Independent Communications Authority of South Africa Strategic Plan and Budget

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Communications

22 March 2010
Chairperson: Mr I Vadi (ANC)
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Meeting Summary

The Chairperson of the Board of the Independent Communications Authority of South Africa briefed the Committee on the Strategic Plan and Budget for the Medium Term Expenditure Framework period 2010/11 to 2012/13.  A detailed strategic plan had been documented and circulated to the Committee.  A summary of the key strategic regulatory projects for the 2010/11 fiscal year was included in the presentation.  The budget provision for the projects amounted to R11.5 million but excluded the staff costs associated with each project.  ICASA had appointed an international consultancy firm to conduct a fit-for-purpose study of the organisation and the report on the second phase of the study was expected in May 2010.

The Chief Executive Officer presented the key operational activities and the budget for the fiscal period 2010/11 to 2012/13.  The total expected revenue for 2010/11 amounted to R300 million.  The most significant expenditure items were staff costs amounting to R159 million and rental on premises totaling R41 million.  The major challenge faced by ICASA was the inability to attract and retain the highly-skilled personnel required in order to carry out the mandate of the organisation.

Members were concerned over the disproportionate expenditure on staff costs and rentals (i.e. two-thirds of the total budget) and queried the effectiveness of the organisation and the productivity of the employees.  Other questions dealt with the new performance appraisal system to be introduced, the status of the various projects underway, the planned relocation of premises, the travel costs incurred, the delays experienced in the processing of license applications, the training of staff, the nature of “general administration” and motor vehicle expenditure, the outreach and communication with the general public and how the regulations issued by ICASA contributed to a competitive environment and encouraged investor confidence in the communications sector.

Meeting report

Briefing by the Independent Communications Authority of South Africa (ICASA) on the 2010 – 2013 Strategic Plan and Budget
Mr Paris Mashile, Chairperson, ICASA, advised that the strategic plan and budget documents have been amended to include the additional information that the Committee required in order to accept the plan and budget in accordance with the Money Bill.  The representatives of ICASA present at the meeting introduced themselves to the Committee.

Mr Mashile briefed the Committee on the vision and mission, the fourteen strategic objectives identified for the Medium Term Expenditure Framework (MTEF) period 2010/11 to 2012/13 and the organogram of the organisation (see attached presentation document.)  A detailed strategic plan document was circulated to the Committee as well.

The presentation included a summary of the key strategic regulatory projects that ICASA had identified with the corresponding budget amount allocated for each project (see Annexure 1 of the detailed strategic plan).  The summary indicated the target dates, the number of employees involved in each project and a reference to the page number in the detailed strategic plan document where more information was available. The budget for projects totaled R11.5 million but this amount excluded the cost of the human resources deployed for each project.

The key strategic regulatory projects identified for 2010/11 included the migration from analog to digital television broadcasts (target date November 2011 but the date was dependent on the availability of set-top boxes), mobile television, the regulations associated with the competitive framework (target date June 2010), the unbundling of the local loop (although the viability was questionable because of the challenges with fibre-optic technology and copper cable theft), inter-connectivity and the Radio Frequency Spectrum.  A summary of the regulatory projects for the subsequent two years were provided.

Mr Karabo Motlana, Chief Executive Officer, ICASA, presented the major operational matters and the budget for the MTEF period 2010/11 to 2012/13.  The operational issues included ensuring that the litigation and general support departments were properly resourced, ensuring that the internal adjudication mechanism to investigate and adjudicate complaints was functional, ensuring that the organisational structure of ICASA was aligned to the Electronic Communications Act (ECA), reviewing the staff skills and remuneration policies, implementing and enterprise resource planning (ERP) system, implementing a document management system and relocating the ICASA head office and regional offices to more cost-effective premises.

The budget for the period 2010/11 to 2012/13 was tabled.  The Department of Communication (DOC) had requested expenditure savings of R10 million for 2010/11 and R15 million for 2011/12.  The budget indicated a reduction in the allocation received from the Department of Communications (DOC).  Expected total revenue amounted to R300 million, staff costs totaled R159 million and rental on premises amounted to R41 million in 2010/11.

