ICASA and SABC on their 2011/12 First Quarter Reports

Meeting report

Opening Remarks
The Chairperson noted he had received apologies from the Minister and Deputy Minister who were attending to other matters and could not attend the meeting. Ms Michaels and Mr van den Berg from the DA could not attend as they were occupied with bi-elections.

He informed Members that the NCOP Provincial Week programme from 12 to 16 September could interfere with the Committee’s current programme. This meant that meetings scheduled for next week and the week after might be moved to Free State.

The ICASA Performance Management System had been formally forwarded. It had been circulated to the parties and Members were expected to study it. The Committee was still waiting for feedback from discussions between Department of Communications (DoC) and ICASA on Local Loop Unbundling (LLU). Currently, the Committee, ICASA and the DoC were not in agreement on the matter. The issue would not be discussed until the entities could agree on how to move forward with the LLU programme. The Committee would wait for the DoC and ICASA to come back to the Committee.

The Committee still had to resolve the issue raised by South African Post Office (SAPO) employees about being under labour brokerage and temporary for the past fifteen years. He hoped to resolve this issue over the next few meetings.

The last matter that the Committee had to resolve had to do with allegations raised by Ms Phumelele Nzimande. This matter had to be processed during the coming meetings.

The Chairperson told the Committee that the advert for the vacant SABC board member post and the two Media Development and Diversity Agency posts was already out. The closing date was end September.

The Chairperson congratulated the SABC as he had noticed that there had been some developments around the Auditor-General’s recommendations, in particular, on the investigation by the Special Investigating Unit (SIU). The Committee wanted the SABC to brief the Committee on its progress on the recommendations at some point, as it seemed to be happening at a snail’s pace. He hoped the SIU’s investigation would be finalised quickly.

Independent Communications Authority of South Africa (ICASA) briefing
Dr Stephen Ncube, Chairperson of ICASA, introduced his team and reminded the Committee that ICASA had not been allowed to present its three-year Corporate Strategy during March 2011 due to non-adherence with parliamentary processes. When ICASA presented its corporate strategy in April 2011, the Committee noted the regulator's budgetary constraints and proposed that ICASA revise its priorities in line with its limited budget allocation. The revised priorities for 2011/12 included: Local Loop Unbundling (LLU), broadband, spectrum monitoring, a review of the existing regulatory framework for broadcasting services to support Digital Terrestrial Television (DTT), universal service, licensing of high demand spectrum, and system automation. He said that the First Quarter Report was the current status as it was in ICASA, and variations would be dealt with in the Second Quarter Report.

Mr Themba Dlamini, Chief Executive Officer of ICASA, reported on ICASA's progress in terms of the revised strategic objectives:

Strategic Objective 1: Ensure participation by Historically Disadvantaged Individuals (HDIs) in the  industry
The outputs consisted of:
▪ Reporting on ownership trends and structures for 50% of all the licences in the sector – the performance indicator was to monitor ownership trends and audit ownership structures in the sector. Public enquiries were held and recommendations were drafted for the Minister. A baseline document on current HDI equity status has been completed. However, ICASA failed to draft recommendations to Minister on proposed changes to Electronic Communications Act as was required.
▪ Monitoring the impact of ownership structure on the diversity of Broadcasting Services (BS). The performance indicator was to ensure licensing improved the sector's HDI profile in the BS sector. The Terms of Reference on the impact of ownership in the BS sector on diversity of views was drafted.
▪ Completing an inquiry process on ownership by persons with disabilities, women and youth – the performance indicator was to develop regulations that addressed the empowerment of the youth, women and persons with disabilities. This was not achieved. The progress of the output was dependent on the outcome of the HDI Equity Compliance Audit.
▪ Documenting HDI Compliance with regulations that were in place – the performance indicator was to develop a long term HDI rollout plan. This was not achieved as progress was dependent on the outcome of the HDI Equity Compliance Audit.

