Funding Skills Development in South Africa

There’s a major drive in South Africa to economically empower the previously disadvantaged majority. Skills development is one of the ways the government is equipping the millions of people who are underprivileged with training so they can be active participants in the economy. To fuel this skills development machine, the Skills Development Levies Act was enacted in 1998.

Under the Act, a collection of Sector Education and Training Authorities (Setas) was established in 2000. While the Setas have gone through change over the years, their roles remain the same. The 21 remaining Setas distribute funds collected from South African companies to finance learnerships, skills programmes, apprenticeships, internships, and bursaries. Companies with an annual payroll of R500,000 (US $34,600) or more pay 1% of that to the South African Revenue Services. The levies are kept in a special fund, with 80% of the money going to the Setas while 20% is distributed to the National Skills Fund (NSF).

The National Skills Fund serves a similar role to those of the Setas, but finance development projects that don’t fall under the latter. In South Africa, there’s a shortage of “scarce skills,” which include accounting, economics, business management, engineering, physics, chemistry, and other science sectors. Every year, the NSF provides bursaries for bridging the skills shortage gap in these and other sectors that are vital for the growth of the economy.

Setas replaced the old industry training boards, and almost every sector of the economy has a Seta dedicated to it. Some of these skills training bodies include the Agri SETA, Bank SETA, Transport SETA, as well as Media, Advertising, Information and Communication Technologies SETA, among others. Annually, more than R13 billion (US $900,000,000) flows to the Setas for use in their respective sectors, and each of them is responsible for creating and implementing a skills development plan and paying out grants. More than 135 learnerships have been developed, covering everything from entry level to post-professional education levels. From high school and college learners to employed individuals who need to take their skills to the next level – everyone stands to benefit from the levies contributed by South African companies. Companies that embark on a learnership programme receive a tax incentive and can claim back up to 70% of the portion of their Skills Development Levy.

Other roles of the Setas include identifying the skills requirements in their specific sectors, ensuring that students receive high-quality training and that the training meets agreed standards that are in line with the national qualifications framework.

While South Africa is among the leading economies in Africa and has been at the forefront of development for many years, it remains one of the most unequal societies in the world. Although one cannot address the scourge of inequality without considering the bitter history of apartheid behind it, the gap between the rich and poor is widened by a lack of quality education for the underprivileged. As a result, the country faces a high drop-out rate of high school learners. The situation is compounded by a curriculum that does not fully equip young people with the skills they need to enter the job market. This is where Setas come in to upskill those in need.