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POLICY BRIEF Labour Market Intelligence Systems and Mechanisms for Skills Planning Lessons and recommendations for South Africa Marcus Powell and Vijay Reddy Introduction In the global economy, it is important to understand what types of skills 1 are required to support productive and inclusive growth, and significantly, how these skills will be produced. Unfortunately, South Africa does not have an institutional structure to track changes in the labour market, and thus lacks a credible planning mechanism for skills development. In order to tackle these issues, the DHET initiated a four year Labour Market Intelligence Partnership project, with research to be conducted by an HSRC led consortium. The project investigates labour market and skill issues, with a view to produce recommendations on how education and training institutions could respond to signals from the labour market. This first policy brief from the HSRC’s Labour Market Intelligence Partnership is based on an analytical study, with the objective to: construct a model and accompanying concepts to guide the development of a new framework for skills planning and information systems in South Africa. 2 The analytical study investigated two interconnected areas, namely: the labour market intelligence system (LMIS), and the planning mechanism for skills development. When tackling the area of LMIS, the study focused upon how data was collected, analysed and what types of labour market intelligence was produced. Whereas, when investigating the skills planning mechanism, the study was more concerned with how 1 We use the word ‘skills’ to refer to all types of post-school education and training. 2 Powell M & Reddy V (2014) Information Systems and Skills Planning: Lessons and Options for South Africa. Labour Market Intelligence Partnership report. Pretoria: HSRC. This draft is intended for wide engagement and debate with key stakeholders Please do not distribute or cite in its present form
Transcript
Page 1: POLICY BRIEF - lmip.org.za Policy Brief 1.pdf · POLICY BRIEF Labour Market ... SETAs have periodically been subjected reforms, ... ranging from SMME development and . Mechanisms

POLICY BRIEF

Labour Market Intelligence Systems and Mechanisms for Skills Planning Lessons and recommendations for South Africa

Marcus Powell and Vijay Reddy

Introduction

In the global economy, it is important to understand what types of skills1 are required to support productive

and inclusive growth, and significantly, how these skills will be produced. Unfortunately, South Africa does

not have an institutional structure to track changes in the labour market, and thus lacks a credible planning

mechanism for skills development. In order to tackle these issues, the DHET initiated a four year Labour

Market Intelligence Partnership project, with research to be conducted by an HSRC led consortium. The

project investigates labour market and skill issues, with a view to produce recommendations on how

education and training institutions could respond to signals from the labour market.

This first policy brief from the HSRC’s Labour Market Intelligence Partnership is based on an analytical

study, with the objective to:

construct a model and accompanying concepts to guide the development of a new framework

for skills planning and information systems in South Africa.2

The analytical study investigated two interconnected areas, namely: the labour market intelligence system

(LMIS), and the planning mechanism for skills development. When tackling the area of LMIS, the study

focused upon how data was collected, analysed and what types of labour market intelligence was produced.

Whereas, when investigating the skills planning mechanism, the study was more concerned with how

1 We use the word ‘skills’ to refer to all types of post-school education and training. 2 Powell M & Reddy V (2014) Information Systems and Skills Planning: Lessons and Options for South Africa. Labour Market

Intelligence Partnership report. Pretoria: HSRC.

LMIP POLICY BRIEF 1

This draft is intended for wide engagement and debate with key stakeholders Please do not distribute or cite in its present form

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02 LMIP POLICY BRIEF 1: SKILLS PLANNING MECHANISM

DRAFT

DRAFTlabour market intelligence was utilised to inform decision making processes at the national and sector

levels3 (or not, as the case may be).

A multi-method approach was used to undertake the study, and involved extensive discussions with those

working in the sector. The following question areas were used to guide the investigation:

• What is the context shaping skills planning and labour market information systems in South Africa?

• How do the skills planning mechanism and labour market information systems operate?

• What has been the performance of the current planning and information systems?

• What are the reasons for the poor performance of the current mechanisms and processes?

• What lessons can we learn from how other countries approach skills planning and information systems?

• Using existing structures and processes, what are the options for building the labour market information

system and skills planning mechanism?

The context shaping the skills planning mechanism and labour market information systems in South AfricaThe key to tackling poverty alleviation and supporting productivity, as well as economic growth,

is to have a clear understanding of where we want to go and how we are going to get there.

