Quality Assurance. There are 72 targets for 2020/21.

3.2.2.1. Programme 1: Administration

The programme aims to instill a single coherent best practice effective and efficient governance, leadership and management activities for the AA, its committees, management and staff of the MerSETA; ensure compliance to legislated and regulated obligations, as well as to organisational policies; and establish a skilled high-performance environment.

The programme has three predetermined targets set for 2020/21. The programme work towards achieving 100 per cent compliance with the Corporate Governance Compliances report; ensure 100 per cent reduction of internal control deficiencies reported in the previous external and internal audit reports.

3.2.2.2. Programme 2: Skills Planning

The programme aims to establish an effective mechanism for sector skills planning. The functions of this programme encompass research, planning, monitoring and evaluation, as well as applied research and innovation. It is intended to research economic, labour market and social drivers, signals and indicators that impact on skills development for the MerSETA sector, particularly pertaining to shortages and gaps related to occupations and skills in demand. Applied research and innovation refer to research and innovation projects intended to pilot, and test concepts and solutions prior to full-scale implementation. Grants are availed to support this programme, to enable partnerships with a broad range of partners, including MerSETA employer and labour stakeholders. This programme is also about establishing systems, processes and policies to promote research, planning, monitoring and evaluation. The programme has eight targets planned for the 2020/21 financial year.

The work of this programme is critical to ensure that scarce and critical skills in high demand are identified and reported on so as to make the skills development responsive to the needs of the industry for ease of absorption of graduates into the labour market. During the year, the programme will approve WSPs and ARTs from small (49), medium (50 -149) and large firms (150+). Efforts will also be dedicated towards conducting of tracer studies to establish employability of skills beneficiaries. The programme will also approve researched Sector Skills Plan (SSP). In supporting the growth of the TVET colleges, two research and development collaboration outcomes will be implemented to support the review, or renewal of TVET college curricula, and or learning materials.

3.2.2.3. Learning Programmes and Projects

This programme is central in the implementation of the NSDP outcomes by implementing programmes, projects and a range of financial incentives, as well as the MerSETA nonfinancial services that will facilitate the MerSETA to achieve its targets for a skilled workforce, in response to local, regional, national and sectoral priorities. Partnerships and strategic alliances with employers, PSET institutions, non-levy paying entities, Small-Medium Enterprises (SMEs), cooperatives, labour organisations, non-profit organisations (NPOs), public entities, other SETAs, informal sector, and international partners are critical in delivering programmes and projects. The programme has 43 targets planned for the 2020/21 financial year.

The programme’s focus includes, initiatives aimed at ensuring that PSET education, training and skills development in public and private institutions are continually responsive to the changing occupations and skills demand required for the MerSETA sector engineering and manufacturing industries and related labour market. In addition, it focuses on increasing workplace experiential learning opportunities, including support for employers to take on more learners in the workplace, introducing training within the SMEs sector and for informal entrepreneurs, and addressing the low level of youth and adult skills. Furthermore, this programme focuses on the implementation of innovative skills development solutions to address emerging new complex skills challenges.

3.2.2.4. Quality Assurance

The purpose of the quality assurance programme is to monitor the quality of the implementation of qualifications, part qualifications, and the learning programmes thereof (learnerships, apprenticeships, skills programmes, skills sets, etc.). The Quality Assurance programme further ensures that the National Qualification Framework (NQF) national standards for quality delivery are adhered to by education and training and skills providers. This is done through monitoring and auditing of delivery, rewarding of successful learners with valid industry-accepted certification, and constantly reviewing the quality cycle, to ensure continuous improvement. This programme also ensures that qualifications and programmes are assessed for relevance and responsiveness to demand.

This programme is also a key area for curriculum research, innovation and development for emerging occupations, and skills needed for the development, expansion, and diversification of the manufacturing, engineering and related services industries.

During the financial year, the programme will provide support to the growth and quality improvement of TVET colleges. The SETA will provide funding support to the two Centres of Specialisation (CoS) in the TVET colleges and support 35 employers to participate in the CoS. The SETA will fund four TVET and two CET colleges for the MerSETA occupational programmes, equipment and workshops infrastructure, award bursaries to TVET and CET college employees registered for MerSETA programmes; fund TVET and CET college employees registered in the MerSETA related programmes, including literacy and numeracy, and industry placement in award.

