Briefing on the

Skills Development Amendment Bill

Labour Portfolio Committee19 August 2003

Presentation outline

Skills problems & challenges in SA prior to 1999

SDA 1998 & SDLA 1999: Institutional & financial framework

Achievements to date Challenges Proposed legislative amendments

Black people denied good general schooling and hence unable to access more advanced training opportunities;

Post-school training opportunities defined in racist and sexist terms (racist institutions, racist programmes, racist rules about access etc);

Post-training workplaces defined on racist and sexist basis – including trades and professions.

Skills problems & challenges in SA prior to 1994

Workers with low levels of skills under-trained because of the cost of compensating for lack of schooling first.

Many black workers with low skills forced to accept ultra low wages.

Unemployment highest amongst those with low levels of skills

Together these trends fuelled wage inequality and workplace apartheid.

Skills problems & challenges in SA prior to 1994

Employers suffered as well: Voluntary levy / training arrangements excluded

the majority of firms, who competed for those with high skills (driving up the costs of those with scarce skills – but without expanding the supply of such skills);

Firms in general under-invested in skills because they feared that ‘the competition’ would poach their skilled people and ‘steal’ their investment. This worsened SA’s ‘low skill’ profile.

Skills problems & challenges in SA prior to 1994

Some micro-economic effects

Low value adding bias in the economy as Low value adding bias in the economy as skill base inadequate to support skill base inadequate to support move up the value chain, move up the value chain, exploit the potential of new technology, exploit the potential of new technology, exploit the opportunities of niche markets,exploit the opportunities of niche markets, to diversify product or service range.to diversify product or service range.

South Africa low on the World South Africa low on the World Competitiveness Report on skills – skills Competitiveness Report on skills – skills inavailability inhibits investment.inavailability inhibits investment.

Purposes of the SDA (clause 2)

1.1. To develop the skills of the South African To develop the skills of the South African workforceworkforce

i.i. To improve the quality of life of workers, To improve the quality of life of workers, their prospects of work and labour their prospects of work and labour mobility;mobility;

ii.ii. To improve productivity in the workplace To improve productivity in the workplace and the competitiveness of employers;and the competitiveness of employers;

iii.iii. To promote self-employment; andTo promote self-employment; andiv.iv. To improve the delivery of social servicesTo improve the delivery of social services

Purposes of the SDA (clause 2)-continued

2.2. To increase the levels of investment in To increase the levels of investment in education and training in the labour market education and training in the labour market and to improve the return on that investment;and to improve the return on that investment;

3.3. To encourage employers toTo encourage employers toi.i. use the workplace as an active learning environment;use the workplace as an active learning environment;ii.ii. provide employees with the opportunities to acquire provide employees with the opportunities to acquire

new skills;new skills;iii.iii. provide opportunities for new entranats to the labour provide opportunities for new entranats to the labour

market to gain work experience;market to gain work experience;iv.iv. employ persons who find it difficult to be employed.employ persons who find it difficult to be employed.

New Institutions introduced:

The National Skills Authority (NSA) – Social partners provide advice and oversee the implementation of the overall strategy;

25 Sector Education and Training Authorities (SETAs) – implementation authorities managed by social partner-based boards;

The Skills Development Planning Unit (Department of Labour - SDPU) – provides planning, monitoring and evaluation support for National Skills Development Strategy

Employment Services at Labour Centres – implementation to communities at local level

Skills Development Purposes to be supported by new institutions:

Skills Development Purposes to be supported by new incentives:

A range of alternative financial models were A range of alternative financial models were researched under NEDLAC in 1995, including:researched under NEDLAC in 1995, including: Voluntary arrangements (status quo ante – which left Voluntary arrangements (status quo ante – which left

low training base unchallenged, only islands of good low training base unchallenged, only islands of good practice in sea of inertia);practice in sea of inertia);

Levy-exemption (only those that Levy-exemption (only those that don’tdon’t train – pay). train – pay). Requires very expensive monitoring. Does not Requires very expensive monitoring. Does not support shared investments for shared gain – support shared investments for shared gain – individual firms ‘get on with it’. Small firms left out.individual firms ‘get on with it’. Small firms left out.

Levy/grant - ‘levels the playing field’ – shared pain Levy/grant - ‘levels the playing field’ – shared pain for shared gain. Rising skills levels overall.for shared gain. Rising skills levels overall.

Skills Development Purposes to be supported by new incentives:

UnanimousUnanimous agreement on the levy/grant scheme agreement on the levy/grant scheme option managed by organised social partners.option managed by organised social partners.

Successful levy/grant schemes internationally Successful levy/grant schemes internationally depend on private sector influence on grant depend on private sector influence on grant payments – hence governance of SETAs agreed payments – hence governance of SETAs agreed to be by organised social partners;to be by organised social partners;

1% payroll levy as a compromise 1% payroll levy as a compromise 20% of levy for National Skills Fund for 20% of levy for National Skills Fund for

unemployed.unemployed.

25 SETAs were established 20 March 2000

SETAs were established after 2 years (1998/9) SETAs were established after 2 years (1998/9) of negotiation between interested parties.of negotiation between interested parties.

Employers, trade union and, where relevant, Employers, trade union and, where relevant, government collectively determine needs and government collectively determine needs and direct training investments;direct training investments;

Responsiveness of education and training Responsiveness of education and training providers enhanced by industry having SETAs providers enhanced by industry having SETAs through which to identify their skill needs and through which to identify their skill needs and increased level of resources to ‘buy’ training increased level of resources to ‘buy’ training that meets their needs.that meets their needs.

NSA recommended a National Skills Development Strategy

2001 – 2005, Minister launched Feb 2001.

