Globally, skill shortages persist across various sectors, including local governments and healthcare, compelling many countries to rely on foreign professionals to fill critical gaps. South Africa is experiencing a severe and persistent skills shortage that threatens national economic development and global competitiveness. Multiple scholars, including Tshilongamulenzhe (2012) and Shava and Clementine (2016), have documented this challenge across various sectors. The skills deficit spans intermediate and high-level professional roles, with contributing factors including poor education standards, emigration and systemic training gaps (Rasool & Botha, 2011).

While the exact number of critical skills occupations is not clearly specified, evidence strongly suggests that the shortage is widespread and systemic (Matha, 2024). The skills crisis is not merely academic but represents a fundamental barrier to economic growth, with long-term implications for youth employment and national productivity. Concerns have also been raised regarding the transparency and contextual relevance of the Critical Skills List, particularly regarding the geographic distribution of critical occupations (Business Tech, 2023). Consequently, many local graduates are often denied fair opportunities to compete in the labour market. Similar concerns exist within the Sector, Education and Training Authorities (SETA) framework. Each SETA compiles an annual priority skills list that informs skills development programmes. However, this process is increasingly perceived as performative or politicised, as many programme beneficiaries remain unemployed, thereby contributing to the growing pool of unemployed graduates (Mseleku, 2022).

In the local government sector, municipalities continue to face severe skills shortages that negatively affect service delivery (Van der Waldt et al., 2018). Rural municipalities, in particular, struggle to attract and retain skilled professionals due to spatial inequalities in skills development opportunities and weak linkages between educational institutions and labour markets (Daniels, 2007; Mlachila & Moeletsi, 2019). A major contributing factor is the lack of coordination between institutions responsible for education and labour market planning (Rasool & Botha, 2011).

The purpose of this study was to examine why existing skills planning structures and practices fail to effectively align skills supply with labour market demand in South Africa. The study specifically focused on the role of SETAs in identifying and addressing skills shortages within the public sector.

The objectives were:

Labour market theory provides a framework for understanding the relationship between education systems, skills production and employment outcomes. Classical labour market theory suggests that wages and employment levels are determined by the interaction between labour supply and labour demand (Borjas, 2016). In an efficiently functioning labour market, the education and training system produces skills that correspond to employer demand, ensuring equilibrium between labour supply and demand. When alignment fails, structural imbalances such as skills shortages and unemployment emerge.

Human capital theory further complements this perspective that investment in education and training enhances productivity and employability (Becker, 1993). However, this depends on the relevance of skills produced. When educational outputs do not match employer requirements, the anticipated benefits of human capital investments are not realised, resulting in graduate unemployment and inefficiencies. Skills mismatches can be vertical (over- or under-qualification) or horizontal (employment in unrelated fields), both of which reduce productivity and limit labour absorption (Brunello & Wruuck, 2021; OECD, 2017). Structural labour market conditions, including institutional weaknesses and poor coordination between education providers and employers, exacerbate these mismatches (McGrath & Powell, 2015; Gumede and Biyase, 2016).

Effective skills planning relies on robust labour market intelligence: systematic collection and analysis of labour supply, demand and occupational trends (International Labour Organization [LIO], 2018). Labour market intelligence allows policymakers and training institutions to anticipate emerging skills needs.

In South Africa, SETAs are responsible for generating sector-specific labour market intelligence and coordinating training initiatives (Coetzee, 2013; Tshilongamulenzhe, 2012). Each SETA develops a Sector Skills Plan (SSP) to identify priority skills and guide interventions. However, studies indicate that SETAs have struggled to fulfil this mandate due to their reliance on incomplete Workplace Skills Plans (WSPs) and Annual Training Reports (ATRs), leading to inaccurate representations of actual labour market demand (Labour Market Intelligence Programme [LMIP], 2020; Marock et al., 2008; Matha, 2024).

