1. BACKGROUND

Thank you Chairperson, it is an honour and a privilege for us as Sector Education and Training Authorities (SETAs) to be invited to meet and report to the Labour Portfolio Committee. SETAs would like to record their appreciation to the Minister of Labour, the Chairperson and members of the Committee for affording us what has become an annual opportunity.

This presentation is informed by specificonsidered inputs from the 8 SETAs that were mandated at the monthly forum of SETAs. This report It is an attempt to give a progress overview on our functions since SETAs were launched by the Minister of Labour on 20 March 2000. I will briefly describe what is entailed in each core function and go on to present to the Committee the major successes of this establishment phase, plus the challenges that all of us face with respect to the implementation of the National Skills Development Strategy in ourthe respective national economic sectors.

Before we proceed with this presentation, we would like to describe to the Committee the contextual environment within which SETAs are required to perform their functions It is important to note at this point that each SETA operates within different combinations of contextual circumstances, have different organisational perspectives and unique identities that are shaped by the particular location. Some of the more important aspects that form the SETAs contextual environment are the following:

Each SETA operates in one of 25 discrete economic sectors with their own business profile, employment profile, skills profile and specific needs. Sectors differ appreciably in terms of size (number of employers and employees, as well as Skills Development Levy contribution to the SETA), nature of employers operating in the sector (private, public or a combination), and type of employers (some very large dominant employers vs. a vast numbers of Small Medium & Micro Enterprisess (SMMEs)). The Department of LabourOL can provide specific figures.

SETAs have stakeholder organisations that comprise different mixes of government, public and private entities with levels of participation varying across the board – from very active to non-participatory. SETAs are stakeholder-driven organisations, with each stakeholder advocating and lobbying particular perspectives, expectations, value systems and interests. Different government departments, trade unions and employer groupings participate in the different SETAs.

Appreciation is due to the democratically elected parliament for having had the vision and courage to embrace and introduce fundamental change in skills development at the workplace by passing a number of pieces of enabling legislation, inter alia the South African Qualifications Authority Act Act, Skills Development Act, Skills Development Levyies Act, Public Finance Management Act, Adult Basic Education &and Training, Further Education &and Training, Higher Education & Training. As a result of this post 1994 legislation, new and complex structures and systems have been and continue to be established. Continuous improvement and amendment to this "young" legislation is expected to ensure the delivery of needed skills in a timely and cost effective manner.

Chairperson, I wish to echo the words of the Minister of Labour who has often said that we are engaged in a "revolution". The new generation legislation referred to above is indeed revolutionary because it seeks to replace the old training and development system with a fundamentally new way of people development in South Africa. The nature of the new system represents a comprehensive change to training and development in the workplace, which means that every aspect of skills development is up for review. In this movement, all interested and affected parties are engaged in industry-wide strategies via SETA governing bodies and in skills forums or committees at company level. This change has required a new mindset by all parties and beneficiaries of the system.

SETAs are "young" organisations. In two days’ time, on 20 March 2003, we will be exactly three years old. We all know the teething problemsenergies and demands of three year olds. ChairpersonHowever, we trust that you are are observing the SETAs are observed from this perspective. Young as they are, SETAs are serving some very old and mature organisations, for example Old Mutual, a company that is more than 150 years old.

Chairperson: We wish to highlight that SETAs have spent a substantial amount of time and effort in the last three years on

establishing systems and structures;
building the capacity of all role players; and
adopting policies to institute proper governance practices.

SETAs are now starting to implement programmes and initiatives aligned to the long-term objectives of the National Skills Development Strategy.

Chairperson: This presentation is intended to answer the question: We hope to draw a picture of wWhat has South Africa has achieved in terms of skills development transformation in the last three years and further what are point out the areas that need improvement and our collective attention.? The following helicopter view of the SETA world will be complemented later by specific figures from the eight SETAs present here today.

