Governance Matters & Investigations at SSETA and W&R SETA: with Deputy Minister present & stakeholder input

Meeting report

Opening remarks
The Chairperson indicated that the Committee was scheduled to meet with numerous entities.

Much of today’s meeting is to follow up on matters that the Committee had raised before- matters relating to governance, irregular expenditure, qualifications of appointed executives and forensic investigation reports.

Briefing by Wholesale and Retail SETA
Ms Yvonne Mbane, Board Chairperson, W&R Seta, agreed with the Committee that consequence management must be implemented by all means necessary. However, it was important for Members to note that the new Board was dealing with historical matters. Some of the decisions in question today were taken by the previous Board.

Mr Tom Mkhwanazi, CEO, W&R Seta, indicated that the presentation was lengthy but he would focus on the important parts.

He commenced with the background of the information that was requested by the Committee and reported that, the Portfolio Committee received and noted the entity’s correspondence dated 10 June 2020 about consequence management taken against employees implicated in the various forensic reports. The Committee reiterated its resolution taken at the meeting held on 26 May 2020 that consequence management be implemented against employees in the forensic reports, despite the Board’s decision not to institute further actions for variety of reasons.

The Committee wanted to be furnished with the details of the following matters:
The terms of reference of each forensic investigation;
Recommendations of each investigation;
Progress made thus far by W&RSETA in implementing the recommendations; and
And how much was spent by the W&RSETA in commissioning each forensic report.

The forensic investigators and their costs were (See presentation for the scope of the investigations):
-Ligwa Advisory Services: Forensic Investigation commissioned by the previous Board in July 2016 to the value of R2 799 024,90
-Sedupe & Metja Forensic Investigation commissioned by the Administrator in October 2016 to the value of R600 000,00
-NEXUS Forensic Services:  Forensic Investigation commissioned by the previous Board in November 2017 to the value of R1 600 121.22

The total cost of the forensic investigations came to R5.7 million.

The presentation highlighted the recommendations emanating from each investigation.

The entity reported that it took the following action:

-It reviewed and strengthened all its policies and procedures (including the Delegation of Authority) and its governance framework and instruments to improve compliance. Training workshops on internal control systems and policy instruments for all employees have been conducted;

-The cleanup of the Commitments Register has been finalised and confirmed by the Auditor General;

-A Backlog Project was put in place and finalised in June 2019; and

-The backlog of long outstanding payments has been cleared

-The Accounting Authority had also commissioned an Ad-hoc Committee to evaluate and determine the legal standing of the forensic reports, and to consider each case on its merits and demerits to determine the suitable cause of action in ensuring that the institution stabilises; The following came out:

• Disciplinary Action was initiated and there was a settlement agreement for the official to leave the organisation;
• Some employees exited the organisation before disciplinary action was taken; and
• 6 Warnings (written and verbal) were issued; and
• 11 Employees were suspended, however,  due to investigations conducted no disciplinary processes were instituted. The suspensions were lifted whenever changes occurred to the SETA leadership between the Board and the Administrator due to the court case.

-The Accounting Authority investigated the matters and deliberated on the Adhoc Committee recommendations. The Accounting Authority also heavily relied on the legal recommendations from the Bowmans Report

Lastly, R473 773,02 out of R1 648 401.94 has been recovered and some are still in process of being recovered; criminal cases were referred to SAPS; and submission has been made to National Treasury requesting condonation of non-compliance with the PFMA. The SETA is awaiting a response.

Briefing by Organisation Undoing Abuse Tax (OUTA)
Adv Stefanie Fick, Executive Director: Accountability Division, OUTA, gave a brief background of OUTA’s involvement in the Services Seta matter and how the information was presented to OUTA.

OUTA’s court application is against the Services SETA and Grayson Reed (Pty) Ltd, the business which was awarded the contract worth R162-million in November 2017.

In 2018 OUTA received information from whistleblowers that there were irregularities in the awarding of the Grayson Reed tender, and unpaid learner’s stipend.  In order to verify this, OUTA submitted a PAIA application to the Services SETA, asking for specific documents relating to the tender and contract. OUTA submitted that the non-rendered or non-delivery of services affected the credibility of the Services Seta in the education environment and learners were affected by the lack of service from the service provider.

SSETA has a duty to recoup funds wasted on irregular tenders in terms of the PFMA and ensure their mandate is adhered to. Cancelling of service level agreement is not enough to ensure accountability. The Portfolio Committee should take note that the Skills Development Levy is not utilised for its intended purpose.

