SETA LANDSCAPE – TRAINYOUCAN Comments 2016

SETA LANDSCAPE – STAKEHOLDER FEEDBACK

Below is TRAINYOUCAN’s feedback on the DHET’s proposals concerning the National Skills Development Strategy (NSDS) and the Sector Education and Training Authority (SETA) landscape.

In its capacity as a Private Training Provider, TRAINYOUCAN has brought together the input of its business partners, service providers, clients and other stakeholders in drafting this response.

(Government Gazette No. 39386 on 10 November 2015 refers).

BRIEF RESPONSES TO OPTIONS 1 – 4:

Option 1 can only be accepted on condition that its “minimal changes” include

  • Conducting an analysis of the best practices of effective SETAs and incorporate these into any changes to the skills development system.
  • Establishing and implementing effective mechanisms to deal with under-performing and dysfunctional SETAs.
  • Not reducing industry representation on SETA Boards.
  • Giving professional bodies a stronger role in the system for improving occupational competence.

Option 2 is supported to the extent that SETAs can share their resources and save costs, but there’d be the risk that they could monopolise the sector.  This would make it more difficult for the private sector to approach them for projects and needs. Large SETAs like the WRSETA only seem to award learnerships to the likes of Shoprite, PnP, Edcon.  Smaller companies are left out.

These risks exist with the third option as well except instead of SETAs, the pros and cons sit this time with the Skills Council and the other bodies.

Option 4 is not supported.  It is believed that improved controls and efficiencies via standardized processes are needed, not SETA integration into DHET.  The remainder of this document focuses the most on this Option.

OVERVIEW

These aspects of the proposal are believed to be positive:

  • Introduction of uniform processes to reduce confusion when interacting with more than one SETA
  • Control over the remuneration of SETA managers, staff and Boards
  • Attempts to address the uneven funding of SETAs in key sectors such as agriculture.

However, the DHET proposals will have a negative impact on skills development as a key mechanism for economic growth and job creation because

  • Employers, employees and job-market entrants will be negatively affected by the decreased availability of funding for workplace competence development training
  • Decisions on skills development for the economy will be taken by government entities that have limited insight into the skills required to ensure business productivity, growth and staff retention
  • The proposals fail to incorporate best practices of SETAs that perform well and the professional bodies that make a significant contribution to occupational competence
  • The proposals alienate employers, the key constituency that the Minister relies on to achieve the NSDS targets
  • The proposal confirms that in order to perform the function “(determine the skills needs of employers), it is desirable that the SETABs remain as close to their constituent workplaces as possible” (p.37). In its argument against clustering the SETAs, the NSLP raises concerns about increasing “the distance between the management of the SETA and the companies it serves … with more layers between beneficiaries and service provision inevitably being introduced.  This may well further slow service delivery rather than achieve the desired acceleration” (p.14).  However, this would be exactly the outcome of the implementation of the NSLP proposal to move SETAs into a government department.
  • The premise that centralised control by a government department will improve the relevance and responsiveness of the skills development system to the skills needs in the labour market
  • Reflects unrealistic expectations of the outcomes of the proposed changes and lack of understanding of the major disruptions to service delivery that will result from them
  • SETA reduction from 25 to 23 and then to 21 caused disruptions to service delivery. The DHET’s proposed changes on the systems’ level will require corrective measures
  • May result in large-scale delays in skilling the unemployed and employed
  • May further erode employer trust in and support for the skills development system
  • Incorporating SETAs into a government department will distance them from their key constituency, the private sector employers. Furthermore;
  • Funds intended for skills development for industry, sector and economic growth will be diverted to fund an expanded DHET bureaucracy and other government priorities.

