Skills Development

The Skills Development Act 1998 (SDA) introduces mechanisms to improve the relationship between the provision of education and the skills need for workplaces. These include new learning programmes, new approaches to implementing workplace-based learning and financial incentives.

The Act clarifies the role of the SETA’s in relation to grants and distribution of grants.

The SDA completely changed workplace learning.  The vision was of an integrated skills development system, which promoted economic growth, increased employment and social development by focusing on education, training and proper employment services.

There have been various amendments to the act since its inception which we will see as we progress.

Skills Development Levies Act

The Skills Development Levies Act provides the laws and regulations for funding for the development of the workforce, in line with the Skills Development Act.  From 1 April 2001 it is required that all organisations with an annual payroll of more than R250 000 to pay a skills development levy of 1% of their payroll.

In 2005, the Taxation Laws Amendment Act 9 of 2005 section 24(1) changed this to an annual payroll of R500000. (While there are exemptions available for some organisations, all employers must register and then apply for exemption).

The levy is payable monthly to the South African Revenue Services (SARS).  When registering as a levy payer, organisations are asked to stipulate to which SETA they belong so that levies can then be forwarded to that SETA.

Originally 70% of the levy was refundable to companies in the form of grants, once they had met the various requirements set out for each grant. This was later changed and is now more complex. 

20% of the levy was sent to the National Skills Fund to assist with schemes for the unemployed, while 10.5% was for the SETA’s running costs and an additional .2% was allocated to SARS for collecting the levies.


  • SETA may still use a maximum of 10.5% of levies received for administrative purposes but may also use any contributions received over and above the 10.5% from public service employers for administrative costs.
  • From October 2012 all SETAS must transfer 0.5% of all levies received to the QCTO for quality assurance functions.
  • With effect of March 31st 2012 all surplus funds for the financial year must be transferred to Pivotal Grants within 10 working days of the 31st
  • With effect of the 31st March 2012 all surplus funds from previous financial years must be transferred within 10 working days to Pivotal Grants.
  • National Treasury may permit usage for other reasons as deemed fit.
  • SETAS must pay mandatory grants to any employer who employs more than 50 employees and who has submitted a WSP and ATR.
  • Mandatory grants will be 20% of total levies paid as per the relevant sections of the SDLA. This grant is to be paid at least quarterly. Note that this in fact is the only grant that is guaranteed in terms of current legislation.
  • All unclaimed mandatory grants will be transferred to pivotal grants. (Pivotal grants are explained on the next page)
  • A SETA must allocate a pivotal grant to an employer for a learning programme at a level determined by the Director General through a general circular to all SETAs to fund learners on pivotal programmes inclusive of funding of University of Technology students and FET College graduates subject to verification by the SETA to a maximum of 10% of total levies paid by the employer.
  • In addition a SETA may allocate additional pivotal grant funds to an employer for pivotal programmes, should the employer have spent more than 3% of their payroll on training as reported in the pivotal training report and verified by the SETA.
  • A SETA may only commit, beyond each financial year, discretionary funds for learners in pivotal programmes.

  • A discretionary grant may be paid in terms of sub regulation (1) to any employer within the jurisdiction of a SETA, including an employer who is not required to pay a skills development levy in terms of the Skills Development Levies Act

Mandatory grant and Pivotal Grant recovery by employers

Mandatory Grants must be paid by the Seta if the company fulfils the requirements to receive Mandatory Grants i.e. must submit a workplace skills plan, Pivotal training plan and the annual training report. Mandatory means that they must be paid, they are guaranteed. The Mandatory grant is currently 20% of levies paid by the company. 

Discretionarygrants are paid at the discretion of the Seta Management and Board and are linked to Scarce and Critical Skills. Discretionary grants account for 49% of the SETA’s 80% 

PIVOTAL grants can be defined as professional, vocational, technical and academic learning programmes that result in qualifications or part qualification on the National Qualifications Framework (NQF). 80% of all discretionary funds must be allocated to Pivotal Grants which leaves 20% of the total for mandatory grants.

In summary

  • 80% of all grants are paid to the SETAS
  • 5% is used for administration cost and 0.5% goes to QCTO
    Balance is now 69%
  • 20% is allocated to Mandatory grants
  • 49% is used for Discretionary grants of which 80% must be used for Pivotal Funding and 20% for Discretionary Funding

Payment of grants

  • An employer seeking recovery of a grant against the levy payment must meet the eligibility criteria for grant recovery as prescribed.
  • A SETA must not pay a mandatory grant and pivotal grant to an employer who is liable to pay the skills development levy in terms of section 3 (1) of the Skills Development Levies Act, unless the employer.
  1. Has registered with the Commissioner in terms of section 3 (1) of the Skills Development Levies Act.
  2. Has paid the levies directly to the Commissioner in the manner and within the period determined in section 6 of the Skills Development Levies Act.
  3. Is up to date with the levy payments to the Commissioner at the time of approval and in respect of the period for which an application is made.
  4. Has submitted a Workplace Skills Plan and Pivotal Training plan and the Annual Training Report within the time frames prescribed in the regulations.
  5. With effect from 15 April 2012, has submitted and implemented its workplace skills plan for the previous financial year to the extent that it satisfies the criteria for implementation that must be established and approved by the SETA Accounting Authority based on guidelines provided by DHET.
  6. Has WSP, PTR and ATR approved by the committee and the relevant labour representative.