Strategic Objective 2: Ensure the Provision of Broadband Services
The Committee asked ICASA to focus on finalising and publishing the LLU framework by November 2011. ICASA was asked to release a discussion document on LLU in the first quarter. This was achieved. The LLU discussion document was gazetted on 22 June 2011.

Other outputs for Strategic Objective 2 consisted of:
▪ Holding a Broadband Colloquium with stakeholders by September 2011. This was not achieved. The identification of indicators had to be collected for a geographic map of available broadband services.
▪ Establishing an ICASA, Industry sector and nationwide broadband committee. The regulator is currently participating in the broadband intergovernmental implementation committee, which represents a nationwide committee on broadband.
▪ Identifying possible bands for additional 500 MHz spectrum for broadband wireless access by March 2012. This was in progress.
▪ Promoting the sharing of infrastructure for the provision of broadband services. This was achieved. ICASA has reviewed a legal opinion on the rights of licencees wishing to lease electronic communications facilities, and has prepared a draft on how to support infrastructure sharing.
▪ Identifying hindrances to broadband penetration and proposing corrective measures. A meeting with SALGA and FTTH was held on 30 June 2011.

Strategic Objective 3: Optimising use of radio frequency spectrum to support the widest variety of services
The outputs consisted of:
▪ The development of a Spectrum Assignment Dashboard. A re-assessment of the terms of reference and a debriefing has taken place. Negotiations with potential service providers had started.
▪ Reporting on the comprehensive usage of spectrum. This was not achieved. The planned spectrum audit was completed but not published.
▪ Ensuring compliance with the Consumer Protection Regulations, including increasing accessibility initiatives for persons with disabilities. ICASA participated in an internal review of the regulations to identify shortcomings. An internal review on the Code on People with Disabilities regulations was done and shortcomings were identified. A Council Committee would be established in the second quarter to commence with the review of the regulations.

Strategic Objective 5: Promoting protection of consumers and accessibility for persons with disabilities
Outputs consisted of:
▪ Reporting on consumer satisfaction. This was achieved.
▪ The development of consumer programmes. This was achieved.
▪ Increasing accessibility initiatives for persons with disabilities. This activity was to commence in 2012/13. The project would be integrated into the Review of the Code on People with Disabilities.

Strategic Objective 6: Ensure compliance with legislation and regulations
Outputs consisted of:
▪ Completing the Compliance Procedure Manual by September 2011. This was achieved.
▪ Publishing the Universal Service and Access Obligations (USAO) framework document. This was not achieved. The USAO Review Findings Document was still being finalised.
▪ Developing Universal Service Access Regulations. The performance indicator was to gazette the definition and list of under-serviced areas. The list had been verified by the Demarcation Board of South Africa.
 
Strategic Objective 7: Strengthen and Modernise ICASA
Outcomes included:
▪ Completing the proposed funding model and engaging with stakeholders such as National Treasury and the DoC. This was not achieved. However, ICASA was in the process of engaging with DoC on the matter.
▪ Completing the review and implementation of a new organisational structure to align with ICASA's strategy. Phase Two of the review was completed and a structure was defined. A change in the management process was delayed.
▪ Maximising the value derived from resources/assets. A security audit was conducted for security systems at the ICASA head office. An access control manual was drafted in consultation with a security committee.

Strategic Objective 8: Promote Competition
Outputs included:
▪ Setting out targets for new players having access to spectrum. This was not achieved. A proposal was drafted on the issue but not yet approved.
▪ Developing annual reports on aspects of the communications infrastructure. The identification of indicators is to be collected for a geographic map of available broadband.
 
A table showing budget utilisation for 2010/11 was included as additional information in the presentation. It showed that ICASA had to use its reserves to pay for certain expenditures due to budget constraints. At the beginning of the year, ICASA's cash reserves amounted to R55m. By the end of the year, it had dwindled to R34m. The cash was utilised to fund the 2010/11 deficit and asset acquisitions.

