ATC230703: Report of the Portfolio Committee on Higher Education, Science and Innovation on Budget Vote 17 with Reference to the National Skills Fund and Energy and Water Sector Education and Training Authority, Dated 14 June 2023

Higher Education, Science and Innovation

Report of the Portfolio Committee on Higher Education, Science and Innovation on Budget Vote 17 with Reference to the National Skills Fund and Energy and Water Sector Education and Training Authority, Dated 14 June 2023

INTRODUCTION AND MANDATE

The Portfolio Committee on Higher Education, Science and Innovation (“Committee”), having assessed the Revised 2020 – 2025 Strategic Plans, the 2023/24 Annual Performance Plans (APPs), budgets and Medium-Term Expenditure Framework (MTEF) budget projections of the National Skills Fund (NSF) and Energy and Water Sector Education and Training Authority (EWSETA), reports as follows:

Mandate of the Committee

The Committee derives its mandate from Section 55(2) of the Constitution of the Republic of South Africa, which states 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.

Purpose of the Report

The Report accounts for the work done by the Portfolio Committee in assessing the Revised 2020 – 2025 Strategic Plans and the 2023/24 Annual Performance Plans (APPs), budgets and MTEF budget projections of the NSF and EWSETA. On 31 March 2023, the Minister of Higher Education, Science and Innovation; tabled the Strategic Plans and the 2023/24 APPs of the NSF and EWSETA. The Speaker of the National Assembly referred the planning documents to the Portfolio Committee in terms of Rule 338 for consideration and reporting.

Method

On 3rd and 17th May 2023, the Committee convened briefing sessions with the Auditor-General South Africa (AGSA) and the NSF and EWSETA, respectively. The Auditor-General briefed the Committee on the outcomes of a proactive review of the Higher Education and Training Portfolio 2023/24 APPs, while the NSF and EWSETA presented their planning documents, budgets, including the MTEF budget projections. The Committee scrutinized the planning documents and budgets against the key government policy documents, including amongst others, the National Development Plan (NDP), the revised 2019 – 2024 Medium Term Strategic Framework (MTSF), and the 2023 State of the Nation Address (SONA).

OVERVIEW OF THE KEY POLICY FOCUS AREAS RELEVANT FOR THE NSF AND EWSETA
1. Key Government policies
  1. National Development Plan (NDP) Vision 2030

South Africa has set itself goals through the National Development Plan (NDP), to eliminate poverty and to reduce inequality by 2030. In working towards achieving these goals, Government identified three main priorities, namely: raising employment through faster economic growth, improving the quality of education, skills and innovation; and building the capacity of the state to play a developmental, transformation role

The NDP sets out a vision for the country through its Vision 2030. The NDP identifies skills development and education as critical enablers of economic development. The NDP states that SETAs should play a more effective role in the production of skills that must meet the immediate needs of the employers. The NDP sets out the role for SETAs as facilitators of skills development in the following areas:

Skills development for existing businesses;
Unemployed people who wish to obtain employment in the sector and emphasis on internships; and
Training should cover levels of the National Qualifications Framework (NQF) required by the sector.

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 part of a coherent but differentiated system. The White Paper sets out strategies to expand the current provision of education and training in South Africa, improve its quality, and integrate the various strands of the post-school system. The White Paper sets interventions for implementation by different sectors within Post-School Education and Training. The Department has developed a Draft National Plan for Post Education and Training (NPSET) from the White Paper, which will be an implementation plan with measurable targets for each sub-system of the sector. The main policy objectives are:

A post-school system that can assist in building a fair, equitable, non-racial, non-sexist and democratic South Africa;
A single, coordinated post-school education and training system, expanded access, improved quality and increased diversity of provision; and
A post-school education and training that is responsive to the needs of individual citizens, employers in both public sectors, as well as broader societal and development objectives.

Human Resource Development Strategy for South Africa (HRD-SA) 2010 – 2030

The HRD Strategy for South Africa (2010 – 2030) is a call to action. Its primary purpose is to mobilise multi-stakeholder participation, and to encourage individuals and organisations to take on the challenge of improving the human resource stock of the nation. The document sets out collective commitments for sectors of society in skills production. The different sectors of the post-school education and training will have to ascribe to the goals of the HRD Strategy which are: to urgently and substantively reduce the scourge of poverty and unemployment in South Africa; to promote justice and social cohesion through improved equity in the provision and outcomes of education and skills development programmes, and to substantively improve national economic growth and development through improved competitiveness of the South African economy.

National Skills Development Plan (NSDP)

The NSDP aims to ensure that South Africa has adequate, appropriate, and high-quality skills that contribute to economic growth, employment creation, and social development. The NSDP is the key policy which informs the work of the NSF and the SETAs 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 the 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 supporting worker initiated training; and
Outcome 8: Supporting career development services.

