Briefing on the Skills Development Amendment Bill Labour Portfolio Committee 19 August 2003

1. Briefing on the Skills Development Amendment Bill Labour Portfolio Committee 19 August 2003

2. Presentation outline • Skills problems & challenges in SA prior to 1999 • SDA 1998 & SDLA 1999: Institutional & financial framework • Achievements to date • Challenges • Proposed legislative amendments

3. Skills problems & challenges in SA prior to 1994 • 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.

4. 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.

5. 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.

6. Some micro-economic effects • Low value adding bias in the economy as skill base inadequate to support • move up the value chain, • exploit the potential of new technology, • exploit the opportunities of niche markets, • to diversify product or service range. • South Africa low on the World Competitiveness Report on skills – skills inavailability inhibits investment.

7. Purposes of the SDA (clause 2) • To develop the skills of the South African workforce • To improve the quality of life of workers, their prospects of work and labour mobility; • To improve productivity in the workplace and the competitiveness of employers; • To promote self-employment; and • To improve the delivery of social services

8. Purposes of the SDA (clause 2) -continued 2. To increase the levels of investment in education and training in the labour market and to improve the return on that investment; 3. To encourage employers to • use the workplace as an active learning environment; • provide employees with the opportunities to acquire new skills; • provide opportunities for new entranats to the labour market to gain work experience; • employ persons who find it difficult to be employed.

9. Skills Development Purposes to be supported by new institutions: 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

10. Skills Development Purposes to be supported by new incentives: • A range of alternative financial models were researched under NEDLAC in 1995, including: • Voluntary arrangements (status quo ante – which left low training base unchallenged, only islands of good practice in sea of inertia); • Levy-exemption (only those that don’t train – pay). Requires very expensive monitoring. Does not support shared investments for shared gain – individual firms ‘get on with it’. Small firms left out. • Levy/grant - ‘levels the playing field’ – shared pain for shared gain. Rising skills levels overall.

11. Skills Development Purposes to be supported by new incentives: • Unanimous agreement on the levy/grant scheme option managed by organised social partners. • Successful levy/grant schemes internationally depend on private sector influence on grant payments – hence governance of SETAs agreed to be by organised social partners; • 1% payroll levy as a compromise • 20% of levy for National Skills Fund for unemployed.

12. 25 SETAs were established 20 March 2000 • SETAs were established after 2 years (1998/9) of negotiation between interested parties. • Employers, trade union and, where relevant, government collectively determine needs and direct training investments; • Responsiveness of education and training providers enhanced by industry having SETAs through which to identify their skill needs and increased level of resources to ‘buy’ training that meets their needs.

13. NSA recommendedaNational Skills Development Strategy2001 – 2005, Minister launched Feb 2001. • Work of SETAs and National Skills Fund guided by • The National Skills Development Strategy: • Skills to promote Quality Lifelong Learning • Skills to promote formal sector growth • Skills to promote SME sector • Skills to promote development sector • Skills to support access to LM by the young • 3 EQUITY TARGETS • Each with measurable success indicators

14. SETA achievements A consolidated report on the NSDS will be tabled at the Skills Conference on 14 - 16 October 2003 2002/ 2003 implementation report • By March 2002, some of SETA achievements included: • 504 045 workers in ABET programmes; • More than one in five of ALL workers in the labour market have received structured learning under the skills development strategy (over 2 million) • 37 797 learners were engaged in learnership programmes – programmes which themselves did not exist prior to 2000. • Over 17000 of apprentices continue to be funded by SETAs.

15. 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

16. 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.

17. 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.

18. 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.

19. 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.

20. 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.

21. 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.

22. 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)

23. 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.

24. 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.

25. 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.

26. 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.

27. 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)).

28. 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.

29. 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