National Skills Authority Conference 14-15 March 2019: Skills Levy in the Context of the Skills System

1. NATIONAL SKILLS AUTHORITY CONFERENCE14 – 15 MARCH 2019 SKILLS LEVY IN THE CONTEXT OF THE SKILLS SYSTEM By: Mvuyisi Macikama

2. CONTENT • OVERVIEW OF SA CONTEXT • OVERVIEW OF THE SKILLS DEVELOPMENT LEVY SYSTEM • PURPOSE OF THE ACT • FUNDING ALLOCATION IN SOUTH AFRICA – SETAs and NSF • SKILLS DEVELOPMENT LEVY GROWTH, DISBURSEMENT AND EXPENDITURE • ACCUMULATION OF RESERVES/ SURPLUS FUNDS • SYSTEMIC IMPROVEMENTS AND TRENDS • CONCLUSION

3. OVERVIEW OF THE SA CONTEXT

4. SA OVERVIEW • The Statistical Release on National and Provincial Labour Market: Youth for Q1: 2008 to Q1: 2015are indicating that of those of working age in South Africa, 19.7 million are youth (ages 15 and 34 years) and 16.2 million are adults (ages 35 to 64 years). • Thus, the majority (55%) of South Africa’s potential working force consist of our youth (ages 15 to 34 years).

6. Education level of the unemployed youth Unemployed (Actively seeking and discouraged) 5.7 million 29% Unemployed youth Of the 5.7 million unemployed youth, 4.8 million (93%) either have an education level of matric only (33%) orbelow matric (60%),with few having tertiary education. This means, that the majority (93%) of the unemployed may be able to acquire skills through the CET system (incl. skills programmes) and TVET system (incl. occupational programmes). NOTE: Of those that pass their National Senior Certificate (matric) +/- 30% qualify for university entrance. Thus, 70% must be catered for by TVET system and thosewithout matric by the CET system in the main.

8. PSET System: Shape and Size OVERVIEW OF SA CONTEXT NDP Target: 1.62 million System growth = 0.52 million (32%) Higher Education +/- 1.1 million (6%) 26 Universities: 969 00 114 PHEIs: 143 000 TVET +/- 800 000 (4%) NDP Target: 2.5 million System growth = 1.7 million (213%) 50 TVET Colleges: 711 000 627 Private Colleges: 79 000 CET Colleges: 275 000 (1%) NDP Target: 1 million System growth = 725 000 (264%) Largest growth envisaged for the TVET and CET system. This includes a strong component of workplace based learning, especially in the TVET system. The SETAs and the NSF will continue to play a critical roll in linking the PSET learning institutions to the workplace through the provision of funding for WPBL. 8

9. OVERVIEW OF THE SKILLS DEVELOPMENT LEVY SYSTEM

10. OVERVIEW OF THE SKILLS DEVELOPMENT LEVY SYSTEM • Funding of the Skills Development in South Africa is legislated through the Skill Development Levies Act, 1999 • Skills Levy serves to fund the skills development initiatives in the country and regulates compulsory levy payment by employers to fund education and training within various economic sectors in South Africa

11. OVERVIEW OF THE SKILLS DEVELOPMENT LEVY SYSTEM • Criteria used for employers to become eligible to pay skills levies: • The company must have an annual payroll of over R500 000 (is it cost effective for those employers, with annual payroll of R1m and below, to have this administrative burden – in the context of red tape SMMEs have been raising with government) • The company must register with SARS • The company must pay a skills levy of 1% of its monthly payroll to SARS

12. OVERVIEW OF THE SKILLS DEVELOPMENT LEVY SYSTEM • The SDL payments are allocated to the Sector Education and Training Authorities (SETAs) and the National Skills Fund (NSF) based on the SIC code • 80% of the SDL is allocated to 21 SETAs while 20% is allocated to the NSF