2. SETA FUNCTIONS

The Skills Development Act of 1998, and subsequently the Skills Development Levies Act of 1999, provides an institutional framework and resource base to devise and implement national, sectoral and workplace strategies aimed at increasing the provision of relevant and quality skills among the members of the South African workforce. The aim is to enable us to succeed in the global market and to create opportunities for communities, companies and individuals.

Allow us now to discuss the following functions of SETAs as they have emanated from legislation:

Skills Planning and Grant Disbursement
Quality Assurance
Learnerships & Skills Programmes
Finances
Governance

2.1 Skills Planning and Grant Disbursements

One of the core functions of each SETA is to facilitate and monitor skills planning and reporting, as well as to disburse skills grants to qualifying companies in the sector. The key enablers of this function include the:To execute this function SETAs have been involved in the

registration of Skills Development Facilitators (SDFsSDFs);;
processing of company Skills Plans and Training Reports (60% of the levy is a mandatory grant to companies who submit these);;
development and implementation of Sector Skills Plans (SSPsSSPs), and
implementation of strategic projects, such as to support SMMEs.

From the skills levies, SETAs are required to disburse two kinds of grants, namely, mandatory grants and discretionary grants. Mandatory grants have been determined by the Department of LabourDepartment of Labour to be paid to companies that submit skills plans and reports that meet the criteria set by SETAs. These mandatory grants make up 60% of the levies collected from companies.

SETAs are also required to identify and drive the implementation of Strategic Projects in the relevant sector. This is resourced via the discretionary funds of the SETA. The discretionary fund is currently made up of 10% of the levies paid by companies. Levies that are paid by companies and not claimed through the SETA-approved processes, accrue and complement the discretionary pool of funds. The SETA develops criteria for its discretionary grants to support or subsidise the implementations of value-adding projects, which have a sector-wide impact informed by the priorities and targets of the National Skills Development Strategy and the Sector Skills Plans.

2.1.1 Successes with regard ito Skills Planning and Grant Disbursements

The Department of LabourDepartment of Labour has approved the Sector Skills Plans for all economic sectors. These are five-year plans whose targets are updated annually. Prior to the Skills Development Act, economic sectors were not required to undertake this kind of industry-wide skills development planning and reporting. It is an achievement to be proud of.

The preparation of an SSP requires research and consultation with the industry stakeholders to ensure that the following detail is reflected and agreed: the business profile, employment profile, factors that influence change, current skills provision or supply, and future skills needs. Given that this was our first experience with SSP development and that the schedule was tight, one expects improvements in the next set of SSPsSector Skills Plans.

In each economic sector there has been a definite increase in the number of Workplace Skills Plans (WSPsWSPs) and Annual Training Reports (ATRs) submitted by companies during the past year. This growth in participation means that more and more skills grants are being disbursed to qualifying companies by the SETAs. The Department of Labour keeps a quarterly synthesis report on this exercise. Later we will discuss the constraints in participation by the SMMEs.

The number of strategic projects identified and supported by the various SETAs through discretionary grants has increased considerably. This is perhaps emerging as the most powerful opportunity available to SETAs to timely supportacquire incentives for the implementation of relevant and timely sector-wide projects. that may also complement other stakeholder Stakeholder initiatives have found joy in these discretionary project funds. Given the growing capacity of SETAs, we anticipate that more discretionary allowance will be given to SETAs so that they may respond to strategic needs in their specific contexts.

The process requirement for companies to nominate and register Skills Development Facilitators with the various SETAs has meant that there is a dedicated resource in the company to facilitate the planning, reporting and consultation on skills development. SETAs have implemented recognized unit standards-based training programmes for SDFsSkills Development Facilitators and have thus built capacity in the sectors. Efforts to ensure representivity among SDFsSkills Development Facilitators are on-going in the different sectors.

SETAs are furthermore promoting a learning culture in companies. TheySETAs are best placed and resourced to encourage the concept of the workplace as a place of learning. Company Bbusiness objectives are informing the training objectives. SETAs are able to track the trends of skills development in their respective sectors and begin to measure the impact of the outcomes of the training in relation to productivity and performance of the overall sector. These data are becoming available in SETAs that analyse the companyannual skills plans and reports of companies.