Nowhere is this more true than in the field of skills development, where it is imperative for planners to

understand what skills are in demand now, and are likely to be in demand in the near future. Such intelligence

is vital for education and training providers to design curricula with the type of skills that can help young

people obtain employment, help existing workers improve their productivity, and help the economy to

adjust to changes in regional and global markets.

Following the end of apartheid, considerable resources were invested in the reform of the skills development

system. Considerable effort was placed on a new approach to skills planning and the management of

labour market information. This process of reform was managed by the Department of Labour, and saw the

establishment of a new skills development system and planning mechanism comprising: a national skills

authority (NSA), the sector education and training authorities (SETAs), three successive National Skills

Development Strategies, and a series of sector skills plans.

Each National Skills Development Strategy has been supported by the implementation of a series of Sector

Skills Plans (SSPs). Responsibility for the development and implementation of the SSPs rests with the

Sector Education and Training Authorities (SETAs) which cover the main sectors of the economy. These

SETAs have periodically been subjected reforms, including consolidation of the number of SETAs through

mergers, and more recent attempts to improve management and governance structures.

The skills strategies and plans were reinforced through legislation to facilitate implementation. Perhaps the

most significant of these was the Skills Development Act of 1998, which provided the architecture for the

current system. Other relevant pieces of legislation include the Skills Levy Act, the National Qualifications

Framework Act, and various amendments to the 1998 Act.4

3 It should be noted that the skills planning mechanism covers the institutional structures for undertaking the planning process, as well as the wider political economy and how this influences decisions on how resources are allocated for skills development.

4 For more details understanding of the legislation see: http://www.labour.gov.za/DOL/legislation/acts/skills-development/skills-development-levies-act

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LMIP POLICY BRIEF 1: SKILLS PLANNING MECHANISM 03

DRAFTIn addition to skills planning through the SETA system, universities and to a lesser extent, Further Education

and Training Colleges, also undertake a form of skills planning through their enrollment planning.

How do the present skills planning mechanism and labour market information system operate?We now turn to examine how the skills planning mechanism operates, and identify the structures supporting

the flows of information and knowledge. Figure 1 provides a schematic outline of the main bodies and

structures formally involved in these processes until 2009.5 The diagram depicts the approach adopted

after 1994 to ensure that an improved match is achieved between the supply and demand for skills:

• Starting on the left, the first block refers to the structures and institutions involved in the provision of

data, knowledge and intelligence on the labour market.

• The second block outlines the main mechanisms responsible for skills planning, consisting of the

National Skills Authority (NSA), the SETAs, enterprises and skills development and training providers of

different kinds.

• The third block outlines the plans that are produced at the national, sector and workplace levels.

At the heart of the skills planning mechanism was the National Skills Authority (NSA) and the Sector Education

and Training Authorities (SETAs). The NSA was responsible for developing a national strategic framework

and targets for priority areas. The SETAS were the key institutions tasked to understand current and future

skills in demand in their sector. The SETAs were supposed to identify priority skill areas for their sector,

develop plans and identify strategies to tackle shortages or gaps. The education and skill providers were

another important set of partners in this process, who worked with employers to deliver the skills.

The way in which the skill planning mechanism operates is complex and involves a number of processes.

The key institution for supporting the consolidation of plans was the Skills Development Planning Unit

(SDPU) within the Department of Labour (DoL). The SETAs, to a large extent, (because of the sheer volume

of work associated with the SETA plans), had the greatest influence on the structure and operation of the

SDPU. The SDPU developed a number of guidelines for the SETAs to assist with their sector skills plans,

but the evidence shows that the way in which data was collected, analyzed and presented varied

enormously, and was not optimal.

What has been the performance of the current planning and information systems?Evidence on the performance of the skills planning process is found in the degree to which the right quantity

and quality of skills are being produced for the labour market by the current skills system. For instance, the

continued publication of lists of scarce skills raises questions about the effectiveness of the current planning

mechanisms.6 The Manpower Group in South Africa undertakes an annual survey of scarce skills and

according to this research, there is a severe shortage of professional engineers. Another scarce skills list

5 It should be pointed out that this was the process prior to the transfer of skills planning responsibilities to DHET, and the systematic attempt to build a post-school education and training system that is in process since 2009.