Graduate unemployment in South Africa reflects the consequences of persistent labour market mismatches. While higher education institutions have expanded access, employment opportunities have not grown correspondingly (Mseleku, 2021). Structural unemployment arises from ongoing mismatches between labour supply and demand, often exacerbated by technological change, institutional inefficiencies and economic restructuring (Dunga & Maloma, 2022; Sutherland, 2020). Weak coordination between education institutions, government departments and industry stakeholder’s further limits workforce development. Inadequate labour market intelligence allows graduates to enter the workforce with qualifications misaligned to economic needs, perpetuating skills shortages and unemployment.

South Africa plays a central role in Africa’s economy and is a member of the BRICS alliance. Despite this, it remains one of the most unequal nations globally, with approximately 63% of the population living in poverty (World bank, 2024). Unemployment, shaped by social, economic, spatial, environmental and political factors, continues to drive poverty and constrain economic growth (Dunga & Maloma, 2022; Francis & Webster, 2019; Ngubane et al., 2023; Stats SA, 2025). In March 2025, South Africa’s unemployment rate reached 31.9%, the highest in Africa, with young adults aged 25–34 and those with lower educational attainment disproportionately affected (see table 1) (Stats SA, 2025; Trade Economics, 2025). Not in Education, Employment or Training (NEET) rates also increased, highlighting systemic gaps in aligning education outputs with labour market demand.

Persistent graduate unemployment demonstrates a structural mismatch between the skills produced by educational institutions and those required by employers (Mseleku, 2022; Tshishonga, 2022; Bhorat, 2022; Tshishonga & Matsiliza, 2021). Skills mismatches are further compounded by SETAs’ limited effectiveness in bridging education and industry, weak labour market monitoring and insufficient demand-driven planning (Matha, 2024). Structural issues such as poor governance, fragmented institutions, inadequate infrastructure in rural schools and the legacy of apartheid exacerbate these challenges (Mouton et al., 2012; Sulla & Zikhali, 2018).

The interplay of these factors, including structural unemployment, weak institutional coordination, ineffective skills planning and educational deficiencies, requires a paradigm shift. Strengthened labour market intelligence, demand-driven education and training and strategic skills planning are essential to align graduate output with employer needs. Only through dynamic, inclusive and forward-looking approaches can South Africa bridge the gap between skills supply and demand, reduce unemployment and unlock its full socio-economic potential.

Despite the critical role of skills planning in addressing unemployment and improving economic performance, a persistent misalignment between industry and government continues to undermine the efficacy of these initiatives. This divide results in fragmented skills development efforts, with industry and government actors often operating in silos without a shared understanding of labour market needs (Daniels, 2007; Grawitszky, 2007). Consequently, skills planning is increasingly perceived as a procedural ‘tick-box’ exercise, primarily aimed at enabling companies to access discretionary SETA grants rather than serving as a strategic tool for guiding workforce development (Matha, 2024).

Rather than fostering a responsive and demand-driven system, skills development efforts are dominated by short-term learning programmes that offer limited pathways to sustainable employment or career progression (LMIP, 2020). This focus on immediate compliance and reporting priorities, rather than long-term labour market alignment, perpetuates the production of graduates whose skills do not match employer requirements (Brunello & Wruuck, 2021; OECD, 2017). The result is ongoing skills shortages and elevated unemployment rates, with graduate unemployment reaching 8.7% in the third quarter of 2024 (QLFS, 2025).

Effective collaboration between industry and SETAs is critical to producing accurate forecasts of skills shortages, which can enable early interventions before gaps exacerbate unemployment. However, institutional fragmentation and poor coordination among key stakeholders continue to undermine comprehensive solutions. Skills shortages themselves further strain these inadequate structures, revealing the need for a coherent, coordinated approach to skills planning. To meaningfully improve employment outcomes, skills planning must move beyond compliance-driven exercises to a strategic, data-informed advocacy process. Such an approach should prioritise long-term economic transformation, strengthen labour market intelligence and ensure that training interventions produce graduates equipped with skills that meet real industry demand. Only through coordinated, demand-driven planning can South Africa address skills mismatches, reduce graduate unemployment and enhance overall economic efficiency.