In response to the “problem statements”:

  • It is strongly felt that the logic of the problems listed concerning the SETAs (as they currently perform) does not square with the logic of the proposed legislation
  • For this and other reasons (current events), there is a perception that the proposed changes are intended to seize policy and financial control more than they are about about stakeholder consultation on a publically raised tax for up-skilling the workforce in partnership with government
  • Further work needs to be done in conceptualising the SETAs within DHET as little has been done other than change the administrative route from the Labour to HE ministries. Further consideration needs to be given to the networking of PSE to workplace learning and Continuing Workplace Focused Learning.

It is clear from the current performance of Higher Education that the following problems exist:

  • Where employers once got funding for un-employed learnerships, arranging training providers and workplace experience in exchange for guaranteeing employment for 70% of un-employed learners who completed programs, much of the funding is now going to colleges for that training and it becomes their responsibility to find employers for the workplace experience. This creates a disconnect between what colleges teach and what employers require, which is especially unfair seeing that the colleges receive the funding but employers, the responsibility.
  • Cost effectiveness of graduates produced by higher education institutions versus what is achieved by private providers
  • Lack of alignment with industry needs by higher education

It is proposed

  • That DHET should not radically change the SETA System and only deal with those SETAs which do not perform efficiently
  • That the Mandatory Grant change from 20% to 50% (as per BUSA judgement).
  • That financial incentives in the proposed legislation are simply not enough to encourage employers to train beyond the skills needs of their own businesses.
  • DHET should only “fix what is broken” with minimal change to the system
  • Focus on building skills for workers
  • Avoid putting forth other bureaucracies.

The language of ‘occupations’ becomes the accepted terminology for workplaces and learning institutions

The proposal that the unit of analysis should be the “occupation” is accepted.

The National Skills Fund manages the share of the levy funds historically known as the Professional, Vocational, Technical and Academic Learning (PIVOTAL) grant.

Skills Funding has traditionally been intended for Workplace employees, not students (Funded by employers for their employees) to ensure workforce is skilled.

The allocation of these funds will be made in line with the National Skills Development Strategy IV

There is a concern that the function of the SDF (Skills Development Facilitator) will phase out as they are primarily funded by organisations (not SETAs).

The strength of this model is that it permits the Minister to bring alignment between the work of the skills system and the education and training provider system by means of a single, integrated Ministerial Policy Statement, and ensures that collectively the system meets not only sectorally determined priorities but also national strategic priorities.

The recommended changes to the funding model invest too much control of funds in a single entity – the DHET.

We believe the DHET and the NSA under-exercise the powers they have in terms of Section 15 of the Skills Development Act of 1998 to take action in cases of SETA mismanagement, fraud or non-compliance.  The Services SETA is one example: it was under DHET “Administration” for a number of years from April 2011 when the Minister removed the CEO.  This SETA remained dysfunctional for many years under different Administrators who were appointed, monitored and controlled by the DHET.  The Minister has taken the same action in the SETAs for Construction, Local Government and Culture, Arts, Tourism & Hospitality.  The problem is failure of DHET to manage the performance of SETAs through the Service Levels Agreements the DHET Director-General signs with each SETA.

The Skills Development Branch in DHET has clearly failed in its responsibility towards “developing and implementing appropriate legislation and policies for a sustained quality and accessible post-school education and training system (and) managing annual Service Level Agreements between the department and the SETAs and monitoring them in line with the SLA regulations.”

Creating five new director (and related staff) posts in this DHET Branch is unlikely to achieve the desired result.

Finally, the government’s poor service delivery record and the unacceptable state of many State Owned Enterprises don’t support the assumption that incorporating SETAs into DHET will improve their efficiency, effectiveness and impact.

Option 4: SETAs as an integral part of the larger PSET system (2)

Option 4, as with Option 3, proposes the introduction of a ‘shared services’ system to address the effectiveness and efficiency challenges which face the current system and to bring into alignment the criteria, application and disbursement systems of the levy funds.

We note that DHET’s Proposed SETA Landscape changes have not come with SETA Statistics year ending 2014 to 2015.  Without these, effectiveness and efficiency challenges remain partially anecdote.