The MerSETA is committed to building a self-directed career and vocational guidance. This programme positions the manufacturing, engineering and related services industry as providing attractive pathways for personal and career developmentfor current workers, new entrants and future works. The MerSETA has initiated several partnerships with various institutions, which focus on innovative career development initiatives. The priorities for the next period are to increase the number of career guidance practitioners in technology-focused institutions, entrench activities related to the international World Skills competition in the South African artisan development landscape, and to provide career development for workers through career path mapping and advice. There will be an increasing focus on career advice and advocacy on new and emerging occupations.

 

3.3. Media, Information and Communication Technologies SETA

3.3.1. Overview and assessment of the 2020/21 Medium-Term Expenditure Framework

Table 5: Reflects the budget summary indicating allocations across the MTEF

Nominal vs Inflation

 

Estimate of expenditure from current year 

Next year's budget

Following year's budget

R million

2019/20

2020/21

2021/22

2022/23

TOTAL

876 285,7

1 052 853,0

1 104 649,1

1 159 018,0

Projected inflation rate

-

4,4%

4,6%

4,6%

Inflation factor

100,00

104,40

109,20

114,23

R million

2019/20

2020/21

2021/22

2022/23

Nominal amounts

876 285,7

1 052 853,0

1 104 649,1

1 159 018,0

Inflation-adjusted

876 285,7

1 008 479,9

1 011 561,2

1 014 673,5

Source: MICT SETA Strategic Plan 2020-2025

Over the MTEF, the SETA’s budget amounts to R3.31 billion. For the 2020/21 financial year, the MICT SETA has a total revenue amounting to R1.05 billion. The budget is made up of R1.02 billion or 97 per cent from levies and R28 million or three per cent of Investment income. The MICT SETA’s overall budget is projected to grow to R1.1 billion for 2021/22 and R1.15 billion for 2022/23. However, when considering inflation, the budget is estimated to only grow to R1.01 billion for 2021/22 and R1.014 billion for 2022/23 which is virtually not a substantive increase over the MTEF period.

In terms of expenditure, the bulk of the budget, R700.63 million is apportioned for discretionary grants towards spending on skills development intervention projects and grant administration in programme 3: Learning Programme. An allocation amounting to R217.73 million is for mandatory grants payment to employers. An amount of R134.48 million is allocated for administrative costs, which is inclusive of running costs for the ETQA division, which also include the QCTO qualification allocation and programme 2: Sector Skills Plan and research running costs.

 

 

3.3.1.1. The impact of COVID-19 on the revenue of the MICT SETA

The skills development levy (SDL) contribution four-month holiday to respond to the socio-economic impact of COVID-19. The contribution will impact on the MICT SETA projected administration costsamounting to R138.48 million, which equates to 10.5 per cent of the total levies that was budgeted to be paid by the employers. The skills development levies contribution holiday will result in the shortfall of R44.83 million on the administrative costs. This will result in the entity exceeding the 10.5 per cent limit required by section 2 of the SETA Grant Regulations.

The MICT SETA has budgeted to utilise R52.54 million of the discretionary grants towards discretionary administration costs, which equates to 7.5 per cent of the budgeted discretionary grant. The SETA will also experience a shortfall amounting to R16.87 million due to the SDL four-month holiday. This will also result in the entity exceeding the 7.5 per cent limit. Allocation for skills development interventions in programme 3: Learning Programmes declined from R699.82 million to R376.24 million. This resulted in reduced targets of beneficiaries from 11 845 to 6 196 learners.

3.3.2. Overview and assessment of the Annual Performance Plan (APP) 2020/21

The work of the MICT SETA is divided into four programmes, namely, Administration; Skills Planning; Learning Programmes and Projects and Quality Assurance. There are 77 targets for 2020/21.

3.3.2.1. Programme 1: Administration

This programme aims to ensure effective leadership, strategic management and administrative support to the MICT SETA. The primary goal for the programme is to ensure that a fully functional and operational the MICT SETA realise its strategic outcomes through the provision of a well-established and functional facilitative role to the other core functions and operational divisions within the MICT SETA.

The programme is comprised of three sub-programmes, namely: Finance, Corporate Services and Governance. The three sub-programmes has a combined total of 12 targets for 2020/21.The programme will strive to achieve an unqualified audit opinion and strengthen its supply chain management compliance to ensure that procurement of services is aligned to relevant policies and procedures.

