Universal Service and Access Agency of South Africa Annual Report for 2009/10

Meeting report

Briefing by the Universal Service and Access Agency of South Africa (USAASA)
Mr Louis Moalodi, Chairperson of the USAASA Board, outlined the contents of the presentation to the Committee (see attached document). 

A summary of the governance model of the Agency summarised the mandates of the Finance and Development, the Human Resources and Remuneration and the Audit and Risk Management committees established by the USAASA Board.  The term of office of two Board members had expired in July and the Agency had recommended that the Minister appointed two new female members to the Board to address the gender imbalance.

An organogram depicted the executive management structure, which was aligned with the governance structure and business plan of USAASA.  The vision and mission of the Agency was presented.

Mr Phineas Moleele, Chief Executive Officer, USAASA advised the Committee that the briefing would be conducted by members of the Board and executive management.

Prof Shaun Pather, Member of the USAASA Board, presented the overview of the Agency’s corporate plan and strategy and summarised the projects that USAASA was engaged in.  The research projects included devising the definitions to be included in the Electronic Communications Act (ECA), the implementation of the National Universal Access and Service (UAS) program and the manual and operational procedures for the Universal Service and Access Fund (USAF).  Other projects concerned the handover of legacy access centres, the rapid deployment of public access services in under-serviced areas, the deployment of broadband infrastructure in under-serviced areas and the disbursement of the subsidies for Set Top Boxes (STB’s).

Mr Winile Lamini, Head: Universal Service and Access Fund (USAF), USAASA presented a summary of the performance of the Agency in meeting the eight key strategic objectives that were set.  The targets for three objectives were achieved.  Two objectives were rolled over to 2010/11 because consultations with stakeholders had not been completed.  Reasons for not achieving the targets were provided.

Mr Andrew Hlubi, Chief Financial Officer, USAASA presented the financial performance of the Agency for the 2009/10 financial year.  Total revenue amounted to R33.7 million and total expenditure was R30.3 million.

The Agency received an unqualified audit opinion from the Auditor-General.  The emphasis of matters by the Auditor-General concerned irregular expenditure of R562,950, fruitless and wasteful expenditure of R355,988 and material under-spending of budget amounting to R15.29 million.  The action taken by the Agency to address the emphasis of matters was explained.  The under-spending was as a result of the projects that could not be completed before the end of the year and USAASA had requested that the funds were rolled over to the following year.  The request was approved by the National Treasury.

Mr Molefe Mollo, Executive: Business Development Services, USAASA presented the performance report for the first six months of 2010/11.  The briefing included an overview of the progress made in the key infrastructure projects concerning the STB subsidies, the roll-out of broadband infrastructure in under-serviced areas (such as Msinga in Kwazulu Natal), the provision of public access facilities in under-serviced areas and the hand-over of new and legacy access centres.

Mr Hlubi presented a summary of the financial performance for the period April to September 2010.  The total budget for the year was R66.7 million but only 31% of the budget (R20.8 million) had been spent during the first six months of the year.  Reasons for the under-spending were provided.  The briefing included a variance report for the USAF.

Mr Moleele summarised the constraints resulting from the previous operating model of the Agency.  The major constraints were a focus on legacy programs, acting as an implementer rather than as a facilitator, an ineffective consultation process with stakeholders, conducting research on an ad-hoc basis, carrying out projects rather than managing the projects and not utilising the funding provided.  The changes made to address the constraints were outlined.

Ms Thandeka Mngadi, Executive: Performance Management, USAASA expanded on the migration roadmap developed by the Agency.  The roadmap identified fourteen phases in the migration process, from the development of a new corporate plan to the achievement of a sustainable organisation.

Mr Moleele concluded the briefing by summarising the challenges faced by USAASA in carrying out its mandate.  The Agency was dependent on the performance of other entities in order to meet its objectives.  Clarity on the provision of subsidies for STB’s was required.  The Agency used a list of under-serviced areas identified by the Department of Rural Development but was awaiting the list of areas determined by the Independent Communications Authority of South Africa (ICASA).  USAASA had engaged with the provincial Premiers to identify where access facilities were most needed and to align projects with the provincial initiatives for development and provision of basic services.  USAASA would like to see that ICASA provided accreditation to the local Universal Service Obligation (USO) initiatives.  The Agency was frustrated by the inability to fully utilise the funding available in the USAF.  The assistance of the Committee was welcomed to provide strategic direction, thereby ensuring that the USAASA projects were aligned with national policy objectives.  USAASA was engaging with local communities to a greater extent in order to inform people of the services delivered by the Agency and to ensure that the infrastructure provided would be optimally utilised.

Discussion
Mr N Van den Berg (DA) complimented USAASA on the standard of the presentation made to the Committee.  He acknowledged the important work done by the Agency but questioned that such a large organisation was necessary.  A recent study concluded that a 10% growth in gross domestic product (GDP) was achieved with every 1% of growth in ICT services.  He felt that the structure of the Agency could be improved and that too much effort was expended in developing strategies and reviewing projects rather than on ensuring delivery.  He cited the examples where the key strategic objectives were not achieved.  Too many projects were still under way and few were actually finalised as planned.

