ATC240118: Report of the Portfolio Committee on Higher Education, Science and Innovation on the Assessment of the 2022/23 Annual Reports of the Transport Education and Training Sector Education and Training and (Teta) and Manufacturing, Engineering and Related Services Sector Education and Training Authority (Merseta), Dated 22 November 2023

Higher Education, Science and Innovation

Report of the Portfolio Committee on Higher Education, Science and Innovation on the Assessment of the 2022/23 Annual Reports of the Transport Education and Training Sector Education and Training and (Teta) and Manufacturing, Engineering and Related Services Sector Education and Training Authority (Merseta), Dated 22 November 2023

INTRODUCTION AND MANDATE

The Portfolio Committee on Higher Education, Science and Innovation (“Committee”), having assessed the 2022/23 Annual Reports of the Transport Education and Training Authority (TETA) and Manufacturing, Engineering and Related Serves Education and Training Authority (merSETA), reports as follows:

1.1. 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 the mechanisms contemplated in section 55(2) of the Constitution.

1.2. Purpose of the Report

The report accounts for the work done by the Portfolio Committee on Higher Education, Science and Innovation in assessing the 2022/23 Annual Reports of TETA and merSETA, which were tabled in accordance with Section 40 (1) of the PFMA; and as referred in terms of the National Assembly Rule 338 by the Speaker of the National Assembly to the Committee for consideration and reporting in terms of Rules 339 and 340, respectively.

1.3. Method

On 11th October and 1st November 2023, the Portfolio Committee convened briefing sessions with the Auditor-General of South Africa (AGSA), TETA and merSETA, where the audit outcomes of the Higher Education Portfolio and the 2022/23 Annual Reports were presented and scrutinised.

OVERVIEW OF THE KEY POLICY FOCUS AREAS RELEVANT FOR THE SECTOR EDUCATION AND TRAINING AUTHORITIES (SETAs)

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 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, transformational role.

The NDP sets out a vision for the country through 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 employers. The NDP sets out the role of 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 emphasise internships; and
Training should cover the levels of the National Qualifications Framework (NQF) required by the sector.

2.2. 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, to improve its quality, and integrate the various strands of the post-school system. It further sets the interventions for implementation by different sectors of the Post-School Education and Training. The White Paper sets out policies to guide the Department of Higher Education and Training (DHET) and the institutions for which it is responsible for contributing to building a developmental state with a vibrant democracy and a flourishing economy.

It sets out a vision for:

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;
A stronger and more cooperative relationship between education and training institutions and the workplace; and
A post-school education and training system that is responsive to the needs of individual citizens and of employers in both public and private sectors, as well as broader societal and developmental objectives.

Furthermore, it is premised on achieving the following:

Expanded access to TVET and university education;
Establishment of community colleges and skills centres to mainstream vocational education and training;
Establishment of a national skills planning mechanism within the DHET;
A strengthened National Skills Authority (NSA) to perform a monitoring and evaluation role in the skills system; and
Opening up workplaces to give more youth access to work-integrated learning opportunities.

2.3. 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.

2.4. National Skills Development Plan (NSDP)

The NSDP ensures 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 that informs the work of SETAs until 2030 and has been crafted within the policy context of the NDP, and the White Paper. The SETAs 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.

2.5. 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 outlined in MTSF Priority 3: Education, Skills and Health. For the 2020 – 2025 planning period, the Department will focus on the following:

Expanded access to PSET opportunities, which aims to provide a diverse student population with access to a comprehensive and multifaceted range of PSET opportunities;

Improved success and efficiency in the PSET system aims to improve efficiency and success of the PSET system;
Improved quality of PSET provisioning to build the capacity of PSET institutions to provide quality education and training;
A responsive PSET system to provide qualifications programmes and curricula that are responsive to the needs of the world of work, society and students; and

Excellent business operations within DHET to ensure sound service delivery management and effective resource management within the department.

2.6. Economic Reconstruction and Recovery Plan (ERRP) and the ERRP Skills Strategy

The impact of COVID-19 on the country has negatively affected an already ailing economy, which has deepened the high unemployment rate, poverty, and inequality. In response to the economic challenges resulting from the COVID-19 pandemic, the 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 areas are as follows:

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

To contribute towards the realisation of the ERRP goals, the Department developed the ERRP Skills Strategy, which 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 the demand and supply of relevant skills for ERRP and there are eight interventions focused on the provision of targeted education and training programmes as follows:

Intervention 1: Expand the provisioning of short skills programmes (both accredited and non-accredited) to respond to skills gaps identified in the strategy. Intervention 2: Enable the provisioning of short skills programmes (both accredited and non-accredited) that respond to skills gaps identified in the strategy.
Intervention 3: Expand the provisioning of workplace-based learning (WBL) programmes to respond to occupational shortages and skills gaps identified in the strategy.
Intervention 4: Increase enrolments in qualification-based programmes that respond to the occupational shortages identified in the strategy.
Intervention 5: Review and revise education and training programmes to respond to occupational shortages and skills gaps identified in the strategy.
Intervention 6: Update the draft Critical Skills List and the associated regulatory mechanisms.
Intervention 7: Strengthen entrepreneurship development programmes.
Intervention 8: Embed skills planning into economic planning processes.
Intervention 9: Facilitate the use of the National Pathway Management Network (PMN) in the PSET system.
Intervention 10: Strengthen the post-school education and training (PSET) system.

