This week the DHET issued communication to SETAs to abide by the Labour Appeal Court (LAC) decision in relation to the removal of the sweeping mechanism and informed all SETAs that the mandatory grants payable to employers remain unchanged as the dispute around Regulation 4(4) is still pending before the Labour Court.


There have been many communications recently around the judgement of the SETA Grant Regulations and we at Global Business Solutions would like to provide clarity regarding the matter given that we have the benefit of having our CEO, Mr Jonathan Goldberg, being a BUSA (Business Unity South Africa) representative at NEDLAC who brought the litigation against the then Minister Blade Nzimande.

To understand this case well, we must first look at what the issues were with the proposed 2012 Grant Regulations.

In terms of the 2005 Grant Regulations regarding monies received by a SETA, an employer who paid skills development levies could claim 50% of those levies back in the form of a mandatory grant if it complied with the eligibility criteria.

However, the 2005 Grant Regulations were repealed by the 2012 Grant Regulations and it is the 2012 Grant Regulations, and the way in which these were promulgated, that formed the subject matter of the review application before the Labour Court.

Regulation 4(4) Regulation 3(12)
Regulation 4(4) of the 2012 Grant Regulations reduced the mandatory grant that an employer could claim back from 50% to 20% of the total levies paid by the employer. The 2012 Grant Regulations also introduced “the sweeping mechanism” which is that if a SETA has not spent at least 95% of its discretionary funds, the surplus will be “swept” into the National Skills Fund on 1 October of each year. This sweeping mechanism was a completely new concept which was not contained in the 2005 Grant Regulations.

The crux of this appeal was whether, in making and promulgating the 2012 Grant Regulations, the Minister complied with his obligation to consult the Authority as contemplated in s36 of the Skills Development Act (SDA).

The second issue was whether the sweeping mechanism, Regulation 3(12), was rationally connected to the purpose for which it was taken or to the information before the Minister.

August 2015 Labour Court Judgement

Judgement was handed down by the Labour Court in August 2015 in the litigation brought by BUSA. The Court declared Regulations 3(12) and 4(4) of the 2012 Grant Regulations to be invalid and it set them aside.

However, it suspended the effect of that order until 31 March 2016 to give the Minister an opportunity to rectify the position by introducing a valid replacement of the invalid regulation.

The Minister initially took steps to appeal against the Labour Court judgement and order, however the Minister instead re-promulgated the invalid regulation in identical terms prior to the order coming into effect.

July 2016 BUSA Labour Court Review

BUSA then launched renewed review proceedings in the Labour Court on 1 July 2016 to review and set aside Regulation 4(4) as well as the Minister’s decision to re-promulgate it.

The Minister was then required to make the record available to BUSA. From the record it was evident that the Minister adopted the approach that Regulation 4(4) had previously been set aside by the Labour Court only because of a procedural irregularity for the failure to consult. Having since consulted with the National Skills Authority, the Minister was advised to re-promulgated Regulation 4(4) on the basis that the defect would have been cured. This approach was fundamentally wrong as the judgment of the Labour Court was clear in that Regulation 4(4) was set aside not only because of the procedural irregularity but also on the basis that it was irrational and unreasonable in substance.

Shortly after BUSA launched the renewed review proceedings in July 2016, the Minister applied for the appeal to be reinstated against the Labour Court Judgement of August 2015.

May 2017 Labour Court Appeal

The appeal hearing was held on 31 May 2017 in the LAC and the Court delivered a judgment on the matter and set aside Regulation 3(12). The Minister is expected to issue a notice in the Government Gazette to repeal this specific Regulation from the SETA Grant Regulations of 2012.

It is important to understand that Regulation 4(4) is not affected by the recent decision of the LAC and is still in force as BUSA’s review against the Minister’s subsequent attempt to re-promulgate regulations 4(4) is still outstanding and the matter has only been set down for late March 2018.

October 2017 New Minister Higher Education appointed

It may be worthwhile, considering the change of Ministers recently, for BUSA to explore the possibility of engaging the new Minister, Henie Mkhize, to see if the DHET might be willing to discuss reverting to the pre-existing regulations to get out of the current legal quagmire.

December 2017:  Current status

In the meantime, this week the DHET communicated to SETAs that they must abide by the LAC decision in relation to removal of the sweeping mechanism. The Department informed all SETAs that the mandatory grants payable to employers remain unchanged as the dispute around Regulation 4(4) is still pending before the Labour Court. This is foreshadowed to be heard in March 2018.

As always, we will be sure to keep you informed.

Kind Regards

Menet Hamel
[email protected]
Global Business Solutions
07 December 2017