In Industry News

Johannesburg – The 21 sector education and training authorities (Setas), which receive more than an annual R13 billion in ring-fenced funds, are set to be scrapped.

Minister of Higher Education Blade Nzimande gazetted a sweeping proposal on the future of the Setas this week.

It gives them two more years to operate before they stop being “authorities” and become “advisory boards” (Setabs) with very little of their current operational role remaining.

Most importantly, the Setas will lose control of a massive chunk of the skills levy South Africa exacts from all employers who have more than 50 workers.

This 1% payroll tax is estimated to reach R16.7 billion this year and keep growing faster than normal tax funds for higher education.

The proposal sees 40% of this levy money, which is flowing to the Setas for use in their respective sectors, going to the National Skills Fund to be centrally administered.

The public release of the proposal comes in the middle of a legal battle over Nzimande’s previous intervention in the Seta system late last year.

The proposal depends on Nzimande’s department of higher education and training winning that case in the Labour Appeal Court.

The case stems from a regulation that cuts down the amount of levy money the Setas could pass straight back to the levy-paying employers – the mandatory grant.

It used to be 50% of the levy, but Nzimande cut it down to 20%, with the rest falling into the Seta budget for discretionary grants.

It is this discretionary grant money that the proposal now wants to move out of the Setas altogether.

However, a court challenge by Business Unity SA has suspended Nzimande’s reform, which he has appealed.

The proposal represents the endgame in Nzimande’s long battle to overhaul the Setas since 2009, when the system was moved out of the department of labour to the then new higher education and training department.

Some Setas and business groups have fought him, claiming that the independence of the Setas and the companies’ right to claim back much of their levies are the foundation of the system.

In terms of the proposal, the new Setabs will have at least one senior government official on their boards who will wield veto powers. This is a break from the original design where the Setas were independent with boards comprising 50% labour representatives and 50% employer representatives.

The proposal says concerns around the “elevation of the role of government … underestimate the benefit of working together in new ways for shared benefits”.

The proposal follows the White Paper for Post School Education and Training from January 2014, which suggested that the Setas be reshaped and their levy funds directed at the public education sector.

If the post-school system is taken as a whole, the skills levy is the major source of new money in the foreseeable future.

The proposal sees the levy becoming a complementary part of the normal higher education and training department budget and will potentially direct more funds at the vocational training college sector that has been identified as government’s top higher education priority.

Raymond Patel, CEO of the manufacturing sector’s Seta, Merseta, said the proposal was “not a fait accompli”.

Merseta and the Services Seta are the only two Setas with budgets of more than R1 billion a year.

Patel said the proposal was flexible and far from final. “It requires a lot of comment and input. We have spoken to our stakeholders and want to form one common position,” he said.

The Seta leaders were given the proposal in September, but the final version was released for public comment this week.

The government’s unhappiness with the Setas is multifaceted. The system seriously underspends the levy money, but Setas often blow their admin budgets. There are also complaints about the quality of the training the Setas fund at private sector institutions.

A major selling point for the proposal is cross-sectoral subsidisation. Some declining sectors will be footing the bill for training in other sectors with good growth prospects, states the proposal. This will “be painful for some, but nationally necessary and ultimately in the collective interest”.

Some sectors need more training funds, but they generate low levies because of low wages – agriculture in particular.

The proposal is not just about money. It also calls for an overhaul of the complicated proliferation of distinct “qualifications” being created by sectorally focused Setas.

The new plan will create more broadly “occupational” qualifications that apply nationally and across sectors.

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