2019 – 2024 Medium-Term Strategic Framework (MTSF)

The 2019 – 2024 MTSF is a five-year strategic plan of Government and forms the second five-year implementation phase of the NDP. The Department of Higher Education and Training is responsible for contributing to the realisation of the policy priorities as outlined in the MTSF Priority 3: Education, Skills and Health. For the 2020 – 2025 planning period, the Department will focus on these outcomes as follows:

Expanded access to PSET opportunities;
Improved success and efficiency in the PSET system;
Improved quality of PSET provisioning;
A responsive PSET system; and
Excellent business operations within the DHET.

In implementing Priority 3, the Department of Science and Innovation, the Department of Employment and Labour and the Department of Agriculture, Land Reform and Rural Development support the work of the Department.

Economic Reconstruction and Recovery Plan (ERRP) and ERRP Skills Strategy

The impact of COVID-19 in the country has negatively affected an already ailing economy, which deepened the high unemployment rate, poverty and inequality. In response to the economic challenges resulting from the COVID-19 pandemic, government developed an Economic Reconstruction and Recovery Plan. The Plan sets out a reconstruction and recovery plan for the South African economy that is aimed at stimulating equitable growth. The Plan identifies priority interventions and enabling areas to grow the economy and create jobs.

The priority interventions are:

Infrastructure investment and delivery;
Industrialisation through localisation;
Energy security;
Gender equality and economic inclusion of women and youth;
Support for the recovery and growth of the tourism, creative and cultural industries;
Green economy interventions;
Mass public employment interventions;
Strengthening agriculture and food security; and
Macro-economic policy interventions

The ERRP Skills Strategy is directed towards both public and private education and training institutions and skills development providers (including workplaces). The idea is to strengthen partnerships between the public and private sectors to improve efficiency and effectiveness. The Strategy aligns demand and supply of relevant skills for ERRP.

Entities of the Department are required to align their programmes and funding to contribute to the skills interventions aimed at supporting the ERRP.

2023 State of the Nation Address (SONA)

During SONA 2023, the President highlighted that the most effective and sustainable way to build an economy is to equip people with the skills and know-how to drive it. There is thus a need to strengthen the link between the skills that we develop and the skills the workplace needs. The President further noted that in 2023/24, the National Skills Fund will provide R800 million to develop skills in the digital and technology sector through an innovative model that links payment for training to employment outcomes. In 2022/23, there was a commitment to place over 10,000 TVET college graduates in employment; and target was achieved, and there is now a new target for 2023 of 20,000 TVET graduates to be placed in employment.

The President alluded that the number of students entering artisan training in TVET colleges will be increased from 17,000 to 30,000 in the 2023 academic year. One of the key ingredients for economic growth and competitiveness is the ability to attract skills that the economy needs. To produce the skills that the country needs, the President said that there will be an expansion of vocational education and training systems through the implementation of the approved curriculum of the three-stream model.

OVERVIEW AND ASSESSMENT OF THE 2020 – 2025 REVISED STRATEGIC PLANS, 2023/24 ANNUAL PERFORMANCE PLANS AND BUDGETS OF THE NSF AND EWSETA

NATIONAL SKILLS FUND

The NSF was established in 1999 in terms of Section 27(1) of the Skills Development Act, stating the following: “The National Skills Fund (NSF) is hereby established”. Therefore, the NSF is not established with a legal persona. The NSF is a Schedule 3A public Entity, governed by the Public Finance Management Act (PFMA) (No. 1 of 1999, as amended).

In terms of Section 29(1) of the SDA, the Director-General of the Department of Higher Education and Training (DHET) is the accounting authority of the NSF as contemplated by Section 49(2) (b) of the PFMA. In terms of Section 29(1)(d) of the SDA, the Director-General of the DHET must, subject to the laws governing the public service, appoint the executive officer of the NSF who will, upon such appointment, be in the employment of the public service. The NSF derives its mandate from the Constitution of the Republic of South Africa. With respect to legislative mandate, the NSF’s mandate is informed by the Skills Development Act, 1998 as amended and the Skills Development Levies Act, 1999, the National Qualifications Framework Act, 2008 (Act No. 67 of 2008, as amended) and the relevant policy mandates explained above. The NSF’s mandate is further informed by key government strategies and programmes, such as the Industrial Policy Action Plan (IPAP), National Growth Path (NGP), National Infrastructure Plan (SIPs), Science, Technology and Innovation Decadal Plan, National Plan for PSET, Jobs Summit Agreement Frameworks and the District Development Model (DDM).

