Beauty academy gets R64-million government subsidy in midst of budget cuts

Gauteng’s Department of Social Development has awarded grants of over R56-million to two skills development organisations, in a year in which funding to other sectors including the elderly and community care, has been cut.

• The Gauteng Department of Social Development has cut funding for services to organisations helping people with HIV and older people.
• Yet it granted nearly R114-million to two organisations over two years, one a beauty academy called Beauty Hub, and the other a former shelf company, Daracorp, that has existed in its current form only since 2020.
• Most organisations receive less than R1-million per year from the department.
• The department points out that the money for Beauty Hub is being used to train over 1,100 students, and that 315 had found jobs and ten had started their own salons.

The two non-profit organisations are the Beauty Hub Academy, which was allocated R30-million, and Daracorp, which was allocated over R26-million, for the 2023/24 financial year.

Both also received tens of millions of rands in grants in the previous (2022/23) financial year, with Beauty Hub receiving R33.7-million and Daracorp R23.9-million respectively, a combined total of R113.7-million over the two years. 

In April last year, the department proposed deep cuts in key funding. According to Lisa Vetten, a research associate at Wits University’s Southern Centre for Inequality Studies, the proposals would have meant R418-million would have been cut from non-profit organisations (NPOs) providing welfare services. The money was to be redirected towards the department’s research and development programme and its poverty alleviation initiatives.

The department later backtracked and revised its budget. The amount then allocated to NPOs was reduced by R233-million according to figures supplied to GroundUp by the department. Sectors hardest hit were older people, (where the budget for NPOs was cut by R54-million compared to the previous year), HIV services (cut by R98-million) and community care (cut by R26-million).

But Daracorp and Beauty Hub’s funding was almost unaffected. Funding to the two far outstripped funding to any other organisation in 2022/23. Most got less than R1-million out of the almost R2.3-billion funds paid to NPOs.

Beauty

Beauty Hub Academy, which offers training in hairdressing and beauty therapy for people on social security, is registered both as a private, for-profit company and as an NPO. Its website makes no mention of a non-profit arm. Beauty Hub received R33.7-million from the department’s women’s development, welfare-to-work, poverty alleviation and youth development programmes in the 2022/2023 financial year, according to Nkosana Mtolo, the spokesperson for the MEC of Social Development.

It will receive over R30-million in four quarterly tranches over the 2023/2024 financial year.

Responding to questions, Mtolo said the department had funded Beauty Hub to train 565 people receiving social security in 2022/23, with a further 565 targeted for training in 2023/24. This means that over the two years, Beauty Hub will have received funding to train 1,130 students at an average of over R56,000 per person. (This is based on dividing the funding amount by the number of beneficiaries.)

According to Mtolo, Beauty Hub trainees who are beneficiaries of social security are fully subsidised – the whole course fee is covered by the department – and get a daily meal and travel allowance.

Mtolo said that 315 beneficiaries of Beauty Hub’s department-funded training had found jobs, and ten had started their own salons. All the qualifications funded by the department are for one year courses, according to GDSD.

Joel Nkomo, one of Beauty Hub’s two directors, said: “Once these beneficiaries exit, as an institution we assist them to find employment opportunities so that they can participate in the economy. The mandate of the programme is to provide employable/entrepreneurial skills in order for the individuals … to either find employment or start their own businesses so that they no longer depend on the welfare system.”

“Beauty Hub offers accredited training in the Hairdressing and Beauty Therapy industry,” Nkomo said.

He said that without the department’s permission he was unable to disclose how the grants were spent, as the funding agreement between Beauty Hub and the department was “confidential”.

It’s also not clear why the department has chosen to subsidise one particular beauty school when there are many other reputable ones in the country which have not benefited from a state subsidy.

Small farming

Daracorp, which offers training for small-scale rural and urban farmers, was first awarded a grant of R3.75-million by the department in 2020/2021, within a year of being registered. The organisation got almost R24-million under the women’s development programme, in 2022/2023 and a further R26.1-million in the current financial year.

