National Skills Fund & National Skills Association on their 2013/14 Annual Reports

Meeting report

Apologies
The Committee received apologies from the Minister, the Deputy Minister and the Director-General of the Department.The Chairperson said that both the National Skills Fund (NSF) and the National Skills Authority (NSA) were very important entities for South Africa because they contributed to making sure that South Africa had skilled people -- and skilled people were economically active. The NSF had a huge role to play by providing skills development funding, so as to ensure a skilled South African populace.

Presentation by National Skills Fund (NSF)
Mr Kgaogelo Hlongwane said that the mandate of the NSF was to fund skills development projects of national priority, as per National Skills Development Strategy (NSDS) III, section 28 of the Skills Development Act (SDA), and to fund activities to achieve a national standard of good practice in skills development. During the 2013/14 year, R3.138 billion had been disbursed towards skills development, which was an increase of 40% from the previous financial year. This showed a consistent increase in grant disbursements since the NSF's move from the Department of Labour to the Department of Higher Education, and the implementation of the NSDS III. Grant disbursements of R3.594 billion exceeded the total revenue of R3.321 billion by R0.272 billion. R2.585 billion had gone towards grants for training 77 000 students, R528 million towards key skills infrastructure development, and R25 million towards establishing a credible skills planning mechanism and strengthening of the Post-School Education and Training (PSET) system.

The NSF had received an unqualified audit opinion, but key matters had been raised by the AG. These were the restatement of corresponding figures for 31 March 2013 as a result of errors discovered during the year ended 31 March 2014, as well as two significantly important targets which were not reliable when compared to the source information, or evidence provided, due to a lack of standard procedures for recording and monitoring of performance. The NSF had developed an action plan to address the matters raised by the AG, and this in turn had been incorporated into the performance agreements of all senior managers.

The NSF’s financial performance for the year showed an increase in skills development grant disbursements, with their cash and cash equivalents consisting of Public Investment Corporation (PIC) investments, funds in the bank, as well as funds advanced for skills development projects. There had been had an overall increase of R778 million in assets to due to funds received from Sector Education and Training Authorities (SETAs) towards Technical and Vocational Education and Training (TVET) college infrastructure development. NSF’s commitments exceeded their available funds and had forced them to tap into their reserves. Their over-commitment amounted to R2.87 billion, which had resulted in a decline in the accumulated surplus.

Briefing by National Skills Authority (NSA)
Mr Edward Majadibodu, Chairperson of the NSA, said that the entity was a statutory body that was first established in 1999 in terms of Chapter 2 of the Skills Development Act (SDA). Their functions included advising the Minister on skills development policy and the legislative framework, liaising with SETAs and qualifications bodies, consulting with relevant stakeholders and commenting on the annual financial statements of the NSF. Key areas of advice pertained to reviewing the skills development legislative framework to support the integration of education and training with the national government NSF framework. The NSA also supported the development of post-school education and training that encouraged society to support and build a developmental state. The NSA and Department of Higher Education and Training (DHET) had agreed to strengthen the NSA in order to reduce its dependence on DHET processes.

A new NSA board was scheduled for an orientation and capacity building workshop upon appointment. The NSF board’s term of office had ended on 30 June 2014, and the 4th term board nominations were being considered. Their focus areas were a skills system review process, which would include SETA re-establishment and the National Skills Development Strategy (NSDS), the SETA panel review process, the appointment of SETA council members, the result of the investigative function of the NSA, the recommendation of the White Paper on the NSA, as well as how to strengthen the NSA's capacity to monitor and evaluate the role, as envisaged by the White Paper.

With regard to funding, the NSA received a budget allocation from the DHET through voted funds. It was mainly for administration activities such as personnel expenses for secretariat staff, administration and logistics such as printing, travel, accommodation and subsistence.

Discussion
National Skills Fund
Professor B Bozzoli (DA) said that the presentation by the NSF failed to give an entire indication of what exactly was going on, because it was bland and lacked detail. The fact that they had exceeded their targets sounded ridiculous. There had been a waste of money, but there was a lack of information to measure the exact wastage. The percentage of Skills Fund reserves seemed to have targets that were out of reality, or something must have gone completely wrong. She asked what would happen when the reserves ran out, and added that the Fund seemed like an easy way in which the Minister and the DG could get money out to fund things that suited them. She asked about how they were advised to choose the projects they funded, and why the National Student Financial Aid Scheme (NSFAS) was funding TVET colleges when they had so much money in reserves.

Ms S Mchunu (ANC) congratulated the Fund on having a huge amount of money in its reserves, and added that all their money put together could, and should, be used in a more productive manner.

Ms J Kilian (ANC) said the Auditor General's report had raised a concern on the reliability of the reported financials. That was very alarming. She enquired about how this would be fixed, because the Committee would not want to see it in future. She perceived that there was no consequence management, and that all departments failing in this area were not adhering to the Public Finance Management Act (PFMA).

Mr Y Cassim (DA) said that if the financial statements disclosure had not been done properly, that was a problem, and asked the NSF to explain if there was an overlap between NSFAS and the Fund. He also referred to the R1 billion rand bail-out the Fund had given to NSFAS, and asked who would bail them out if they again had a shortfall. He said that such large reserves should be used in order to avoid student disgruntlement in future. He asked about the R2 billion under expenditure by SETAs, and wanted to know how that money would be dealt with.

