NATIONAL SKILLS FUND

1. NATIONAL SKILLS FUND Portfolio Committee: 09 March 2011

2. OUTLINE • INTRODUCTION • LEGAL MANDATE OF THE NSF • BRIEF OVERVIEW AND CURRENT STATUS • KEY INTERVENTION FOR SKILLS & EMPLOYMENT • KEY STRATEGIC ISSUES • NSF FINANCIAL POSITION

3. INTRODUCTION • NSF established in 1998, through the Skills Development Act, 1998 • Took over from the Training of Unemployed Persons (TUP Fund) operations in 1999 • Received first Levy in 2000 • Mandates derived from NSDS I (2001-2005), NSDS II (2005-2010, extended to 2011) • Fund is just over a decade in existence.

4. LEGAL MANDATE OF THE NSF Skills Development Act, 1998, as amended, outlines the key obligations pertaining to the NSF, being: • Use of the money in the fund: • To fund projects identified in the NSDS as National Priorities, • To fund such other projects related to the achievement of the purpose of the Act as the DG determines and • The administration of the fund within the prescribed limit, as regulated from time to time.

5. Control and Administration of the NSF: • The Director General: DHET, is the accounting authority of the NSF and must: • control the fund • Keep proper records of the Fund (Financial, asset & liabilities thereof) • Prepare Annual Financial Statements. • Other legal obligations: • NSF to be managed in accordance with the PFMA • The NSA required to advise the Minister on the strategic funding framework and criteria for the allocation of NSF funds.

6. Investment of surpluses in line with applicable regulations and guidelines • DG to submit Annual Financial Statements to the NSA for information purposes • Unexpended balances can be carried over to the following financial periods.

7. BRIEF OVERVIEW AND CURRENT STATUS • Under-spending, which has characterised the NSF since its establishment: • Resulting from protracted processes of change-over from one phase of the NSDS to the next (due to need for changes in funding frameworks, regulations and consultation processes thereon) • Resulting from the effect of the Presidential Proclamation that transferred skills development responsibilities from DoL to the DHET, which brought about unforeseen transitional challenges.

8. Also resulting from general capacity constraints of the skills development delivery machinery (Private and Public), available to the Skills Levy Institutions (NSF & SETAS), which has constrained the spending ability of these institutions over the years. NSDS III identified this as a critical area of focus (Goals 4.3 & 4.7). • Partly due to the past NEGLECT of public training institution (FET’s SOE’s) as a critical vehicle for massive skills development initiatives • Undue focus on short courses by the abundant skills provisioning institutes, mainly private, most of which have not led to a full qualification or decent job opportunities for intended beneficiaries. The incoming NSDS III calls for linking of skills development to career paths & career development that promote sustainable employment and in-work progression, representing a break from the past practices.

9. Important to consider is consequence of the introduction of the Skills Development Levy in 1998, as a result of identified skills need for economic growth and development: • Considerable financial resources becoming available in the country for skills development, • Non-allocation of the new found financial resource to physical capacity building of dedicated institutions for skills development, such as community skills centres and dedicated skills training capacity in existing public sector institutions. (as now identified in the NSDS III) • As a direct result of this vacuum, the country saw saturation of short skills development providers in tens of thousands across the country, with offerings, most of which have led many young people around a circle.

10. Review of Skills Development Projects approved since Presidential Proclamation under the NSDS II, but to be implemented during the period of the new strategy (Nov to Dec 2010), necessitated by the need to: • determine strategic fit to the goals of the NSDS III and relevance of fit with DHET plans of the future • pursue alignment to the Department’s vision of an integrated post school education system • scale down on NSF activities related to NSDS II (2005-2010), which also implied totally closing down activities on funding windows. • begin designing new funding frameworks & processes that will support the incoming NSDS.

11. Based on the internal review outcomes, the NSF has had to: • Re-negotiate with implementation agencies for re-costing and alignment of projects to the goals of the NSDS III • Negotiate out of other approved projects for re-conceptualisation, taking into account expected outcomes of the new NSDS. • Negotiate reduction of budget through elimination of other budget items considered excessive to the real thrust of the required training.

12. Currently, the NSF is involved in NSDS II wrapping up processes, which include, but not limited to: • Closure of current projects that have run their full period. • Production of closure reports for different funding windows of the NSDS II • Transfer of unutilized funds back to NSF • Developing an NSF 6 year funding report of the NSDS II.

13. The NSF is also busy preparing ground for NSDS III implementation by: • Developing a Funding Framework in line with the NSDS III priorities • Developing criteria, procedures, guidelines & Regulations for NSDS III implementation • Consulting with the NSA regarding the funding framework, criteria, procedures, regulations and implementation guidelines. • Working on the appropriate structure, within the broader skills branch of DHET, to support the new strategy.

14. NSF’s interaction with the Provincial Skills Development Forums (PSDFs) has been severely reduced since the transfer, however: • NSF continued to set aside funding of R900k to cater for their operational requirements. • DoL offices in Provinces & Premier’s Depts in some Provinces continue to house activities of PSDF’s and costs related thereto • The NSF continues to relate to the PSDF’s through the NSA, especially in relation to Strategic Projects run through Provincial Governments & SETAs

15. KEY INTERVENTION FOR SKILLS & EMPLOYMENT • At the beginning of the year, the Minister made the following commitments, which are in full swing at this stage: • Make available R150m to NSFAS to fund full cost of study in critical skills and for rural students in all institutions of Higher learning in the country, • To cover 820 1st year enrolments • Over 335 financially deserving rural students • 300 Students with disabilities

16. Further R100m allocated to a contracted agency, Career Wise,, to fund, through bursaries, full cost of study of first year and continuing students in critical skills required by the country for economic growth and innovation. • Further R94m earmarked for allocation to the National Research Foundation to fund students in Post Graduate, Masters’, Doctoral and high level research Programmes.

