ACTING CEO, ESTER ANNA NGHIPONDOKA ON THE VOCATIONAL EDUCATION AND TRAINING LEVY

By Prime Focus Reporter
February 2014
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The promulgation of the Vocational Education and Training Act of 2008 ushered in a new era of reforms to our country’s Technical and Vocational Education and Training regime.

 

One such an innovation is the Vocational Education and Training (VET) Levy aimed at better refocusing our country’s training system and resources on meeting our national socio-economic development needs.

 

In essence, the VET Levy requires affected employers to make a monthly contribution to the National Training Fund of the Namibia Training Authority, who is to apply such funds towards up skilling and training Namibians in key national priority training and occupation areas.

 

Acting Chief Executive Officer of the Namibia Training Authority, Ester Anna Nghipondoka sheds more light on the issue.

 

PF: Why a VET Levy?

 

AN:Training systems in many developing countries are confronted with trying to develop strategies about how to enhance their efficiency and effectiveness. While there are many important elements to such a strategy, one important issue is that of financing training. An appropriate financing model should ensure both the stability of funding needed to develop the capacity for policy implementation as well as the level of financing to improve training outcomes.

 

In many developing countries, and Namibia is no exception, government budgets constitute a vulnerable and unreliable source of financing for training. Thus an important objective in the financing of such a system is to increase the contribution of beneficiaries – both employers and trainees.

 

Vision 2030 and our National Development Plans (NDPs)emphasise skilled labour force as a precursor for growth and competitiveness. However, in Namibia, there is a serious under-provision of demand-led training opportunities, which have been constraining key aspects of our country’s economic growth.

 

It goes without saying then that through the mobilization of additional resources, the quality and quantity of skills development can be accomplished, that skills shortages constraining enterprise development can be reduced, and productivity and incomes and or profits can be enhanced.

 

Bottom line is that funds generated through the VET Levy can assist our country to free up more training opportunities and meet the training needs of the employed, the unemployed and the disadvantaged.

 

PF: How do you respond to sentiments that question the appropriateness for a training levy for Namibia? There seem to be some quarters in society who feel it is not necessary.

 

AN:Financing is one of the central issues in any Technical and Vocational Education and Training (TVET) strategy or reform being discussed and implemented. In fact, it is a standard item on the agenda of any regional or international workshop or conference on TVET.

 

Historically, funds devoted to TVET are insignificant compared to the overall budget allocated to education by various governments, despite the fact that TVET plays an essential role in promoting economic growth and the socio-economic development of countries and has benefits for individuals, their families, local communities and society in general.

 

However, quality TVET is very expensive as it needs workshops of reputable standards and also requires regular investment in new equipment, as well as the maintenance and repair of existing equipment. This demands heavy financial and recurrent capital to respond effectively to the needs of the existing labour market and to the ever-increasing use of technology by industry.

 

On the other hand, human resources with industrial experience are expensive. Training centres seeking to recruit competent staff must compete with private industry that has a better capacity to pay these experienced professionals. It must also be emphasized that quality TVET delivery warrants a relatively low trainee/trainer ratio, since high enrolments in intensive practical programmes would compromise the quality of learning outcomes, thereby increasing unit cost.

 

PF: Who is going to pay the VET Levy?

 

NA:The Namibia Training Authority is to collect the VET Levy from all employers with an annual payroll of N$ 1 000 000-00 (one-million) or more. Such employers will be required to submit payroll returns to the NTA on a monthly basis.

 

Only the State; Regional Councils as defined in Section 1 of the Regional Councils Act of 1992; Charitable organisations, public and not-for-gain educational institutions and faith-based organisations, whether or not supported wholly or partly by grants from the public revenue are exempt.However, any institution may apply to the Minister of Education for consideration for exemption.

 

The collection of the VET Levy is a key objective under our current Strategic Plan, which calls for an effective system to be put in place for administering the levy – both for levy collection as well as administration of grants.

 

PF: Similar systems have been implemented in other parts of the world. What have you learned from the experiences of others?

 

NA:There are over 30 countries in the world where levy schemes exist or have existed in the recent past. Imposing payroll taxes on enterprises have indeed become a significant source of financing for skills training, both in specialized training institutions and in enterprises.