6 For more information on these scarce skills list see the following web pages: (1) www.saleader.co.za/human-capital/human-capital-menu-categories/careers/item/695-where-are-south-africa-s-biggest-employment-shortages (2) www.adcorp.co.za/NEws/Pages/SA%E2%80%99seconomydesperatelyneedshigh-skilledworkers.aspx (3) www.dhet.gov.za/LinkClick.aspx?fileticket=akZ2tL6YU7k=&tabid=346&mid=1415

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DRAFTproduced by Adcorp Employment identified a high demand for professional workers across all occupations. The

Departments of Higher Education and Training, Labour and Home Affairs all have developed their own list of scarce

skills. First, and perhaps the most important issue raised is that taken together, these lists demonstrate that significant

shortages exist, continue to grow, and are not being addressed by the current skills system. Second, there is no

consistency between any of the different lists about what constitutes a scarce skill. A third closely related issue is the

lack of credibility or confidence in the current lists of scarce skills. For instance, the recent list produced by the

Manpower Group ranks ‘drivers’ as the second most scarce skill. Government needs to provide leadership and

guidance in defining and developing consistent methodologies for estimating scarce skills.

Reasons for the poor performance of the current mechanism and processes At the heart of the problem is the large number of tasks that the SETAs are expected to perform in producing their

sector skills plans. In theory, the planning mechanism is comprehensive. Enterprise plans are expected to feed into

Sector Skills Plans (SSPs), and in turn, these are supposed to feed into the National Skills Development Strategy. At

the same-time, the National Skills Development Plan provides the framework for the Sector Skills Plans, and these

feed down to the enterprise level.

However, the intended ‘top-down, bottom-up’ approach to planning does not work according to these expectations.

A financial incentive was introduced to encourage enterprises to submit their workplace skills plans to SETAs, in the

face of non-compliance. Moreover, the Workplace Skills Plans (WSPs) became more concerned with documenting

delivery rather than on future or anticipated skill needs at the enterprise level. The planning cycle for most enterprises

was totally different to that followed by the SETAs and government departments.

Another problem with the current mechanism is the capacity of the SETAs to develop their own plans. The expertise

of planning and labour market analysis is a key skill shortage in most countries and it questionable whether the

SETAS are able to develop this capacity (or whether it is realistic to expect the SETAs to carry out such functions).

Figure 1 highlights that there a number of different data sources that SETAs need to use. It was envisaged that Stats

SA could provide data that could be used by the SETAs for compiling their sector skills plans. However, in reality

there was limited alignment between sectors and occupations as covered by the official statistics, and the operational

coverage of the SETAs.

An attempt was made to support SETAs with their planning through the establishment of a Skills Development

Planning Unit (SDPU). Evidence shows that many of the DoL staff at the former SDPU were suddenly expected to

become involved in complex planning and labour market analysis, most of which were beyond their job functions.7

Planning and labour market expertise are scarce skills and they cannot be developed overnight.

Another signal for planning was supposed to have come from the Department of Trade and Industry (DTI). A review

of the DTI web-pages can reveal that they have many different strategies, ranging from SMME development and

industrial development, to trade and exports. However, these labour market signals have not been communicated

to the education and training institutions, indicating the lack of links and co-ordination at the national level. It is then

difficult for SETAs to translate these signals to their planning.

A final issue, and equally as important as these factors, relates to the philosophical assumptions underpinning the

skills planning mechanism. The theoretical and philosophical assumptions underpinning a skills system influence the

7 See: Molapo, T (2007) An Evaluation of the effectiveness and efficiency of the SDPU work routines, DOL

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LMIP POLICY BRIEF 1: SKILLS PLANNING MECHANISM 05

DRAFTway in which institutional structures relate to each other, as well as the types of mechanisms and processes

that are established. In South Africa, despite the developmental state discourse, in practice, the nature of

labour market processes is frequently presumed to be voluntary. It is assumed that information will be

supplied on skill shortages, that plans will be developed, priorities identified, and that providers and learners

will respond to the market signals. So, for example, the planners would identity areas of shortages and skills

training and development providers would respond by offering such programmes of learning. In turn, the

learners would also chose to study for skills that are scarce since they are more likely to be employed and

receive higher wages.