Overview and assessment of the Revised Strategic Plan

The NSF revised its 2020 – 2025 Strategic Plan (which was last revised tabled in 2021/22). The revision of the Strategic Plan was informed by, amongst others; the advent of COVID-19 in South Africa; alignment of the five-year outcomes to new indicators introduced in the 2021/22 APP; the establishment of a Strategic Planning function in NSF to improve and strengthen planning in the NSF; the aligning the new outcomes and outputs indicators to support the ERRP Skills Strategy and Plan; the need to address the alignment findings on new indicators as per the Auditor-General of South Africa findings; alignment with the Department of Monitoring and Evaluation (DPME)’s revised framework for the strategic plan and annual performance plans; the recommendation arising from the Evaluation Study of the NSF prior five-year strategic plan (2015 to 2020) e.g. Revised Theory of Change; the DHET Revised Strategic Plan 2020 - 2025; the NSF budget framework alignment to take into account adjustments due to 4 months skills levy holiday; and new research and socio-economic analysis, inclusive of the impact of COVID-19; and the NSF implementation of revised Programme Structure adjustment, as NSF adopted three Programmes thus separating beneficiary-based interventions from PSET Capacity intervention as these are distinct performance areas and cannot be reported under the same outcome.

Material changes to the 2020 – 2025 Strategic Plan, include amongst others;

Impact Statement was amended to” Reduced inequality and poverty among National Skills Fund beneficiaries”;
Programme 1: Administration – (this was previously programme 2: Organizational Sustainability)
Programme 2: Skills Development Funding – (this was previously programme 1: Quality Skills Developed)
Outcomes – Outcome 2 was changed to “A skilled and capable workforce to support an inclusive growth path”;
Programme 3: Post-School Education and Training System Improvement Funding;
Outcome and output alignment, to ensure compliance with the Framework for Managing Programme Performance Information to measure and improve performance reporting;
Aligning and including new outcome and output indicators to target internal administration outcomes and new indicators related to the ERRP Skills Strategy specifically the indicators on work integrated learning and digital skills development;
Addition of new indicators;
Revision of technical indicators descriptors to ensure that the scope of evidence to support financial and performance is clearly captured; changes and new standard operating procedures and revision of targets based on prior years and evaluation performance and non-performance in prior years – all targets increased to an overall 27% additional beneficiary focus on funding;
Research and contextual insight: Assessment of the NSF business environment (internal and external) in relation to prior years’ performance and identified critical drivers that informed the strategic planning period;
The reviewed budget is updated in the addendum to the Strategic Plan 2020 - 2025 and 2022-2023 Annual Performance Plan taking into account projections and estimation on levy collections due to shifts in the workforce; and
Elimination of ambiguities on the Technical Indicator Description (TIDs), which enables the Accounting Officer upon continuous assessment of returns, indicate measures that will be taken to ensure that implementation of the APP remains on the track.

Overview and assessment of the 2023/24 Annual Performance Plan (APP) performance targets

The NSF’s work is divided into three Programmes, namely, Administration, Skills Development Funding and Improved PSET System. The three Programmes have a combined total of 48 targets for the 2023/24 financial year.

Below is a summary of the key deliverables per programme:

Programme 1: Administration

The Programme ensures a sound service delivery environment and effective resource management at the NSF. The focus is to ensure effective business operations like strategic planning, financial and project monitoring and evaluation, organisational positioning, organisational performance management, organisational culture development, corporate image, stakeholder relations management and corporate governance, and an unqualified audit outcome. For 2023/24, the Programme has 11 targets.

The following are key selected annual targets for the 2023/24 financial year:

Addressing 100 per cent of material audit findings;
Payment of 100 per cent of valid invoices;
Compliance (100%) with the PFMA and applicable regulations as per the compliance;
Implementing 100 per cent of approved standard operating policies and procedure; and
Developing and revising 100 per cent of new planned policies and procedures.

The Programme’s budget amounts to R212.7 million or 5.3 per cent, which increased by R8,2 million or 4 per cent from R204,5 million in 2022/23. Employee costs received the bulk of the Administration Programme budget, at R138,4 million or 65 per cent. Operating costs received R67,7 million or 31.8 per cent of the total Administration Programme budget. The Programme’s budget is projected to increase in the outer two years of the MTEF period to R223,0 million and R233,4 million in 2024/25 and 2025/26, respectively.

Programme 2: Skills Development Funding

The programme measures the success of its funded learners by tracking those who may be employed or self-employed within a reasonable period after successfully completing their education and training. This measurement provides a reliable measure of the success of the funded skills development initiatives against the strategic priority interventions in creating a capable South African citizenry that contributes towards improving economic participation and social development. The Programme has 24 planned targets in 2023/24.

