SETA reform requires decisive action, not another promise

South Africa can no longer afford to tinker at the edges of an expensive and extractive system that has clearly lost its way.

The SETA system has deteriorated from what was once a credible reform instrument into a bloated, bureaucratic and corruption-prone relic. This collapse did not happen overnight, nor did it occur unnoticed. It unfolded in full view of ministers, boards and oversight authorities who, for years, failed to act with the urgency required.

Recent comments by President Cyril Ramaphosa indicating that the system should be overhauled are welcome. But South Africans have grown weary of promises. Against the backdrop of persistent reports of corruption and wasteful expenditure, what society now demands is visible action and measurable consequences.

A system that started with purpose

The SETA framework was introduced through the Skills Development Act of 1998, alongside the Skills Development Levy (SDL), which requires employers to contribute 1% of their payroll. In its early years, between 2000 and 2004, the system collected around R3 billion to R4 billion annually, growing steadily as compliance improved.

The initial design was sound. Employers would help fund and shape skills development, ensuring that training aligned with real economic needs. Roughly 70% of funds were earmarked for employer grants and training initiatives, while the remaining 30% was split between administration (10%) and the National Skills Fund (20%).

For a time, the model showed promise. It was intended to be demand-led, driven by industry and focused on building a more capable workforce.

From reform instrument to extraction mechanism

However, as the state capture era under former President Jacob Zuma took hold, SETAs became  yet another target for systemic looting and maladministration. What followed was a gradual but unmistakable shift from a system designed to empower employers to one increasingly defined by control, compliance, capture and corruption.

Today, the SETA system no longer operates as a skills development engine. It functions more like a tax recycling scheme layered in red tape.

More than R20 billion moves through the 21 SETAs each year, yet much of this is absorbed by administration, process layers and patronage networks.

Employer engagement has declined significantly, and many businesses no longer see the system as a training and development opportunity for their staff or interns, but rather as a costly and frustrating exercise in trying to recover a small portion of a compulsory levy.

A system that measures motion, not impact

Perhaps the most damning feature of the current model is its fixation on activity rather than outcomes.

SETAs continue to report on the number of learnerships registered and training interventions funded, and yet far less is said about how many participants secure sustainable employment, or whether businesses become more productive and whether critical skills shortages are being addressed.  

The result is a system that produces certificates without capability, and training without transformation or employment.

Worse still, the model has enabled the proliferation of questionable training providers who have little experience or infrastructure, but who enter the system primarily to access grant funding. At the same time, reputable training providers have in some cases been sidelined, leading to disputes and even multi-million-rand legal business damage claims against the SETAs. 

Governance failures with little consequence

Overlaying these inefficiencies is a pattern of weak governance and minimal accountability. Irregular expenditure, leadership instability and questionable grant allocations have been widely documented, yet meaningful consequences remain rare.

Business and civil society have raised concerns about the direction of the SETA system for years. These concerns have been reinforced by a 2025 Bureau of Economic Research (BER) report from Stellenbosch University, which paints a deeply troubling picture.

Over a 13-year period, SETAs received R164 billion in levies, yet struggled to spend effectively, accumulating large surpluses while outputs declined. The cost per certificate reached approximately R181,000, significantly higher than comparable university or TVET funding per person.

Of the 2.6 million learners registered by SETAs during the period under review, more than 630,000 failed to achieve certification. Meanwhile, administrative headcount increased by 60%, with wage bills rising at an unsustainable average of 12% per year.

These figures point not to a system in need of minor reform, but to one that has become structurally disconnected from its purpose.

The case for a new model

The debate is no longer whether the SETA system is underperforming. That is now widely accepted. The real question is whether it can be fixed and whether it should be entirely replaced.

A growing number of stakeholders are advocating for a fundamentally different approach, along the lines of an Employer-led Training Incentive Scheme. (ETIS)

Under this model:

• Employers would retain a far greater share of their levy, conditional on verified training outcomes

• Bureaucratic grant processes would be replaced with simpler, more cost-effective and auditable tax incentives or rebates

• Funding would be linked directly to actual training delivered and employment created, rather than compliance paperwork

This would shift the system back to where it was always meant to be, in the hands of employers and aligned to real economic demand.

Putting resources where they belong

Closing down SETAs does not mean abandoning skills development. It means removing a failing intermediary and placing resources directly in the hands of those who can use them effectively, employers and trainees.

A reformed system must eliminate unnecessary layers of approval and reporting, whilst introducing clear, outcome-based oversight mechanisms and focus on employment outcomes, earnings progression and employer satisfaction. 

Funding should prioritise apprenticeships and workplace-based training, where real skills are developed. Incentives must reward job placement and retention, not course attendance.

The SETA system has become a delivery problem, not a funding problem.

Until we dismantle the structures that absorb billions without producing meaningful results, we will continue to train people for jobs that do not exist, enrich connected networks that exploit the system, and leave businesses struggling to find the skills they need.

The time for incremental reform has passed. In its current form, the SETA system has failed, in its current form, has failed. The only credible path forward is bold, decisive change.