Daracorp was registered as a non-profit shelf company (NPC) in March 2019 and new directors were appointed when it was purchased off-the-shelf in March 2020. Daracorp was also registered as a non-profit organisation three months later.

“This programme is one of the few that is implemented in an urban setting,” Thomas Ngubane, the chairman of Daracorp NPO and also a member of Daracorp’s NPC, said. The organisation used a “co-op model” to produce at higher scales, while people who received daily state meals at Community Nutritional Development Centres participated in Daracorp’s food gardens programme.

“The uniqueness of our programme is that it combines a value chain approach of commercialisation of small-scale farmers with a food security element in an urban setting with utilisation of idle state land as project sites”, Ngubane said.

“The programme is designed to assist the beneficiaries to produce their own food, equip them with farming skills and create enterprises that allow them to make money out of farming whilst utilising state land that is under-utilised or not utilised at all, for free.”

He said the project “ticked all the boxes”, “in that it is intended to address poverty alleviation and create sustainable livelihoods, women development, and youth development.

Asked why Daracorp had been allocated tens of millions of rands less than three years after it was first registered, Mtolo said: “There is no specific requirement on the number of years” for an NPO to be in existence for it to be funded.

Differences in funding

Questions have also been raised about the difference in the size of the department’s grants to these two companies compared to other non-profit organisations offering skills training.

Emdeni Skills Centre, an NPO run by Abraham Kriel Bambanani, offers skills training to young adults over 18 “in partnership” with the department. It receives significantly less funding from the department to subsidise its trainees.

For example, students who do Emdeni’s course in tunnel and permaculture agriculture, which costs R13,365, only receive a R2,100 subsidy. A four-month assistant chef course with Emdeni costs R19,724 with a R3,400 subsidy, leaving students with an amount of R16,234 they must cover.

Vetten said: “Unemployment is alarmingly high, especially among young women, and it is extremely important that we try to create decent work that ensures that people do not live in poverty.”

“However, the question raised by the size of the subsidies to Beauty Hub and Daracorp is how we do so without creating new inequities in the process. “

“So, for example, the Beauty Hub grant is covering students’ course fees in full. Yet compared to other NGOs offering similar courses that are also SAQA accredited, the department is only offering them R1,000 to R3,000 towards the cost of these courses, Vetten said.

“Two levels of inequity are potentially the result of this different treatment. One is at the level of the organisation, which has to work harder to find additional funding. The other is at the level of the individual seeking to develop their skills to become employable.

“One category of individuals has their costs paid in full while the other doesn’t, meaning that they will likely not be able to attend the training unless they, or the organisation, can source the balance of funds.”

Vetten said the department should be transparent about its funding decisions.

Lack of transparency

In a report for the Social Development portfolio committee in the Gauteng Legislature, researcher Nonhlanhla Jikolo raised questions about the department’s allocation of funds to non-profit companies and difficulty in assessing outputs compared to expenditure.

Her concerns echo those of other organisations that GroundUp spoke to, who asked to remain anonymous as they fear this may affect their funding.

“Since the number of NPOs that were funded in the quarter under review is not stipulated, it would be difficult to draw conclusions on the extent to which the expenditure is also a reflection of the achieved outputs”, Jikolo wrote.

She also raised questions about the lack of detailed information supplied to the portfolio committee and difficulties in assessing overspending by the department.

She also flagged overspending on “households and machinery” and “equipment”, which were much higher than the original budget.

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On other line items she flagged underspending. For instance, only 27% of the “goods and services” budget was spent, only 53% of the “compensation of employees budget” and only 55% of the money allocated to NPOs. This, said Jikolo, “may suggest that not much was delivered on activities that are rendered through the same line items.”

Vetten said: “People who rely on social services are living in very difficult, often impoverished circumstances. They should not be made to compete against each other for the prize of who is most deserving of social assistance.”

Published originally on Groundup | Raymond Joseph and Ella Morrison