Addressing these challenges requires a shift from supply-driven to demand-driven skills planning. Demand-driven approaches prioritise employer needs and emerging occupational trends before designing training interventions (ILO, 2018). Strong collaboration between government, industry and educational institutions is critical. In South Africa, strengthening labour market intelligence and improving stakeholder coordination are essential for aligning skills development initiatives with actual labour market demand. A demand-driven approach would reduce skills mismatches, improve graduate employability and enhance national economic competitiveness.

This study adopted a qualitative research approach grounded in an interpretivist paradigm to explore how institutional actors understand and implement skills planning processes within SETAs. This approach enabled an in-depth examination of perceptions, practices and systemic challenges shaping labour market alignment.

This study adopted a qualitative multiple case study design, focusing on the Local Government SETA (LGSETA) and the Health and Welfare SETA (HWSETA). These cases were purposively selected for their strategic roles in addressing public sector skills shortages, as well as their established involvement in skills planning processes and in the development of SSPs.

The case study approach enabled an in-depth exploration of governance processes, institutional arrangements and systemic constraints influencing the effectiveness of SETAs in responding to skills shortages. By examining these cases within their real-life institutional contexts, the study was able to generate nuanced insights into how skills planning mechanisms operate in practice. The research was conducted within the institutional environments of LGSETA and HWSETA, providing a contextualised understanding of organisational dynamics, policy implementation processes and stakeholder interactions that shape skills development outcomes in the public sector.

Ethical approval was obtained prior to data collection. Participants were formally contacted, provided with information sheets and gave informed consent. The researcher maintained a non-participant role throughout.

A total of seven participants were selected using purposive sampling. Participants were chosen based on their direct involvement in skills planning, labour market intelligence and training implementation processes within SETAs and affiliated organisations. The sample included:

Data were collected through semi-structured interviews and document analysis. Interviews used 10 open-ended questions aligned with study objectives and were audio-recorded with consent.

Data were analysed using a thematic approach, with interview transcripts coded inductively in NVivo software (Lumivero, Colorado, United States) to allow themes to emerge organically from the data. Document analysis was employed to triangulate findings and corroborate patterns identified in the interviews. To ensure data quality and rigour, multiple strategies were implemented, including triangulation of data sources and member checking with participants. Furthermore, all coding decisions and analytic processes were transparently documented to enhance the credibility and trustworthiness of the findings.

Findings are presented thematically, using an analytical narrative supported by quotations and policy documents, and aligned with the research objectives.

Ethical clearance to conduct this study was obtained from the Research Ethics Committee at the University of Johannesburg (Ref. No. 21PMGPP26). Ethical approval was obtained prior to data collection. All participants provided informed consent, and confidentiality and anonymity were maintained throughout the study.

The findings of this study have important practical implications for improving the effectiveness of skills planning in South Africa. There is a need to strengthen labour market intelligence systems to ensure the availability of accurate, timely and reliable data for decision-making. In addition, improved coordination between government, industry and educational institutions is essential to align skills development initiatives with actual labour market needs. Furthermore, the adoption of demand-driven, data-informed forecasting approaches for training programmes is critical to enhance responsiveness to economic trends and reduce the mismatch between skills supply and demand.

The study focused on LGSETA and HWSETA. Future research should include additional SETAs and employ quantitative forecasting models to predict skills shortages to complement qualitative insights.

Figure 1 presents a proposed demand-driven skills planning framework. Although often depicted as a linear process, it is important to recognise that skills planning is inherently complex and requires a systemic perspective. Central to this framework is the generation of accurate labour market intelligence, which forms the foundation for data-driven forecasting and informs the design of targeted training interventions. These interventions aim to produce graduates whose competencies closely match employer demand, thereby mitigating skills mismatches and reducing unemployment. Integral to the framework are continuous feedback mechanisms that enable the system to remain adaptive and responsive, supporting the ongoing refinement of policies and interventions in line with evolving labour market dynamics. This approach underscores the necessity of a holistic and iterative process to achieve effective alignment between skills supply and labour market needs.