However, in the context of South Africa some of the inherent assumptions under-pinning the current

voluntarily or market based system are not correct. For example, planners and stakeholders do not have a

clear understanding of what are the priority skill areas, and what areas they should target; learners don’t

have information about what skills are in demand and will only understand the relevance or value of their

skill once they have finished their programme; and the limited understanding about priority skill areas means

that providers deliver programmes of skills training based on their own resources or expertise, rather than

what is required in the labour market.

The current philosophy underpinning what is in effect a ‘voluntary’ or ‘market-based’ approach has helped

contribute towards a supply-led skills development environment in which there is a limited understanding of

priority skill areas, few linkages with industrial development needs, and a general failure to anticipate or

forecast future scarce skills.

Figure 1

Institutional mechanisms for skills planning, including structures and processes for data collection and utilisation

Structures responsible for producing data,

intelligence and signals on the labour market

Mechanisms for planning

skills development

Skills plans produced for

different levels

Improved match between the

supply and demand for skills at the

national and sector levels

DoL NSA

SETAs

DTI

DoE

SDPU

Other data providers (e.g. Stats SA)

DHA

Enter-prises

E&T providers

NSDS

SSPs

WPSP

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06 LMIP POLICY BRIEF 1: SKILLS PLANNING MECHANISM

DRAFT

DRAFTLessons gained from how other countries approach skills planning and the production of labour market intelligenceWhat are more appropriate models for skills planning, and how do other countries approach the function of

skills planning and producing labour market intelligence? A number of different planning models were

analyzed and the implementation experiences of a number of countries were investigated. Bear in mind that

one approach to planning is not inherently better than another, but that each model discussed represents

a political attempt to manage change.

The first model investigated is the ‘education’ or ‘market based’ model. This approach uses the formal

education system as the main mechanism for skills development. It is reactive in that it tends to respond to

what the market requires, as opposed to anticipating what the market might need in the future. The

countries that have adopted this approach include the United Kingdom, Hong Kong and former Anglo-

Saxon colonies.  One of the characteristics of this approach is the key role played by the formal education

systems in producing skills and the high value placed on collection of labour market data. However, this

data is often not translated into labour market intelligence or used by those involved in planning.

The second model explored is the ‘social partnership’ or ‘employment approach’ which emphasises

workforce development as the key vehicle for skills formation. This approach has been applied in the

Netherlands, Scandinavian countries and the Republic of Ireland. The important role played by social

partners, both in terms of identifying skill requirements and determining which type of skills should be

produced, could provide lessons for South Africa. Other facets of this model worthy of consideration are

collaboration between government departments on skill issues, and setting-up structures dedicated to

producing labour market intelligence.

The third model is the ‘integrated economic’ approach or ‘developmental state model’ of skills formation,

which focuses upon demand side policies and their role in the generation of higher level skills.  The best

example of the developmental state model can be found in Singapore which has successfully generated

synergies between trade and investment strategies, and those for skills development –a capability that

South African may want to develop. The developmental state model is also much more interventionist and

anticipates change, as opposed to responding to change.

The final model is based on what could be called the ‘catch up countries’ model,   those developing or

middle income countries attempting to leap-frog stages of development based on skills. These countries

normally adopt a more holistic approach to skills and human resource development. Emerging examples

include Sri Lanka and Botswana. One of the key lessons from this approach is the importance of ensuring

synergies between national macro-policy frameworks and those for skills development, as well as linking

skills to employment and wider human resource development issues.

Recommendations for moving forward: Options for skills planning and the production of labour market intelligenceThe introduction of reforms in South Africa needs to take into account the implementation experiences

since the end of apartheid, and also draw on the experience of other countries. Future recommendations

must also take into consideration the policy implications emanating from the recent draft White Paper on

Post-Secondary Education. Here we propose three intersecting and complementary sets of options for

reform based on the analytical study.