17. The NSF has further committed R200m to the EPWP, under DPW targeted at training 40,000 beneficiaries • For prior training, meaning training unskilled labour for later participation in specific EPWP project in the area concerned. • Onsite training – focusing on “on the job training” • Training for exits – at completion of projects (artisan trades, full ABET)

18. Currently the NSF is supporting 268 community-based organizations by training 1,935 learners in various skills that include organization management and technical skills. • A total of six service providers have been contracted to implement the skills development projects in the Eastern Cape, KwaZulu-Natal and Mpumalanga provinces at a total budget of R10m. • Mainly with Rural Focus.

19. The NSF facilitated the provision of skills development support to 367 community based co-operatives. It had 29 active Memoranda of Agreement with service providers across all provinces. • The support to 367 co-operatives benefited 4 000 co-operative workers of which 67% are women, 38% Youth and 6% People with Disabilities. • The skills development interventions included business management skills, technical skills and mentoring. • These skills enhanced the capacity of the co-operatives to engage efficiently in their respective activities • Over R12m was allocated in this project, which is now at the tail end.

20. Skills Development support to Emerging Entrepreneurs in rural areas through the Basic Employment Skills Development (BESD)-Programme • Contracts were concluded by the provincial offices of the Dept of Labour and in the close-out period • To provide skills development support to emerging entrepreneurs in the informal economy and to un/under-employed young people. • Specific benefits of the BESD programme include: • improving the employability of individuals without any professional, occupational and basic entrepreneurial skills and experience; • affording better access to (self) employment in local employment programmes; and • generating sustainable increase of individual incomes from small micro enterprises.

21. CURRENT CONTRACTS – 2010/11: • Information related to the current contracts (managed via the provincial offices of the Dept of Labour) and funded by the NSF are as follows - • Gauteng North: Skills development support to Emerging Entrepreneurs – total 120 at R 3 814 804. • Gauteng South: Skills development support to Emerging Entrepreneurs – total 120 at R 3 814 804 • Training of EDP’s – total 12 at R 353 970 • Northern Cape: Skills development support to Emerging Entrepreneurs – total 100 at R 3 179 004. • The continuation of the BESD programme is still under review in light of the new strategy, NSDS III.

22. The National skills Fund (NSF), under the Industry Support Programme supports the DTI by providing training incentives to newly established businesses and expansion of existing businesses in two ways: • Workplace Skills Development Support Programme (WSDSP)

23. Business Process Outsourcing and Off-shoring (BPO&O) Project • The Business Processing Outsourcing and Off-shoring (BPO&O) programme is linked to the Government Assistance Programme (GAS) that identified BPO&O as a priority sector for the attraction of investment and the creation of jobs. • Since 2008 to Jan 2011, 4665 learners were trained and R 18 258 757 was disbursed to 10 companies.

24. The latest is the Monyetla for the Business Processing Outsourcing and Off-shoring (BPO&O) sector. • Developmental goal: • Supporting the establishment of South Africa as a competitive destination for off-shored business processes as a means of creating jobs and attracting • Project purpose: • To rollout the Monyetla Work Readiness programme over a 12 month period to 3,000 more unemployed young people following the successful DoL-funded pilot in 2008/9 • Key Result Area 1 • Equip unemployed South Africans from the National Skills Development Strategy target groups with the skills required to enter employment in the BPO sector • Key Result Area 2 • Implement an employer-led consortium model to optimize employment to ensure the placement of at least 70% of learners in employment on completion

26. The above NSF interventions in skills development and employment facilitation does not represent a conclusive picture of the NSF’s continuing funding obligations and/or planned interventions • As stated in the overview above, the NSF is seized with preparations for the new strategy, so as to ensure that the current funding obligations and future ones are guided by a framework and criteria that speaks to the new NSDS. All processes are expected to be concluded by April 15, 2011

27. KEY STRATEGIC ISSUSES • Establishment of a strong M & E capacity and systems in the NSF within the broader context of the Skills Branch • Consultation with HRDC to agree on priorities that advance the HRDS • Broad communication of NSF funding framework and applicable criteria, guidelines, procedures and regulations to facilitate implementation of NSDS III

28. Building appropriate capacity of the NSF to disburse grants in an efficient manner • Addressing skills for priority government programmes (Job creation, IPAP, Rural Development, the green economy, fighting crime and corruption) • Developing strong partnership to increase the capacity of the system to deliver on skills (FET Capacity building, NAMB capacity, DHET research capacity)

29. NSF FINANCIAL POSITION

30. NSF FINANCIAL POSITION: • For the current financial year ending on March 31, 2011, the NSF has a projected income of R2bn • Budgeted expenditure amounts to R3bn • Representing a budget deficit of just under a R1bn. • A deficit for which NT approval was obtained, due to availability of surplus funds in NSF coffers from previous years. • In recognising the reality of under-spending in the current year, the NSF has revised its 2010/11 budget to fall in line with expected spending, a process that is still underway within the DHET.

31. Overall, to date the NSF has total funds amounting to R6bn, before accounting for commitments. • It is important to make the point that the NSF is not ready to expend all its surplus income in one go due to the limited skills development & training infrastructure in the country.

32. However, the NSDS III, provides a welcome opportunity for the NSF to foster a wide range of partnerships to facilitate processes of skills development in the country, in a manner that will ensure that the skills development levy is spent in the most productive and efficient manner.

33. THANK YOU