Discussion
Ms J Killian (COPE) said she was confused by the last slide in the presentation, which focused on the budget utilisation for 2010/11. She asked if it represented ICASA’s projected financial position, and more specifically, if it showed that ICASA would still be operational but would have to curtail some of its projects in order to achieve its strategic objectives.

Mr Dlamini replied that the total allocation made to ICASA in 2011/12 was R351m. The presentation was a forecast of ICASA’s finances and showed that it had not deviated from the allocation after Members asked ICASA to reprioritise. ICASA reprioritised within the R351m allocated. The information presented was just to say that when ICASA requested additional funding from the National Treasury through the DoC, going forward, this was the picture that it would be giving.

The Chairperson said that the Committee still did not understand what the CEO was trying to say. 

Mr Thamsanqa Ndadana, Acting Chief Executive Officer, clarified that the last slide in the presentation showed the actual results for the year ended 31 March 2011 versus the full year budget for the same financial period.

Ms W Newhoudt-Druchen (ANC) noted that ICASA first spoke of having a deficit of R8.6m, but slide 25 reflected a different amount for the deficit. She asked what the deficit was for the current quarter.

Mr Ndadana answered that ICASA had a deficit of R10.9m at the end of March 2011. The deficit of R8.6m was the deficit at the end of June 2011. The deficit of R8.6m was mainly made up of depreciation expenses.

Ms Killian said that she noticed that ICASA’s outputs, as mentioned in the presentation, were not really measurable. ICASA had to ask itself what impact it was making out in the public. It had to evaluate its impact and whether the public was receiving value for money. If ICASA wanted more funds, it had to show the Committee that it had optimised the funding already available to it. She noted that ICASA listed Broadband and Digital Terrestrial Television (DTT) as a project. It was not a project; it was supposed to be one of its core functions. ICASA had to ensure that everybody, including those in remote rural areas, had access to broadband. She proposed that the Committee ask the Office of the Auditor General to assist ICASA to formulate strategic goals and output, and to show it how to achieve them so that the regulator could maximise its impact on the country.

Mr Dlamini explained that the presentation gave the Committee a snapshot of what ICASA was doing at this point in time. ICASA had annualised targets that would show its output or impact at the end of March 2011. Some of the indicators alluded to in the presentation would allow ICASA to do an impact analysis; however, it was unable to talk to the impacts of particular achievements in particular quarters. It could only reflect on the work that it had done at a particular point in time related to an annualised target.

Mr Dlamini said the broadband programme was not a project per se, it was just a mechanism that was formulated within ICASA to take some of the strategic objectives and convert them into projects. The overall strategic objectives would continue to drive ICASA, but a project management approach would be taken to drive certain programmes internally. The broadband strategic objective was not being reduced to a project; a project management method was being used to address the objective.

Ms Newhoudt-Druchen noted that ICASA said there was no money for disabled people, and her concern was, if there was a deficit, how the Committee would know whether the programme for increasing accessibility initiatives for disabled persons would be implemented. ICASA said there were a few shortcomings about the review of the Code on People with Disabilities. She understood that a committee would be established to do the review. When would this happen? This matter had been spoken about for years. She also wanted to know if the committee would report back to the Portfolio Committee on Communications. When was ICASA going to have a proper definition of “under-serviced areas”?

Mr Ndadana replied that the deficit was due to timing differences. Some expenses were incurred earlier than expected, which was why the deficit occurred. At the beginning of the financial year, ICASA gave the DoC a schedule that basically highlighted how much it expected to receive over the next twelve months in quarterly tranches. ICASA expected to incur expenses to the value of R66m, but it ended up spending slightly more than what was anticipated. The expenses were also incurred earlier than expected.

Ms Newhoudt-Druchen said that this answer did not cover her question. At the beginning of the presentation, ICASA said there was no money to cover the objective to increase accessibility initiatives for persons with disabilities. ICASA also said it had a deficit. She asked when the objective would be covered, as there was no funding for it for 2011 and 2012. The disability matter had always been neglected and now the country had to wait until 2013.