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LMIP POLICY BRIEF 1: SKILLS PLANNING MECHANISM 07

DRAFTThe operationalisation of the developmental state model

The first area for reform centers on the need to articulate the role of the developmental state and to identify

the practical implications for implementation. On the one hand, this philosophy means that industrial

priorities must play a more significant role in driving the skill agenda in South Africa. This will mean that

mechanisms and structures are put in place to translate industrial priorities and consider their implications

for skills development. A consensus would also need to exist around the priorities for skills development

and this must be accepted by government departments, enterprises and unions. On the other hand, the

developmental state model would also mean that social partners play a role in determining how supply and

demand are managed, particularly identifying what skills are in demand and decisions over how resources

are invested in skills development.

Reforms for Labour Market Intelligence

The second more concrete area for reform centers on options for the production of Labour Market

Intelligence. The DHET must be able to produce valid and recent information on the labour market that has

credibility and can be used to support planning processes at the sector and national levels. This labour

market intelligence should also provide the basis for producing a list of scarce skills that is readily accepted

by employers, stakeholders and the public. Suitable methodologies must be developed to support this

process.

Figure 2 outlines a possible structure for managing the production of Labour Market Intelligence (LMI).

There are many assumptions underpinning this diagram, and it is intended to provide the basis for discussion

and dialogue.

At the heart of any system for producing LMI, there needs to be a central body responsible for coordinating

various processes associated with collection, collation and analysis. There is a need for a structure –

labelled LMIU in Figure 2 - that has political support and a significant budget to perform this function. The

name and reporting lines and location of such a structure would need to be decided upon by further

consultation amongst those working in the sector. Whatever the name and the reporting lines, it is clear that

the LMIU structure will have to perform a number of specific functions related to understanding the supply

and demand for skills in South Africa, as well as broad trends in the regional and global labour markets. A

number of specified indicators or a custom-designed research plan would help drive these processes.8

It can be expected that the LMIU would collect data on the supply and demand for skills, covering current

need and expected future needs. The LMIU would be expected to perform a coordinating role in this

process and other agencies would carry out the data collection and analysis. Nevertheless, the LMUI

should play a key role in producing a document on scarce skills and other trends in the labour market.

The production of supply-side data should pose no major difficulties and could come from three main

sources. The first is the Higher Education and Training Management Information System (HETMIS) which

provides data on the outputs from the formal education sector, particularly those at the post-secondary

level. The second source of data would need to collate the outputs from private post-secondary education

and skills development providers. This might need to be collected using a specific survey or sampling

technique. The third source of supply-side data would cover workplace training.

8 Note: We have limited our attention to the role played by LMI in supporting planning processes. However, it is recognised that LMI would need to play an important role in supporting monitoring and reporting activities. This is another area that will need to be defined prior to the setting up of this new structure.

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08 LMIP POLICY BRIEF 1: SKILLS PLANNING MECHANISM

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LMIP POLICY BRIEF 1: SKILLS PLANNING MECHANISM 09

DRAFTThe collection and analysis of data on the demand situation is more complex and will involve a range of

organisations. A significant proportion of the data on demand, particularly around the economy and

occupational structure of the labour market, would come from StatsSA. Special arrangements would need

to be made about specific types of data that should be produced by StatsSA for the LMIU. Other sources

of data would have to be collected through surveys, specific studies, forecasting approaches and focus

groups. The LMIU would not have the capacity to undertake such work and, instead, it should be sub-

contracted out to research institutions, universities and consultancy companies. This would be driven by a

research plan and the LMUI would manage a framework contract between different contractors and take

primary responsibility for quality assurance. One of the key activities will be the development of a forecasting

tool that can be used as a basis for determining future skill needs. Other sources of demand-side data

relate to the implications of government department’s plans and policies (especially the economic

departments), and the LMIU would need to work with the NSA (or similar structure) to interpret their

implications for skills development.

SETAs could be expected to play a more important role in the collection of data on both the supply and

demand of skills in the workplace through a modified workplace skills plan. The LMUI would have to play

an important quality assurance role in this process, supporting the questions that will be addressed, the

type of questionnaire that will be administered and how the data will be collated, as well as analyzed. The

precise details of these issues will need to be discussed with SETAs and stakeholders. Managing the data

collection process of the SETAs will be one of the main roles of the proposed LMIU. These issues are

discussed in more detail in the next section on skills planning.