All SETAs have doubled their efforts and found various creative ways of involving and supporting SMMEs. , while Tthe DOLDepartment of Labour has established an SMME Forum to facilitate dialogue on this common challenge that is facing the SETAs. At this point we may as well start discussing some common challenges with regard to skills planning and grant disbursements.



2.1.2 Challenges ito Skills Planning and Grant Disbursement

A major constraint faced by most SETAs is the participation rate by companies within each sector with regard to the claiming of grants disbursements. Typically, SMMEsmall companies with less than fifty employees show a reluctance to participate in the grant schemes., simply Bbecause their levy contributions are so small, that it is just not cost effective for them to go through the process of claiming back their rebates. It is after all not mandatory for registered companies who pay the skills levy to claim their grants back.

The unclaimed levies lead to an accumulation of surpluses within SETAs. Unclaimed mandatory grants are allocated to discretionary projects. It is at times not possible for SETAs to know and plan in advance how to utilise theall unclaimed funds. Much effort is spent trying to locate and encourage the non-participants. Many SETAs have contracted independent SDFsSkills Development Facilitators and regional training advisors to find and assist the SMMEs to complete the relevant submit claim formss.

All SETAs are also faced with the challenge of increasing the participation of SMMEs in the skills development strategy. Generally, SMMEs feel that the effort of claiming grants is not worth the return. Many SETAs have contracted the services of regional advisors and independent SDFsSkills Development Facilitators to raise awareness and help complete the relevant claim forms for SMMEs. The participation of SMMEs in the new skills revolution however remains one of the key challenges and may require a legislative re-think.

The quality, accuracy and relevance and accuracy of the second generation of SSPsSector Skills Plans should improve, with more data available from WSPsWorkplaceompany Skills Plans and ATRsAnnual Training Reports, as well as more time available to conduct research and consult with industry, as mentioned earlier..

Now that the culture of preparing and submitting skills plans and reports is fairly well established in companies, it is necessary to improve the use and relevance of the content of the plans and reports so that the skills grants are utilised to incentive the needs of the industries. This is our next challenge.

The capacity of trade unions to participate in company skills planning and reporting structures and processes at company and industry level can also be improved. and tThe DOLDepartment of Labour has specificdesigned programmes planned for this purpose.

Many levy-paying companies have not yet seen the link between the training of employees and greater productivity and profitability for their businesses. Some companies continue to view the skills levies as an additional tax on the business and are reluctant to participate in the skills development strategy. Investing in people has a long-term return.

2.2 Quality Assurance

The quality assurance function of SETAs is governed by the South African Qualifications Authority (SAQA) Act of 1995 and its related Regulations. Education and Training Quality Assurers (ETQAs) are accredited by SAQA for individual primary focus areas and are mandated to fulfilfulfill specific functions, including to

accredit constituent learning providers;
facilitate the assessment and moderation of learning outcomes;
arrange for the certification of learners;
maintain an appropriate database.
recommend new requirements for or modifications to standards and qualifications; and
maintain an appropriate database.

To fulfilfulfill their functions, ETQAs are required to have a Quality Management System in place with clearly defined policies, procedures and review mechanisms.

2.2.1 Successes ito Quality Assurance

All SETAs have been accredited by SAQA as ETQAs to establish, maintain and promote quality in the respective sectorsfulfilfulfill the ETQA functions. This was achieved on time.

SETAs have begun to accredit Learning Providers are being accredited by SETAsin terms of the new system..

SETAs are funding the training of assessors and moderators and are registering them onto SETA databases. It is critical that assessors be trained in the new outcomes-based approach to assessment.

Systems and security mechanisms for the Certification of Learners are being standardisedstandardized across ETQAs.

A culture of outcomes-based assessment has been introduced in every sector, including the processes for Recognition of Prior Learning.

Processes are being implemented to assess and recognise prior learning irrespective of how, when, and where such learning was obtained.

Systems and security mechanisms for the Certification of Learners are being standardized across ETQAs including the databases for records of learning.