Mr Dlamini answered that the project for persons with disabilities would be integrated into the review for the Code on People with Disabilities. This was also linked to Output 7 for Strategic Objective 4, which was to ensure compliance with Consumer Protection Regulations, including increasing accessibility initiatives for persons with disabilities. The point was to look at the internal review of the End-User and Subscriber Service Charter for regulations. When this was achieved, it would be submitted to the Council to commence with the review of the regulations. The two targets were deliberately linked so when ICASA asked for additional funding it could combine the funds at one point instead of keeping them separate. ICASA hoped to have the review committee in place by the end of the financial year.

Mr Dlamini replied to the question on the review committee that would look at the Code on People with Disabilities. He explained that after the formation of the review committee, a mechanism would be put in place to ensure ICASA interacted with the Portfolio Committee on all aspects of what the review committee was established to do.

Dr Marcia Socikwa, ICASA Councillor, said the list for under-serviced areas had been finalised by the Demarcation Board, and it was going to be published some time nest week. The list would be made available to the public because it wanted the municipalities concerned to comment on the list and tell them if what was on the list was a true reflection of what was happening on the ground.

Ms A Muthambi (ANC) said that the President had said that service delivery for the country was very important. She wanted to know what LLU was doing for service delivery, and if it could improve fixed penetration. She asked why ICASA focused so much of its attention on urban areas that were sufficiently competitive and what this meant for competition in rural areas. Why was the LLU framework not developed? Did LLU speak to job creation? She noted that ICASA developed a Complaints Turnaround Strategy to enhance the resolution of consumer complaints. She asked how it planned to deliver on this output. She asked if the discussion document for the review of the existing regulatory frameworks/regime for Broadcasting Services was going to be finalised on 30 September 2011.

Mr William Stucke, ICASA Councillor, replied that ICASA was in discussions with the Minister on the subject of LLU; therefore, he preferred not to answer the questions on LUU at the moment.

Mr Pieter Grootes, General Manager: Markets and Competition (ICASA), answered that the deadline to complete the discussion document for the review of existing regulatory frameworks for Broadcasting Services would be met.

Rev K Zondi (IFP) said that the presentation was supposed to address ICASA’s strategic plan for the first quarter; however, he had a problem with the packaging of the report because the information was not user-friendly. The presentation should have addressed issues raised in a statement made by the Minister, which spoke about low internet connectivity to households. The Minister said that many South Africans still relied on broadband in their place of work and broadband penetration only stood at 5% of the population. The presentation should have shown how ICASA’s programmes contributed to resolving these problems and improving the situation in South Africa. This was what the public wanted to hear. It was also what the Committee wanted to hear so it could be better placed to assist the regulator in problems it encountered.

Mr Stucke commented on what ICASA was doing to meet the objectives raised by the Minister. He said that during the first five months of this year the cost to communicate fell by 27%. This was in contrast to the Consumer Price Index (CPI), which increased.

Mr Dlamini replied that the additional information that was provided in the presentation gave an indication that ICASA wanted funding for three different areas going forward. These include operational programmes, capital programmes and expenditure, primarily on monitoring capabilities. This process was already unfolding and ICASA had met with the DoC to discuss this matter. The presentation looked at the re-prioritised deliverables that were agreed upon. ICASA was trying to contribute to the country through its strategic objectives. However, it also had to ensure that how it delivered to the country was within its means. This was why ICASA focused on its revised deliverables. He hoped that more funding would come to the regulator so it could start addressing global activities.

Ms T Ndabeni (ANC) said that she was concerned. She was going through ICASA’s corporate plan and hoped that this would be the last time that the Committee and the regulator would have to engage on administrative concerns. The indicators shown in the presentation were not really indicators; they were objectives. Indicators usually told an entity how it could measure what it said it was going to do in its outputs or deliverables. ICASA said it wanted to achieve universal access. The Key Performance Indicators (KPIs) were supposed to show how it would do so. The presentation did not show how ICASA would do this.