Discussion
Advocate J de Lange (ANC) congratulated ICASA on the presentation to the Committee.  He said that the Committee now had a clearer perception of the work that was being done by ICASA.  The strategic plan submitted provided the Committee, the Department and the other stakeholders with the means to assess ICASA’s priorities and performance.  He would like to see a more detailed breakdown of the operational plans, which included the timelines and flow of work and which would assist all involved to understand their roles.  He noted that the expenditure on the operational plans amounted to only R11 million and asked for a more detailed breakdown of the remainder of the allocation received from the DOC.  He expected that the bulk of the funding was spent on personnel but he felt that the costing of the projects should have included the cost of the staff working on each project as well.

The Chairperson remarked that the detailed strategic plan included more information on the various projects.

Mr N van den Berg (DA) requested a breakdown of the current status and the most important outstanding matters.  He was aware that it could take a long time for licenses to be issued and that 2010 was a very important year in the communications sector.

The Chairperson pointed out that the information was provided on page 11 of the detailed strategic plan document.

Mr Mashila advised that the report submitted indicated the seventeen projects completed during 2009/10 and indicated the projects carried over for completion during the first quarter of the 2010/11 fiscal year.

Ms P De Lille (ID) referred to the detailed strategic plan document.  She noted that a new site for the head office must still be identified (see page 27).  She recalled that a consultant had been appointed to find suitable premises some time ago and wondered why the process was taking so much time.  She noted that the budget for traveling had been cut by an amount of R3 million for the 2010/11 fiscal year (see page 22 and 23).  She felt that the budget of R6 million for travel was still inordinately high and wondered if the original budget had amounted to R9 million.  She asked if costs would be kept down in future years as well.  She noted that the projects with the highest priority was indicated on page 12 in bold type and asked if ICASA had identified other priority levels for the remaining projects.

Mr Mashile replied that the priority assigned to each project was indicated on the summary included as Annexure 1 in the detailed strategic plan.

Mr Motlana advised that ICASA had appointed a consultant to conduct a feasibility study to determine where the premises of the organisation should be situated.  The relocation exercise was a lengthy and involved process, requiring the approval of the Department of Public Works, the National Treasury and the DOC.  He confirmed that the original budget for travel was R9 million.  He explained that representatives from ICASA had to attend various international meetings and conferences on the communications industry held abroad.  Although the budgeted amount had been reduced, the need to travel had not diminished and ICASA may have to recover the additional travel costs from the DOC.

Ms J Kil
ian (COPE) thanked ICASA for the detailed strategic plan submitted, which allowed the Members to have a better understanding of the nature of the work done by the organisation.  She noted that more than two-thirds of the budget was operational expenditure and that little capital expenditure was incurred.  She understood that the nature of the work was human-intensive and that the cost of the human resources was high.  She asked if the expenditure on training was to equip employees with the necessary skills or to ensure that already skilled employees kept up to date with the latest technological developments.  She asked for an explanation of the expenditure on motor vehicles.  She confirmed with the Chairperson that the previous documents received from ICASA had been replaced with the documents submitted during the present meeting.

Mr Motlana advised that ICASA spent approximately 3% of total staff costs on training.  It was important that the organisation kept abreast of the methodologies and technical developments in the sector.  ICASA had taken steps to ensure that the training expenditure was more effective by bringing the trainers to South Africa rather than sending groups of trainees overseas to attend courses.  The cost of training increased by approximately R300,000 per annum, which was manageable.  ICASA expected to save approximately R10 million per annum by relocating premises.  The premises currently occupied were expensive and were not fit for purpose.  He advised that the motor vehicle expenditure was incurred for the specialised fitment of vehicles for the purpose of spectrum monitoring.

Ms De Lille asked if performance agreements had been signed with the Minister of Communications.

Mr Mashile advised that a workshop was recently held with the DOC to consider the agreements.  Agreement was reached on certain amendments and the target date for the signing of the agreements was set for the end of March 2010.

The Chairperson confirmed that the draft agreements were circulated to the Members of the Committee for review.  He had requested Adv De Lange to consider the legal aspects of the agreements on behalf of the Committee.

Adv De Lange expressed his doubts that the process was the best way to improve the performance of individuals.  He felt that the process was merely a mechanism to determine salary increases.  He was critical of the provision made to award cash bonuses for performance as he felt that a bonus for doing the job required was inappropriate.  The performance agreement document appeared to be satisfactory as a mechanism for a salary review but he doubted that it would result in an improved level of performance.  He was doubtful over the efficacy of the mechanism for a review of the assessments as well.  He would like to discuss the matter further before submitting a report on the agreements.