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

2.7. 2021 State of the Nation Address (SONA)

One of the key focus areas of President Ramaphosa’s February 2022 SONA was a comprehensive social compact to grow the economy, create jobs, and combat hunger. Additionally, the SONA addressed critical priorities for the PSET sector. In response to the huge challenge of youth unemployment, the President announced that the Department of Higher Education and Training (DHET) will place 10 000 unemployed TVET) college graduates in workplaces from April 2022. The President further appealed to the private sector to support measures relating to youth employment and, wherever possible, to drop experience as a hiring requirement and give as many young people as possible their first job.

The President also announced that infrastructure projects will be prioritised to support economic growth and better livelihoods, especially in energy, roads, and water management. The President said the Infrastructure Fund is at the centre of this effort, with an R100 billion allocation from the fiscus over 10 years. The Infrastructure Fund is now working with state entities to prepare a pipeline of projects with an investment value of approximately R96 billion in student accommodation, social housing, telecommunications, water and sanitation, and transport.

OVERVIEW AND ASSESSMENT OF THE 2021/22 NON-FINANCIAL AND FINANCIAL PERFORMANCE OF TETA AND MERSETA

The Sector Education and Training Authorities (SETAs) are established in terms of the Skills Development Act, 1998 (Act no 97 as amended) and listed in terms of the PFMA, as a Schedule 4A public entity. The Skills Development Act mandates 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).

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 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. TRANSPORT EDUCATION AND TRAINING AUTHORITY (TETA)

3.1.1. Overview and assessment of TETA’s 2022/23 non-financial performance

Table 1: TETA’s Programmes and their related achievement against performance targets for the 2022/23 financial year

TETA	APP Targets 2022/23	Achieved	Not achieved	% Achievement
1. Administration	10	10	0	100%
2. Skills Planning and Research	14	14	0	100%
3. Learning Programmes and Projects	86	78	8	91%
4. Quality Assurance	17	16	1	94%
Overall Total	127	118	9	93%

For the 2022/23 financial year, TETA had four budget programmes, as illustrated in the above table. The programmes had 127 2022/23 Annual Performance Plan (APP) targets. The entity achieved 93 per cent of the 127 targets, recording an increase of 4 per cent from 89 per cent in 2021/22.

3.1.2. Non-financial performance per programme

3.1.2.1. Programme 1: Administration

The programme provides administrative support services and enables TETA to deliver on its mandate and ensure compliance with all government imperatives. For the year under review, the programme had 10 targets, constituting 9 per cent of TETA’s 2022/23 APP targets. The programme achieved 10 or 100 per cent of the planned targets.

Selected key achievements:

TETA obtained an unqualified audit opinion from the Auditor-General for the 2021/22 financial year.
Ninety-one per cent of discretionary grant funding was allocated to PIVOTAL programmes against the target of 80 per cent.
TETA achieved 100 per cent against the target of 80 per cent of its procurement plan.
The reviewed organisational structure was approved.
TETA submitted its Workplace Skills Plan and Annual Training Report by 30 April 2022.

3.1.2.2. Programme 2: Skills Planning and Research

The programme established mechanisms for skills planning and research capacity. For the 2022/23 financial year, the programme had 14 targets, constituting 11 per cent of TETA’s 2022/23 APP targets. The programme achieved 100 per cent of the planned targets.

Selected key achievements:

Six research studies were conducted against the target of three. The reason for this overachievement was that three of the completed research studies were commissioned in the 2021/22 financial year but were completed in the first quarter of 2022/23.
The TETA Sector Skills Plan was approved.
Mandatory grants were approved as follows: 218 for large firms against the target of 150; 252 for medium firms against the target of 170, and 709 for mall firms against the target of 500. The overachievements were ascribed to the stakeholder capacitation workshops conducted and additional support provided.
Ten capacitation workshops were conducted.
Eighty learners enrolled in the Skills Development Facilitator training against the target of 70.
Tender conducted 281 verifications for mandatory grants/discretionary grants due diligence.
TETA allocated 63 per cent of the discretionary grants budget to developing intermediate skills.

3.2.1.3. Programme 3: Learning Programmes and Projects

The programme aims to increase access to occupationally directed programmes within the transport sector. The programme had a total of 86 targets, constituting 68 per cent of TETA’s 2022/23 APP targets. The programme achieved 78 or 91 per cent of the planned targets.

Selected key achievements:

Number of employed learners on bursaries, achieved 71 the target of 70.
Number of employed learners on skills programmes, achieved 615 against the target of 430. The overachievement was ascribed to prior year contracts implemented in 2022/23.
Number of learners enrolled for occupational occupations, achieved 73 against the target of 60. The overachievement was ascribed to prior year contracts implemented in 2022/23.
Number of learners in Adult Education and Training (AET) programmes, achieved 461 against the target of 100. The overachievement was ascribed to prior year contracts implemented in 2022/23.
Number 70 of learners in Artisan Recognition of Prior Learning (ARPL), achieved 71 against the target of 70.
Number of candidates in leadership development programmes, achieved 15 as planned.
Number of candidates in executive leadership development programmes, achieved 15 as planned.
Number of women on leadership programmes, achieved 15 as planned.
Number of partnerships implemented with TVET colleges, achieved 3 against the target of 2.
Number of partnerships established with universities, achieved 2 against the target of 1)
Number of partnerships implemented with Community Education and Training (CET) colleges, achieved 2 as planned.
Number of graduates placed on internship programmes (Graduate internship) completed, achieved 205 against the target of 150.