Reforms to the mechanism for skills planning

The third set of options for reform, focused on the skills planning system, is equally complex as those for

LMI. Figure 3 outlines the proposed new mechanism for skills planning, the relationships between

components and the type of plans that will be produced. Drawing on a strength of the current system,

emphasis will be placed on a ‘top-down and bottom-up’ approach to the skills planning process.

At the highest level of decision-making and coordination will be the National Planning Commission and

Cabinet. The NPC has produced the National Development Plan and it can be expected that the future

planning commission could be responsible for developing a more integrated plan, ensuring that there is

more joined up thinking between government departments. The intended role of NPC could be improved

management of the country’s development process. The National Panning Commission could also play a

significant role in validating the content of any National Skills Plan.

At the national level the reformed NSA (a national advisory body) in conjunction with the LMIU will play an

important developmental role, particularly around tracking major changes being implemented by other

government departments, as well as other changes in the economy, and identifying their implications for

skills development.

In addition, the NSA and the LMIU will play an important quality assurance role in validating the Sector Skills

Plans (SSPs) produced by the SETAs. This process occurred in the former system, but without much

success. Under the reformed process the NSA, along with the LMIU, will play a much stronger developmental

role in ensuring that SSPs are aligned to national plans and priorities, including emerging ones when they

occur. This will be achieved through a number of new strategies.

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10 LMIP POLICY BRIEF 1: SKILLS PLANNING MECHANISM

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DRAFT• The LMIU will undertake a national skills survey to help determine what the priority skill needs at the

enterprise level are. The information from this survey will be used by the NSA to validate the plans from

the SETAs, particularly around whether all the national priority skills needs are being addressed by the

SETAs and whether there are duplications in provision.

• Where national priorities are missed and where potential duplications in supply may occur, the NSA will

have the power to intervene and ensure that corrective actions take place within the plans of the

appropriate SETA.

• The LMIU will inform the NSA about those priority skill areas that take a long time to develop, providing

the basis for ensuring that SETAs work with providers to deliver such programmes.

The core of the planning process will continue to be focused upon the SETAs, universities and technical and

vocational education (TVE) colleges. The SETAs, universities and TVE colleges would be more focused on

managing supply and demand at the sectoral level. The SETA SSPs, universities and TVE college enrollment

plans would need to be streamlined and produced in accordance with government planning cycles. This

process will involve a much closer working relationship with the LMIU and the NSA. Specific responsibilities

of the SETAs will focus upon identifying skills needs, and working more closely with providers to ensure that

appropriate responses occur, particularly around the development and actual delivery of programmes.

Page 12: POLICY BRIEF - lmip.org.za Policy Brief 1.pdf · POLICY BRIEF Labour Market ... SETAs have periodically been subjected reforms, ... ranging from SMME development and . Mechanisms

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Published by the Labour Market Intelligence Partnership (LMIP), a research consortium led by the Human Sciences Research Council (HRSC)www.lmip.org.za

Designed, typesetting and proofread by COMPRESS.dslwww.compressdsl.com

DisclaimerThe ideas, opinions, conclusions or policy recommendations expressed in these policy briefs are strictly those of the author(s) and do not necessarily represent, and should not be reported as, those of the HSRC-led consortium or DHET. The HSRC-led consortium and its funders take no responsibility for any content or syntax errors, omissions in, or for the accuracy of, the information contained in these policy briefs.

SkILLS ForecaStIng:

SUppLy and deMand

Peliwe Lolwana

& Asghar Adelzadeh

[email protected]

[email protected]

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an

aLyS

ISHa

roon

Bho

rat

haro

on.b

hora

t@uc

t.ac.

za

reconFIgUrIng the poSt-SchooL

SectorGlenda Kruss

[email protected]

pathwayS

throUgh e&t and

Into workpLace

Vijay Reddy & Nhlanhla Mbatha

[email protected]

nmbatha@

hsrc.ac.za

artISanaL MILIeUx

and IdentItIeS

Angelique W

ildschut

awildsch

ut@hsrc

.ac.za

FoUndatIon For LaboUr Market

InForMatIonVijay Reddy & Andrew Paterson

[email protected]@hsrc.ac.za

capacIty bUILdIng

workShopS

reSe

arch

coM

MUn

Icat

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poLIcy roUndtabLeS


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