 

The key principle behind such schemes is “who benefits, pays”, and as such, there is an expectation that employers will share in firm-specific training costs.

 

Another rationale for such schemes is based on sentiments that because firms are contributing financially, such interventions will encourage them to put greater emphasis on upgrading the skills of their workforce and make them more competitive.

 

Levy schemes based on payroll taxes are also attractive because they provide a sheltered source of revenue for training and represent a means of mobilizing funds that may otherwise be unavailable to the public sector.

 

We consulted far and wide. And yes, we did consider international experiences in coming up with what we believe is a model that speaks to our specific needs as a country.

 

PF: There is evidence to suggest that training levy schemes seem to be more effective under conditions of economic growth. Given our country’s current growth rates, are you confident that the imposition of the VET Levy will make the right impact?

 

NA:Yes, we are aware of such studies. For example, in Singapore, the Skills Development Fund is related to the fact that the economy and correspondingly, the demand for training, have been growing. Thus, up skilling is a continuous and expanding process that is based on economic development needs.

 

However, in countries such as Tanzania where growth has been slow, the imposition of a training levy has not had a significant impact on increasing training as growth rates, and employer demand has remained depressed.

 

For us, it was therefore a conscious effort to create a model under which skills development policies are linked with both current economic development realities and overall economic development strategy. Our Industry Skills Committees play an important role in this regard as they act as vehicles through which we source intelligence from industry on sector-specific training needs. We use this information in the setting of training priorities.

 

PF: How is the VET Levy going to work?

 

AN:The VET Levy is to supplement and fund the development and establishment of applicable systems and processes, to ensure demand-led training.

 

In line with the provisions of the VET Act of 2008, this is to include inter alia, the provision of financial and technical assistance to employers, training providers, employees, learners and other bodies to promote Vocational Education and Training and funding Vocational Education and Training programmes and projects.

 

The VET Act also makes provision for the NTA to offset expenditure it incurs in the performance of its functions, including its core administration costs.

 

PF: Are qualifying employers willing to bear the costs? And how do you avoid them they passing the burden onto workers in the form of lower net-of-tax wages?

 

AN:It is totally natural for local employers to resist the VET Levy. In fact, some have indicated during our consultationsthat other forms of taxation already overburden them.

 

However, what employers need to realize is that the VET Levy is ultimately aimed at the promotion of a high degree of self-financed, employer-based training and the development of an employer-based training culture. It becomes a matter of changing mindsets – to embrace an employer training culture under which any investment in training is deemed an investment in the people of our country.

 

PF: How will you ensure that the benefit relation between levy-paying companies and beneficiaries of training is maintained?

 

AN:Several points of principle guide the operation of payroll levy schemes across the world. These include inter alia that such levies are subject to periodic review; where possible and that such levies vary across sector and industry to reflect differing skill composition in the labour force and training needs.

 

The best way of maintaining this relationship is effective engagement to ensure relevance and that the range of training services and courses provided reflect the range of employer needs.

 

As the custodian of the VET Levy, it is therefore important for the NTA not to venture into extraneous and inessential activities. Instead, our focus, as a funder of Technical and Vocational Education and Training in our country, should remain on maintaining its relevance to levy-paying employers, industry, training institutions and trainees. This is in line with our mandate as per the VET Act of 2008 and our current Strategic Plan.

 

PF: In conclusion, what is your message to Namibian employers who are to pay the VET Levy and to the public at large?

 

AN:It is a simple message – To collectively embrace and support the VET Levy towardsbecoming a reliable source of financing publicvocational education and training in our country, because our country has faced considerable difficulties in mobilizing the funds necessary for training our people through other options at our disposal.

 

We are confident that the funds generated through the VET Levy will assist us in the development of national training capacities. We are also confident that the VET Levywillsignificantly boost the financing of the training needs of disadvantaged groups and small employers.

 

Implementation thus far has indeed proved cumbersome and it has been a learning curve throughout for all involved – the NTA, industry, employers and government. We have faced a few challenges, but regardless of our differences, we worked together shoulder to shoulder. At the end of the day, teamwork divides the task and multiplies the success. PF