Targets not achieved:

Number of employed learners on bursaries completed, achieved 24 against the target of 35.
Number of employed learners in AET completed, achieved 26 against the target of 50. Underachievement was ascribed to learners not being found competent in all learning areas.
Number of board members on leadership programmes completed, achieved zero against the target of 15. The nonachievement was ascribed to the programme still being underway.
Number of unemployed learners on AET programmes completed, achieved 43 against the target of 100. It was reported that the target was not achieved because learners were not found competent in all learning areas.
Number of unemployed learners on apprenticeship programme, achieved 167 against the target of 250. It was noted that operational requirements from stakeholders led to the shortfall.
Number of learners on cadetships completed, achieved 7 against the target of 35. This underachievement was ascribed to a delay in external quality assurance processes.
Number of learners on candidacy programmes completed, achieved 2 against the target of 7. The underachievement was ascribed to a delay in external quality assurance processes.

3.1.2.4. Programme 4: Quality Assurance

The programme aims to strengthen the quality assurance system. For the 2022/23 financial year, the programme has 17 targets, constituting 13 per cent of the TETA’s 2022/23 APP targets. The programme achieved 16 or 94 per cent of the planned targets.

Selected key achievements:

Number of curricula developed for occupational qualifications, achieved 3 against the target of 2.
Number of learning materials developed for the Quality Council for Trades and Occupations (QCTO) approved occupational qualification, achieved one as planned.
Number of training providers capacitated of TETA ETQA systems, achieved 241 against the target of 200. The overachievement was ascribed to more training providers who attended the capacity-building workshop.
Number of external moderations conducted, achieved 409 out of 140. It was reported that the overachievement was due to more applications for external moderation being received in the year under review as a result of ETQA efforts to encourage the certification of learners.
Number of TVET lecturers trained on the TETA quality assurance system, achieved 100 as planned.
Number of TVET/CET Managers trained in curriculum-related studies achieved 50 against the target of 20. The target was overachieved because the providers enrolled more managers on the programme at no extra cost.

Target not achieved:

Number of TVET/CET lecturers exposed to the industry implemented, achieved 0 against the target of 25. The nonachievement was due to the unavailability of workplaces to host lecturers, which resulted in the target not being met.

3.1.3. Overview and assessment of TETA’s 2022/23 budget allocation and expenditure

For the 2022/23 financial year, TETA’s total revenue amounted to R920,4 million, comprising R61,6 million from exchange (R1,2 million of other income and R60,4 million of interests received – investment) and R858,8 million (R4,9 million of other income, R838,5 million of Skills Development Transfer and R15,2 million of Skills Development Levy penalties and interest. The total revenue increased marginally by R88,2 million or 10.6 per cent from R832,1 million in 2021/22. Total expenditure amounted to R943,7 million. Total expenditure against total revenue amounted to 103 per cent of its budget, with an overspending of 3 per cent or R23,2 million. It has been reported that R23,2 million forms part of the discretionary grant reserve. The deficit incurred in 2022/23 decreased significantly compared with R104,2 million in 2021/22.

Spending on grants and project expenses amounted to R806,6 million, constituting 85.4 p per cent of the total expenditure for the 2022/23 financial year. Notably, spending on grants and projects decreased by R23,1 million compared with R829,7 million spent in 2021/22. Expenditure on employee-related costs amounted to R76,1 million, while an amount of R60,9 million was for administrative expenses.

Key costs drivers in terms of administrative expenses were as follows: Consultancy and service provider fees: R20,1 million (R16,1 million: 2021/22); other administrative expenses: R7,3 million (R4,5 million: 2021/22); Board costs and committee costs: R4,9 million (R2,9 million: 2021/22); depreciation and amortisation: R4,7 million (R3,5 million: 2021/22); external auditor remuneration: R4,0 million (R3,6 million: 2021/22); building expenses: R3,9 million (R3,3, million: 2021/22); and lease rentals and operating leases: R3,6 million (R2,7 million: 2021/22).

3.1.4. Irregular, fruitless and wasteful expenditure

For the year under review, TETA did not incur irregular, fruitless and wasteful expenditures for the 2022/23 financial year. The amount of R92 million included in irregular expenditure in the prior year relates to an amount identified by AGSA as irregular. There is a variance between the budget and actual expenditure of R92 million in the 2021/2022 financial year. The variance represents payments for historical commitments from the rollover surplus approved by the National Treasury in terms of section 53(3) of the PFMA. It has been reported that there were ongoing discussions between TETA, AGSA, and the National Treasury to resolve the matter.

3.1.5. 2022/23 audit outcomes

TETA obtained a qualified audit opinion for the 2022/23 financial year, which is a regression from an unqualified audit in 2021/22.

Basis for the qualified qualification

Skills development grants payable – discretionary grants: The Auditor-General (AG) was unable to obtain sufficient appropriate audit evidence to substantiate the skills development grants payables disclosed in note 15 to the financial statements. Consequently, the AG was unable to determine whether any adjustments relating to skills development grants payable (discretionary) of R4 388 000 disclosed in note 15, discretionary grants and project expenses of R657 263 000 disclosed in note 6, and commitments of R818 574 000 disclosed in note 22 to the financial statements were necessary.

Additionally, there was an impact on the surplus for the period and the accumulated surplus in the financial statements.

Emphasis of matter

Restatement of corresponding figures: As disclosed in note 32 to the financial statements, the corresponding figures for 31 March 2022 were restated as a result of errors in the financial statements of the public entity at, and for the year ended, 31 March 2023.