OUTA recommended the following:
-Administration in terms of the Skills Development Act
-Probe into further allegations of maladministration and mismanagement
-Consider OUTA’s inputs in the appointment of future boards

SSETA should be held equally accountable in instances where non-compliance with governing legislation and procurement policies are prevalent.

Briefing by Services Seta (SSETA)
Mr Stephen De Vries, Chairperson, SSETA, indicated that this was the second time the new Board has appeared before the committee. The new Board had to account for historical matters that predate it.

He was pleased to report back on matters that were raised previously.

Ms Amanda Buzo-Gqoboka, CEO, SSETA, presented a tabulated presentation outlining questions and responses on matters that were raised by the Committee in previous engagements.

[See presentation for details]

Ms Buzo-Gqoboka clarified the question that was raised by Members regarding what seemed a misrepresentation of the CFO’s job description against the advert. She clarified that when they pulled the information they created a structure by a way of a table which pooled the requirements of the CFO’s position. It was an oversight error that was made when we were putting together the documents for the Committee.

Response to OUTA by Services Seta
Ms Buzo-Gqoboka presented its response to OUTA and commenced with the GRADIMA matter. It was an internal matter, which related to an outstanding payment as a result of an incomplete process As the matter stands now, the processes have been completed and the payments were made and the matter is closed.

Unfortunately looking at the nature of the matter and how OUTA used it, it becomes evident the extent to which OUTA would go in seeking to portray wrongdoing that does not exist.

On the second matter relating to Grayson Reed, SSETA required a service provider to implement the national rollout of the learner attendance monitoring system, administration of attendance-based payment calculation and disbursements on a monthly or other regular timeframe with the requisite reporting and financial stewardship responsibility for an initial 24-month period. Grayson Reed would provide the following services:
-National rollout and supply of biometric devices compatible with the Services SETA system;
-A national enrolment and issuance of pre-paid debit cards to learners on existent and future Services SETA funded training projects;
-A monthly administration and disbursement of stipends to qualifying recipients; and
-A monthly Reporting on attendance by location and project

She provided additional background information on the advertisement of the tender.

There were a number of allegations that were outlined in the presentation, these included:
-Where the 100 000 figure for learners originated from
-The tender was advertised less than a week before the closing date. Services SETA advertised on the 29 July 2017, in the Sowetan and on 30 July it was advertised in the City Press and in the Government tender bulletin on 25 August 2017 with a closing date of 29 August 2017.

“In the absence of any known addenda, it is unclear whether the agreement had been implemented retrospectively.”
The tender for rollout and management of the biometric learner attendance monitoring systems (BLAMS) was awarded to Grayson Reed on 13 October 2017. The letter of appointment was issued and the project was set to commence on 1 November 2017. The commencement date was reflected as 1 November 2017, which was the date of implementation of the tender. There is nothing irregular or untoward with a contract being signed on a particular date to reflect a commencement date.

“It is unclear whether the agreement had been terminated based on breach by Grayson Reed”
The service level agreement between the Services SETA and Grayson Reed was mutually terminated between the parties. That was after SSETA decided to currently bring the management of learner attendance and the payment of stipends in-house whilst looking for a permanent solution on the matter.

“Purported purchasing of BLAMS: Corncastle”.
This allegation concerns the internal affairs of Grayson Reed. The tender did not prescribe where the provider should procure the biometrics monitoring. As to where the biometrics monitoring units were to be procured, that was left entirely at the discretion of Grayson Reed, as long as they met the specifications. The amount of R2,499 997.20 was for the procurement of 500 biometric monitoring units. The payment of R16,154 500.00 was part of the implementation of the tender and included distribution of stipends to over 10 000 learners.
 
OUTA says that “…in the absence of proper breakdown and accounting records for such expenditure indicate potential money laundering.” It is with regret that OUTA makes such a speculative allegation without any shred of evidence.

“It was found that Grayson Reed was not registered with the Companies and Intellectual Property Commission (“CIPC”)”
Bid submitted by Grayson Reed included a tax clearance certificate (Annexure D) which reflected the company’s registered name as Muroba Group Holdings (Pty) Ltd. The trading name was reflected as Grayson Reed. The registration number of the company was correctly recorded in the Bid as 2012/00070/07. It is not correct that Grayson Reed was not registered with CIPC.

“It was also discovered that the biometric units were not manufactured in South Africa…”
Services SETA did not seek to procure biometric units from the service provider. Grayson Reed did not have to be the local manufacturer of the biometric units. 

“Concerning the request for access to information …”
OUTA elects to distort the truth and record, incorrectly so, that the documents or information were received only from Grayson Reed. After receipt of the request for information, the SSETA followed the third-party notification process and duly notified Grayson Reed of the request as set out in PAIA.
 