3.3.2.2. Sector Skills Planning

The programme aims to conduct research, and develop a credible (Board and DHET approved) Sector Skills Plan (SSP) that reflects an accurate (triangulated) list of scarce and critical skills, serving as the basis for the SETA’s Strategic Plan. The programme has 14 targets for 2020/21.

The programme will focus on funding, through the discretionary grants, the development of high, intermediate and elementary skills. To ensure credible mechanisms for identification of occupations in high demand, WSPs and ARTs from small, medium and large firms will be approved. The programme will produce an SSP focused on the Fourth Industrial Revolution (4IR) and a career guide with career opportunities and labour market information.

3.3.2.3. Programme 3: Learning Programmes

The programme implements and monitors learning programmes in the Media, Advertising and ICT sub-sectors. These learning programmes will include a focus on 4IR, and will be rolled-out in both urban and rural areas in partnership with constituent employers. The programme has 48 targets. The programme provides funding to expand access and ensure improved success of unemployed and employed learners / students into learnerships, internships, skills programmes, artisan programmes, short programmes, bursaries and work-integrated learning. The programme will support 32 rural development projects. The SETA will, through this programme establish partnerships with TVET and CET colleges, universities and employers.

The growth of TVET and CET colleges will be supported through funding the CoS; facilitating exposure TVET college lecturers to the industry through skills programmes; training of TVET and CET college managers on curriculum related studies; and awarding bursaries to TVET and CET college lecturers. The programme will also fund the training interventions of cooperatives, small businesses, train people on entrepreneurship to start their own businesses; and support CBOs, NPOs, and NGOs with training interventions.

3.3.2.4. Programme 4: Education and Training Quality Assurance

The programme aims to create access to quality programmes and to quality assure training provision in the Media, Advertising and ICT sub-sectors. The objective is to implement the quality assurance regulations as stipulated by the Quality Council for Trades and Occupations (QCTO), and to improve the service and the turnaround times with regard to accreditation of Training Providers, registration of Assessors and Moderators and learner certification. For the 2020/21 financial year, the programme has four targets.

In contributing towards improved quality of provisioning within the sector, the SETA will accredit 632 Training Providers offering occupational qualifications in high demand; register 1100 Assessors assessing quality of programmes; register 660 Moderators moderating quality of programmes and develop or review eight MICT SETA registered qualifications.

4. OVERVIEW AND ASSESSMENT OF THE NATIONAL SKILLS FUND’S 2020 – 2025 STRATEGIC PLAN AND 2020/21 ANNUAL PERFORMANCE PLANS

4.1. Overview and assessment of the 2020/21 Medium-Term Expenditure Framework

Table 1: Reflects the budget summary indicating allocations across the MTEF

NSF

 

Estimate of expenditure from current year

Next year's budget

Following year's budget

R million

2019/20

2020/21

2021/22

2022/23

TOTAL

4 305,0

4 501,4

4 766,6

5 076,1

Projected inflation rate

-

4,4%

4,6%

4,6%

Inflation factor

100,00

104,40

109,20

114,23

R million

2019/20

2020/21

2021/22

2022/23

Nominal amounts

4 305,0

4 501,4

4 766,6

5 076,1

Inflation-adjusted

4 305,0

4 311,7

4 364,9

4 443,9

Source: NSF Strategic Plan 2020-2025

The NSF’s budget over the MTEF amounts to R14.34 billion. For the 2020/21 financial year, the NSF has a total revenue amounting to R4.5 billion. The budget is made up of R3.8 billion or 86 per cent from levies and R560 million or 12 per cent of Investment income and R58 million or one per cent of other income. The NSF’s overall budget is projected to grow to R4.7 billion for 2021/22 and R5.0 billion for 2022/23. However, when considering inflation, the budget is estimated to only grow to R4.3 billion for 2021/22 and R4.4 billion for 2022/23 which is virtually not a substantive increase over the MTEF period.

Expenditure during the year is projected at R6.35 billion and it is projected to decrease to R5.52 billion in 2021/22 and R5.25 billion in 2022/23. The bulk of expenditure, R6.02 billion is apportioned to programme1: Quality Skills Developed, which funds skills development interventions towards expanding access of learners to PSET opportunities, and supporting other national programmes such as providing skills development through the Expanded Public Works Programme (EPWP) and National Rural Youth Service Corps (NARYSEC) programmes, skills development aimed specifically at growing SMMEs and cooperatives,community-based skills development initiatives.Sub-programme 2: Organisational Sustainability’s total budget amounts to R272.15 million, of which R132.14 million is for compensation of employees and R129.43 million is for goods and services.

