Anton Visser | Chief Operations Officer | SA Business School | mail me |
The Skills Development component of B-BBEE scorecards has created a large and robust training industry. However, while many organisations deliver quality learnerships and skills programmes, an alarming number exploit the system and the corporate sponsors of learnerships. The consequences extend far beyond financial loss.
South Africa is grappling with a staggeringly high youth unemployment rate. Against this backdrop, such exploitation constitutes cruel treatment of vulnerable young people. They enter learnership programmes expecting genuine training, work experience and fair compensation. Instead, they often receive inadequate training while unscrupulous providers claim fees from sponsors under the guise of learnership training costs.
We are aware of unethical entities pocketing millions of Rands while delivering substandard programmes. This undermines the true purpose of learnerships: providing new workforce entrants with meaningful experience and training in formal working environments. Done correctly, this helps them transition to sustainable employment and long-term career growth.
Sponsor beware – the dangers of neglect
The foremost problem arises when learners are hosted at training providers’ facilities with little or no oversight from sponsors. Many learners hosted by unethical training companies receive no meaningful work experience. Despite bold claims of thousands graduating annually, the absence of oversight means learners obtain qualifications they never truly completed. They leave the programmes no better positioned than when they started.
Substandard programmes also defraud SARS, sponsor companies, taxpayers and the learners themselves. This is a key warning sign of learnership and ETI fraud.
For corporate sponsors, it is crucial to conduct thorough due diligence, maintain ongoing oversight of training providers, and remain engaged with learners. Without this vigilance, sponsors may inadvertently fund exploitative, subpar programmes.
We highlight the warning signs that sponsors should look out for:
Employee Tax Incentive (ETI) fraud
The ETI encourages youth employment by reducing employers’ PAYE obligations while maintaining employee wages. Unscrupulous providers may advise sponsors to register learners as employees to claim ETI allowances against monthly payroll PAYE. This creates false employment to claim incentives for trainees, not genuine employees.
With SARS intensifying its crackdown on abusive ETI schemes, businesses face severe financial and reputational consequences. These include repaying illegitimate claims with interest and losing tax compliance status. In this case, the sponsoring company bears all the risks associated with the project. That means additional SARS assessments, penalties, and possible labour law violations.
Excessively low learnership costs
If your company pays far below market-related rates per learner annually, take it as an alarm bell. Quality learnerships require infrastructure and resources. These include classrooms, workplace facilities, learning materials, qualified facilitators, assessors and full-time trainers.
Ask yourself: Have you personally visited your provider’s facilities? Can they demonstrate legitimate, quality workplace environments where learners complete practical hours? Legitimate costs cannot be deeply discounted without compromising quality. Ignoring this red flag exposes your company to potential learnership and ETI fraud.
Learnerships of less than 12 months
Learnerships require learners to complete specific notional hours at 10 hours per credit. Most programmes range from 120 to 150 credits. This translates into at least 1,200 work experience hours, typically achieved over 12 months of full-time engagement. Any provider promising completion in less time should raise immediate concerns.
Also, verify your provider’s completion rates. How many learners successfully finish? What percentage of secure employment afterwards? SETAs require 100% project completion, 90% learner retention, 80% national certification achievement and 70% permanent placement with host employers.
Restricted access to learners or facilities
As the sponsor and employer, you should be able to meet your learners during working hours without restriction. If visits result in unavailable learners or evasive responses, it may signal fraud.
Alarmingly, some illegitimate providers exploit system gaps in disparate SETA databases. They register identical learners for multiple simultaneous programmes across different SETAs and claim fees for training never delivered.
Inability to facilitate learner absorption
The B-BBEE scorecard emphasises absorption. It encourages sponsors to employ learners post-programme. However, companies outsourcing learnerships for unemployed individuals or people with disabilities often cannot provide suitable environments. They typically rely on training companies for absorption. Providers that cannot facilitate this step present another major risk.
Absorption is crucial. Without progression to gainful employment, learnership programmes perpetuate cycles of unfulfilled expectations and demoralisation among young people.
Success story – ethical implementation works
In the past six months, we placed 250 South African learners into permanent positions. This followed completion of Contact Centre (NQF 2 and 4) and Business Administration (NQF 2) learnerships.
Companies in manufacturing, engineering, financial services, food and beverage and healthcare sectors provided full sponsorship. This covered training costs and monthly stipends for disabled youth aged 18 to 27.
The majority of positions came through our BPO partner network, specialising in debt collection, sales and customer service. Additional placements occurred within sponsoring organisations.
Get involved in the learnership journey
It is vital to partner with ethical, credible training providers that prioritise the interests of your business, employees and learners.
Sponsors must remain actively involved with both their training providers and their learners. By doing so, you can ensure that your investment in skills development and youth employment delivers for the economy, your organisation and young South Africans. Most importantly, this approach prevents your company from falling victim to learnership and ETI fraud.