Option 4 permits sectors that hold their promises of job creation to claim more funds than they contribute, whilst declining sectors will contribute to growth and development elsewhere – painful for some, but nationally necessary and ultimately in the collective interest of all.

For the first time labour market employers will also be able to influence not only the work of the SETAs but also that of the education and training Institutions, and consequently not only influence the spending of the levy but also of the fiscal allocations.

The 1% salary allocations through Skills Development Levies Act is not enough for the current economic unemployment status.

Current un-employment status is estimated at 25.4% in 2016. Proposed changes will not address skills in the workplace. As a result of proposed changes, there will be less skilled people and a higher unemployment rate.

(Unemployment figures as reported by SA Breaking News and Trading Economics).

The DHET control over the skills levy funding will reduce the money available for skills development to drive economic growth:

  • “The targets set under the NSDS, interpreted in the proposed Ministerial Statement, will broadly frame the allocation of grants although discretion will be given to the Director-General to respond to national priorities (p.44).
  • ‘The role of government departments will be strengthened on SETAB boards … The government representatives will have a veto right in relation to the adoption of the sectoral brief to be submitted to the DHET to ensure that the strategic priorities are addressed therein’ in terms of a mandate for the veto provided by their respective Directors-General (p.38).
  • The SETABs will manage the disbursement of the Mandatory and Sector Specific Grant (previously the sectoral component of the Discretionary Grant) ‘under streamlined, national prescriptions” (p.36).

Despite the above bullets, the NSLP claims that “For the first time labour market employers will also be able to influence not only the work of the SETAs but also that of the education and training institutions, and consequently not only influence the spending of the levy but also of the fiscal allocations” (p.16).

This gives the impression that sections of the proposal were written by people who had not read or understood the implications of other sections.

An integrated PSET system provides employers, at a systemic level, with an opportunity to input into matters such as the prioritisation of programmes to be delivered, curriculum design, lecturer capability, areas of needed specialisation and the like, for which they have called for a long time. In other words, this option aims to usher in a responsive PSET system which serves the goals of society, as well as economic growth and job creation for the nation.

 SETAs

No longer semi-autonomous entities

SETAs will be established as a Specialised Delivery Unit of the Department of Higher Education and Training in terms of Section 7B of the Public Service Act (1994, Proclamation 103 of 1994) – Sector Education and Training Advisory Boards (SETAs)

The proposal states that “To better integrate the SETAs into the post-school education and training system, the SETAs to be located as specialised service delivery units within the Department of Higher Education and Training and to be renamed Sector Education and Training Advisory Boards (SETABs)” (p.3).

This is a significant departure from the current situation in which the SETAs are not part of the DHET structure, but their relationship to DHET is governed by Service Level Agreements with the Department.

SETAs are currently public institutions listed by the National Treasury in Schedule 3A of the Public Finance Management Act (PFMA), together with institutions such as the Estate Agency Affairs Board, Luthuli Museum, the Mine Health and Safely Council, SAQA and SARS.

The proposal to incorporate SETAs into DHET is accompanied by an increase in government representatives on the Boards of SETABs where they will have veto power (p.38). This will increase the distance between SETAs and employers, who will see SETAs as part of government and no longer committed and positioned to address the skills needs in their sectors. Therefore, the proposed landscape changes will not achieve the aim “to ensure that the proposed SETABs: continue to build relationships developed by SETAs with employers in their sectors; and better understand the current and future training needs in and for workplaces” (p.4).

NSDS IV (1 April 2018 – 31 March 2023)

We are in agreement that the NSDS4 should run from March 2018 to March 2023.

It is understood that NSDS4 will be drafted by DHET with input from the Human Resources Development Council. Consultation with sector specific employer organisations and professional bodies is recommended instead of the formulation of new bodies within DHET.