For the 2023/24 financial year, the Programmes aims to, amongst others:

Fund 61 500 learners for education and training;
Have 31 690 of NSF-funded learners completed their education and training;
Fund 39 000 learners for education and training towards occupations in high demand;
Have 13 000 of NSF-funded learners completed their education and training towards occupations in high demand;
Fund 5 000 bursary funded students for their qualifications;
Have 3 000 of bursary funded students who completed their qualifications;
Fund 11 500 learners for skills development through community-based skills development initiatives;
Fund 1 000 youth from rural areas for skills development in response to innovation and digital technology;
Have 500 youth from rural areas who completed skills development in response to innovation and digital technology;
Issue two requests for proposals;
Fund 1 600 SMMEs and co-operatives funded for skills development;
Have 5 500 NSF-funded learners for education and training who completed their education and training through SMME and cooperative skills development initiatives; and
Conduct an evaluation study on NSF-funded SMME and co-operative intervention.

The Programme’s budget amounts to R3,3 billion or 81.1 per cent of the total NSF expenditure allocation for 2023/24. The budget increased by R201,8 million or 6.3 per cent from R3,1 billion in 2022/23. The Programme’s budget is projected to increase in the outer two years of the MTEF period to R3,6 billion and R3,8 billion in 2024/25 and 2025/26, respectively.

Programme 3: Improved PSET System

The Programme measures the outcome of the NSF’s investment in expanding and improving the effectiveness and integration of the PSET system. For the 2023/24 financial year, the Programme has 13 planned targets.

For the 2023/24 financial year, the Programmes aims to, amongst others:

Fund three skills development infrastructure projects;
Have two NSF-funded infrastructure development projects that achieved 60 per cent of envisaged outputs;
Have three NSF-funded infrastructure development projects completed;
Fund 36 capacity development projects;
Have NSF-funded 32 PSET capacity development projects which achieved more than 60 per cent of envisaged outputs;
Fund three research interventions; and
Have one NSF-funded research project completed.

The Programme’s budget amounts to R510,4 million or 12.2 per cent of the total NSF expenditure allocation for 2023/24. The budget increased by R9,5 million or 1.9 per cent from R500,9 million in 2022/23. The Programme’s budget is projected to increase in the outer two years of the MTEF period to R525,8 million and R542,0 million in 2024/25 and 2025/26, respectively.

Overview and assessment of the 2023/24 Medium-Term Expenditure Framework (MTEF)

Table 1: Budget summary indicating allocations across the MTEF

2023/24 BUDGET ESTIMATES	Revised budget	Medium-Term Expenditure Estimates
R million	2022/23	2023/24	2024/25	2025/26
Revenue from non-exchange transactions	4 347 627	4 715 392	4 963 130	5 339 369
Skills deployment levies	4 247 627	4 605 392	4 963 130	5 339 369
Transfer from the DHET	100 000	110 000	-	-
Revenue from exchange transactions	568 050	624 855	693 589	769 883
Finance income	528 233	581 057	644 973	715 919
Finance income from advance payment to skills Development programme and projects	39 817	43 798	48 616	53 964
TOTAL Revenue	4 915 677	5 340 247	5 656 719	6 109 252

Source: NSF Annual Performance Plan, 2023/24

Over the MTEF period, the NSF’s revenue amounts to R17,1 billion. For the 2023/24 financial year, the NSF’ revenue amounts to R5,3 billion, which is made up of R4,7 billion of revenue from non-exchange transactions (R4,6 billion from skills development levies, R100,0 million transfer from DHET) and R624,8 million of revenue from exchange transactions (R581 million and R43,7 million of income from advance payment to skills development programmes and projects).

The NSF’s revenue increased by R424,5 million or 8.6 per cent from a revised budget of R4,9 billion in 2022/23. The overall revenue is projected to increase in the outer two years of the MTEF period to R5,6 billion and R6,1 billion in 2024/25 and 2025/26, respectively. Allocation from DHET transfer will be discontinued from 2024/25 going forward. The R110,0 million DHET transfer is allocated to the Entity to support the Presidential Youth Employment Initiative. The reasons for the discontinuation of the PYEI allocations in the outer two years of the MTEF period were not explained.

The NSF’s projected expenditure for the 2023/24 financial year amounts to R4,1 billion, with a projected surplus of R1,1 billion. Programme 2: Skills Development Funding received the biggest budget of R3,3 billion, which constitutes 63.4 per cent of the NSF’s total expenditure for 2023/24. Programme 3: Improved PSET System received the second biggest allocation, R510,4 million or 12,2 per cent of the Entity’s total expenditure. The Administration Programme received R212,7 million. The accumulated surplus and reserves are projected at R12,7 billion in 2023/24.