SETAs are contributing to the development of Qualifications and Unit Standards within their respective sectors.

The promotion of quality is being implemented by SETA ETQAs.

2.2.2 Challenges ito Quality Assurance

Companies and training providers are experiencing the accreditation processes to be time consuming. SETAs are continuously investigating ways and means of simplifying the accreditation processes without, however, compromising the requirements and standards set by SAQA.

When it comes to quality management systems, Tthere is a lack oflimited capacity within the public and privatetraining provider fraternity on quality management systems (public or private). Without setting up and supporting centers of excellence in the various sectors, the skills strategy will be at risk.

There is also a need to build the capacity of training providers to develop outcomes-based learning materials. Given the fact that outcomes-based learning materials are needed to provide learnership qualifications, SETAs need to set aside funds and establish develop the capacity and systems to support this process.

There is not only a limited number of qualified and experienced assessors and moderators, but also a lack of assessment guides and tools.

The delays on NQF-registered Qualifications and Unit Standards impact negatively on provider accreditation and assessment processes.

The implementation of the recommendations of the NQF Review Report shwould have addressed much of the constraints on quality assuranceraised by SETAs, in particular the need to clarify the relationship between economic sector ETQAs and the Band ETQAs. It is expected that the DOE and DOL will soon remove the uncertainty on the way forward with regard to this report..


2.3 Learnerships and Skills Programmes

The implementation of learnerships has become the indicator of training delivery in South Africa. The President, in his state-of-the-nation address on 14 February, mentioned the importance of learnership implementation and the critical role of SETAs in this regard.

SETAs are actively designing, registering, administering and promoting learnerships and skills programmes in the various sectors. Briefly, a learnership is a structured learning programme of on-job and off-job training that leads to a qualification on the NQF. A skills programme, however, does not lead to a full qualification, although a leaner will obtain recognised credits.

A tripartite agreement must be signed before a learnership is implemented. This agreement outlines the responsibilities and obligations of the signing parties and is relevant for the duration of the learnership. The signing parties are the

training provider,
employer, and
learner.

The tripartite agreement is subsequently lodged with the SETA, which is empowered by the Skills Development Act to oversee and manage the agreement.


2.3.1 Successes ito Learnerships and Skills Programmes

A total of 406 learnerships have been registered among 25 SETAs and over 25 000 learners have embarked on learnerships. Many SETAs have ensured that learners graduate from learnerships with employable skills and high levels of placement of learners have occurred.

All SETAs have spent a substantial amount of time and resources creating and promoting awareness of the new learnership system in their sectors.

The apprenticeship system is being successfully maintained and converted into the learnership system in the relevant sectors. The DOLDepartment of Labour has facilitated the dissolution of Industry Training Boards.

2.3.2 Challenges ito Learnerships and Skills Programmes

A learnership should lead to a qualification registered on the NQF. In our presentation last year, SETAs recorded a constraint in terms of "the pace in which the NQF is being rolled out (i.e. the writing and registration of qualifications and unit standards by SAQA)". Around this time last year, a Ministerial study team made recommendations on how to speed up this process. SETAs Iin particular SETAs have wanted to take direct charge in setting the training standards within their economic sectors. SETAs are however contributing to the writing of needed industry standards and qualifications.

An on-going challenge facing the new skills strategy is to obtain and maintain the buy-in from employers who ultimately would be the ones signing up the learners. In sectors without a history of apprenticeships this is a quite a challenge. The DOLDepartment of Labour and SETAs are currently engaged in joint marketing efforts and incentive schemes, including skills grants and tax incentives for employers.

It is the accredited training providers who must offer learnerships. As a result, the pace of the delivery of learnerships is linked to the quality assurance issues mentioned earlier. Building the capacity of providers should be the priority activity at this stage.

Access to learnerships by the youth and unemployed people has been identified as a national priority. However, the young and unemployed people continue to feel otherwise. In an effort to raise awareness on emerging opportunities, the DOLDepartment of Labour and SETAs will conduct a learnership campaign including as well as a learnership week from 16 to 21 June. Members of Parliament can play a helpful advocacy role in this leanership campaign.