Mr Mncube answered that ICASA had defined its eight strategic goals, which were approved by the Committee. This formed the framework in which ICASA operated. The presentation showed how ICASA unpacked all eight areas. The Committee could also look at ICASA’s business plan, which elaborated on the points made in the presentation. The presentation was an abstract element of some of the activities that ICASA was involved in. He said ICASA could forward a more detailed report to the Committee.

Mr Dlamini added that the intention was not to look at administrative issues, but to focus on the global picture. He knew that the KPIs or pre-determined objectives were a new concept so a number of entities such as ICASA were “not quite there”. He understood that the KPIs had to be drafted in a way that addressed the concerns raised. The Auditor General was also trying to assist ICASA in “crisping up” its quantitative and qualitative reporting. 

Ms Killian asked ICASA to elaborate on the upcoming relocation of its head office.

Mr Dlamini replied that this was “on the radar”. There were two permutations that ICASA followed. One was to look at the unavoidable expenditure approach, which was a National Treasury framework to try to secure funding for the relocation. The additional information in the presentation showed the costs for the relocation of the ICASA head office. If ICASA was successful with the unavoidable expenditure submission to Treasury, then it would be able to “activate” the relocation of the head office. ICASA's current lease expired in October 2011, but it took a precautionary measure and extended the lease to October 2012 because it did not know how the particular funding process would unfold.

The Chairperson said that he did not know what Mr Dlamini was saying. The presentation did not tell the story the CEO just told the Committee, which was that ICASA had extended its lease agreement. He thought ICASA was going to move its head office in November.

Mr Dlamini explained that if the Committee went back to when ICASA reprioritised its deliverables, it would see that they were reprioritised on the basis of what was available. ICASA's intention was to relocate by the end of November 2011. ICASA anticipated that it would be able to use the adjustment estimate as a vehicle for trying to procure the money, but subsequent to its interaction with the DoC through the Office of the Auditor General, ICASA was advised that it would be a risky approach to say it would be out of the building by end November 2011. ICASA was advised to take a precautionary measure by extending its lease agreement to October 2012.

The Chairperson noted that this discussion had taken place outside the Committee and an agreement had been made without its approval. This was an issue, as ICASA always made agreements outside of the Committee. He thought that ICASA did not take the Committee seriously, as it always presented on things it knew it was not going to do. ICASA did not even think to report to the Committee when it made the agreement to extend its lease to October 2012. Members had to hold the regulator accountable for what it presented before the Committee. He had a problem with ICASA when it presented one thing to the Committee, and went out and did a completely different thing. From the way ICASA spoke about the relocation, it was clear it was not a priority to inform the Committee of the plans.

Mr Dlamini apologised explaining that it was not ICASA's intention to undermine the Committee. ICASA would come back to the Committee with the status of the relocation.

Ms Ndabeni added that it was not the first time that ICASA said one thing to the Committee, but went out and did a different thing. She reminded ICASA that when it appeared before Parliament and made certain commitments, it was expected to deliver on them. She understood that ICASA was an independent entity, but it was not independent of the Committee.

The Chairperson thanked ICASA for its presentation. He warned that ICASA had to present on everything that needed its active involvement. A workshop was needed to discuss matters with the Auditor General so all relevant parties could have a better understanding of certain concepts, and so they could all move forward as one. The Committee required a written submission updating it on ICASA's second quarter performance. Then, if necessary, ICASA would be called to account for its second quarter performance. In terms of the regulatory impact assessment, ICASA was on record saying it was not one with the DoC. This formed part of undermining the decisions of the Committee. This had to be discussed and settled. The Committee had a responsibility to resolve this matter.