All the information that Grayson Reed did not object to it being produced was duly supplied to OUTA and information to which Grayson Reed objected to was not provided. A full exposition of how the request for access to information was handled appears from the answering affidavit filed by the SSETA in the High Court application, attached in the report as Annexure E. The application to compel access to information that was objected to by Grayson Reed is still pending and the matter will be determined by the High Court. The position of the SSETA concerning the High Court application is articulated in its answering affidavit.

In conclusion, the tender was subjected to a specialist audit by the Auditor General of South Africa. The finding on discrepancy between the tender invite and the tender document was resolved. However, the finding on the discrepancy during functionality evaluation remained unresolved. AGSA acknowledged management’s responses and the finding was resolved on the previous experience finding. The same applied to the finding relating to discrepancies relating to the bid requirement.

OUTA does not produce any evidence to back its allegations; this is concerted recycling of the issues that OUTA had been peddling since 2018. Allegations of maladministration in the SSETA are not founded and are damaging the reputation of the SSeta. The AGSA did not raise such; the tender was evaluated and awarded in line with applicable SCM prescripts. OUTA must petition the authorities that investigate commercial crimes with the evidence they have.

Briefing by South African Qualifications Authority (SAQA)
Ms Faith Nyaka, Director: Registration and Recognition, SAQA, gave a presentation on the minimum requirements needed and highest qualifications of the appointed SSETA candidates and what was communicated to the Committee previously in relation to this. The presentation highlighted details for the following posts: CEO, CFO, Executive in the Office of the CEO, Executive Planning and Executive Core Business.

(See Presentation)

Briefing by the National Skills Authority (NSA)
Dr Thabo Mashongoane, Director, NSA, explained the NSA investigation process – how it conducts its investigation processes.

He proceeded to outlined the allegations of the three Setas that the NSA was requested to investigate. The first one was the Services Seta and the allegations were:
-Irregular payments such as exorbitant costs of purchasing skills centres and building of provincial offices.
-Maladministration and improper conduct of members of the Accounting Authority
-Maladministration and improper conduct of the Chairperson

For the Construction Seta, the allegations were:
-Supply chain irregularities
-Failure by the Accounting Authority to promote good governance
-The Accounting Authority members received financial benefit for doing business with the CETA.
-Human resources malpractices

For the Transport Seta (TETA), the allegations were:
-Corruption by the CEO
-Abuse of power at the TETA
-Unilateral conduct of the TETA Chairperson and failure by the Chairperson to act in accordance with Accounting Authority resolutions
-Failure by the Accounting Authority to exercise its fiduciary responsibility

The NSA had findings for each of the allegations that were submitted and it made recommendations for consideration by the Committee and the Minister.

(See presentation for detailed findings and recommendations)

The NSA also responded to questions that were posed by the Members in the previous engagement.

Discussion
Dr W Boshoff (FF+) referred to the Services Seta in the Eastern Cape where students did not receive their stipends since December. He had enquired about this matter and it was not acknowledged, but when the inquiry was sent through the Committee it was responded to. He has since received correspondence that the money was paid and received. He was pleased that something was done to resolve it.

Ms D Sibiya (ANC) was not pleased about all the SETAs, the issues are all the same and common and government is merely wasting time with these SETAs. She then suggested that they be dismantled.  

Ms J Mananiso (ANC) asked W&R SETA about the steps that the Board took regarding the recommendations made by its Ad Hoc committee. She echoed the sentiments of Ms Sibiya and indicated that there were inconsistencies with recruitments, SCM, and payment of stipends throughout all the Setas. Improvement is necessary, and she wanted to know what the new Board members would do differently to ensure positive outcomes.  

She wanted to know about the turnaround time of completing the pending cases and investigations. Lastly, she sought more clarity on the gender and ethnic descriptions of the people who committed the crimes.

Mr B Nodada (DA) said that he was extremely disappointed by the presentations received today, because it showcased how dire the conditions the Setas are in. We need to recognise that there is a bigger challenge with the Setas.

He asked for an indication from the Minister why he has not yielded to the advice of the NSA to place the Services Seta under administration. OUTA indicated that the skills levy was not used for its intended purpose; he asked how the organisation came to that conclusion about the Services Seta.

It is quite alarming that, in its presentation SAQA pretty much informed the Members that the Executives appointed by the Services Seta did not meet the qualification requirements for the positions. It has been made clear that we were basically lied to on numerous occasions in the meetings about these appointments. The incumbent for the CFO position did not qualify for it – the incumbent did not meet the minimum qualification requirements. There is a high probability that this is a norm in the sector, which is why this sector is collapsing. He suggested that it needs to be looked into whether the Executives of these Setas possessed the minimum required qualifications for their positions. This also applied to the Department.

