Local Government SETA on progress made in restoring governance and operational efficiency at the entity; with Deputy Minister

Video The Portfolio Committee on Higher Education and Training met with the Local Government Sector Education and Training Authority (LGSETA) in Parliament, the first engagement with the entity since it was placed under administration on 19 August 2025 by Minister Buti Manamela for a period of 12 months. They met to receive a progress report from the Administrator, Mr Zukile Mvalo, on steps taken to restore governance and operational efficiencies at the entity, in line with the terms of reference issued at the time of his appointment. The Administrator reported that the entity had been found in a severely compromised governance state on his arrival: the board’s term had lapsed, leaving no functioning Accounting Authority; the CEO had been serving in a dual capacity as both CEO and Accounting Authority, a structurally irregular arrangement; the Audit and Risk Committee had been dissolved; three executives remained on suspension since 2021 with their disciplinary cases unresolved; and the LGSETA was engaged in litigation against the Auditor-General. Since the Administrator’s appointment, the recommendations of the National Treasury forensic report had been substantially implemented, and a criminal case had been registered with the South African Police Service and subsequently transferred to the Hawks (case number CAS 235/10/2025). The judicial review proceedings against the Auditor-General were withdrawn in November 2025, and the Audit and Risk Committee was re-established in December 2025. Of 367 projects flagged as potential material irregularities totalling R136.9 million, 91% had been reviewed and cleared, with 64 projects valued at approximately R13.1 million referred to attorneys for recovery. The LGSETA’s financial position remained strong, with revenue of R912.9 million for the nine-month period to December 2025, a cumulative surplus of R224.9 million, and a liquidity position of R2.66 billion. Operationally, the picture was less encouraging. Only 27% of annual targets had been achieved by the end of the third quarter. Programme three, which covers learning programmes and constitutes the core of the LGSETA’s mandate, had achieved 17 of 55 targets by December 2025, a significant decline from the 85% achieved at year-end in the 2024/25 financial year. The SETA noted that an improvement plan with specific deadlines was in place. A total of 14 000 beneficiaries had been reached by December 2025, and an “adopt a municipality” pilot programme was providing onsite skills support to 11 of the 66 municipalities classified by COGTA as dysfunctional, with early improvements in audit outcomes observed. The exit plan targets the appointment of a permanent CEO and a new Accounting Authority before 19 August 2026. The dominant concern throughout the session was the LGSETA’s decision to extend, by six months (to 30 September 2026), the lease on its current office premises, the very building whose procurement the National Treasury forensic report had declared irregular, having been secured for approximately R50 million against a board-approved ceiling of R20 million. Members felt that extending the lease was costing the entity approximately R1 million per month and amounted to compounding the original irregularity rather than rectifying it, contrary to the explicit mandate of the administration. Members observed that the Administrator had served as DDG responsible for Skills Development for eight years prior to his appointment and had entered the role with full knowledge of the building problem and the lease’s expiry date, making the extension a self-created problem rather than an unavoidable emergency. Members pressed the Administrator on how a legal opinion had not been obtained before extending a contract that the forensic report had flagged, and why National Treasury had not been consulted. The Committee was further concerned about the sequence of the new procurement process: a conditional offer had been issued to a preferred bidder in December 2025, accepted within two days, with a probity audit initiated only afterwards, a sequence members characterised as an afterthought that had created potential legal exposure should the bidder claim loss of income arising from the delay. The Administrator committed to obtaining an independent legal opinion on the lease extension within seven days. The SETA invoked the All Pay Constitutional Court precedent to justify the continuation of the irregular lease on an interim basis, but the analogy was rejected, noting the circumstances bore no comparison. Some of the Members called on the Administrator to consider resigning, arguing that he had committed the same category of conduct he was appointed to rectify. The Department confirmed that extending an irregularly procured contract could constitute financial misconduct under section 83 of the PFMA, that this provision applied equally to the Administrator, and that he would act if he arrived at a finding of misconduct. The Committee also raised concern about the criminal case opened against all former board members for financial misconduct arising from the irregular CEO appointment. They questioned the legal soundness of the case, noting that, under the Skills Development Act, the appointment power resided with the Minister, not the board, whose role was to recommend. Charging the recommenders while leaving the appointer outside the consequence management framework was, in the Committee’s view, misdirected and unlikely to succeed. Members also noted that the now-Minister had been Deputy Minister at the time of the appointment, and they asked why the former Minister did not feature in the administration’s consequence management plans. The Department confirmed that the Public Protector was investigating the irregular appointment of the CEO and that the former Minister had been called to appear. Members further raised concern that no skills audit of the LGSETA’s workforce had been conducted and that this was absent from the Administrator’s work plan, undermining the quality of any handover report. They pressed the Department on how it exercises oversight over SETAs, expressing serious concern that the Department’s response amounted to reliance on whistleblowers, and noting that the Constitution vested oversight powers which the Skills Development Act could not override. Members also raised the matter of three CCMA disciplinary cases against the suspended executives being declared inaudible and inadmissible following the death of the presiding commissioner, stating that they did not accept that official records from 2022 and 2023 proceedings could simply be lost. They undertook to write to the Minister of Employment and Labour, seeking a formal explanation and the court register. They noted that one of the executives had already been found guilty on two of five charges and that the LGSETA had been right to reject the CCMA’s recommendation of a suspended sanction, given the unambiguous nature of the board’s R20 million ceiling. Resolutions and Commitments The Administrator committed to obtaining an independent legal opinion on the lease extension within seven days and to flagging the former board members against whom criminal cases were opened to the Department of Public Service and Administration, by the end of March 2026. The Department committed to providing the Committee with the detailed administration work plan in writing. The Committee requested, within seven days, the CCMA (Commission for Conciliation, Mediation and Arbitration) ruling in the executive’s disciplinary case in which a not-guilty finding had been returned on the building-related charge; the board minutes alleged to have approved the increase in the lease cost from R20 million to the contracted amount; and the independent legal opinion on the lease extension. The Committee further undertook to write formally to the Minister of Employment and Labour regarding the lost CCMA records and to the Director-General on his obligation to charge the Administrator should a misconduct finding be confirmed. The Committee noted that the internal audit report containing consequence management recommendations for the 64 unresolved irregular expenditure projects was scheduled for presentation to the Audit and Risk Committee on 20 March 2026. It recorded that enforcing consequence management was a mandatory term of the Administrator’s appointment.