Mr Mashile asked if the Committee had a copy of the draft framework for the performance management system.  He explained the criteria for the five performance levels.  Rewards were only applicable if an individual had exceeded the expected level of performance (i.e. levels four and five).  He understood that the performance agreements were consistent with the requirements of the Department of Public Service and Administration (DPSA).

The Chairperson suggested that the discussion was limited to the strategic plan and budget and that the performance agreements were discussed later if time allowed.

Mr S Kholwane (ANC) asked for clarity on the different target dates set for the two projects concerning the regulations for universal service and access.

Mr Mashile explained that more detail was available in the detailed strategic plan (i.e. the business plan) document.

Ms M Socikwa, Councillor, ICASA explained that one project dealt with the amendment of licenses and the other project dealt with the universal access regulations.  The two processes had to be carried out simultaneously but there were different target dates for completion.

Mr Kholwane commented that the explanation provided was not documented.  He remarked on the relatively small amount of the budget that was allocated to the projects (i.e. R11 million).  He queried the advisability of budgeting for an inadequate amount to cover the travel obligations.  He commented on recent reports in the media concerning the expenditure on staff recruitment.  He asked if the budgeted amount for recruitment costs was expected to increase.  He asked for an explanation of what was meant by “general administration costs” and “other expenses”.

Mr Mashile explained again that the budget for the projects excluded staff costs.  He explained that the staff employed by ICASA was highly skilled specialists who demanded considerable salary packages.  The staff cost component of the projects could be calculated and could be expected to have a significant impact on the budgeted amounts indicated.

Mr Motlana explained that it was essential that representatives from ICASA attended international conferences, such as the conferences on World Radio and the postal union.  ICASA was under considerable pressure from the FIFA World Cup during 2010/11 and made little provision for international travel during this fiscal year.  The cost savings were transferred to the critical unfunded capital expenditure items listed on page 24 of the strategic plan document.

Mr Motlana advised that ICASA was not the first choice of employer of graduates and the organisation experienced difficulty in attracting suitably skilled and experienced specialists.  ICASA made use of the services of a specialised recruitment consulting firm to identify suitable candidates to be short-listed for interview and appointment.  The filling of highly specialised vacancies could take a considerable length of time.

Mr T Mosia, Chief Financial Officer, ICASA advised that “general administration” included expenditure on staff wellness and safety programmes, such as health and protective clothing.  He pointed out that a substantial amount of work was being done in the regions on inspections and monitoring.  Most of the work on the projects was being done by ICASA personnel and very little was spent on external consultants.

The Chairperson noted that ICASA spent R160 million on staff costs and R41 million on rentals for premises.  Those two items alone accounted for two-thirds of the total budget and appeared to be disproportionate.  ICASA agreed that the renting of premises was not cost-effective.  The critical issue was whether ICASA was receiving R160 million worth of effort and productivity from the approximately 400 employees.  This was the first time that the Committee became aware of the total expenditure on staff.  He wondered what the optimum staffing levels should be and if the staff currently employed had the necessary qualifications and skills to complete the projects.  He noticed that 50% of the work to be done was carried over from the previous year and he had to ask the question what was the staff doing? He understood that many of the employees were highly qualified technicians but he was not sure if ICASA was the most productive of organisations.  The ICASA Councillors were accountable for the performance of the organisation and he felt that further engagement was necessary to determine if ICASA was the right kind of organisation to carry out the tasks assigned to them.

Ms L Mazibuko (DA) noted that one of the reasons given for carrying over incomplete projects from the previous year was the frequency of litigation that ICASA was involved in with certain operators.  She asked if ICASA had the necessary qualified staff to deal with the litigation issue.

Mr Mashile explained that ICASA was responsible for regulating a multi-billion Rand industry.  The operators were extremely well-resourced and ICASA had to match them Rand for Rand.  ICASA’s Annual Reports included the details of the achievements during the fiscal year and were presented to the Committee every year.  He admitted that ICASA faced many challenges as the organisation was not as well-resourced as the operators in the industry and was unable to afford the high salaries demanded by the best individuals in the industry.  ICASA needed to have staff retention measures in place to counteract the high turnover rate but was considered to be a minor operator in the industry.  Many employees were leaving because of the negative perceptions of ICASA created by media reports.  Ex-ICASA employees were sought-after in the industry. The performance appraisal system being introduced should allow the organisation to assess the level of productivity.

The Chairperson wanted to hear what the CEO’s opinion was on the matter.