Other matters

Retention of 2021/22 surplus: The AG noted that there are current deliberations with the National Treasury and the Department of Higher Education and Training regarding the appropriate approval process for the retained surplus of R977 317 000, for the financial year 2021-22, as disclosed in note 20 of the financial statements. The outcome of the matter could not be determined, and no provision for any liability was disclosed in the financial statements.

Report on the audit of the Annual Performance Report

The material findings on the performance information of the selected programmes are as follows:

Programme 3: Learning Programmes and Projects: The AG found that, based on the audit evidence, the actual achievement for 17 indicators did not agree with what was reported. The AG could not determine the actual achievements but estimated them to be materially more or less than reported.

		Reported achievement
3.1b Number of employed learners on skills programmes entered
3.1b Number of employed learners on skills programmes completed
3.1f Number of employed learners on apprenticeship programmes completed
3.1g Number on Artisan recognition of prior learning programmes
3.1g Number of learners on ARPL completed
3.2a Number of unemployed learners on bursaries entered
3.2a Number of unemployed learners on bursaries completed
3.2b Number of unemployed learners on skills programme entered		1 672
3.2b Number of unemployed learners on skills programmes completed	400	1 215
3.2c Number of unemployed learners on leadership programmes completed		1 532
3.2d Number of unemployed learners in AET programmes entered
3.2d Number of unemployed learners in AET programmes completed
3.2e Number of unemployed learners on apprenticeship programmes
3.2e Number of unemployed learners on apprenticeship programmes completed	100
3.2f Number of learners on cadetship entered
3.11a Number of small and medium enterprises funded
3.11b Number of small NLPEs funded

Programme 3: Learning Programmes and Projects: The AG found that based on audit evidence, the actual achievement for 7 indicators did not agree with the achievement reported. Consequently, the achievements are more or less than reported.

Indicators	Target	Reported achievement	Actual audited achievement
3.1 Number of learners on RPL completed	10	10	22
3.3 Number of partnerships implemented with TVET colleges	2	3	0
3.3. Number of partnerships implemented with universities	1	1	0
3.3 Number of partnerships implemented with CET colleges	2	2	0
3.7 Number of career platforms produced or developed	3	4	3
3.8 Number of media information sessions conducted	6	15	0
3.11 Number of NGOs funded	3	3	0

Material misstatements: The AG identified material misstatements in the annual performance report submitted for auditing. These material misstatements were in the reported performance information of Programme 3: Learning Programme and Projects. Management did not correct all the misstatements, and the AG reported material findings in this regard.

Report on compliance with legislation

Annual financial statements, performance, and annual report: The AG noted that the financial statements submitted by TETA for auditing were not prepared in accordance with the prescribed financial reporting framework and were supported by full and proper records, as required by section 55(1) (a) and (b) of the Public Finance Management Act (PFMA).

Material misstatements of disclosure items identified by the auditors in the submitted financial statements were corrected and the supporting records were provided subsequently. However, uncorrected material misstatements and supporting records that could not be provided resulted in the financial statements receiving a qualified opinion.

Internal control deficiencies: The AG reported that Management’s inability to implement adequate internal controls related to the financial reporting process resulted in non-compliance with the requirements of the applicable financial reporting framework. This deficiency may have contributed to errors or misstatements in the financial statements.

Management did not establish sufficient oversight controls for the performance reporting process, which led to inaccuracies in performance reporting. The lack of adequate oversight may have compromised the reliability and accuracy of the reported performance metrics.

The management’s oversight responsibility over compliance with performance information was inadequate, leading to repeated findings in the annual financial statements, performance reports, and annual reports. The lack of adequate oversight raises concerns about the organization’s adherence to legal and regulatory requirements.

Other reports:

The AG reported that the National Intelligence Bureau is currently conducting investigations into the theft of assets that occurred on the premises. As a matter of national security, the agency is diligently working to identify the perpetrators and recover the stolen assets. The ongoing investigation underscores the importance of safeguarding sensitive assets and upholding the integrity of security measures. Further updates on the progress of the investigation will be followed up in the next year's audit.

3.2. MANUFACTURING, ENGINEERING AND RELATED SERVICES SECTOR EDUCATION AND TRAINING AUTHORITY (merSETA)

3.2.1. Overview and assessment of the merSETA’s 2022/23 non-financial performance

Table 2: The merSETA’s Programmes and their related achievement against performance targets for the 2022/23 financial year

Programme	APP Targets 2022/23	Achieved	Not achieved	% Achievement
1. Administration	1	1	0	100%
2. Skills Planning	7	4	3	57%
3. Learning Programmes and Projects	41	16	25	39%
4. Quality Assurance	11	8	3	73%
Overall Total	60	29	31	48%

For 2022/23, merSETA had four budget programmes, as illustrated in the table above. The programmes had 60 2022/23 APP targets. The entity achieved 29 or 48 per cent of the 60 targets.

3.2.2. Non-financial performance per programme

3.2.2.1. Programme 1: Administration

The purpose of this programme is to:

Instil a single coherent best practice of effective and efficient governance, leadership, and management activities for the Accounting Authority, its committees, management and staff of the merSETA.
Ensure compliance with legislated and regulated obligations, as well as with organisational policies, and
Establish a skilled high-performance environment.

For the year under review, the programme had one target, which was achieved as planned. The programme achieved 100 per cent compliance with the Corporate Governance Compliance report.

3.2.2.2. Programme 2: Skills Planning

This programme aligns with the first core mandate and function of the SETA, that of research, planning, monitoring, and evaluation for the expressed purpose of establishing an effective mechanism of systems, processes and policies for decision-making. For the year under review, the programme had seven targets and achieved four or 57 per cent of the planned targets.