In the three references to professional bodies in the NSLP,

  • There is no mention of their contribution in the recommended changes or
  • Their role in the proposed Occupational Teams that will function under DHET control

Professional bodies are better placed than these Occupational Teams to ‘bring together representatives of employer, education and training providers, and others’ (p.21). These are already their stakeholders; they have an in-depth understanding of the occupations they represent and they make a substantial contribution to skills development in those occupations, for example through competency profiling, standards setting, qualifications development and Continuous Professional Development (CPD).

The model of the structure of Occupational Teams (p.22) is flawed in that it separates the development work of occupational teams in three areas for developing the theoretical foundation, practical training and structured workplace learning for occupations. The separation of these three components is a fundamental flaw in the structure of occupational qualifications (in Knowledge, Practical Skills and Work Experience Modules) that should not be repeated by Occupational Teams.

The most effective way to develop occupational profiles and curricula is to work back from what constitutes competent performance in the workplace. Then one needs to consider: what do people need to know to demonstrate this competence; what skills must they have; and what learning activities in a real or simulated context will give them the opportunity to apply the knowledge and skills in an integrated way in the actual work situation.  One cannot really determine the knowledge that is required without considering how the knowledge will be used in acquiring the skills and applying those skills in a workplace context.

Concerning

The Role of SETAs in NSDS IV

Role 4: Support the development of institutions to meet these

needs

Support for the governance and management of institutions.

The current SETA provincial offices will increasingly be integrated into a coherent network of service delivery units that will interface with providers, employers and government agencies in the province in a streamlined fashion.

The building of capacity of providers and the relevance of their programmes to occupational learning is indeed a good idea, but must include private providers and not only public institutions.

Further Questions and Concerns Specific to the Proposal of Option 4:

  • What will happen to private providers? They fill a niche in certain sectors where recognised public institutions do not provide essential training e.g. the banking and insurance sectors.
  • How will the changes in skills development funding impact current private providers who are mostly SMMEs that benefit from grant funding and work largely with corporate businesses?
  • What will happen with the accreditation of private providers?
  • What assurance is there that the skills development levy will not be channelled into areas/objectives that do not form part of employee skills development for employed people? It is strongly suggested that this money continue to be used specifically for employed people as it was originally intended.  Points 4, 7 and 9 need to be integrated and the wording improved.
  • Has thought been given to the impact on small business entrepreneurs who are facilitating employment?
  • Where does business have a say in the spending of the levies and at whose discretion will funding decisions be made?
  • What engagement has been undertaken with youth and access to opportunities to gain experience? While this is currently the role of SETAs it can be drastically improved to impact on the employment of youth into businesses via SETA intervention.  It is agreed that SETAs as public sector intermediaries must be strengthened.
  • Within the structure (option 4) the Minister of Higher Education and Training has “arrested” decision making power from relevant stakeholders (i.e. Labour and Business) to maintain full authority as a higher education decision maker. Will the Minister have power to dictate to Business how their Skills Development levies will be spent?

It is suggested that a diagnostic exercise be undertaken to determine why the relevant SETAs are under performing and that appropriate actions be taken, instead of changing structural and funding landscape.

Grant Structure 1 April 2018

A greater portion of the Skills Levy should be managed at a cross-sectoral level – more funds transferred to the National Skills Fund, and be managed centrally, without sectors having guaranteed access to these funds going forward

80% of current Discretionary Fund to be located in the National Skills Fund – allocations made in line with NSDS IV

The recommendation that 80% of the current SETA discretionary grant funding be shifted to the National Skills Fund is rejected.

SETAs to be funded from the current 10% administration grant but % to be reviewed

It is recommended that SETA administration costs remain 10% of the Skills Development levy, with a view to reducing this as they become more efficient due to standardized systems and procedures.