Some of the funds that could support learnerships are under utilised partly because of the slow up take of leanerships. Strategies to inform the potential beneficiaries about existing learnership opportunities are being devised in various SETAs with collaboration of the Department of LabourDepartment of Labour.

Chairperson: This leads us to the next section on Finances.

2.4 Finances

Nature and flow of funds

SETAs derive their income in the form of levies paid in terms of the Skills Development Act and the Skills Development Levies Act. These levies are based on the Rand value of payrolls of employers in their respective sectors. At the moment, the rate of the levy is 1% of the gross payroll value.

The levies are at present collected by the South African Revenue Services, which in turn pays the monies over to the Department of LabourDepartment of Labour, from where the funds are forwarded to the SETAs concerned. The actual amounts involved, expressed as a percentage of the total, are as follows::

The grants available to SETAs are distributed as follows:

Available for mandatory grants 60%
Available for discretionary grants 10%

Additional income is earned by the SETAs in the form of interest and penalties. In fact, in some cases, the interest income earned (for the reasons set out below) has been sufficient to meet the operational costs of certain of the SETAs, which makes an additional 10% of the total levy paid by employers available for skills development in the sector.

It should also be noted that some SETAs have gained access to other means of funding, e.g. international donors such as the European Union, some National Government Departments and from the National Skills Fund.

It is important to highlight the differencestinction between those SETAs consisting mainly of government departments and those made up mainly from the private sector. The difference is that the public SETAs like the SETA for Defence and Intelligence do not receive grants, but contributions from departments. The contribution in question amounts to 10% of 1% payroll and it is used for the administration of the SETA. This practice becomes a constraint, in that such SETAs do not have discretionary funds out of which training programmes may be funded. It has been suggested that those government departments should increase the 10% to at least 20%, so that the other 10% could be utilised as discretionary funds by such SETAs. The arrangement to contribute to the line function SETAs is regulated by means of a Cabinet resolution and as such cannot be statutorily enforced. An amendment to the Skills Development DAct to enforce compliance with the legislation might be necessary in this regard.
Chairperson: Later today the DIDTETA will throw more light on this set of issues.



2.4.1 Successes ito Finances

A number of SETAs have had great success in getting money back to their stakeholders as envisaged by the Acts, but also in the form of upgrading the skills in their sectors through appropriate projects. Grant payments, both for Mandatory Grants and Discretionary Grants, have increased steadily as SETAs built their own capacity and as more and more employers (both large and small) have started to participate in the activities of their respective SETAs and complied with legislative requirements.

It is important to recognise that, because of the public funds involved, it is imperative that these achievements must be registered, while acting within the framework of good governance and the requirements of the Public Finance Management Act.


2.4.2 Constraints/Challenges ito Finances

As with any system of complexity, it has taken time for many of the teething problems that were initially experienced to be resolved in a satisfactory manner. These problems included aspects such as difficulties with the receipt of levies and the flow of monies back to the stakeholdersqualifying companies.

Capacity to administer the system also had to be built on a sustainable basis. and aA number of SETAs, while adopting modern and innovative approaches, have been very successful in making sure that the required capacity is in fact available on a sustainable basis. However, the challenge to develop and retain the capacity to successfully manage projects is noted.


One of the remaining constraints affecting all SETAs is the time it takes to get grants back to the employers, due to the fact that implementation grants (amounting to 45% of the total levy) can only be paid once the year in question has passed and the training reports are in fact received from the employers. This constraint, we understand, is in the process of being addressed by the Department of LabourDepartment of Labour in the form of revised regulations, which will allow for the earlier payment of grants, whilst retaining the necessary checks and balances. A key challenge has been the need to develop and retain the capacity to successfully manage projects, the importance of which was not fully appreciated at the inception of the SETAs.


2.5 Governance

The governance provisions established for the SETAs, based as they are on the Public Finance Management Act of 1999, are sound. A sound governance structure is, however, not sufficient in itself.