Selected key achievements:

Number of Workplace Skills Plans (WSPs) and Annual Training Reports (ATRs) approved for small firms achieved, 2 311 against the target of 1 800. This overachievement was ascribed to more submissions from small entities.
Number of Workplace Skills Plans (WSPs) and Annual Training Reports (ATRs) approved for medium firms, achieved 919 against the target of 918.
Number of WSPs and ATRs approved for large firms (achieved 551 against the target of 551).

Targets not achieved:

Number of sector research agreements signed for TVET growth occupationally directed programmes (achieved 0 against the target of 2). The nonachievement was ascribed to insufficient discretionary grant applications to meet the target.
Number of established and emergent cooperatives trained in the sector and national identified priority occupations or skills (achieved 0 against the target of 30). The nonachievement was ascribed to insufficient demand from discretionary grant applications to meet the target.
Number of mall and emerging enterprises trained in the sector and national identified priority occupations or skills (achieved 614 against the target of 730). The underachievement was ascribed to the memorandum of agreements (MOAs) not all returned to meet the target.

3.2.2.3. Programme 3: Learning Programmes and Projects

The programme focuses on the management of grants allocation and implementation thereof as well as the management of learners covered by grant-allocated funding agreements undergoing a variety of learning interventions that result in skilled people. For the year under review, the programme had 41 targets, constituting 68 per cent of merSETA’s 2022/23 APP targets. The programme achieved 16 or 39 per cent of the planned targets.

Selected key achievements:

Percentage of total approved discretionary grants (DG) allocations to employers, allocated to programmes or projects aimed at developing mid-level skills, e.g., clerical, sales and service, skilled craft and trade workers. The SETA achieved 59.7 per cent against the target of 55 per cent.
Number of unemployed learners completing work-integrated learning (WIL) programmes from higher education institutions (HEIs), achieved 262 against the target of 200.
Number of unemployed learners registered for skills programmes, achieved 5 146 against the target of 3 000. The overachievement was attributed to the increased demand for unemployed learners entering skills programmes.
Number of unemployed learners completing skills programmes, achieved 5 257 against the target of 2 570. The overachievement was ascribed to the high volumes of moderation reports that have been received for unemployed skills programme completions.
Number of unemployed engineering graduates registered for candidacy programmes, achieved 27 against the target of 25. The SETA noted that a strategic partnership with Resolution Circle to train Candidate Engineers has resulted in an overachievement of the target.
Number of unemployed learners completing bursary programmes, achieved 99 against the target of 50. The overachievement was attributed to the funded learners from various partnerships only completing during this period. It was also noted that the indicator is dependent on the throughput from institutions.

Targets not achieved:

Percentage of total approved discretionary grants (DG) allocations to employers, allocated to programmes or projects aimed at developing high-level skills, e.g., managers, professionals technicians and associate professionals, achieved 18.5 per cent against the target of 22 per cent. The SETA indicated that the achievement of the target is demand-driven. Of the 3 allocation indicators, a higher allocation percentage was achieved in developing intermediate skills in relation to high-level skills.
Number of unemployed learners registered for WIL programmes from TVET colleges, achieved 114 against the target of 475. The underachievement was attributed to the rejection of learners due to poor compliance documents submitted for reporting purposes.
Number of unemployed learners completing WIL programmes from TVET colleges, achieved 47 against the target of 225. Insufficient demand from discretionary grant applications from learners entering WIL TVETs, leading to reduced pipeline to meet the completion target.
Number of unemployed learners registered for bursary programmes (new entries), achieved 63 against the target of 110. It was noted that there were no new bursary funding agreements signed to enrol new first-time university entrants. This is due to the misalignment of the academic year and financial year, which results in learners falling into the prior year.
Number of employed learners registered for learnership programmes, achieved 904 against the target of 1 440. This underachievement was attributed to insufficient demand from discretionary grant applications to meet the target.
Number of employed learners registered for bursary programmes (new entries), achieved 34 against the target of 104. This underachievement was due to insufficient demand from discretionary grant applications to meet the target.

3.2.2.4. Programme 4: Quality Assurance

The programme aims to catalyse quality improvement for the learning, assessment and certification of training delivery partners of the merSETA, inclusive of modernised learning modalities and associated assessment and credentialing systems. The programme had 11 targets, constituting 18 per cent of merSETA’s 2022/23 APP targets. The programme achieved eight or 73 of the planned targets.

Selected key achievements:

Number of TVET Centres of Specialisation (CoS) supported, achieved three as planned.
Number of TVET colleges funded for merSETA occupational programmes, equipment, and workshop infrastructure, achieved three as planned.
Number of SETA offices maintained in TVET colleges, achieved three as planned.

Targets not achieved:

Number of TVET college lecturers awarded bursaries, achieved 0 against the target of 20, and this was ascribed to insufficient demand from discretionary grant applications to meet the target.
Number of TVET college lecturers exposed to industry through skills programmes, achieved zero against the target of 60. Insufficient demand from discretionary grant applications was cited as the reason for not meeting the target.

3.2.3. Overview and assessment of merSETA’s 2021/22 budget allocation and expenditure

For the 2022/23 financial year, merSETA’s total revenue amounted to R1,8 billion, comprising R1,6 billion from non-exchange revenue (R1,5 billion from Skills development levy income and R15 million from skills development levy penalties and interest) and R289,2 million from exchange revenue (R289,2 million from interest income). Revenue increased by R248,1 million from R1,6 billion in 2021/22.

