Corruption and collapse: How Services Seta blew R163-million and broke SA's skills promise

Daily Maverick

2 days ago

From fake companies winning multimillion-rand contracts to whistleblower warnings ignored, this exposé reveals how corruption flourished unchecked at South Africa's Sector Education and Training Authorities (Setas). As pressure mounts for reform, the question remains: will new leadership break the cycle of corruption?
Long before axed higher education minister Nobuhle Nkabane took office, the Sector Education and Training Authority (Seta) was already under a cloud of corruption and governance failures. Tasked with managing training levies and skills development in the services sector, the Services Seta has been dogged since 2018 by allegations of tender irregularities and financial mismanagement, exposed through investigations by watchdog group Organisation Undoing Tax Abuse (Outa).
How the Services Seta missed every red flag
At the heart of the Services Seta scandal lies a R163-million contract for biometric units meant to track learner attendance and manage stipend payments. Shockingly, the tender ran for just four days — far short of the Treasury's 21-day requirement — and bids were evaluated a week before the closing date.
The contract went to Grayson Reed — a shell company with no track record, no South African Revenue Service (SARS) declarations, and no real capacity to deliver. Investigators later revealed that the name itself was bogus. Despite glaring red flags, the Seta's bid committees waved the deal through. Outa says this blunder cost taxpayers more than R163-million.
Outa's investigation also uncovered serious financial irregularities in the execution of the contract. Grayson Reed submitted travel and accommodation claims exceeding R2.1-million, many lacking proper supporting documents. Some invoices were allegedly fraudulent, while others billed for expenses incurred by unrelated parties.
Suspiciously high fuel and Uber claims suggested daily double-charging, with duplicated invoices slipping through. Despite the red flags, senior Services Seta officials — including Project Accounting head Mpho Teffo and CFO Tsheola Matsebe — authorised the payments, raising alarm bells over the Seta's internal controls.
The contract's pricing was equally alarming — items like exam pads and USB sticks were inflated by up to 8,000%. Learners reported delayed stipends, faulty biometric devices, and underpayments. Strangely, records showed Grayson Reed paid its supplier more than it charged the Seta — raising red flags around possible kickbacks or financial mismanagement.
Despite Outa's repeated calls for cancellation and investigation, the Services Seta only terminated the contract six months early, in 2019, with no funds recovered and no criminal charges laid.
More contracts and more questions
The Grayson Reed saga was not a one-off. In June 2023, Outa uncovered yet another case of suspect spending at the Services Seta — a R36-million contract handed to Five Star Communications and Projects for branding materials.
A branded tender box costing R302,000 — marked up by over 8,000% — was among 29 inflated invoices paid to Five Star without question, all approved by then-CEO Andile Nongogo and branding head Duduzile Mwelase. Outa has since laid criminal charges with SAPS against the pair and two Five Star directors, citing fraud, corruption and breaches of the Public Finance Management Act.
The Werksmans report: confirming the suspicions
Under intense pressure from Outa and Parliament, the Services Seta commissioned Werksmans Attorneys in early 2023 to investigate procurement irregularities across multiple contracts.
Werksmans' findings confirmed whistleblowers' worst fears — exposing deep rot in the Services Seta's procurement processes.
Contracts were pushed through in as little as five days, with payments made before verifying delivery. In one shocking case, a contract ballooned from R6.6-million to R89-million with no valid explanation. Even committee setups were flawed — some decisions appeared to rest on just one improperly appointed member.
Adding to the turmoil, the Auditor-General issued a qualified opinion on the 2023/24 financials, citing poor record-keeping, material misstatements and glaring control failures. Irregular expenditure topped R193-million for the year — pushing the total to a staggering R1.26-billion.
Impunity persists
Daily Maverick spoke to Wayne Duvenage, the CEO of Outa, who said that while Outa had exposed multiple irregularities, particularly concerning tender manipulation and contract awards, in many cases the incumbents had remained in their positions.
'We try to get the boards to recognise misconduct or maladministration. If they don't act, it becomes very difficult for us to effect any meaningful change,' he said.
The 2023/24 annual report shows that disciplinary cases over irregular spending remain unresolved. Daily Maverick contacted the Services Seta for comment on 9 July, but the organisation did not respond to queries on the status of these cases.
In hearings in October 2024, committee members condemned the Services Seta's leadership for ignoring the Werksmans report and failing to hold anyone accountable, warning that this impunity eroded public trust and fuelled corruption.
Outa laid criminal complaints against Nongogo with SAPS in June 2023 over corrupt practices involving overpriced contracts awarded by the Services Seta. Nongogo was implicated alongside other officials for approving exorbitant payments and fraudulent activities. Nongogo was later appointed as NSFAS CEO in 2024.
Do Seta boards dodge the old playbook?
On the issue of Seta board appointments, Duvenage said that the former minister should have come up with a different approach.
'The chairperson and board members are in powerful positions, and they must be strong people appointed to exercise effective oversight. The minister knows, and we've told her, that these Setas have corrupt networks that infiltrate and use executive positions to control tender flows,' he said.
'We need skilled, credible board members with the moral courage to stand up to corruption,' said Duvenage. 'The public are not fools — we won't just accept anyone in these positions.'
In June, Nkabane told Parliament that her selection of 21 Seta chairpersons was guided by an advisory panel including advocate Terry Motau SC and several senior officials. But that claim is now unravelling — Motau says he was never formally involved, and others named have also denied participating in the final decisions. Their denials cast serious doubt on the accuracy of the minister's version of events.
The way forward
Reflecting on South Africa's investment in skills development, estimated at R21-billion annually, Duvenage said the returns had been inadequate. He reiterated that a systemic overhaul was urgently needed.
'There must be a summit, bringing together government, business, service providers, evaluators, civil society and citizens to map out a new way forward,' he said.
Duvenage called for an industry-led approach, with businesses identifying skills needs instead of the government dictating priorities. He warned that credible business leaders were stepping back due to political interference, saying: 'The system has collapsed. It's not working.'
South Africa's Setas stand at a crossroads, their promise of skills development overshadowed by corruption and mismanagement. Without urgent reform and accountability, public trust will continue to erode, and the country's workforce will ultimately bear the consequences. DM