The Sectoral Education and Training Authorities (SETAs) are established in terms of the Skills Development Act, 1998 (SDA). There are currently 21 SETAs in South Africa, each responsible for managing and creating learnerships, internships, unit-based skills programmes, and apprenticeships within its specific sector of operation. In short, the SETAs cater for businesses and industries within a particular sector of the economy. They are intended to equip learners and potential employees with the necessary skills to empower them to obtain employment and earn a sustainable living.

OUTA contends that in some SETAs these objectives are not being realised. This results in industry and learners being deprived of development by the very institutions that promise to empower them. This in turn casts a shadow on the country’s skills development in general – which cannot be taken for granted in a society with a staggering unemployment rate of 30.1%.

The SETAs' funding, intended to be used to encourage learning and development in South Africa, is derived from the Skills Development Levy which is paid by employers. Employers with a total salary cost of at least R500 000 a year are liable to pay the levy, which is 1% of the total paid in salaries to employees (including overtime payments, leave pay, bonuses, commissions and lump sum payments) and is paid over to the South African Revenue Service (SARS). 

In the 2019/20 financial year, the SETAs together received R14,861 billion in funding through the levies. In 2018/19, a total of R1.602 billion in levies was collected by SARS for Services SETA alone. OUTA’s research and investigations indicate that vast amounts of funds are being maladministered or are simply being misappropriated.

OUTA found that the Services SETA has for instance been “spending” an exorbitant amount of funds on service providers who were contracted to deliver services that the Services SETA is geared to deliver itself with in-house personnel. OUTA found that the Services SETA contracted a service provider to pay grant payments (stipends) to learners and manage a biometric learner attendance monitoring system. This agreement was worth R162.669 million, yet little to no services were rendered. To put this into perspective, the Services SETA is only one of 21 SETAs and this contract relates to a single service provider.

OUTA has been frequently approached by learners registered for courses funded by the Services SETA who say that they have not received their stipends for months at a time, with some of them yet to receive any stipends. Some learners were unaware of any biometric devices being used to record their attendance at training facilities or businesses. Rather, most roll calls were filled out manually by signing attendance registers. OUTA is concerned by the fact that services are procured by the Services SETA, yet the delivery of these services remains unclear.

OUTA’s continued investigation into the SETAs has suggested that corruption and maladministration are also present in other SETAs, effectively depriving many more learners and industries of much needed skills.  

• After exposing the Services SETA's questionable R163 million contract with Grayson Reed in November 2018, OUTA called for the SETA to cancel this and for an investigation into the matter by an independent authority. No investigation took place. In September 2019, the SETA cancelled the contract six months before it was due to end, but failed to take further action.

• OUTA calls for the recovery of any misappropriated funds from this contract.

• OUTA calls for criminal charges against those implicated in this fraud.

• OUTA wants the perpetrators of corruption and misappropriation of funds within Seta to be held accountable and be prevented from committing further corruption.
  

• OUTA calls on the National Treasury’s Chief Procurement Officer to investigate the Services SETA’s procurement processes.

• OUTA calls for a national reassessment of the entire SETA system, as this failure of governance raises concerns over the possibility of substantial sums being syphoned out of these entities.

• OUTA is a proudly South African civil action organisation, that is purely crowd funded. Our work is supported by ordinary citizens who are passionate about holding government accountable and ensuring our taxes are used to the benefit of all South Africans.

2019: The PAIA request for information:

On 23 January 2019, OUTA sent the Services SETA a request for information in terms of the Promotion of Access to Information Act (PAIA), asking for specific information relating to the Grayson Reed contract. Documents requested in a PAIA application should be provided within 30 days.

The list of documents requested is here.

On 4 March 2019, the Services SETA provided four documents and refused the rest.

The information requested included:

• The Services SETA’s needs analysis which resulted in the tender;

• The tender compliance checklist;

• The Grayson Reed tender response;

• The recommendations by the Bid Specification Committee, the Bid Evaluation Committee and the Bid Adjudication Committee to appoint Grayson Reed;

• The master service level agreement between the Services SETA and Grayson Reed;

• Billing documentation from 1 November 2017 to 31 January 2019, including proof of payments and deliveries;

• The register of learners and entities which received stipends;

• The schedule of payments by the Services SETA to Grayson Reed;

• The attendance records generated by the biometric units supplied by Grayson Reed; and

• The names and registration numbers of Grayson Reed subcontractors on this contract.

This was the information provided by the Services SETA:

• The Services SETA’s latest supply chain management policy;

• The needs analysis which resulted in the tender;

• The tender advert;

• The tender compliance checklist.

 2019-2021: The PAIA court action:

• On 16 October 2019,  OUTA filed a court application in the Johannesburg High Court, challenging the Services SETA's refusal to provide all the information OUTA requested in the PAIA application. OUTA's notice of motion and founding affidavit are here.

• On 20 January 2020, the Services SETA filed an answering affidavit. The Services SETA's answering affidavit is here.

• On 2 April 2020, OUTA filed heads of argument. The OUTA heads of argument are here.

• The Services SETA failed to file heads of argument. OUTA then set the matter down for 18 February 2021 to compel the Services SETA to file its heads of argument. 

• On 18 February 2021, OUTA and the Services SETA agreed that the SETA would file its heads of argument by close of business by 25 February 2021, which it did. The Services SETA heads of argument are here.

• On 5 March 2021, OUTA applied for an opposed motion court date to be allocated.

• On 5 June 2021, the Services SETA filed supplementary heads of argument; these heads are here.

• On 6 June 2021, the Services SETA filed further arguments. This document is here.

• The matter was set down for hearing on 7 June 2021, but was postponed by a day. 