Energy and Water SETA (EWSETA)

The Energy and Water SETA is established in terms of the Skills Development Act, 1998 (Act no 97 as amended) and listed in terms of the PFMA, as Schedule 3A public entities. The Skills Development Act mandates the SETAs to promote skills development for the education and training sector. The SETAs are funded through the one per cent levy income paid by employers to the South African Revenue Service (SARS).

With respect to the legislative mandate, the overall mandate of the SETA is informed by the Skills Development Act, 1998 (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.

Other legislation that informs the mandate of the SETA, include, amongst other, the Skills Development Levies Act, 1999, the National Qualifications Framework Act, 2008 as amended, Public Finance Management Act, 1999.

Overview and assessment of the EWSETA’s 2023/24 Annual Performance Plan performance targets

The work of the EWSETA is divided into four programmes, namely; Administration, Skills Planning and Monitoring, Learning Programmes and Projects and Quality Assurance. For the 2023/24 financial year, the Entity’s four programmes have a combined 73 targets.

Below is the summary of key deliverables per programme

Programme 1: Administration

The key focus of the Administration programme is to build a high performance and ethical culture within the EWSETA. The programme is in line with the Revised Medium Term Strategic Framework’s Priority 1 which aims to build a capable, ethical, and developmental state. The Programme has five Sub-programmes namely; Corporate Services/ Strategic Management; Governance, Audit and Risk; Human Resources; Marketing and Communications and Information Technology. There are seven (7) planned targets for 2023/24.

The following are key selected annual targets for the 2023/24 financial year:

Approve Strategic Plan, Annual Performance Plan and Annual Operational Plan;
Submit four SETA good governance reports in line with the governance template from DHET with 100 per cent achievement;
Achieve unqualified audit opinion;
Limit labour turnover to 13 per cent per annum;
Participate in 20 sector events and EWSETA events hosted; and
Operationalise 90 per cent of ICT Governance.

The Programme’s budget amounts to R85,5 million or 24.0 per cent of the total EWSETA expenditure allocation for 2023/24. The budget increased by R2,6 million or 3.2 per cent from R82,9 million in 2022/23. The Programme’s budget is projected to increase in the outer two years of the MTEF period to R88,0 million and R91,9 million in 2024/25 and 2025/26, respectively.

Programme 2: Skills Planning and Monitoring

The purpose of the programme is to ensure implementation of evidence-based research and evaluation to inform programme planning and implementation. The Programme has three Sub-programmes, namely; World Skills Plans and Annual Training Reports, Sector Skills Plan and Monitoring and Evaluation. There are Seven (7) targets planned under this Programme for 2023/24.

The following are key selected annual targets for the 2023/24 financial year:

Approve Work Skills Plans and Annual Training Reports for 140 small firms, 50 for medium firms and 30 for large firms;
Approve annual Sector Skills Plan for 24/25;
Implement two research agreements (energy + water);
Produce a topical research report; and
Submit four (4) quarterly monitoring reports to the DHET.

The Programme’s budget amounts to R83,3 million or 23.4 per cent of the total EWSETA expenditure allocation for 2023/24. The budget increased by R4,3 million or 5.5 per cent from R79,0 million in 2022/23. The Programme’s budget is projected to increase in the outer two years of the MTEF period to R87,0 million and R90,8 million in 2024/25 and 2025/26, respectively.

Programme 3: Learning Programmes and Projects

The purpose of the programme is to ensure that the energy and water sectors has adequate, appropriate and high quality skills that contribute towards economic growth, employment creation and social development. It contributes to the MTSF Priority 3: Education, Skills and Health and the priorities announced by the President in the 2022 State of the Nation Address.

The Programme has 55 planned targets for 2023/24.

Train 20 small and emerging enterprises on sector and national identified priority occupations or skills;
Support 20 people trained in entrepreneurship to start their own businesses;
Enrol 100 artisan learners and have 75 artisan learners completed;
Grant bursaries to 250 unemployed learners (new enrolments);
Enrol 900 learners on Recognition of Prior Learning (RPL)/Artisan Recognition of Prior Learning (ARPL) and 250 learners completed RPL/ARPL;
Establish two partnerships with Technical and Vocational Education and Training (TVET) /Community Education and Training (CET) colleges;
Establish two partnerships with higher education institutions (HEIs);
Establish two Inter-SETA partnerships;
Place 500 TVET and university students requiring work integrated learning to complete their qualifications and 250 students (TVET and university) completed their workplace learning;
Enrol 200 unemployed learners in internships and 150 learners complete internships;
Enrol 400 unemployed learners in skills programmes and 350 learners completed internships;
Enrol 800 unemployed learners in Learnerships programmes and 600 learners completed learnership programmes;
Enrol 20 learners for Candidacy programmes and 10 learners complete Candidacy programmes;
Support 300 learners with short courses;
Enrol 150 workers in Learnerships programmes and 100 learners completed their Learnership programmes;
Enrol 1 000 workers in skills programmes and 750 workers completed their skills programmes;
Train 10 established or emergent cooperatives in sector and national priority occupation or skill; and
Train 25 small or emerging enterprises on sector and national identified priority occupations or skills that enhance growth and development.