He asked the W&R SETA whether it made provisions for counselling for its implicated employees or whether there were any other interventions made for them.

As for the allegations against the Services Seta; he sought clarity on interventions made for consequence management and the timeframes for the outcome of the investigations.
           
Mr T Letsie (ANC) referred to the W&R SETA and said that it had used R5.7 million to institute forensic investigations but then goes back to disagree with the outcome of the forensic report. This is madness or insanity.

Many of our people are unemployment and the skills assessment in the country indicates that we are not doing well – this is where the Setas come in. We are not pleased with these Setas and perhaps we should exercise our powers as public representatives and defend our people against corruption.
There was money set aside by W&R SETA for infrastructure development in South Gauteng to build a TVET College, but today we are told that it wrote to the Minister to grant them the right to use that money for something else. After eight months, we will be here asking what happened to that money.
As for Services Setas, on the Motheo matter (slide 6), he was not pleased with the response provided by the Seta. The initial project cost R250 million and moved up to R450 million. We asked the Services Seta in the last engagement whether the project managers failed to inform the Seta that the initial funds were insufficient. He wanted to know whether the project was even initially costed and how long the project was envisaged. He also asked for further details on Motheo.

He was looking forward to hear what the Services Seta would say after the SAQA’s presentation on the qualifications of the Executives. Members have raised concerns about this matter, but the Seta remained adamant on its position. He suggested that a skills audit should be conducted from executive level to junior managers in the entire sector. It remains clear that people do not possess the requisite qualifications.

The former Chief Executive Officer and some of the Executives paid themselves about R41 million, and this matter was still on-going. People loot and misappropriate funds and nothing happens. The very same individual implicated on this matter gets appointed in another pubic office position. We have seen this happen in a number of occasions.

He referred to the Services Seta, and asked whether the challenges with the attendance register were resolved and whether stipends were being paid on time.  Lastly, on the R1.6 million, was this amount covering the teaching of the learners or was it only for the service provider?

The Chairperson referred to the Services Seta and indicated that now that the SAQA report has come out on the qualifications of its Executives, is the Board still maintaining its position? SAQA confirmed that the Executives appointed did not meet the required qualifications, and the only person who meets the requirement is the Executive Manager in the Office of the CEO, who happens to surpass the qualifications of the CFO and actually qualifies for that position. The Committee understands that the current Board was not responsible for this but it needs to know what the Board intends to do about it.
Secondly, on the projects of the skills centres, the explanation was provided but it was not satisfactory. In one project (Motheo), there was a deviation of about R130 million, which was way above the permitted deviations. This means there was a contravention of the laws but nothing of substance was said about this. Most of the issues that led to the deviation could have been picked up if the team actually went to the project site and the job was done properly. It does not look like the team visited the project site. The Committee needs to get an explanation on why the deviation was more than 20% of the project cost.
As for W&RSETA, the Committee was interested to know about how the recommendations were implemented. Consequences on these matters were not clear.
There is a new matter in the public domain about a dossier that was printed by one of the Members of Parliament to the W&RSETA, making some allegations on the redirecting of funds. The Committee expects a response on this matter within seven days. If the Seta has not yet been made aware of this matter, the Committee will certainly forward the dossier to the W&R SETA for perusal and subsequently provide a response.

He welcomed the explanation provided by the Services Seta on the Grayson Reed tender matter, unless OUTA feels different and the latter was more than welcome to rebut the explanation by Services Seta.

Mr Mkhwanazi said that the Ad Hoc committee was a committee that was set up by the previous Board when the investigation Reports came up. The Reports set up a number of recommendations and that included looking at positive reviews and policy changes as well as monies that could be recovered, opening civil and criminal cases and disciplinary of employees.

Counselling was indeed provided for employees and they were also trained in order to understand the policies of the Organisation as well as the new policies.

Consequence management must be implemented and one employee has already been dismissed subsequent to the Report. The entity was sending a firm and strong message that corrupt activities will not be tolerated in the organisation. If Members are not satisfied with the responses, the Board would be happy to consider its recommendations or further actions to be taken.

The Bowman Report consolidates all the recommendations of the investigations. The W&R SETA has commenced the process of instituting recovery of the funds.

Ms Mbane said that the Board would like to work with the Committee. The R5.7 million was not only limited to the disciplinary issues but it was spanned across a number of areas in terms of fixing the organisation, which included the recovery of the funds, the pursuit of civil and criminal cases as well as the implementation of the commitment record. We are open to suggestions of the Committee in dealing with these matters moving forward.