• On 8 June 2021, the matter was heard in court. Judgment was due to be delivered on 10 September 2021 but was postponed.

• On 4 November 2021, the Johannesburg High Court ordered the Services SETA to comply with the PAIA request and provide OUTA with the documents. The judgment is here. “Our Constitutional values require that public bodies be transparent, and that transparency in turn equates to public confidence on how the public funds are managed,” said Judge Marcus Senyatsi.

• On 10 November 2021, SETA furnished OUTA with the requested documents. 

August 2020: Parliamentary Portfolio committee submission:

• On 25 August 2020, OUTA made a presentation to Parliament's Portfolio Committee on Higher Education, Science and Technology on maladministration in the Services SETA, in particular on the contract with Grayson Reed.

• OUTA's presentation is here. The minutes of this meeting are here.

• OUTA trusts that our report will assist the members of the Portfolio Committee to hold the individuals to account for their roles in the looting of the Services SETA. The Portfolio Committee has been investigating the affairs of the SETAs, specifically the Services SETA, from 2019. In this meeting, OUTA called for the Portfolio Committee to call on the Minister of Higher Education to place the current board of Services SETA under administration. OUTA pointed out to the committee that the Skills Development Levy was not being used for its intended purpose. While the Services SETA dismissed OUTA's allegations at that meeting, the SETA's own presentation referred to the "former CEO and his executives" as having "fraudulently orchestrated payments of various amounts of money to themselves without the required authorisation" involving R40 million.
  

• OUTA also calls for the Services SETA to do the right thing and institute action against services providers that benefited from irregular expenditure, in line with the provisions of the Public Finance Management Act.

November 2022: What's in OUTA's report on the Services SETA

• After receiving the information from the Services Seta through the PAIA application, OUTA compiled a report detailing its findings.

• The SSETA’s contract with Grayson Reed Consulting was awarded in October 2017 for R162.669 million and ran for about two years. The contract was to procure and manage a biometric learner attendance monitoring system and to make direct payments of stipends to learners. In 2018, OUTA started investigating allegations of corruption and mismanagement of funds in the contract after being alerted by a whistleblower.

• OUTA found problems in the tender and the contract.

• The bid for the tender was advertised for just four days before the closing date. The bid was published in the government Tender Bulletin on 25 August 2017 and closed on 29 August. The National Treasury Regulations require that a tender be published for at least 21 days before the closing date. The bid description in the adverts for the tender in the daily newspapers differed from the description which was reflected on the SSETA website. The Constitution requires that procurement of services by organs of state be done in accordance with principles of fairness, equitability, transparency, competitiveness and cost effectiveness.

• The records of the SSETA’s Bid Evaluation Committee (BEC) reflect that the evaluation of the bid was conducted on 21 August 2017, eight days before the closing date. The SSETA has said that the bid evaluation date must have been a mistake, but our report is based on the documents before us.

• From OUTA’s investigations, it appears that the BEC and the Bid Award Committee (BAC) failed to conduct a due diligence investigation into the Grayson Reed consortium, which would have revealed that Grayson Reed did not have the required experience, had not previously declared any revenue to SARS and opened a business bank account shortly before submission of its bid documents. The Grayson Reed consortium partners showed a similar lack of experience.

• Notwithstanding the irregularities in the procurement process, the SSETA accounting authority (the board) awarded the tender to the Grayson Reed consortium. The board has a fiduciary duty in terms of the Public Finance Management Act to act in the best interests of the public entity, but OUTA is of the view that the SSETA’s board failed to do that and ultimately cost the taxpayer more than R163 million.

• OUTA found irregularities pertaining to travel and accommodation claims worth R2.168 million. Most invoices were submitted without source documents, some had source documents which did not back up the claim or appeared to be fraudulent, while other costs were not incurred by Grayson Reed but by other entities. The SSETA travel and accommodation policy was ignored. In February 2019 and March 2019, the ground travel claims were R194 800 and R259 309 respectively. “Taking into consideration the explanatory notes attached to the invoices, it looks like every employee at Grayson Reed was traveling daily by Uber and filling their vehicles every second day with fuel. They then claimed it back from SSETA… Not only was the fuel claim extremely high but there were also several instances where claims were clearly duplicated and thus charging SSETA double for the same expense,” says OUTA’s report. Payments were authorised by the SSETA’s Senior Manager: Project Accounting and the Chief Financial Officer.

• OUTA first exposed this contract in November 2018, saying the equipment had allegedly not been delivered or didn’t work (see here). In September 2019, the SSETA ended the contract six months early (see here). As far as we have been able to establish, no action was taken and nobody was held to account.

OUTA's report on the Services SETA

• OUTA’s complaint to the SAPS is here and the attached report on our investigation into the Grayson Reed contract is here.
  
  

November 2022: What we did with our report on the Services SETA

• On 30 September 2022 OUTA shared its report with SSETA to inform them about the findings following the report and to afford the SSETA the right of reply.

• On 5 October 2022 OUTA held a meeting with SSETA to discuss the report and to hear SSETA's reply. During the meeting SSETA advised that although they did not have a formal response at that stage, the one issues that they dispute at this stage is the issues of the date for evaluation of bids. They also undertook to table OUTA's report on their next executive committee meeting for discussion.

• On 30 November 2022, OUTA opened a criminal complaint at the SAPS Parkview police station, backed up with a copy of our report on the SSETA. Our complaint calls on the police to investigate fraud and corruption charges against two serving officials of the SSETA and all the directors of the businesses involved in the SSETA contract with Grayson Reed.  

• OUTA also handed over its report to the Special Investigating Unit.
• Services SETA has since appointed Werksmans Attorneys to conduct investigations on the Grayson Reed tender based on OUTA's report. OUTA will monitor this investigation to see what the outcome will be.