Training for success

There is general agreement that South Africa needs more and better-quality training. Our human resource development record is extremely poor by international standards and needs to change. We need a more skilled and productive workforce to compete effectively in international markets and to respond to new technologies. We need a training system which assists the poor and unemployed, improves their prospects of employment and redresses the inequalities and scars of our past.

But who should control, manage and pay for this training? Agreement on these issues is not so simple. The devil is in the detail. As negotiations on the skills development bill get underway, Harriet Perlman explores the current debate. This article does not comment on the current state of negotiations

A number of studies have shown that our training is inadequate. There is general under-investment in, and unequal access to, training. Training is frequently of poor quality with poor portability of skills and little concern for the needs of the informal sector.

Current training institutions are highly fragmented. The Department of Labour funds training through nine regional training centres, training trusts (which operated in the old homelands) and private training providers. These institutions provide training for unskilled and semi-skilled workers, as well as for the unemployed. Between 1990 and 1994 the number of workers trained at the training centres fell from 31 650 to 19 227. The department's scheme for the training of unemployed persons has had poor results, both in terms of the numbers trained and the outcomes of the training.

The Department of Education funds technical and vocational training in technical colleges and technikons, much of which takes place in isolation from job-related experience.

Industry-specific training boards organise training across 28 sectors of industrial activity. These boards are mainly funded by voluntary levies and grants from employers in the industry, and focus mostly on training artisans. In addition, private training centres also carry out a wide range of training.

Since 1985 there has been an 85% decline in the number of artisans receiving training, the majority of whom are white. In 1985, 12 933 people attained artisan status, while in 1994 only 3 960 achieved this. Training boards have been criticised in the past for the poor quality of their training, inequalities in terms of access, trade-test entry barriers and their strong artisan focus. Furthermore, many sectors are not covered by the 27 industry training boards.

Low-level industry training

The level of industry-based training is generally low by international standards, particularly in sectors with high employment-growth potential. Most industry training is informal with only a small proportion of formal training being done for lower-level workers. We spend only 2,7% of payroll on training compared to 4% and 7% in Organisation for Economic Cooperation and Development countries. Of the structured training being done, most is taking place in large companies, a little in medium-sized ones and virtually none in small and micro-sized enterprises.

Everyone agrees that there is a critical need to upgrade skills. Training needs to raise entry-level training but also produce skills relevant to labour-market needs.

The Department of Labour on September 2 this year released for public comment its skills development bill. It proposes a number of mechanisms to tackle the problem and bring about a "skills revolution" in our country.

What the bill says

The green paper which preceded the bill argued that "skilled people are a fundamentally necessary part of any economic and employment growth strategy", and that "re-establishing the linkages between learning and working is a condition for growth".

The bill is primarily concerned with:

• Forging a closer link between training and the needs of industry and the labour market.
• Greater coordination of training at sectoral level.
• Increasing the level of investment in training by industry.

The bill proposes that, to increase access to entry-level education and training, a system of learnerships should replace the apprenticeship system. Learnerships will combine structured learning and work experience, be flexible with different entry and exit levels, be credit-bearing and portable to support mobility within and across firms.

Lindsay Falkov, director of human resource development in the Department of Labour, says: "Learnerships will radically improve access to training and enable people to come in below apprenticeship level and work their way up to intermediate level. Learnerships are a vehicle for establishing an effective entry-level system."

In order to coordinate the skills development strategy, the bill proposes two mechanisms. Firstly, the current industry training boards should be replaced by education and training boards (ETBs), which will be established in each industry or subsector; secondly, sectoral coordination will occur through sectoral education and training authorities (Setas).

New financial measures

The bill also proposes new financial measures to expand investment in training. The current voluntary levy scheme is to be replaced with an obligatory national-levy grant scheme. All employers will be required to pay between 1% and 1,5% of their payroll costs to industry education and training funds. The bill does provide for any category of employers to be exempted from the liability to pay the levy.

Eighty per cent of the levy will remain in the sector to support enterprise-based training for employees and management, as well as learnership training for industry-wide entry-level skills. But the grant will also be used to expand entry-level education and training for targeted groups.

Twenty per cent of the levy will go to the National Skills Fund (NSF), to be managed by the Department of Labour. The NSF will fund training for target groups, pre-employment training (including adult basic education) and strategic training in priority or declining sectors. Government will also contribute to the fund.

Falkov says: "Fifty per cent of the population is outside of formal employment. We must improve the quality of unemployment training."