She welcomed the opportunity to respond to the new matter referred to by the Chairperson within seven days.

Adv Fick said the investigations started when OUTA received complaints from students who were not receiving their stipends. OUTA pursued the matter to ascertain why the Services Seta was not making the payments for stipends. This is how OUTA got into this matter.

As for the Grayson Reed matter, even on the Services Seta’s version, she still had questions on why the procurement did not take place within the country. The R16.1 million that was paid towards the goods was in the register but why did the Seta spend that much money only for the assets to sit idle? That is an enormous amount of money that could have been channelled towards other important things.

OUTA was also investigating the skills levy and the maladministration in that levy but this will be shared with the Committee once more evidence had been obtained. It is greatly concerning that there was still significant number of students that did not receive their stipends.

Ms Buzo-Gqoboka addressed the issue of R41 million: the entity did not insert the names of the incumbents because it is protecting their names but the Committee will get the list of the names. The list of the names will be sent to the Committee today.

It is not the former CEO (Mr Andile Nongogo) that is implicated in the R41 million, but this information will be provided to the Committee. The matter is currently in court. The Services Seta has recovered some of the monies from the implicated individuals. The reason why the matter was still pending was because of disputes in court. They all have different representations, which stall the process even further.

Mr Tsheola Matsebe, CFO, SSETA, in response to OUTA, said that the R2.4 million referred to the procurement of the devices which were 500, with a cost of R4,900. The R16 million related to the amount that Grayson Reed was disbursing to learners on the Services Seta’s behalf. This covered for 10 000 learners – R1, 600 per leaner per month. We then developed a cycle where we can incorporate the verification process and the movement of funds from the Seta to Grayson Reed and to the learners. The R16 million was based on what was confirmed on the attendance register on that specific month for the learners. On the 7th of every month, the service provider would provide a report on the funds that were paid and whatever was not paid would be subtracted.

On the SCM matter, the Report was provided. There were two areas we had issues on; the first one was about the formation of the validity period in the tender document. This was an administrative error which did not result in any entity being disadvantaged.

The second one referred to the certificate but it was not linked to the entity that was awarded. We launched a disciplinary enquiry and it found that the certificate was not valid. However, due to the technicalities of the certificate, it was not clear from the processors. This was dealt with internally and the irregular expenditure was reported.

Ms Mamabele Motla, Executive Manager: OCEO, SSETA, spoke on the construction of skills centres and said that the funding given to Motheo was a conditional grant. On the specific slide, the funding for Motheo and Priska – these were conditional grant allocations not supply chain management variation. That 20% deviation is applicable for supply chain management processes. Motheo is a flagship project. In 2014, the allocation was R250 million which was based on the funding that was available at the time. However, in our letter we were very clear that it would be subject to the design, specifications, and supply chain process of the College. Therefore, the process implemented by the College made clear in the response that over and above the R250 million, the Board must be consulted for approval. Hence, the approval only took place in 2015 to the value of the specifications – the R320 million was approved by the Board and it was for the specifications.

The application of the deviation would be added to the financial statements.

There is variation in the Beaufort West Skills centre based on the lessons learned on the Motheo project and others.

The delays in the Motheo project stemmed from the constructors and sub-contractors payments issues. The Services Seta had to intervene on this matter and had to pay sub-contractors directly. The bulk services approval from the municipality also contributed to the delay. Access to the college was also another challenge because the road that provided access to the college was not conducive. The municipality delayed in decommissioning the road but the team recently learned that it has done so – we were not allowed to use this road before.

The Chairperson indicated that the projects needed to have the specialists come on board and identify all the issues and technicalities that needed to be resolved.

Mr De Vries said that as the new Accounting Authority it is prepared to work together with the Committee. On the National Skills Authority input, the Board would appreciate some collaboration with the NSA and some of its recommendations have already been implemented.

The Accounting Authority will go back and convene and discuss the SAQA’s report on the requisite qualifications of the executives. The SAQA’s report will be tabled to in the next Board meeting for further discussion on its implications and a resolution on the matter will be reached.

Ms Nyaka said that SAQA would make itself available to assist the Services Seta on a way forward regarding the issues with the qualifications.

Mr Mashongoane welcomed the suggestions regarding the skills audit in the sector and noted the suggestions made by the Members. The National Skills Authority has an on-going engagement with the Minister on its recommendations.

The Chairperson thanked everyone present and congratulated the new Board of the Service Seta.

The NSA needs to improve its processes and must conduct its investigations speedily.

The meeting was adjourned.