Ms S Tsebe (ANC) agreed with Mr Van den Berg.  The Committee wanted to see an increase in the delivery of universal access services.  She asked where the projects were being implemented, for example where the 18 further education and training (FET) colleges were situated that would be provided with connectivity.  She asked what agreements were in place for the ongoing maintenance of the ICT centres.  She noted that the projects included the involvement of local entrepreneurs and asked if these entrepreneurs were mentored.  The report on the actual performance against the business plan included on page 20 of the annual report indicated that many objectives were not met.  She asked for more information on the partnerships being formed with municipalities to administer the STB subsidies.  She pointed out that the data provided by the South African Broadcasting Corporation (SABC) on television set ownership was not accurate and should not be relied on to determine the number of STB’s required.  She noted that tenders had to be re-advertised because of changes in the organisational structure of the Agency and asked for an explanation.  She asked for an explanation on the fruitless and wasteful expenditure incurred when the capped leave of an employee was taken over by the Agency (see note 25 on page 57 of the annual report).  She asked why the employees responsible for the irregular expenditure item mentioned in note 26 (page 58) had only received a verbal warning.  She asked if the disciplinary steps taken against employees were done prior to the audit or only after the Auditor-General had submitted his report.

Mr K Zondi (IFP) noted that certain projects were delayed because of ongoing consultations and asked for more information.  He asked who was responsible for ensuring that independent operators delivered the required services.  He asked for clarity on the list of areas considered to be under-developed by ICASA.  He asked if the employees responsible for the irregular expenditures were properly trained and had the necessary experience to carry out their functions.

Ms W Newhoudt-Druchen (ANC) noted that the gender targets for female employees and Board members were not met.  She asked if the employment target of 2% for people with disabilities had been met.  With regard to the provision of Cyberlabs in schools, she recalled that ICASA had reported that there were not sufficient skills available to effectively utilise the Cyberlabs and that there were problems with the provision of connectivity to schools.  She asked what action had been taken by USAASA to address these challenges.  She said that parents in poor areas could not afford school fees.  She asked how non-fee paying schools were supported to ensure the sustainability of the access services provided to the schools.  She asked how many schools for the disabled were included in the program.

Ms R Morutoa (ANC) referred to the comments of the Auditor-General concerning internal control (see page 38 of the annual report).  She asked what action had been taken by the Agency to address the concerns about leadership and governance, in particular the failure of the accounting authority to exercise adequate oversight responsibility.

The Chairperson asked for further clarity on the projects to provide connectivity for FET colleges.  The legislation made provision for e-rate subsidies to be available to schools and colleges.  He wanted to know how the Agency ensured that its priorities were aligned with the priorities of the other Government Departments, for example providing access services to a clinic would not be effective unless the Department of Health had the same objective for that clinic.

Mr Vusi Ngcobo, Member of the USAASA Board, replied that imbalance in the representation of women at the executive management level was addressed by the appointment of two women to the vacant positions.  The premises occupied by the Agency were not suitable to accommodate disabled members of staff.  The Board had approved the proposal that the Agency moved to new premises that provided facilities for disabled persons.  Persons with disabilities currently made up 5% of the total staff complement.  The partnership with municipalities referred to the need to obtain approval of business rights over the sites selected for the provision of access services.  It could take up to six months before a municipality approved re-zoning applications for the sites.

The Chairperson pointed out that the length of time necessary to obtain business rights on the sites should have been taken into consideration before the performance targets were set by the Agency.

Mr Ngcobo explained that the Agency had found that it was essential to hold extensive consultations and planning sessions with municipalities to ensure that the sites were in line with the local authorities’ Integrated Development Plans (IDP’s) and the needs of the community and would be sustainable.

Ms Tsebe asked if municipalities had declined applications for business rights.

Mr Ngcobo confirmed that applications for re-zoning had been turned down.

Mr Moleele said that the issue of the positioning of USAASA was extensively debated since the Telecommunications Act was revised in 2001.  The Agency played a role in the developmental agenda of the country and had to be in a position to implement national policy.  In the past, the focus was on the provision of telecommunication services and the mandate had to be repositioned to address the need for modern ICT services, for example broadband.  The operations of USAASA was dependent on the operations of other Government entities, for example the Department of Basic Education (DBE) had to determine which schools qualified for the e-rate subsidy but had not provided the Agency with the list of the schools requiring connectivity.  The e-rate model had been the subject of debate for many years and there were many issues that had not bee resolved.  USAASA had an obligation to maintain the legacy sites at 68 schools and continued to cover the costs involved.  The DBE did not recognise the sites as assets and there was confusion over who was responsible for security, the management of the site and the maintenance of the equipment.  The Agency had no control over the content of the computers.  The teachers at the schools needed to have the skills to use the computers to impart knowledge and the question arose about who should be responsible for the training of the teachers.  These issues needed to be resolved before responsibility for the legacy centres could be transferred to the schools.  Similarly, the weaknesses in the original model had complicated the handover of Cyberlab and telecentre sites to municipalities.  The sites in poorer areas did not generate sufficient revenue to maintain the equipment and poor people could not afford to pay for access services.  USAASA was exploring alternative funding models, for example the municipality waiving the cost of electricity, water, municipal services and rates.  Other options included the involvement of NEMISA and the private sector in providing training, for example obtaining Microsoft accreditation for the training provided by the site.  The various stakeholders needed to share the responsibility for the sites.

