Skills levy cut hampers training

Read time 5min 40sec
Higher education and training minister Blade Nzimande was served with court papers after he trimmed the skills grant.
Higher education and training minister Blade Nzimande was served with court papers after he trimmed the skills grant.

Government's reduction in the amount of cash companies recoup for training has already had an adverse effect on the skills pipeline.

The refundable percentage of the skills levy has dropped, and while there is a discretionary grant that would help to address this lack of incentive, the industry says this is earmarked for courses that are of no use to it, and will not help to develop a skills pipeline.

In April, the amount companies could claim back on training dropped from 50% to 20%, with the 30% being accessible through the so-called discretionary grant. However, training through vendors such as Microsoft and Cisco cannot be claimed back under this category.

Instead, the amount now being held back by Sector Educational Training Authorities (SETAs) is going into public Further Education and Training courses, which the industry says are irrelevant as they are the equivalent of a matric.

The IT Association (ITA) is fighting the change in regulations, as it is seen as an anti-incentive in getting companies to fund skills training programmes at work and will widen the skills gap.

In May, Business Unity SA (BUSA), of which the ITA is a member, issued court papers against higher education and training minister Blade Nzimande, arguing that the drop, which came into effect in April, will harm skills development.

Stripped out

Skip Franzen, chairman of the ITA committee on sector skills, says the effect of lower reimbursed levies is already being seen in training planning.

The difference - between the initial 50% and the gazetted 20% - is accessible through a discretionary grant, the bulk of which has been set aside for what the department calls pivotal programmes.

However, Franzen argues that this programme specifically excludes vendor training, which is a huge portion of training spend, and eliminates companies' ability to recoup what they have spent on courses offered by companies like Microsoft and Cisco. The ITA has more than 100 members in the sector and is represented by BUSA in the levy talks.

A "huge" part of IT training is being excluded by the MICT SETA, which the ITA estimates at about 80%, because of the new regulations, says Franzen. He says, as a result, companies cannot claim back for the training that is needed. "This can't be right for IT companies or good for training or good for those seeking a career in IT."

Torque IT FD Gerhard de Beer says its clients cannot claim back any training done for vendor certificates and, as a result, the company is expecting at least an 8% to 10% drop-off in turnover from October. He adds this will increase once refunds in the pipeline have been processed and budgeted for. "It's horrific... There's no good news in the pipeline."

De Beer says there is no incentive to train, which will hurt the economy and will adversely impact the already scarce skills situation.

Key skills

According to the MICT SETA's latest skills development plan for 2013, in the IT subsector, another 493 software developers and 451 developer programmers will be needed between 2012 and 2015. Some 402 computer network and systems engineers are required, as are 351 ICT systems analysts.

In the telecommunications subsector, in the same timeframe, 16 ICT business development managers are needed.

The SETA says technical skills development accounts for 34% of all skills interventions over the next three years, and the next two categories of skills that are in high demand are software development and software programming.

"There is estimated to be a slight undersupply of degree graduates for the three-year period 2012 to 2015 for the ICT subsector," the plan says. Notes the skills plan: "The MICT SETA is required to focus primarily on the development of scarce and critical skills in the sector."


In a letter written to Nzimande, the ITA says the reduction in the grant does not provide enough incentive to the many small companies. "We believe the impact of the current regulations will be that small employers will be lost to the training and development system."

The ITA believes less critical and scarce training will be done, and notes the reduction has already had an impact on the amount of training that is being planned. "This cannot be a reasonable outcome."

Franzen says small and medium companies make up about 40% of the sector and, with the reduction in what they get back on training and the amount of paperwork, they are not incentivised to grow skills, which he says is "short-sighted".

In his response to the ITA, Nzimande says: "Employers who do excellent training, which is quality assured, will now be able to gain a far bigger slice of the pivotal grant than those who do not train or do not train well."

However, Franzen says the MICT SETA has prioritised training into lower level skills, which are at matric level, which is where the discretionary grant will be focused. "It's not so clever."

The ITA will send another letter to the minister and is also engaging with BUSA, says Franzen.

Business view

BUSA CEO Nomaxabiso Majokweni says: "The key underlying concern from BUSA is that a large proportion of the levy funding that should be used to support workplace and sectoral skills development is likely to be removed from workplace and sectoral initiatives.

"This will have serious consequences for skills development and will undermine the objectives of the Skills Development Act." Majokweni says the cornerstone of the funding model was to provide incentives for companies to embark on training their workforce through the mandatory grant dispensation.

"Any major or radical change in the mandatory grant dispensation upon which employers have developed current and future skills plans may have the serious and unintended consequence of leading to a drastic reduction in training across South Africa at a time when the country can least afford it."

Both the department and MICT SETA were asked for comment but did not revert by the stipulated time.

Login with