  • The recommendation is the standardization of systems and procedures for SETA’s along the lines of the “focus areas” listed under Shared Services (12.3.2) and below:
    • Corporate governance (risk management, Audit)
    • Business management (planning, monitoring, control, performance management, communication, culture development)
    • Human resources Management support (development, HR Admin, payroll structures and admin, recruitment)
    • Financial management
    • Information and Communication Technology management
    • Knowledge management
    • Facilities management
    • Document management
    • Project management
    • Contract management
    • Central grant management services.
    • It is proposed that the number of SETA’s remain at 21 with a life span linked to the NSDS and that underperforming SETA’s are carefully performance managed.
    • SETA board structures to remain the same (i.e. a balance of input from Business and Labour and Government influence to remain with Public Sector SETA’s).
    • Outcomes of audits should be used to rectify governance problems in underperforming SETA’s and this must be a tightly managed process.

SETAs to retain Mandatory grant (20% or 40%) to disburse to levy paying employers

We would propose that the Mandatory grant be returned to the original 50% in line with the outcome of the court case initiated by BUSA.

Remaining 20% of Discretionary Grant to be retained by SETAs a Sector Specific Grant

Funding for workplace learning via the Skills Development levy should not be combined with voted funds, as this will remove any influence that Business has in their disbursement.

“In the longer-term, having secured the workplace based learning opportunity will be set as a pre-condition for enrolment of learners into programmes where this is a requirement.  This implies that securing such workplace-based learning will become a precondition for the allocation of voted funds to an institution” (p.30).

But the current post-school system delivers thousands of students who cannot complete their qualifications because they cannot find an employer where they can complete the compulsory workplace experience of the qualification.

This requirement particularly disadvantages learners from rural areas and small towns such as Nqutu, Qunu, Lebowakgomo and Pofadder where it is almost impossible to find employers willing to give them the work experience in their specific fields of study, for example dental technology or mechatronics.

This new funding model is not in line with the “spirit” of building workplace competence, developing employees and their progress in the workplace through skills development.

NSF to allocate funds directly to QCTO

Access to NSF funding has always been difficult and further centralisation will compound this problem.

SETABs role with regards to levy funds

Their administrative budgets linked to the execution of their mandated functions, although the quantum of these budgets will be reviewed in the light of their changed functions

The management of the Mandatory Grant

The management of 20% of their traditional discretionary grant – to become known as Sector Specific Grants – which will address matters of strategic importance to the sector which fall outside of the National Skills Fund

The management of ‘projects’ approved and funded by the National Skills Fund derived from their sector skills plans (including those linked to the achievement of occupational targets).

If there is less Skills Funding to organisations, there will be less organisational participation in SETA projects likes WSP/ATR’s, and less planning into skills projects in the workplace.

It is recommended that DHET

  • Provide stronger incentives for employers to provide learning opportunities in their workplaces and to support other training for occupational competence.
  • Keep the skills levy funding for skills for the economy out of the centralised control of the National Skills Fund (NSF).
  • Keep SETAs out of DHET and don’t implement the changes that will transform them into Sector Education Advisory Boards (SETAs) incorporated into DHET structures.
  • Conduct a thorough analysis of the best practices of effective SETAs and incorporate these into any changes to the skills development system.
  • Establish and implement effective mechanisms to deal with under-performing and dysfunctional SETAs.
  • Not reduce industry representation on SETA Boards.
  • Give professional bodies a stronger role in the system for improving occupational competence.
  • Rethink the proposals on Occupational Teams and adopt a more realistic approach to the Organising Framework for Occupations (OFO).

Implement the following NSLP proposals: establish a shared service system for all SETAs; develop common procedures that apply across SETAs based on the best practices identified; and establish the Skills Planning Unit.

Conclusion

It is believed that the problems listed concerning the SETAs (as they currently perform) do not call for the legislation suggested. There is a perception that the proposed changes are intended to “capture” policy and financial control more than they are about about stakeholder consultation on a publically raised tax for up-skilling the workforce in partnership with government.

Further work needs to be done in conceptualising the SETAs within DHET as little has been done other than change the administrative route from the Labour to HE ministries. Further consideration needs to be given to the networking of PSE to workplace learning and Continuing Workplace Focused Learning.

Written by Siya Khumalo

TRAINYOUCAN Team