Mr Moleele said that the municipalities were involved in the digital migration program by identifying who qualified for the STB subsidy.  The process of identifying the beneficiaries of the subsidy had to be credible and agreement with the local authorities on the approach to be followed was essential.  The Agency was investigating alternative uses of STB’s, for example to provide connectivity services to households.  USAASA had submitted recommendations to ICASA concerning the identification of under-serviced areas but the Regulatory Authority was responsible for issuing the list.  In the interim, the areas identified by the Department of Rural Development were used to identify five sites in areas earmarked for development.  The Agency was in discussion with the provincial premiers to identify target areas.

Mr Ngcobo explained that the comment concerning the accounting authority arose because it was not clear what the level of authority was to approve payments.  Consequently, the Agency had clarified that the CFO was authorised to approve payments up to R500,000, the CEO could authorise payment up to R1 million and any amount exceeding R1 million had to be approved by the Board.

Prof Pather gave the assurance that the Board and senior management of USAASA shared the Committee’s concerns over the failure to achieve the performance targets.  He reiterated the necessity for ensuring that adequate consultation had taken place and that full agreement was reached before infrastructure to provide services were provided.  The mandate of the USAASA was limited to merely providing access but the Agency had learnt from the many mistakes in the past that it was essential to work closely with all the stakeholders involved.  All aspects of the value chain involved in the provision of access services had to be taken into consideration.  He reported that the project to provide definitions had been completed, submitted to ICASA and gazetted.

Mr Ngcobo explained that the former CEO had agreed that the accumulated leave of an employee transferred from another Government entity would be taken over by the Agency.  The decision made was not in order and the Agency was attempting to recover the expenditure from the employee concerned.

Mr Hlubi advised that the Agency’s response to the Auditor-General’s comments on irregular expenditure was provided on page 58 of the annual report.  The procedures followed in the procurement of hotel accommodation and catering services and the adequate testing of the market before a sole supplier was appointed were reinforced.  Telkom was requested to provide itemised invoices to avoid overpayments for services at sites that were not yet functional.

Mr Lamini confirmed that the FET colleges were receiving the e-rate subsidies.  The colleges provided training to students and were situated in all the provinces.  The Agency invited licensed operators to submit proposals to roll out broadband services in the areas earmarked for development.  In the case of Msinga, an application was received from a local operator as well.

Mr Moahlodi advised that USAASA was increasing its visibility by establishing more provincial and district offices in Mpumalanga, North West, KwaZulu Natal, Eastern Cape and Limpopo provinces.  Personnel from the central office were deployed.  The Agency was working closely with the provincial and local government authorities to identify where access sites were needed and had embarked on a formal process to engage with the authorities with a view to establish partnerships.

Mr Moleele conceded that the Agency used to have an ad-hoc approach with regard to providing access to services to the disabled community.  The studies compiled by the Meraka Institute had been considered to assess which services were required by the different categories of disabled persons.  It was necessary to engage in extensive consultations with the disabled community to determine the type of services and facilities that were required.

Mr Lamini added that connectivity services were provided at three schools for the disabled situated in the Western Cape Province.

Mr Moleele responded to the comment of the Auditor-General concerning leadership and governance.  He advised that the organisational structure of the Agency was recently reviewed and that all the weaknesses identified in the processes and procedures would be addressed before the end of the current financial year.

Mr Lamini acknowledged that certain projects were delayed as a result of the appointment of a new Minister of Communications, a new Director-General of the Department of Communications, Chairperson of the USAASA Board, a new CEO and CFO.  The change in leadership affected the tender adjudication process and certain projects had to be rolled over to the following year.  All the projects had since commenced.

Ms Tsebe asked if all audits were conducted by the Auditor-General or if the Agency made use of the services of external auditors.  She asked if the members of the Risk Management and Audit Committee had declared their private interests to the Board.

Ms Morutoa wanted to know if the members of the USAASA Board had declared their interests.

Mr Hlubi replied that the Agency had appointed an external audit company to conduct audits in prior years but currently all audits were performed by the Office of the Auditor-General.  The Audit and Risk Management Committee and the Internal Audit Committee conducted internal audits on a regular basis.

Ms Saré Grobler, Board Secretary, USAASA advised that all members of the Board and staff were required to complete annual declarations of interest.  Board members were required to declare their interests and sign confidentiality agreements at each Board meeting.

The Chairperson thanked the representatives from USAASA for the briefing.  The Committee was concerned over the failure of the Agency to meet all its objectives during the previous year.  He suggested that the strategic plan included realistic and achievable targets.  He anticipated that the debate on the positioning of USAASA would continue but the Agency needed to be in a position where it could operate effectively without undue reliance on the performance of other entities.  The Agency played an important role in providing access services to all communities in South Africa.

The meeting was adjourned.