Mr E Siwela (ANC) noted that the NSF was using very little money for administration purposes. He said that the construction of TVET colleges was supposed to begin in January 2015, and asked when they would function. The Fund had over achieved in some areas of their work, but there were sectors which were not funded, and quite a delay in the procurement process. He said that they had failed to meet some of their targets, and asked what measures they had put in place to prevent this from happening in future.

Mr C Kekana (ANC) said that when the NSF was sponsoring TVET colleges, they needed to bear in mind the scarce skills that the country needed the most. Pupils with maths, science and accountancy were scarce. There needed to be an intervention at the post-matric level regarding scarce skills.

Mr M Mbatha (EFF) commented on the entity’s 60% vacancy rate, and said that it was an alarming percentage. A structure needed to relate to its function and have activities relating to its vision, but the current status quo contradicted the vision and mission of the Fund, and this required an explanation.

Mr Zukile Mvalo, Chief Director, DHET, said that the questions from the Members were empowering. Most vacancies were being filled during the year. There were 124 funded posts, and 84 were vacant. It was very difficult to deliver on their mandate when they had such a large number of vacancies. There had been an initiative to track down graduates who were funded by NSFAS, in order to employ them and see them absorbed by industry. The role of NSFAS was to administer funds transferred to them by SETA's. A huge surplus carried over yearly was not good. Money from the NSF needed to be used in order to assist as many students as possible. He added that the funds were never enough and that the NSF had good working relations with NFSAS. The NSF was planning a meeting with NSFAS in November to maintain smooth communication lines between them.

Mr Wean Minnie, Chief Financial Officer, NSF, said that they needed to make their processes more efficient by developing the necessary technology. They had strived to make the Fund more responsive, even had their own building from which to operate. This meant that they could grow organically and overcome their capacity constraints.

The Chairperson said that the Fund could not generalise when they reported to the Committee, and that it needed to be factual. She was not happy about the presentation, and the Committee had zero tolerance for under achievement. The Fund was now a listed entity and it needed to be fully functional. The procurement system seemed to be blamed on the Department, and she urged them to develop their own policies so as to avoid the 'blame game'. They needed to make radical changes, and should blame themselves for under achievement, not the Department. The delivery of TVET colleges was supposed to have happened in 2012. The NSF should be guided by the National Development Plan at all times, and should assist the Department at all costs. The 'blame shift game' was not a solution. There needed to be timeous interventions as well as accurate information presented. The report and the slide presentation had discrepancies, and that this was bad because the report was for public consumption. She said the NSF needed to improve in all aspects.

Mr Minnie said the rationale behind the different amounts was that they had used cash figures. In future they would convert them to accrual expenditure (accrual accounting) for consistency. They had chosen cash figures because they showed activity.

Mr Hlongwane said that the listing of the entity had depended on the Department, and that it had been listed in 2012. He said that this had been a relatively short period of time, and that they were previously a structure within the Department, with a staff component of 56 people. They were currently in a transitional period and relied heavily on the Department. The entity was in the process of making itself functional, and was addressing its HR and finance challenges.
The Chairperson said that they had to speed up the de-linking process, and put pressure on the National Treasury to make this a reality. The NSF needed to have a transitional plan and execute it as fast as possible so as to have radical transformation. They should then bring the Committee a progress report of their transitional process so that they could assess it. This was not a platform for them to defend themselves, because the current status quo was not benefiting society at large, and it needed to be changed. She said that the entity had a role to play in reducing poverty, as well as ensuring access for previously disadvantaged students in South Africa. She added that there was always room for improvement and she hoped for a better presentation when they came back

National Skills Association
Mr Siwela said that the role of NSA was to provide advice to the Department, and as the majority of SETAs were under performing, he asked if they should consider asking the Minister to reduce them.

Professor Bozzoli asked why the NSA did not have financial reports. Were the reports containing the advice given to the Minister open to the public, so that if the Department did not follow the advice, an intervention could be made? She added that government departments should advertise for boards on time.

Mr Mchunu asked whether the delay in the appointment of the board had affected the functioning of the NSA. When would the new board take up office?

Mr Kekana asked if the NSA had numbers of the students who were enrolled, who had graduated and those who had got jobs.

Mr Majadibodu said that with regard to SETA's, there were three views: the first was to do away with them, the second was to reduce them, and the third was the argument not to disrupt the skills system. The NSA had gone with the third option of not disrupting the skills system for the greater good of South Africa. The Act did not require NSA to give financial statements, because it was not an oversight entity, but an advisory body within the Department. The new board had already been appointed and needed to attend an orientation session, as well as a workshop to equip them. The NSA’s functioning had been negatively affected by the late appointment of the board. He did not want to make excuses for why it had been done late, but gave an assurance that it would not be repeated in future.

The Chairperson said that the Committee was looking forward to a more tangible report in future. She thanked both entities for their presentations, and remarked that they had been very informative.

Minutes of a previous meeting were adopted, and the meeting was adjourned.