 

4.1.1. The impact of COVID-19 on the NSF revenue

The skills development levies contribution four-month holiday to respond to the socio-economic impact of COVID-19 will adversely impact the revenue of the NSF for the 2020/21 financial and in the outer years of the MTEF. The NSF’s revenue for the 2020/21 is projected to decline by R1.29 billion (33%) from the original revenue projection of R3.88 billion. The NSF also projects a further decline in the skills development levies projections due to the decline in the national wage bill as a result of COVID-19, resulting in a further revenue loss estimated at R647 million. The NSF’s investment income is also expected to decline due to a sharp decline in reserves. The projected decline in the revenue will impact on the implementation of the tabled APP.

4.2. Overview and assessment of the Annual Performance Plan (APP) 2020/21

4.2.1. Programme 1: Quality Skills Developed

This programme measures the extent to which the NSF has funded learners against strategic priority interventions who may be employed/self-employed within a reasonable time after successful completion of their education and training will provide a reliable measure of success of the skills development initiatives funded in creating a capable South African citizenry, that contributes towards improving economic participation and social development. The programme has two sub-programmes: Education and Training and Improved PSET System.

Sub-programme 1: Education and Training consist mainly of the funding of learners aimed at educating and training on strategic education and training initiatives. These strategic education and training initiatives are linked to contributing to the achievement of the objectives of key government imperatives and initiatives. Sub-programme 2: Improved PSET system aims at measuring the outcome of the NSF’s investment in expanding, improving effectiveness and integrating the PSET system. The outcome of the NSF’s investment in expanding, integrating and improving effectiveness of the PSET system will be impacted by the success of the NSF’s portfolio of projects, specifically aimed at expanding, integrating and improving the effectiveness of the PSET system.

 

For the 2020/21 financial year, the programme has nine set targets for 2020/21. The programme will focus on funding learners towards occupations in high demand; learners from rural areas for education and training; SMMEs and cooperatives for skills development; learners for skills development initiatives through the SMMEs and cooperatives; learners for skills development through community-based skills development initiatives; and learners funded for worker education.

The programme will fund 80 per cent of projects aimed at PSET system improvement that haveachieved a percentage ofthe envisaged outputs and to fund projects aimed at increasingaccess to the PSET system that have achieved apercentage of the envisaged outputs.

 

4.2.3. Programme 2: Organisational Sustainability

The key objective of this programme is to ensure a sound service delivery environment and effective resource management within the NSF. The focus will be on ensuring effective business operations in relation to strategic planning, financial and project monitoring and evaluation, organisational positioning, organisational performance management, organisation culture development, corporate image, stakeholder relations management as well as corporate governance inclusive of a clean audit outcome. The programme will contribute to improving the effectiveness and efficiency of the NSF organisational service delivery and performance. The programme will strive towards achieving an unqualified audit opinion; filling 60 per cent of the funded positions; improving client satisfaction and achieving 30 per cent progress against the implementation plan of the ICT strategy.

 

 

 

 

5. OBSERVATIONS

The Committee, having considered and deliberated on the 2020 – 2025 Strategic Plans and 2020/21 Annual Performance Plans made the following key observations and findings:

 

5.1. General observations

5.1.1.    The Committee acknowledges and notes the impact of COVID-19 pandemic and the strategies put in place by government to respond to the socio-economic impact of the pandemic. One of the measures to respond to the impact of the pandemic is the company tax relief in the form of four-months skills levy contribution holiday. Consequently, there will be a shortfall of R6 billion of the revenue of the SETAs and the NSF, which will impact on the current and the medium term plans, targets and budgets of the entities. Furthermore, the Committee notes that the 2020/21 APPs of the SETAs and the NSF will be revised in line with the reprioritised budget.

5.1.2.    The Committee notes the multiple bursary systems administered by the 21 SETAs. Of great concern is the duplication of functions, while there are national systems such as the National Student Financial Aid Scheme (NSFAS) and the National Research Foundation (NRF) that administer and disburse bursaries to undergraduate and postgraduate students.