Mr Motlana advised that ICASA had appointed an international consulting firm (Adam Smith) to conduct a fit-for-purpose study.  Phase 1 of the study had been completed and a report was submitted.  The report on phase 2 was expected in May 2010.  Copies of the reports would be made available to the Committee.

Ms R Morutoa (ANC) noted ICASA’s commitment to the Universal Service Obligation (USO) but was unable to find any details on the organisation’s outreach programme.  She asked how ICASA communicated with the public and how the regulatory interventions would assist with the roll-out of Information and Communications Technology (ICT) services.

Mr Mashile replied that ICASA had a consumer affairs division that educated consumers on their rights and addressed complaints concerning the unavailability of television and cell phone services.  ICASA got the operators concerned to accompany them on visits to the communities experiencing difficulties with the services offered.  He conceded that ICASA might not have fulfilled the outreach requirement but the previous Annual Report listed the activities of the consumer affairs division.  The tasks of monitoring and enforcement required skilled personnel and not all the functions could be automated.  In terms of ICT, ICASA was involved in educating consumers on their rights and investigating complaints, for example cell phone contracts and the cost of the services provided.

Mr F Sibanda, Councillor, ICASA, said that ICASA promoted competition in the ICT industry, which resulted in an expansion of services to the consumer and the offering of a quality service at a lower price.  The regulations issued by ICASA encouraged an increased number of services, ensured fair play and removed the barriers to entry for new operators to offer their services.

Ms Kilian returned to the issue of whether or not the ICASA model and staff complement provided value for money.  She noted that ICASA had a 14% vacancy rate in the critical fields of engineering, technology, licensing and compliance.  She said that many applicants for licenses complained about the length of time it took to issue a license.  She asked what the reasons were for the delay in finalising license applications.  She thought that the study undertaken to determine the effectiveness of ICASA would provide valuable information on whether the organisation had the optimum staff complement and if the output delivered justified the costs incurred.

Ms M Magazi (ANC) asked how the regulations issued by ICASA encouraged new investors to enter the industry and inspired confidence in the sector.

Mr Mashile agreed that the complaints concerning the turnaround time in the issuing of licenses was a key issue.  He advised that ICASA was in the process of investigating the process in an effort to determine the bottlenecks and reasons for the delay in finalising the applications.  Manuals and procedures were being developed.  ICASA was also trying to determine what the staff was doing but certain activities (such as conducting critical analyses) were difficult to measure in terms of output.  He expected the study to reveal whether or not the staff had the necessary skills and knowledge to carry out their tasks.

Mr T Makhakhe, Councillor, ICASA, said that the regulations formulated by ICASA focused on creating a competitive environment.  Once the regulations were issued, the impact on prices and service delivery can be evaluated.

Mr W Stucke, Councillor, ICASA, said that South Africa had a partially liberated market with a number of licensees in the communications sector.  The licensees were however not able to operate because the competition framework was not in place.

Ms Socikwa said that the Electronic Communications Act (ECA) expanded the regulatory requirements for ICASA.  Although the Board was expanded from seven members to nine, the number of employees in the affected divisions was not increased to cope with the additional workload.  The ECA encouraged a competitive environment and as a result, many more applications for licenses were being submitted.  Currently, one staff member was dealing with forty license applications.  The work involved in processing the applications demanded a high degree of skill and knowledge.  She felt that ICASA should have increased the number of staff in order to speed up the process of issuing the licenses.  She felt that the employees were doing their best but they were overworked.  ICASA needed to increase capacity and the corresponding budget provision.

Mr Stucke remarked that ICASA had a budget of R300 million but actually needed R400 million to operate properly.  The lack of sufficient financial resources meant that ICASA would be unable to do everything that was required.

Mr Van den Berg asked if the frequency register had been compiled.

Mr Motlana confirmed that the register had been compiled and could be made available to the Committee.

The Chairperson complimented ICASA on the improved format of the report submitted to the Committee.  The Committee had a better idea of the work involved, the time frames and the staff complement.  He suggested that ICASA compiled detailed operation plans for the following year.  He looked forward to receiving the report from Adam Smith, which was expected to indicate the kind of organisation that was necessary to carry out ICASA’s mandate.  He thanked the representatives of ICASA for briefing the Committee and advised that the Committee would be unlikely to have any difficulty in approving ICASA’s strategic plans and budget.

The meeting was adjourned.

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