13. PURPOSE OF THE ACT (SDA)

14. THE PURPOSE OF THE SKILLS DEV. ACT • To develop the skills of the South African workforce • to improve the quality of life of workers • to improve productivity in the workplace • to promote self-employment • To increase the levels of investment in education and training in the labour market • to use workplace as an active learning environment through Workplace Based Learning • to provide employees with the opportunities to acquire new skills

15. THE PURPOSE OF THE SKILLS DEV.ACT • To redress the disadvantages of previous discrimination through education and training • To encourage workers to participate in learning programmes

16. FUNDING ALLOCATION IN SA – SETAs and NSF

17. FUNDING ALLOCATION IN SA – SETAs and NSF • Institutional and financial framework: • The SDL payment is allocated to the SETAsand the NSF • The SETA Grant Regulation governs the SETA allocation and use of mandatory and discretionary grants • Grant breakdown: • 100% of the Skills Development Levy collected by SARS, - allocated to the Department of Higher Education and Training • SETAs allocation: – 80% for Discretionary (incl. PIVOTAL grant), Mandatory, Administration (incl. QCTO costs) • NSF allocation – 20%

18. SKILLS DEVELOPMENT LEVY GROWTH, DISBURSMENT AND EXPENDITURE

19. SKILLS DEVELOPMENT LEVY GROWTH • The National Treasury has reported that the system realised a significant increase in the SDL along the years till 2016

20. TOTAL ACTUAL LEVIES PER ENTITY

21. TOTAL ACTUAL LEVIES PER ENTITY

22. SKILLS DEVELOPMENT LEVY GROWTH • Reasons for high % growth of SDL • Lower limit of R500 000 after which employers have to pay the Skills Development Levy (SDL) has not increased in line with inflation, since inception of SDL • SARS efficiency and improvements in general payroll tax collection, and steady improvements in compliance. • General increase in salary levels, particularly in higher salary bands, which are more likely to be linked to increases in CPIX than increases in GDP

23. ACCUMULATION OF RESERVE/SURPLUS FUNDS

24. ACCUMULATION OF RESERVES • Remaining uncommitted discretionary surplus = R 1 180 356 as at 21 March 2016

25. SYSTEMIC IMPROVEMENTS AND TRENDS

26. 7 SYSTEMIC IMPROVEMENTS AND TRENDS IMPROVEMENT IN ADMINISTRATION The last audit cycle by the Auditor-General of South Africa are reflecting an overall improvement in administration at the SETAs, with the audit outcomes reflecting the following:

27. IMPROVEMENT IN ADMINISTRATION

28. TRENDS TO BE NOTED The provisioning of internships, apprenticeships and learnerships have grown substantially over the last five years: • Over the last fewyears, internships grew by 278%, apprenticeships grew by 148% and learnerships grew by 63%. Entries overall have almost doubled (97%) since 2009/10. • Completions have grown by 65% over the last several years.

29. TRENDS TO BE NOTED Cont.: 2010 APPRENTICESHIPS: In an apprenticeship survey conducted in 2010, it was found that 73% of the participants reported their situation to be employed / working. The study further indicated that 56% find permanent employment, 40% less stable contract / temporary jobs and 4% in unstable casual employment. Report on “Institutionalising tracer studies to assess the impact of workplace based training: Reflections on feasibility” 2016 APPRENTICESHIPS: In a tracer study conducted by SSACI in 2016, it was found that 79% of newly qualified artisans find employment. The study further indicated that 58% find permanent employment, with 23% on less stable contract / temporary jobs. Furthermore, 56.5% find jobs easily of fairly easily. SSACI Report – “Global and SA: Artisan Skills Training Trends – An Employer Perspective”

30. TRENDS TO BE NOTED Cont.:

31. CONCLUSION

32. 8 CONCLUSION NSA review of the NSDS III, report of which Minister will launch at the conference, is an important point of reference, through which the skills system can measure how far it has met objectives set in 2010/11. The levy remains an essential resource at the disposal of social partners, to help South Africa close the skills gap that continues to contrain growth of the SA economy.