Labour Minister cracks the whip
6 March 2007
The Sector Education and Training Authorities' financial activities are
facing a severe scrutiny, with government considering some of the most drastic
measures to oversee their current investment arrangements.
Results of an audit conducted by the Department of Labour on the investment
of surplus funds by SETAs, as well as proposed measures which Labour Minister
Membathisi Mdladlana released today (Tuesday) indicate a totally different
approach to the way funds will be handled in the near future.
The audit came in the wake of the Transport SETA having invested over R245
million with Fidentia, a transaction that went wrong and is a subject of the
department's ongoing probe.
[A breakdown of investments made by the SETAs with various legal financial
institutions on different types of accounts is provided below.]
Releasing the audit findings Minister Mdladlana lamented the situation
surrounding the Transport SETA.
"The likelihood of loss of an estimated R245 million of skills development
funds and mineworkers pensions funds through the Fidentia investment that went
wrong is regrettable and a serious matter of concern to me.
"I am following up developments in this regard very carefully. We are also
taking other measures to prevent similar occurrences in other SETAs," he
said.
Labour officials were already working with the National Treasury to
determine whether there were some levels of negligence or contraventions of the
current regulations and extent of their compliance to their policy.
"We have been furnished with most of the records and correspondence between
the Transport Education and Training Authority (TETA) and Fidentia. I am told
that TETA is also conducting its own internal investigation to determine what
could have gone wrong including possible culprits who must be disciplined
accordingly," the Minster said.
The outcome of both investigations would assist in determining the
appropriate steps and action to take at the Board level and within the
department in the event of the Board being implicated.
The matter relating to the recovery of funds was currently under curatorship
in terms of the High Court ruling, and the department would co-operate and
abide by that process.
"I will be engaging SETAs with the view to revisit the current investment
arrangements with the various entities and to make sure that what happened in
TETA is not repeated elsewhere."
This would also involve discussion with the National Treasury on whether to
withdraw the current investment exemption so as to ensure that all SETAs invest
their surplus funds with the Corporation for Public Deposit (CPD) under the
South African Reserve Bank or the Public Investment Corporation.
"I have listened very carefully to the comments made by the President with
regard to the levels of SETA funds that are invested in the midst of the skills
shortages that we are currently facing. I share the same sentiments 100%. SETAs
are not in the stock exchange business. Their role is to ensure that funds
entrusted to them are used for the purposes that they were meant for," the
Minister said.
Minister Mdladlana said he had already requested the National Skills
Authority to revisit the Levy Grants to employers and to advise him on the best
ways to minimise the amount of cash in SETA accounts at any given time.
"I have instructed my officials to work closely with the Auditor-General in
interrogating the SETA levels of commitments, how long some of the projects
have been and whether signed contracts indeed exist against those commitments
or somebody is creatively holding monies under the commitment disguise."
According to the findings released today, an estimated collective amount of
R3,8 billion is invested in the different SETA accounts. Of this amount R3,7
billion is committed towards projects and there is a surplus of R99 million.
The only SETA that does not have an investment account is the Public Services
SETA.
Labour officials have also been ordered to review the guideline on the
allowable amount that any SETA can hold in reserves after commitments from the
current four months to two months of their total monthly levy income.
The audit has found that the SETAs have investment policies that are
approved by their individual SETA Boards in terms of both the Skills
Development Act and Treasury regulations.
SETA boards in accordance with the provisions of the Skills Development Act
and Treasury regulations take the decision � without interference from the
Department of Labour � to invest funds committed to approved projects, levy
grants held in trust on behalf of employers who submitted workplace skills
plans and surplus funds.
Minister Mdladlana pointed out that SETAs were granted exemption by the
National Treasury from investing their surplus funds with the Corporation of
Public Deposits.
"The National Treasury did however, emphasise that all the accounting
authorities of these public entities to take responsibility and ensure that
institutions that they invest with are graded according to Treasury regulations
and provisions, and that risk assessment is undertaken for each investment to
be made with the particular institutions," he said.
In terms of the Public Finance Management Act (PFMA), SETAs are Schedule 3A
public entities consisting of an equal number of employers and employee
representatives, and are required to carry out fiduciary duties, including
"acting with fidelity, honesty, integrity and in the best interests of the
public entity in managing the financial affairs of the public entity."
Regarding this provision, the Minster said it was difficult to say with
certainty that all SETAs had to date adhered to their investment policies as
the policies are not standard.
"The feedback we received from the Boards is that they have adhered to these
provisions, but we are currently investigating the circumstances that led to
the Transport SETA investing R245 million with Fidentia precisely because we
are not sure if the policy was up to standard, or the extent to which they have
complied with their own policy," he said.
The table below provides information as at the end of January 2007 on the
institutions that each of the 22 SETAs invested with, the type of investment,
the relevant amount invested, commitments made against those investments and
the surplus funds.
Recently listed as a public entity, the PSETA does not receive skills levies
like other SETAs and therefore had no surplus funds to invest.
PSETA is funded from the fiscal transfer by the National treasury through
the Department of Public Service and Administration, but is expected to get its
approval policy during the coming 2007/8 financial year.
For information on the institutions that each of the 22 SETAs invested with
as at the end of January 2007; the type of investment; the relevant amount
invested; commitments made against those investments and the surplus funds, go
to http://www.labour.gov.za/media/statement.jsp?statementdisplay_id=11872.
Enquiries:
Zolisa Sigabi
Cell: 082 906 3878
Issued by: Department of Labour
6 March 2007