The Programme’s budget amounts to R172,1 million or 48.4 per cent of the total EWSETA expenditure allocation for 2023/24. The budget increased by R18,7 million or 12.3 per cent from R153,3 million in 2022/23. The Programme’s budget is projected to increase in the outer two years of the MTEF period to R8179,7 million and R187,6 million in 2024/25 and 2025/26, respectively.

Programme 4: Quality Assurance

The programme enables the EWSETA to execute the delegated functions of the QCTO. The Programme has Four (4) planned targets for 2023/24.

The following are key selected annual targets for the 2023/24 financial year:

Approve 20 workplaces;
Develop two qualifications;
Develop four skills programmes; and
Develop two Quality Assurance Standards addendum

The Programme’s budget amounts to R11,4 million or 3.2 per cent of the total EWSETA expenditure allocation for 2023/24. The budget increased by R1,5 million or 15.5 per cent from R9,8 million in 2022/23. The Programme’s budget is projected to increase in the outer two years of the MTEF period to R11,9 million and R12,4 million in 2024/25 and 2025/26, respectively.

Overview and assessment of the EWSETA’s 2023/24 Medium-Term Expenditure Framework (MTEF)

Table 2: Budget summary indicating allocations across the MTEF

2023/24 BUDGET ESTIMATES	Revised budget	Medium-Term Expenditure Estimates
R million	2022/23	2023/24	2024/25	2025/26
Administration (10.5%)	41 848	43 069	44 964	46 942
Government Levies	3 686	3 497	3 651	3 812
Mandatory Grants (20%)	79 710	82 036	85 646	89 414
Discretionary Grants (49.5%)	197 282	203 039	210 372	219 616
Investment Income	10 160	24 026	25 083	26 187
Other Income	100	120	125	131
Total	332 786	355 788	369 841	386 102

Source: Energy and Water SETA Annual Performance Plan, 2023/24

Over the MTEF period, the EWSETA’s revenue amounts to R1,1 billion. For the 2023/24 financial year, the EWSETA’s revenue amounts R355,7 million, which is made up of R331,6 million of levy income, R24,0 million of investment income and R120 000 of other income. The budget increased nominally by R23,0 million or 6.9 per cent from the revised budget of R332,7 million in 2022/23. Discretionary Grants constitute 57.1 per cent of the EWSETA’s total revenue, followed by Mandatory Grants at 23.1 per cent and Administration at 12.1 per cent. Investment income and other income constitute 7 per cent of the Entity’s total revenue for the 2023/24 financial year. The overall EWSETA’s revenue is projected to increase in the outer two years of the MTEF period to R369,8 million and R386,1 million in 2024/25 and 2025/26, respectively.

OBSERVATIONS

The Committee, having assessed the Revised Strategic Plans 2020 – 2025 and the 2023/24 Annual Performance Plans, budget and the MTEF budget projections of the NSF and EWSETA, make the following observations:

National Skills Fund
1. The Entity has experienced negative media publicity due to financial irregularities and poor audit outcomes over the past three years. However, the efforts to turn-around the Entity were acknowledged by the Committee. The Committee also welcomed the disciplinary processes that were initiated against two of the seven officials implicated in the Nexus forensic investigation report. Additionally, the Committee welcomed the appointment of a permanent Chief Financial Officer.
2. The Committee reiterated its concern about the numerous areas of overlaps and duplications between the SETAs and the Entity in their skills development initiatives. It was further noted that the poor coordination of skills development programmes in the PSET system is not adding value to the fight against the country’s triple challenges of poverty, unemployment and inequality. The Entity indicated that the MS Dynamics solution developed does include the extraction and identification of duplicate learners in the system. The ICT solution and the data submission of NSF learner information will be reported to the Department on a quarterly basis for the purpose of analysis of duplication across the PSET system.
3. The delays in the processes that enable the NSF to operate as a separate legal Entity from DHET remain a concern for the Committee. The Entity still largely relies on the DHET to run its daily operations, and this hinders its ability to effectively execute its objectives as an independent Entity. A critical function such as human resources (HR) is still managed by the Department, which delays the filling of funded vacant posts.
4. The delays in the filling of critical positions in the Entity remain a concern and have a negative impact on its performance. Further concerning is the capacity challenges resulting from the suspension of the officials implicated in the forensic investigative report, given that some of them occupied senior positions and were crucial in the operations in the Entity. The Entity indicated that the process of filling vacant posts is ongoing, and the remaining vacant posts were being reviewed in some directorates to ensure the job profiles reflect the needs of the respective units.
5. The Committee acknowledged that the Entity has procured the services of Microsoft (MS) Dynamics as an enabling solution to digitize its business processes. However, it was concerned about the capacity of the Entity to implement the system and its appropriateness for the Entity’s requirements.
6. A concern was raised regarding the NSF funding students to study in Eastern European countries and that these countries are not at the cutting edge in terms of technological advancement compared to Japan, South Korea and the United States of America
7. The Committee was also concerned about the Memoranda of Understanding signed between the Department with Russia and Ukraine and the plans to fund students to study in countries that are currently in serious conflict. The Entity indicated that the Minister signed a bilateral agreement with the government of Russia and a few other countries to host South African students to study qualifications that are listed as high demand. The students were monitored by the University branch on a constant basis and are progressing well.
8. The Committee noted its concern regarding the ability of the NSF to closely monitor the skills development initiatives that are implemented on its behalf by third parties. It was noted that the forensic investigation report revealed poor accountability by the service providers that receive funding from the NSF to roll out its skills development priorities. The Entity indicated that it conducts learner verification visits to ensure that all learners participating in the NSF funded projects receive relevant, good quality and fit for purpose training.
9. The Revised Strategy 2020 – 2025 and 2023/24 APP and the increase in the output indicators and targets in the Entity’s 2023/24 APP were noted by the Committee. However, it was concerned about the ability of the Entity to meet the planned targets for the 2023/24 financial year, given its poor performance in the past three years. The Entity indicated that the new indicators added seek to drive the improvement in the NSF responsiveness and operations so that it can realise improved and increased performance reporting on interventions for beneficiaries and skills development interventions funded.

Energy and Water SETA
1. The Entity was commended for having women (CEO and Board Chairperson) at the upper hierarchy of the organisation.
2. The Committee noted that the Entity has an important role to play in assisting the country in combating its water and electricity challenges through its skills development interventions. However, its budget of R355 million is relatively low, considering the significant demand for skills development in the energy and water sectors.
3. The reported reluctance by municipalities in collaborating with the EWSETA in support of its skills development projects was noted as a concern by the Committee.

The Committee was concerned that there were 617 EWSETA beneficiaries that were identified by the Auditor-General (AG) as having participated in multiple skills programmes and 167 with erroneous Identity numbers (ID) Entity documents during the 2021/22 financial year. In its written response to the Committee, the EWSETA indicated that in the current economic state, learners are moving from one programme to the other and currently cannot be excluded by the SETA due to them having received training by another SETA. The SETA landscape does not have a system in place to identify learners trained with other SETAs but reports detailed learner registration information with DHET quarterly. As DHET receives learner registration from all SETAs quarterly, the SETA is of the view that the DHET is well-positioned to put in place a system that will assist all 21 SETAs in identifying invalid duplications. It was also noted that EWSETA’s system now performs validity checks on captured ID numbers.

The Entity was commended for funding students for postgraduate studies in higher education institutions.
The Committee expressed concern that there were candidates that participated in the Entity’s skills development programmes, however, they did not receive their certificates. The EWSETA reported that 11 000 outstanding certificates were identified in 2021 and a certification backlog projected supported by the NAMB and QCTO was initiated to ensure that all learners who were eligible received their certificates. There were 110 trade test certificates that were outstanding. Outside of the certification backlog project, there was one project affected by a legal matter, which is delaying project conclusion and therefore learner certification,
The Committee noted that there was a forensic audit undertaken at the Entity in 2022/23 financial year. Furthermore, it was concerned that the Entity has allocated R750 000 for another forensic audit for 2023/24, including the two outer years of the MTEF period. The SETA reported that in 2019, EWSETA, through the Board, appointed an independent investigator to conduct forensic investigations into allegations made by whistle-blowing reports on allegations of irregularities. These have been concluded and resulted in a number of employees who were found to have acted in contravention of the organizational code of conduct and the PFMA. Recommendations of the forensic were implemented and certain matters were reported to law enforcement agencies as recommended. Disciplinary actions were taken against employees who were formed to have contravened the code and the PFMA. This led to a number of employees resigning from the entity. There were still ongoing disciplinary hearings that will further require the assistance of those who have conducted the forensic audits. Based on past trends and the susceptibility of the SETA’s operations to inherent fraud risk, management has further provided for forensic investigations should the need arise. For this reason, EWSETA continues to budget for any forensic investigations that may be required, and for legal fees to assist with recoveries and enable disciplinary action.
It was concerning that the Entity is targeting to achieve another unqualified audit opinion in 2023/24 while it also received an unqualified audit opinion with findings in 2021/22. The Committee was of the view that the Entity should target a clean audit.
The Committee expressed concern with regard to the shortage of specialised skills in the country for the construction of power stations and other projects in the energy and water sector. An example was made with regard to the construction of Medupi Power Station and solar plant in the Northern Cape where the country had to import foreign nationals to assist with the construction of the power station. The Committee was also concerned about the report by the EWSETA that TVET colleges do not have the relevant infrastructure and lecturers to enable accreditation of the college to offer the qualifications that are aligned to local skills needs. The work and plans of the EWSETA to improve its TVET and CET infrastructure support programmes to enable accreditation of the college to offer qualifications that are aligned to local skills needs were noted and welcomed.
Concerns were raised with regard to the slow pace of transformation and gender mainstreaming in the energy and water sector. It was further noted that the majority of engineers and other highly skilled professionals in the sector were old white males, and this is not good for the country.