5.2.3.    The duplication in the services and interventions offered by the SETAs was noted with concern, including the impact of their skills development programmes, particularly in geographically remote areas. Members urged the SETAs to work towards having shared services to reduce costs of duplicating services.

5.1.4.    The Committee expressed concerns that the MICT SETA, the MERSETA, the Agricultural SETA and the Financial and Accounting Services SETA have been subject to investigations by the Special Investigating Unit (SIU) and the Public Protector owing to irregularities by the former CEOs and employees.

5.1.5.    Conflict of interests with respect to the awarding of tenders from members of the SETAs boards was cited as the root cause for destabilisation of the core functions in these entities.

5.1.6.    The Committee was concerned that the SETAs were not being utilised as an integral part of industrialising the South African economy.

5.1.7.    The Committee welcomed the commitment by the SETAs to continue paying learner stipends during lockdown as per the directive by the Minister.

5.1.8.    Inadequate tracking and tracing of skills development interventions beneficiaries was noted with great concern.

5.1.9   The Committee urged the SETAs to work towards bring back public confidence with respect to their work, particularly the facilitation of skills development interventions to the unemployed and workers in industries.

5.2. MERSETA

5.2.1. The Committee was concerned about the placement of female learners in male dominated sectors and the role of the SETA in ensuring development and implementation of gender-based violence policies. The entity indicated that it conducts regular monitoring visits to all companies and have an engagement with students on matters affecting their well-being.

5.2.2 The Committee inquired about the action taken against the former CEO and implementation of the remedial action of the Public Projector’s report into his conduct. The entity indicated that disciplinary cases were commissioned against the former CEO with respect to allegations of irregular conduct that resulted in the entity incurring irregular expenditure, and 20 charges were instituted against him, and he was found guilty of 11 charges which were consequential. The term of office of the former CEO lapsed before the report of the PP was released. The PP also recommended the entity to strengthen its human resource policies and train staff to respond to whistle-blowing.

5.2.3   The Committee indicated that the MERSETA has an important role with respect to its contribution to science and innovation, and enquired whether it had engagements with the Department towards the establishment of a University of Science and Innovation in Ekurhuleni. The entity indicated that there had not been engagements with the Department on this matter.

5.1.4.    The planned freeze on salary increase as one of the cost containment measures to be implemented by the MERSETA in response financial pressures caused by COVID-19 was noted. However, the Committee was informed that the SETA management has not yet consulted with employees and their unions on the decision.

5.3. ETDP SETA

5.3.1.    The inadequate financial management skills of TVET college financial managers since the project of the secondment of the South African Institute of Chartered Accountants (SAICA) came to an end was noted with great concern. The entity indicated that it agreed with the South African Qualifications Authority (SAQA) to develop a qualification in financial management for the TVET sector.

5.3.2 The Committee inquired about the role of the entity in the training of educators on COVID-19 preventative measures in schools. The entity indicated that it was working closely with all its constituencies and developed a forum which has undertaken a benchmark exercise that looked at how other countries handled COVID-19 pandemic with respect to the education sector.

5.4. MICT SETA

5.4.1.    The Committee expressed its concern with respect to the allegation of corruption and of awarding of tenders by the former CEO to family members and delays in implementing consequence management against his improper conduct. The entity indicated that the SIU investigation was at 90 percent complete in the matters involving the former CEO and the Asset Forfeiture Unit (AFU) was also involved. The second former CEO was also investigated for financial misconduct and the matter was before the Commission for Conciliation Mediation and Arbitration (CCMA).

5.4.2.    The Committee expressed its concern with respect to inadequate ICT importation and lack of interests in the procurement of locally produced IT products from SETAs. The entity indicated that more companies prefer to outsource instead of developing in-house ICT capacity. The problem in South Africa is the lack of commercialisation of innovation. Consequently, the country would continue to be left behind in ICT development and also continue to rely on imports of computer components from East Asia. The MICT SETA continues to lobby for the manufacturing of IT equipment / components locally.

5.4.3 The Committee inquired about the irregular expenditure incurred by the entity in the 2018/19 financial year and consequence management applied. The entity indicated that the irregular expenditure related to contract extension and procurement of services above threshold limit without following due processes. The implicated officials have since resigned from the entity.