Work of SETAs and National Skills Fund guided byThe National Skills Development Strategy: 1. Skills to promote Quality Lifelong Learning2. Skills to promote formal sector growth3. Skills to promote SME sector4. Skills to promote development sector5. Skills to support access to LM by the young

3 EQUITY TARGETS Each with measurable success indicators

2002/ 2003 implementation report2002/ 2003 implementation report By March 2002, some of SETA achievements included:By March 2002, some of SETA achievements included:

504 045 workers in ABET programmes;504 045 workers in ABET programmes; More than one in five of ALL workers in the labour More than one in five of ALL workers in the labour

market have received structured learning under the market have received structured learning under the skills development strategy (over 2 million)skills development strategy (over 2 million)

37 797 learners were engaged in learnership 37 797 learners were engaged in learnership programmes – programmes which themselves did not programmes – programmes which themselves did not exist prior to 2000. exist prior to 2000.

Over 17000 of apprentices continue to be funded by Over 17000 of apprentices continue to be funded by SETAs.SETAs.

SETA achievementsA consolidated report on the NSDS will be tabled at the A consolidated report on the NSDS will be tabled at the Skills Conference on 14 - 16 October 2003Skills Conference on 14 - 16 October 2003

Challenges persist Isolated instances of fraud and

corruption Not all SETA Boards playing an

optimal strategic and oversight role.;

Not all SETAs achieved their 2002/3 targets as per their business plans;

2 SETAs received qualified Audited Statements for 2002/3

First response: Growth and Development Summit

Social partners accepted as an integral part of the Growth and Development Summit that they need to take ‘ownership’ of their SETAs:

Captains of industry have committed themselves to nominating more senior players and holding their representatives to account;

Leaders of the trade union movement have committted themselves to ensuring improved accountability through more senior people on SETA boards from Labour and ensuring that they are capacitated to play a leading role.

Second response: Amendment to the Skills Development Act

No intention to undertake a fundamental review at this stage;

Original SDA did not allow Minister to respond to problems or to respond to criticisms of excessive wages, poor equity profile etc.

Amendment gives Minister the power to intervene in cases of mismanagement and to hold the SETAs to account.

Technical amendments to improve operation.

5. Establishment and scope of coverage:

The current Act does not give the Minister the power to undertake SETA mergers and changes of scope which may be required to improve performance or sustainability. The Act is therefore amended to do so. The Minister is required to seek the advice of the National Skills Authority and the affected SETA/s before exercising these new powers. Amendments 4 and 5 affect this change by amending section 9 of the Act and inserting a new section 9A.

6. Setting norms and performance standards:

There are areas in which the payment norms and performance standards for SETAs need to be set nationally.

The Minister is given the power to set these norms where needed. They, and other standards, may be regulated according to a new schedule to the Act, Schedule 3.

Public Finance Management Act

The PFMA came into effect after the Skills Development legislation. There are a number of amendments proposed which seek to bring the Skills Act into conformity with the PFMA – see for example amendments 1; 6 (Section 10(1)(h)); 9 and 11.

6. Equity considerations:

The law is changed to make it obligatory for all SETAs to address the question of equity both on its board and in its staff composition.

7. Service Level Agreements

• An new section is added which makes it obligatory for SETAs to enter an annual Service Level Agreement with the Department of Labour.

- This will define performance targets in relation to the implementation of the National Skills Development Strategy and detail reporting requirements.

- The content of the agreement and the procedure whereby it is to be entered and managed is also introduced. (Section 10A)

9. A national standard for good practice in skills development

A new SETA function is introduced – Currently the Department of Labour is piloting the internationally recognised Investors in People standard. The National Skills Authority is extensively involved in the piloting exercise. It is a standard with recognises organisations that have demonstrated their commitment to developing and recognising their people. The standard is also applicable to non-profit organisations and recently FEDUSA, the trade union federation, and SAQA have achieved the standard.

National standard for good practice in skills development (continued)

The proposed amendment will empower the Minister to recognise a standard, as a nationally recognised standard for people development. Amendment 6 to Section 10 (k) gives effect to this and a new clause, 30B enables him to give institutional effect to this commitment and provides that the Director General may allocate funds from the National Skills Fund to support is implementation.

10. Regulation of SETA administration:

The power of the Minister is extended to enable him to influence the use of SETA administration funds. The new provision extends to the Minister a discretionary power to determine salaries and allowances of Board members, should he deem it necessary to do so (Section 14). Amendment 9 (introducing a new section 3B) clarifies that these prescriptions will apply to any outsourced agency, should the SETA outsource the function.

11. Funding of the administration of the National Skills Fund:

Amendment 18 changes Section 28 of the Act to provide for “a maximum of two percent of the money allocated to the Fund … to be used to administer the Fund.” The level has been set at the same point as that set for the payment for services provided by the South African Revenue Service for the collection of the skills development levy.

15. Private Employment Agencies

Whilst there has always been an obligation for private employment agencies to register with the Department of Labour there has been some confusion about the power of the Director General to de-register and close unscrupulous private employment agencies. Recent cases of extreme exploitation and abuse in the domestic worker sector have highlighted the importance of addressing this matter. This matter is clarified in a number of proposed amendments (amendments 2; 4; 15; 16; 17; 21, 22 and 26 – in particular Schedule 3(n) and (o)).

Intermediate Agency for learnerships To introduce a new concept and

will allow an employer to contract a dedicated agency to perform the functions of the employer in learnership agreements and contracts of employment.

Amendment to the Mine Health and Safety Act 1996 To clarify the status of the Mining

Qualification Authority and to bring it in line with other SETAs