SUMMARY

The Committee welcomed the NSF revised APP 2023/24, which had additional 11 targets compared to the previous financial year. The Entity had a projected expenditure amounting to R4,1 billion, of which R3.3 billion is allocated to the Programme 2: Skills Development Funding, which is the core business of the Entity. The Committee was concerned about the negative media publicity that the Entity suffered due to financial irregularities, and it also noted the mechanisms in place to turn-around the Entity. The Committee also implored the Entity to improve its capacity and monitoring systems of its skills development projects to improve accountability.

In relation to the EWSETA, the Committee acknowledged the leadership of the Entity which was led by women (CEO and Board Chairperson), and it further welcomed its APP 2023/24. It was noted that the EWSETA is one of the entities that have a critical role in assisting the country in addressing the shortage of skills in the energy and water sectors, which are key to economic development and are also basic needs for all citizens. However, its budget is very limited due to the small number of levy paying companies in its sector.

The Committee was concerned that the EWSETA is also struggling to forge partnerships with municipalities to expand the implementation of skills development programmes related to the energy and water sector at the local government level. Furthermore, the slow pace of transformation as it relates to the expansion of the number of black professionals in the energy and water sectors was also noted as a concern. The Committee implored the Entity to invest more in skills development programmes that are aimed at transforming the energy and water sectors and to support the government’s plans in eradicating the challenges in the water and energy sectors.

RECOMMENDATIONS

The Committee, having assessed the Revised Strategic Plans 2020 – 2025 and the 2023/24 Annual Performance Plans, budget and the MTEF budget projections of the NSF and EWSETA, recommends the following:

National Skills Fund
1. The process of making the NSF independent from the Department should be expedited.
2. Measures should be put in place to strengthen the monitoring and oversight mechanisms of the Entity over its skills development projects that are implemented by service providers to improve accountability and ensure value for the investment made.
3. The Entity should expedite the completion of the disciplinary processes against the employees that have been implicated in the Nexus forensic investigation report.
4. The Entity should urgently address the capacity constraints that have existed for some time and ensure that vacant posts are filled within regulated timeframes.
5. The implementation of an information and communication technology (ICT) system fit for purpose should be prioritised.
6. The Entity should assist students from TVET colleges and Universities of Technology who need experiential learning to complete their qualifications.

Energy and Water SETA
1. The Department should assist the Entity in establishing and strengthening partnerships with municipalities for the implementation of its skills development projects aimed at responding to the energy and water challenges in the country.
2. The Entity should ensure that it implements its audit action plan in response to the AG’s findings and aim to achieve a clean audit opinion in 2023/24 financial year.
3. The Entity should prioritise the eradication of the outstanding certificates and also ensure that there is no accumulation of a new backlog.
4. The Entity should invest in skills development programmes aimed at improving access and success of young black professionals in the energy and water sector.
5. The Entity should invest in the development of skills development programmes to respond to the water and energy crisis in the country.
6. The Entity should work in collaboration with the Local Government SETA when offering skills development interventions in municipalities to avoid overlaps and duplications.

Report to be considered.

Documents

ATC230703: Report of the Portfolio Committee on Higher Education, Science and Innovation on Budget Vote 17, Dated 14 June 2023

ATC230703: Report of the Portfolio Committee on Higher Education, Science and Innovation on Budget Vote 17 with Reference to the National Skills Fund and Energy and Water Sector Education and Training Authority, Dated 14 June 2023

Higher Education, Science and Innovation

Documents

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