Mr Mncube responded that ICASA valued the Committee’s input and followed it “religiously”. ICASA's intentions were good; however, certain intervening variables occurred and the situation changed. The intention was not to disobey what the Committee put forward. The intention to move went back to 2007. ICASA had given the Committee the historical underpinning of the matter when it wanted to move. The Committee agreed that ICASA had to move; however, the Auditor General and the DoC also had to be consulted and they did not approve the budget for the move. This was why ICASA had to move to “step two”, which was brought to the Committee. The Committee then said that other matters had to be prioritised and the relocation matter was put aside due to budget constraints. ICASA appreciated the Committee and its candidness.

The Chairperson concluded that there were certain matters that had to be resolved with ICASA, but warned that the regulator should not present on matters that had not been finalised internally. The Committee was not part of the consultation process; they were part of the final decisions. He thanked ICASA for the presentation.

South African Broadcasting Corporation briefing
Dr Ben Ngubane, Chairperson of the SABC, informed Members that a new head of audit had been appointed, which meant that the entity's reporting requirements would be met.

Mr Phil Molefe, Acting Group Chief Executive of the SABC, told the Committee that the presentation was based on the entity's corporate plan, which consisted of seven pillars.

Pillar 1: Programming quality, purchasing and commissioning
Key deliverables included:
▪ Sport programming that delivers. The target was to reduce the cost of production by 10% across the board on sport production. This was achieved.
▪ Reduced impairments. This meant reducing the number of titles that were impaired by 50%. This was not achieved, as the exercise to identify actual impairments for the period had not been changed. The SABC explained that during a review of the work that was done, it was found that some of the titles listed as expired actually did not expire and could still be used. Unfortunately, the verification process was a manual one, which slowed things down.
▪ Local commissioned content cost containment. This was partially achieved.

Pillar 2: Platform management
Key deliverables included:
▪ The re-establishment of the market intelligence function to drive business decision-making informed by audience requirements. This was partially achieved. It formed part of the turnaround project.
▪ Television audience delivery. This was not achieved.
▪ The turnaround strategy for the SABC to deliver on audience targets. This was not achieved.
▪ Plan of delivery for the commercial launch of the DTT platform. This was not achieved. The full revised plan for the Group Executive and the SABC Board's approval had taken longer to complete because of limited resources. The revised business plan was not finalised by the end of the first quarter. It would be submitted in the second quarter. Funding plans for the television channels, marketing and the Digital Playout Centre have been prepared for MTEF funding requirements and presented to the DoC on 23 June 2011.
▪ Digital Media established. This was not achieved. The proposed operating model and structure for Digital Media was to be approved in the second quarter.
▪ Increased reach of SABC services through the rollout of low power transmitters. This was partially achieved. There were 37 operational sites and another 57 were currently under construction by Sentech. 10 more applications were with ICASA for approval and an additional 23 sites were being planned.

Pillar 3: News
Key deliverables included:
▪ News programming that delivers audiences and achieves slot targets. This was on track.
▪ 24-hour news channel launched. This was not achieved as shareholder approval of the channel was still pending.
 
Pillar 4: Governance
Key deliverables included:
▪ Headcount reduction to the targeted operating model. This was still ongoing. The target is annual and would be monitored constantly.
▪ Review and revised editorial policy. This was ongoing.
▪ Business performance management. This was achieved.
▪ Individual performance management. This was partially achieved. A new performance system would be reinforced. The old scheme was not working and the new scheme was only rolled out from this fiscal year.
▪ Risk reporting structures. The target was to report to the operational risk committee and group executive. This was achieved.
▪ Review and refinement of internal audit. The target was to develop and table for approval a risk-based audit plan that was aligned to the key strategic goals. This was achieved.

Pillar 5: People
The key deliverables included:
▪ Performance management reward linked to performance strategy and implementation. Partially achieved.
▪ Quarterly organisation wide performance review. Not achieved. The first review still had to take place.
▪ Training of staff to ensure business proficiency and effectiveness. This was achieved.