5.5. National Skills Fund

5.5.1.    The Committee expressed a concern about the budgeted surplus in the current financial year and the two outer years of the MTEF period. It was explained that the accumulated surplus is for the commitment to fund ongoing bursaries towards students on the NFS bursary scheme as they progress from one academic year to the next.

5.5.2.    The Committee was concerned about the impact of the COVID-19 on the budget of the NSF and its ability to continue funding the construction of the remaining new TVET college campuses. It was explained that the NSF has current contractual commitments amounting to R1.51 billion for TVET college infrastructure development and has also budgeted R1.6 billion over the MTEF for the construction/refurbishment of 11 TVET Colleges. The NSF has further budgeted and contractually committed R208 million towards TVET College Connectivity to the South African National Research Network (SANReN).

5.2.3.    The delays in the construction of the new TVET college campuses due to the lockdown was noted with great concern.

6. SUMMARY

The SETAs Strategic Plan 2020 – 2025 and Annual Performance Plan (APP) 2020/21 have been developed taking into consideration their respective Sector Skills Plans (SSPs), National Skills Development Plan (NSDP), MTSF 2019 – 2024, WP-PSET and other relevant policy documents. The tabling of these Plans in Parliament was undertaken before the COVID-19 pandemic and the subsequent lockdown was implemented, and the implications of the pandemic to the revenue of the SETAs and NSF is estimated at R6 billion. The R6 billion revenue loss has compelled these entities to reprioritise their budgets and commitments for the current financial year, and this would impact negatively towards the skills development interventions.

SETAs’ mandate isthe facilitation of skills development interventions to support their upskilling of employees in their respective sector and to support the unemployed young people with learnerships or bursary programme to access economic opportunities. However, conflict of interest and greed in the awarding of tenders has been attributed as being the root causes for the destabilisation of these entities. Poor internal control systems and breach of supply chain management processes remains an ongoing concern in some of the SETAs. Recurring irregular expenditure annually has been noted as a serious concern by the Committee, including the lack of consequence management against those implicated in irregularities.

The Committee welcomed the appointment of the new SETA boards and urged them to turn work towards changing the negative public perception about the SETAs and their impact in society at large. There are SETAs that are performing well in their work and the Committee urged them to continue doing good.

 

7. RECOMMENDATIONS

The Committee, having considered the Strategic Plans 2020 – 2025 and Annual Performance Plans 2020/21 of the ETDP-SETA, the MERSETA, the W&R SETA and the NSF recommends that the Minister of Higher Education, Science and Innovation consider the following:

7.1. General recommendations

7.1.1.    The Revised 2020/21 Annual Performance Plans and budgets of the entities be submitted to Parliament.

7.1.2.    The White Paper for Post-School Education and Training states that where SETAs are funding the provision of qualifications for undergraduate or postgraduates who are not currently employed in line with sector priorities, they should make ring-fenced contributions to the National Student Financial Aid Scheme (NSFAS) instead of disbursing funds to students. The White Paper further indicates that managing disbursement of funds for study requires proper systems, and it does not make sense to duplicate the function. Consideration be given for SETAs funding for undergraduate and postgraduate bursaries to be transferred to the National Student Financial Aid Scheme (NSFAS) and the National Research Foundation (NRF), respectively, to improve efficiency and to save administrative costs of the bursaries by individual SETAs.

7.1.3.    The SETAs should consider working towards having shared services, for example, printing one career guidance booklet containing information of all the 21 SETAs rather than 21 booklets. This will reduce printing costs and improve efficiency.

7.1.4.    A meeting be convened with the National Skills Authority (NSA) to deliberate on the SETAs that have been subject to the SIU and the Public Protector’s investigations and progress towards strengthening internal controls to prevent recurrence of improper conduct by the board members and senior management.

7.1.5.    The MERSETA monitors the development and implementation of gender-based violence policies at the companies where learners are placed for work-based learning, apprenticeships and internships.

7.1.6.    The MERSETA should consult with the labour unions on the looming freeze on salary increases before implementing the decision.

7.1.7.    The MERSETA and the MICT SETA should ensure that those who unduly benefitted from irregular awarding of tenders are pursued and the lost monies are recovered. Internal control measures be strengthened to prevent recurrence of misconduct and corruption. The Committee be briefed on the measures taken within the next six months.

7.1.8.    All the SETAs should develop tracking and tracing systems for skills development beneficiaries.

Report to be considered.

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