The levy will be collected nationally and the sectoral portion allocated back to the ETBs. To get their sectoral funds back, ETBs will have to comply with certain criteria which will be set out in regulations to be agreed by the new National Skills Authority (NSA), which will replace the existing National Training Board.

Sipho Pityana, labour director-general, says: "The levy scheme provides a stable and protected source of funding for training in the context of severe fiscal constraint, low levels of private-sector training and a declining apprenticeship system."

It seems that no one disagrees with the aims of the bill. It's how to achieve them that is in dispute. And the key issues for debate focus on the financing and coordination of the system.

Time and flexibility

One concern is about time and flexibility. André, Dippenaar, chairperson of Business South Africa's committee on education and training, argues that "the lead time between a need and servicing that need must be quick. For example, on a mine one morning we may hit a fault in the ore. We employ multi-tasking to solve it. We can sort it out in a week. We can't wait months for a Seta to approve our training plan!"

There is little doubt that industry training boards must change. Some feel that merging training boards into 21 Setas will streamline training, avoid duplication and heighten portability. Others argue that training authorities need to be close to their industries to be effective, responsive and efficient. Setas, which, for example, combine four employer bodies, could be very large and bureaucratic.

Mike Tshehla, labour representative on Nedlac's skills development negotiating committee, is also concerned about the actual demarcation of the Setas. "We are happy with the concept of the Setas. But they need to be linked with the broader demarcation of sectors which Nedlac is currently working on."

The levy scheme

There are a number of issues around the levy scheme. Firstly, the amount needs to be negotiated. The Department of Labour says between 1% and 1,5%; labour proposes 4%.

Secondly, some argue that levies increase the cost of employment, putting growth and job creation in jeopardy. Employers, rather than increase their employment costs, will simply take on contract workers.

Some commentators believe that a levy exemption would be better. In this way one minimises the cost of disbursement because one's rand stays in the enterprise. Government sets a minimum training standard (say, 1% of payroll) and companies which train to this level are exempt from the tax. A mechanism to check that the training is actually being done needs to be put in place.

A few argue against levies altogether because, with deregulation, training will increase naturally. Dippenaar says: "The reason companies didn't train was that they were protected. But with the opening of the markets the level of training is increasing exponentially. The rules are now different. The real incentive to train is to gain a competitive edge. The free market will speak for itself. Most mines are now spending 4-5% of payroll on training."

Falkov is clear why the levy-grant system is the best choice. "It is just not good enough for employers to say levies should be voluntary. They have been and it didn't work. We looked at funding all over the world from privately funded schemes, tax incentives and subsidies.

"Tax incentives or exemptions are open to abuse, especially in countries where there isn't a culture of paying tax. It is also difficult to monitor them. A levy exemption needs a strong policing mechanism. But it is difficult for another reason: government needs to generate revenue for unemployment and pre-employment training," he says. And this revenue must in part come from the private sector.

Seifsa's Mike McDonald believes that the revenue for the training fund should come from the fiscus. "Skills development is a priority of the government's growth and development strategy. Gear has committed itself to human resource development; therefore, it is not a question of government not having the money but rather how it reprioritises its current spending."

Managing a central fund

But the biggest question remains: can government manage a central fund? Falkov says yes. "There are currently 21 industrial training boards, 21 levy schemes and 21 collecting agencies. Instead, we are proposing one central collection point to rationalise the current administrative structure. We will put in place effective technology to root money back to sectors. It doesn't need to be cumbersome."

The view exists that collection rates across many boards are, in fact, high. One training-board manager said: "We have a 72% collection rate. Where difficulties arise it is because we don't have the teeth to prosecute.

"The government accounting system has no track record of efficient collection, be it the Unemployment Insurance Fund or income tax. Rather allow sectors to collect and give them proper muscle to prosecute defaulters."

McDonald is concerned with the cost of central collection. "Twenty per cent of your levy goes to target-group training. Of the 80% that goes back to the sector at least 20% will be spent on the administration of that money. The benefit will be diluted. We prefer a system where the levy - how much and how to collect it - be determined by the unions and enterprises in the sector itself. For example, hospitality might prefer a tax on rooms; maritime a stamp duty. Sectors should decide for themselves."

While the devil is still in the detail, the bill goes a long way in providing a new vision for a fragmented and ailing training system. But it will need the efforts of all stakeholders-business, labour, government and civil society-to make it work.

• Nedlac has published two booklets on the research into financing training it has undertaken. These are: Overview of the formal training system in South Africa and Financing of training: the international experience. Both booklets can be ordered from Mbuso Ngcongo at mbuso@nedlac.org.za