Services Seta chases millions

2014-07-20 15:01

More than R1?billion goes to the services Seta each year. Now, an investigation aims for a clean audit so money can be disbursed again

The Services Sector Education and Training Authority (SSeta) has launched a major forensic investigation into contracts worth about R273?million to eliminate the allegedly widespread looting and wastage incurred by South Africa’s skills development funds.

On July 1, acting SSeta CEO Liesel Köstlich sent a letter to all the organisation’s providers announcing the investigation by a consortium of forensic firms.

She said the investigation will last eight months.

The list of objectives includes verifying the “existence”, validity, quality and performance of the roughly 2?000 projects for which the SSeta has committed funds.

Every provider of learnership training or other skills programmes – as well as the workplaces that host the practical part of the training – will be visited, according to Themba Mhambi, who was appointed chairperson of the SSeta’s board last year.

Mhambi was previously the administrator of the Construction Education and Training Authority (Ceta), where he ordered a similar investigation – which came back with shocking results.

They found R512?million in commitments that had to be scrapped, Mhambi told City Press this week.

But the SSeta is the largest of South Africa’s 21 Setas, channelling billions of rands into learnerships, apprenticeships, bursaries and other skills programmes.

At least, it used to do that until it, like the Ceta and others, was placed under administration in 2011 by Higher Education and Training Minister Blade Nzimande.

Dr Sihle Moon was appointed the SSeta’s administrator when Mhambi got the same job at Ceta. But during Moon’s administration, the SSeta began receiving qualified audits relating to its commitments. The latest investigation aims to get the SSeta a clean audit this year.

The SSeta receives more than R1?billion in funding each year from the 1% skills levy on the payrolls of all large employers.

Under normal circumstances, the SSeta would also be disbursing that kind of money every year.

But its output has dropped to insignificance since 2011.

As a result, it is now sitting on a mounting pile of cash that exceeded R1.8?billion more than a year ago.

The SSeta is so huge because all labour brokers and their massive contract labour forces, and jobseekers, fall under it.

JSE-listed brokers such as Adcorp, Kelly Group, Workforce Holdings and Primeserv Group have been the bedrock of the Seta system, claiming to provide 30% of all learnerships in the country before the 2011 crackdown.

Until three years ago, Adcorp alone was registering about 4?500 learnerships a year at the SSeta – close to 10% of the entire country’s total.

In its latest annual report released last week, Adcorp lashed out at the “dramatic decline” in the registration of learnerships by the “dysfunctional” SSeta.

The group’s head of learnerships, Tim Smeeton, said the SSeta has “frozen all access” to learnerships even though levies from Adcorp and others “kept flowing”.

Since 2011, Adcorp has barely been able to register any learnerships at all, according to Smeeton.

While the investigation targets providers of funded projects, the labour brokers largely registered unfunded ones for which they received tax allowances.

The basic idea was to keep training costs below the R16?800 tax allowance per learner.

As a result, for years these companies have enjoyed tax rates far below South Africa’s standard 28% company tax – and even negative tax rates.

When the SSeta was placed under administration, there was a perception the overwhelming role of labour brokers in the system was being challenged.

But Mhambi said he will be meeting the labour brokers’ lobby, the Confederation of Associations in the Private Employment Sector (Capes), next week to mend ties.

“We recognise them to the extent that the law recognises them. It is an industry that is clearly playing a key role in training.”

He is promising the SSeta will soon resume its pre-eminent role in the system by enrolling masses of learners in new programmes.

Several thousand learners are set to be registered this year, he claims. All the providers involved in the new contracts have been visited and given the go-ahead already, according to Mhambi.

The commitments to projects will swell more than 10 times to R3?billion by 2016, using the massive pile of cash that has been building up at the SSeta, he said.

The SSeta never launched “massive” investigations into its expenditure in the same way other Setas under administration had done, according to Mhambi.

That means many hundreds of millions of rands’ worth of contracts entered into before the administration period could have been flawed in the same way as the ones Mhambi cancelled at the Ceta.

“We spend money, but performance does not tally with the money going out.”

Practically, SSeta funds get wasted on projects that are complete, but which, according to Mhambi, the SSeta “doesn’t know is finished”.

He added: “Monies are paid for nothing and monies are paid for work that is below par.”

Costs also get inflated, he said.

The SSeta was paying up to R60?000 for a single learnership. The total price should be about R36?000, with half of that being the stipend earned by the learner, said Mhambi.

“The Seta system nearly got out of hand and could have imploded.”

The fact that it relied almost entirely on private training providers contributed to this, according to Mhambi.

“That’s capitalism. Providers are seeking profit. The Setas have been around for 14 years. If you check the money that has gone in and the skills that have come out?...?you can’t help but conclude that a lot of money went where it shouldn’t have gone,” he said.

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