At the end of the financial year, merSETA spent R1,3 billion against the budget of R1,8 billion, recording lower than projected spending amounting to R536,1 million. underspending during the year under review was significant compared to R334 million in 2021/22. An amount of R1,1 billion was spent on employer and project expenses, and R173,6 million was spent on administrative expenses.

Key costs drivers in terms of administrative expenses were as follows: employment costs: R146,5 million (R140,8 million: 2021/22); operating lease rentals: R15,0 million (R15,1 million: 2021/22); telecommunications expenses: R13,8 million (R12,4 million: 2021/22); repairs, maintenance and running costs: R9,7 million (R3,0 million:2021/22); QCTO administration cost: R9,1 million (R6,8 million: 2021/22); travel, conferences and meeting expenses: R9,0 million (R5,1 million: 2021/22); service provider administration fees: R8,8 million (R8,2 million: 2021/22); external audit costs: R5,8 million (R5,3 million: 2021/22), and accounting Authority and sub-committees costs: R5,2 million (R4,3 million).

3.2.4. Irregular, fruitless and wasteful expenditure

Irregular expenditure: During the 2022/23 financial year, merSETA reported irregular expenditure amounting to R1,2 billion. This irregular expenditure makes the merSETA the top contributor to the irregular expenditure of R1,7 billion within the Higher Education and Training Portfolio for 2022/23. It has been reported that R1,1 billion of the irregular expenditure arose as a result of contracts that were signed in contravention of the delegation of authority, and irregular expenditure of R72 million arose as a result of non-compliance with procurement scripts. Of the total irregular expenditure, R779 million identified in the current year is related to prior years.

Disciplinary steps: During the current year, one verbal warning was issued to a staff member for contravention of supply chain management (SCM) prescripts. There were five such verbal warnings issued in the previous year. The merSETA reported that it undertook various training and capacity-building sessions for employees who were involved in transactions that were deemed irregular during the year.

Fruitless and wasteful expenditure: merSETA incurred fruitless and wasteful expenditure amounting to R47,5 million related to expenditure on contracts suspended without deriving value. R200 000 was due to the late cancellation of a venue and loss of consumable stock. It has been reported that fruitless and wasteful expenditure of R46 million identified in the current year is related to prior years.

3.2.5. 2021/22 audit outcomes

merSETA obtained a qualified audit opinion from the AG, which is a regression from an unqualified audit opinion with findings in 2021/22.

Basis for qualification

Discretionary reserve commitments – Contractual: The AG noted that the discretionary grant reserve commitments disclosed in note 20.1 were materially misstated and not correctly accounted for as required by GRAP 1. The entity omitted the expenditures and accruals associated with discretionary grant commitments, which resulted in a misstatement of the commitment balance. The AG could not determine the full extent of the misstatement on grants and transfers payable, employer grants, and expenses because it was impractical to do so. This resulted in a misstatement of the discretionary reserve commitments of R 4 575 115 000 (R 4 060 017) in the financial statements.

Retention of 2021/22 surplus: Deliberations were underway with the National Treasury and the Department of Higher Education and Training regarding the appropriate approval process for the retained surplus of R 4 530 935 000, for the financial year 2021/22, as disclosed in note 19 to the financial statements. The outcome of the matter could not be determined, and no provision for any liability was disclosed in the financial statements.

Report on the audit of the annual performance report

The material findings on the performance information of the selected programmes are as follows:

Programme 3: Learning Programmes and Projects:

Various indicators

The AG noted that based on audit evidence, the actual achievement for the three indicators did not agree with what was reported. The AG could not determine the actual achievement but estimated them to be materially more or less than reported.

Indicators	Targets	Reported achievement
3.41. Number of people trained on entrepreneurship supported to start their business (number of people funded for enterprise growth/enterprise development skills	430	416
3.17. Number of unemployed learners registered for bursary programmes (continuing)	309	448
3.12. Number of unemployed learners registered for learnership programmes	3 000	3 520

Material misstatements: The AG identified material misstatements in the annual performance report submitted for auditing. These material misstatements were in the reported performance information of Programme 3: Learning Programme and Projects. Management did not correct all the misstatements, and the AG reported material findings in this regard.

Report on compliance with legislation

Annual financial statements, performance and annual report: The Ag reported that the financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework, as required by section 55(1) of the PFMA.

Material misstatements of disclosure items identified by the auditors in the submitted financial statements were corrected, but the uncorrected material misstatements resulted in the financial statements receiving a qualified opinion.

Consequence management: The AG was unable to obtain sufficient appropriate evidence that the disciplinary steps were taken against officials who had incurred irregular expenditures as required by section 51(1) (e) (iii) of the PFMA. This was because some investigations into irregular expenditure were not performed.
Expenditure management: The AG noted that effective and appropriate steps were not taken to prevent irregular expenditure amounting to R1, 267 billion as disclosed in note 24 to the annual financial statements, as required by section 51(1)(b)(ii) of the PFMA. The majority of the irregular expenditure was caused by non-compliance with the Grant Regulations.

Furthermore, effective steps were not taken to prevent fruitless and wasteful expenditure amounting to R 47, 5 million, as disclosed in note 24 to the annual financial statements, as required by section 51(1) (b) (ii) of the PFMA. The majority of the fruitless and wasteful expenditure disclosed in the financial statements was caused by expenditure incurred on discretionary grant projects that were never completed and value not received.