The principles set out in the legislation and regulations need to be brought to life by people who are competent and committed to ensuring the best possible use of public funds. Furthermore, the provisions of the PFMA need to be augmented by best governance arrangements as found, for example, in the King 2 Report on Corporate Governance.

A number of SETAs have been successful in establishing and operating governance structures that comply with the best practice.

Regarding the elements of good governance arrangements, the following appear to be essential:

A sector needs to tangibly support the Skills Development Strategy by providing individuals with the appropriate attitudes, skills and knowledge to effectively serve on the governing bodies of SETAs. Various stakeholders would know how they perform on this first step.

Appropriate policies and procedures that deal with all possible core risks such as conflicts of interest, etc., should be adopted and enforced. The DOLDepartment of Labour can make guidelines available to SETAs.

A constitution should properly define roles and responsibilities for the various structures. These are currently under review by most SETAs and the DOLDepartment of Labour..

It is also essential that the following should be developed, implemented and/or approved:

An annual business plan and a budget that includes skills targets of the sector.

A system of appropriate and strong internal controls operated by competent individuals.

A comprehensive system of risk management and compliance monitoring, including a Fraud Prevention Plan.

A vigilant and competent Finance Committee.

An objectiveindependent Internal Audit function.

An objective Audit Committee with requisite experience and expertise.

A Remuneration Committee comprising of of subject matter experts.

An objective Audit Committee with requisite experience and expertise.

An effective external audit function as performed by the Auditor-General.

A Remuneration Committee with requisite experience and expertise accountable to the governing Board or Council.

Codes of conduct subscribed to and lived by all those involved with the SETA. The qualities and character of a Chief Executive Officer are pertinent in this regard.

2.5.1 Successes ito Governance

A number of SETAs have succeeded in establishing best practice governance structures that comply with the above, and more. However, mechanisms for SETAs to share lessons still need to be established.

The Department of LabourDepartment of Labour has implemented Board /or Council and stakeholder capacity building programmes for governing bodies and stakeholder organisations, which are available to all SETAs.

Many stakeholders have taken up the opportunity to become involved in the decision-making processes of SETAs, something that was not available in the past.

In most cases where irregularities and mismanagement have occurred, these were dealt with in terms of the law by governing bodies and the DOLDepartment of Labour.

Chairperson: this takes us to the challenges with regard to governance structures.

2.5.2 Challenges ito Governance

To establish good governance structures that operate effectively and consistently is comparable to embarking on a journey where the destination is never reached and constant vigilance, and indeed humility, are essential requirements. The challenges facing the SETAs with regard to good governance are therefore not a passing phenomenon or a stage at which any one SETA can claim to have arrived. One would of course find examples of all phases within this lifelong learning process within the SETA movementsector.

It has to be realised that this has been a learning process for all parties involved in the governance structures of SETAs. Continuous improvement of governance structures and systems will remain a particular challenge to SETAs.

Some cases have occurred where a working relationship between the Board or/ Council and the operational staff of a SETA (especially the CEO) has not been properly and clearly defined in terms of the rolesduties and responsibilities assigned to both parties. This has led to tensions between the Board or/ Council members and the CEO or /management staff in many SETAs. The King 2 Report on corporate governance could guide SETAs in this regard.

3. CONCLUSION

Chairperson, while it is very difficult to generalize in any greater detail about the overall SETA environment, we hope that we have been able to
:
shed some light on the new and complex environment in which SETAs operate;
give you an idea of the magnitude of the undertaking of the National Skills Development Strategy and its levy-grant system; and
highlight some keysignificant successesachievements and common constraints of the SETAs.

In the coming years, Chairperson, we wish to report even greater stability in the SETA environment, with increased numbers of learners and companies benefiting from the opportunities. We humbly submit that the skills development revolution is but one intervention that our country needs to achieve sustainable growth and development.

Let me thank my colleagues who helped prepare the presentation and all the SETA stakeholder representatives who are here today. I thank you Minister, Chairperson and Members of the Labour Portfolio Committee.
, my colleagues and all the SETA stakeholder representatives present here today.


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