Internal control deficiencies: The AG noted that management’s inability to implement adequate internal controls related to the financial reporting process resulted in non-compliance with the requirements of the applicable financial reporting framework. This deficiency may have contributed to errors or misstatements in the financial statements.

The processing and reconciling controls implemented by management during the financial year were not always adequate and effective as accounting records and schedules presented for audit were not always accurate and complete. The controls over daily and monthly processing of transactions did not prevent and detect deficiencies in some instances.

Management did not establish sufficient oversight controls for the performance reporting process, leading to inaccuracies in performance reporting. The lack of adequate oversight may have compromised the reliability and accuracy of the reported performance metrics.

Management’s oversight of compliance with performance information was inadequate, leading to repeat findings on the annual financial statements, performance reports, and annual reports.

KEY FINDINGS AND OBSERVATIONS

The Committee, having assessed the 2022/23 Annual Reports of the TETA and MERSETA, made the following key findings and observations.

4.1. Transport Education and Training Education Authority

4.1.1. It is concerning that the entity received a qualified audit opinion for the 2022/23 financial year, which is a regression from an unqualified audit opinion in 2021/22. The qualification of the entity was due to the skills development grants payable (discretionary) were not recognised in accordance with the general reporting accounting practices (GRAP1), presentation of financial statements. Additionally, the Auditor-General (AG) was unable to obtain sufficient appropriate audit evidence to substantiate the skills development grants payables disclosed in note 15 of the financial statements.

4.1.2. The overspending amounting to R23.2 million by the entity on its budget for the year under review was a cause for concern. The committee was also concerned about overspending given the country’s difficult economic situation.

4.1.3. The decline in spending on grants and projects by R23 million in the year under review compared with spending in 2021/22 was a concern, given the demand for skills development in the country. The committee argued that underspending was recorded in a critical delivery function of the entity, which is meant to benefit the unemployed.

Inadequate communication between the entity and the Department on matters of governance and management was noted as a concern. The entity was of the view that the Department had not adequately communicated its intention to scrutinise the conduct of the CEO and Board based on the dossier submitted by its Board Chairperson to the Minister. Meanwhile, the Department was adamant that it had followed the proper communication channels regarding its intentions concerning the TETA.
The increase in the spending on consultancy by R4 million during the year under review was noted as a concern. The committee was of the view that the entity could save on consultation fees if it builds in-house capacity or if skills are transferred from consultants to the entity’s employees.
The allegations of frequent international trips taken by the entity’s management were concerning, and an increase of R1.4 million was recorded in travel expenditure during the year under review.
Spending by the TETA to pay performance bonuses for employees, while the entity achieved a qualified audit opinion was of great concern. Furthermore, the committee was of the view that the payment of bonuses was unjustifiable given the audit outcome of the entity.
It was noted with concern that the CEO received a 15 per cent increment in her remuneration (salary, bonus and benefits), which increased from R3.4 million in 2021/22 to R3.9 million during the year under review. The annual report could not substantiate the rationale for the increment, which is beyond the inflation rate.
The AG found that based on audit evidence, the actual achievement for 17 indicators in Programme 3: Learning Programmes and Projects did not agree with what was reported and was concerning as it cast doubt on the reported performance. This matter pointed to weaknesses in the internal control environment within the entity.
It is commendable that the entity did not incur irregular, fruitless and wasteful expenditure during the year review.
The failure of TETA to assist the targeted TVET and CET lecturers with exposure to industry to gain practical experience, which could benefit students from these institutions, was noted as a concern.
The inability of the Board and its sub-committees to execute their fiduciary duties meaningfully was noted as a concern. It was further noted that the matters raised by the AG could have been detected if the Board and its sub-committees had acted swiftly in identifying areas of weakness in the internal control environment.
The alleged conflict between the CEO and the Board Chairperson of the entity was noted as a serious concern, and the Department was implored to closely monitor the situation.
The over-achievement of the number of beneficiaries enrolled in skills development training programmes at no additional costs to TETA was welcomed.

4.2. Manufacturing, Engineering and Related Services Sector Education and Training Authority (MERSETA)

The situation at the entity was concerning as it received a qualified audit opinion during the year under review, which was a regression from an unqualified audit in 2021/22.
The underspending amounting to R536.2 million recorded during the under review out of a budget amounting to R1.8 billion was a cause for concern. This is despite the demand for training and skills development programmes in the country, which remains high for both unemployed and employed adults and young people.
The poor performance against the planned targets (48 per cent) recorded by the entity was not acceptable.
The high number of vacant positions in senior management (CEO, CFO and COO) of the entity remains a serious concern and needs to be speedily rectified. The committee heard that the entity had difficulties filling the posts given the ongoing disciplinary hearing cases against some senior managers occupying these posts on a substantive basis.
The delays in implementing consequence management against employees involved in irregular conduct remain a concern. The committee was seriously concerned about the allegations that the former CEO had purchased shares worth R6 million and that the COO had benefitted from a company that had a contract with the entity, including conflicts of interest by some Board members.
The ability of the Board to exercise its oversight and fiduciary duties towards the entity was questioned given the cases of financial misconduct that were being investigated against some members of senior management. The weak internal control environment of the entity was noted with concern.
It is concerning that the entity incurred R1,2 billion in irregular expenditure, which makes it the top contributor to irregular expenditure of R1,7 billion incurred in the Higher Education Portfolio. The irregular expenditure was mainly due to contracts that were signed in contravention of the delegation of authority and non-compliance with procurement scripts. Nonetheless, it was noted that there was no financial loss as the funding allocated to the training programmes was utilised in terms of SETA requirements. It was also concerning that merSETA is one of the top contributors to irregular expenditure amounting to R4 million not dealt with within the Higher Education and Training Portfolio. The SETA is also the top contributor to fruitless and wasteful expenditures, having incurred R47,5 million or 81per cent of the R58,6 million irregular expenditure incurred within the Higher Education and Training Portfolio for 2022/23.
Poor project management skills to monitor the implementation of skills development projects were a concern. Compounding the situation, was the low uptake of the entity’s skills development programmes in its sector.
The funding of financially needy students by the entity during the year under review is commendable, and it was encouraged to do more in helping financially needy students.
The cancellation of contracts fingered in the forensic investigation was noted.

Other observations
1. The AG findings on the optimal utilisation of resources and leakages resulting from funding of deceased learners, learners in multiple SETAs; double dipping from the National Student Financial Aid Scheme (NSFAS) and SETAs, funding of learners who are above 65 years of age, etc., were noted with great concern. This was compounded by the lack of an integrated information management system for the PSET sector.
2. It was noted that the White Paper for PSET provides that SETAs should make ring-fenced contributions to the NSFAS instead of managing their own systems of disbursing funds to students. However, this is not followed, and the current inefficiencies within the NSFAS make this provision difficult to implement.

SUMMARY

SETAs play an important role in society, as outlined in section 10 of the Skills Development Act, 1998. Given the stagnant economic growth and rise in the unemployment rate among the youth and adults in South Africa, the demand for skills development and training is unprecedented. Thus, SETAs are well positioned to have a positive impact on citizens through the meaningful roll-out of training programmes that will enable unemployed people to access economic opportunities through the skills acquired from the short-term training programmes offered by SETAs. Furthermore, the training programmes of SETAs are also beneficial to the working class.

The committee selected the two SETAs to appear before it and account for their 2022/23 annual performance with emphasis on audit outcomes and performance against set targets. TETA and merSETA were among the nine SETAs that received qualified audit opinions with findings from the AG. Both entities have regressed from having unqualified audit opinions in the previous financial year.

The overall impression of the committee towards both SETAs was not good, given that the AG had identified matters of emphasis that could have been addressed if oversight bodies such as the Boards and their sub-committees discharged their duties meaningfully. The committee was of the view that the internal control environment of both SETAs needs strengthening, so that these entities can achieve clean audits in the 2022/23 financial year. The committee also undertook to closely monitor the audit action plans of both SETAs and to engage further on their governance and management-related matters.

RECOMMENDATIONS

The Committee, having assessed the 2022/23 Annual Reports of the TETA and merSETA, recommends that the Minister of Higher Education, Science and Innovation consider the following:

6.1. Transport Education and Training Education Authority

The entity should strengthen its internal control environment and implement an audit action plan to address the audit findings by the AG so that it can achieve a clean audit for the 2023/24 financial year. Progress reports on the implementation of the audit action plan should be submitted quarterly to the committee.
The process of strengthening security and surveillance of the entity’s head office should be expedited to reduce the risk of recurrence of unauthorised intrusion and theft.
The entity should improve its partnerships with employers to ensure that workplace opportunities are available for CET and TVET lecturers who need industry exposure, as this is crucial to improving the responsiveness and relevance of TVET programmes.
The establishment of an internal ICT unit should be expedited to reduce spending on consultants.
The expansion of the TETA presence to all provinces of the country should be prioritised. Furthermore, rural provinces should be the key focus for future expansion.
The entity should put measures in place to ensure that it operates within its 10 percent threshold in relation to its administration budget.
The Board and senior management of the entity should respond to the written instruction from the Minister in relation to the governance and management matters that have been raised.

6.2. Manufacturing, Engineering and Related Services Sector Education and Training Authority

The finalisation of all the disciplinary cases against employees fingered in the forensic investigation report should be expedited, and the report should be shared with the Minister. Furthermore, the entity should initiate civil lawsuits to recoup funds from employees found guilty of financial misconduct.
The Board should expedite the process of conducting lifestyle audits for all staff, including Board members of the entity.
The entity should implement the audit action plan recommended by the AG to ensure that it achieves a clean audit in the 2023/24 financial year. Furthermore, the updated audit action plan should be submitted to the committee, and its implementation should be reported to the committee on a quarterly basis.
The filling of vacant positions at the senior management level of the entity should be prioritised after the finalisation of the disciplinary hearing cases.
The Board should improve its oversight exercise over the entity to ensure that financial misconduct incidents are detected and mitigated early.
The project management unit of the entity should be capacitated to improve the monitoring and evaluation of projects.
The marketing and communications unit of the entity should expand its advocacy campaigns and roadshows in the manufacturing and engineering sectors to improve the learner uptake of its programmes.
Given the decline in the manufacturing industry in SA, the entity should develop skills programmes to prepare employees for the future world of work.

6.3. Other recommendation

6.3.1. The process of having NSFAS take over the disbursement of bursaries offered by SETAs should be expedited to minimise duplication and related inefficiencies. The Department should initiate a process that will assist in the review of legislation and SETA Regulations to provide for the ring-fencing of funds for bursaries to NSFAS. This would also require that NSFAS inefficiencies be addressed.

Report to be adopted.

Documents

ATC240118: Report of the Portfolio Committee on Higher Education, Science and Innovation on the Assessment of the 2022/23 Annual Reports of the Teta and (Merseta), Dated 22 November 2023

Higher Education, Science and Innovation

Documents

What's wrong with this page?