Pillar 6: Financial Health
Mr Tian Olivier, Stand in for Acting Chief Financial Officer, said that the srategic intent for this pillar was to build an organisation that was economical, efficient and effective. This included building the digital SABC and integrating the digital future into all plans and action. The year to date expenses up to June 2011 amounted to R1 142 million. Revenue amounted to R1 351 million. This gave the SABC an actual net profit of R190m as at June 2011.

Key deliverables included:
▪ Total revenue targets met. This was achieved.
▪ Share of advertising revenue maintained. This was not achieved. SABC 3 had not regained audiences in all key target segments.
▪ TV licence cash collection targets met. This was not achieved. The target was to collect R234 million this first quarter, instead R221 million was collected. This under-performance was attributed to debt collection revenue being under target for the past three months.
▪ Asset management strategy developed and implemented. This was not achieved. Deloitte and the SABC was in the process of drafting a framework for it.

Pillar 7: Stakeholder Management
Key deliverables included:
▪ Enterprise stakeholder management plan implemented. This was partially achieved.
▪ Brand and reputation of SABC approved. This was not achieved. A brand reputation study had to be commissioned to ascertain the health of the brand amongst various key stakeholder audiences. This would allow the SABC to benchmark the findings in two-year intervals.

Discussion
Mr Zondi commended the SABC for a user-friendly presentation. It was very clear and easy to follow. The SABC spoke of reducing the impairments. The SABC said that the verification process was a manual process. He asked if it could elaborate on this. Was there no way in which this information could be accessed in a better way than a manual process? He addressed the cost of sports rights. The Committee knew that the competitors were clobbering the SABC on this matter. It was very painful to see and Members understood it was not in the SABC's control, for example, the recent Bafana Bafana game. The Committee sometimes felt that the SABC was being taken for a ride by those that wanted to charge the broadcaster exorbitant funds. For the SABC to be able to bounce back and satisfy its audience, it had to be very efficient. He asked if there was a strategy to overcome these problems. He focused on the roll-out of low power transmitters to improve access to rural areas. The reason for the deviation was said to be owing to be external partners. He asked who the partners were. Was Sentech one of the partners? He said that it looked as if Siemens was sabotaging the SABC's progress. He wanted to know how the SABC was finalising its contractual issues with Siemens. What was the story with Siemens? The SABC said it was waiting on shareholder approval for its 24-hour news channel. He asked if it was going to be better than the “CNN type of thing” that was boring because it played the same thing over and over. More importantly, was the SABC ready to host a 24-hour news channel? The Committee had some interaction with provincial workers in Durban last week when they were doing oversight. As they were visiting, they almost had a demonstration by freelance workers who felt that their input was not appreciated by the SABC. The Committee felt that even for regional staff members, there was a gap in terms of information about what was happening within the SABC. It was not the Committee's business to explain this to them but Members felt that the workers were in the dark based on the questions they were asking. There was room for improvement here. The workers also said that they thought the SABC was a top-heavy organisation. He asked if this was true, and if it was happening at the expense of low and middle order employees.

Mr Molefe addressed the issue if impairments. He replied that the SABC bought a lot of its content from overseas, but it also licensed a lot of its local content. In the last four or five years, the SABC had a division called content enterprises that procured and acquired content on behalf of platforms. The practice used to be that people would go overseas and buy a “truck-load” of programmes. This would be brought back to South Africa. Then there was situation where there was a dis-juncture between the content enterprise work and the need of the SABC channels for the use of those programmes. More often than not a lot of the programmes that were bought would not be aired, which resulted in a loss for the SABC. This resulted in what was called an impairment. This was an historical practice that was now being corrected. Secondly, another aspect of impairment was the international buying practice. The international sellers would have a “blockbuster”, but in order to buy it, you had to get it with all the less attractive films that were sold with it as a package. More often than not, the less attractive films were of no value. People in television called it “buying a dog with its fleas”. This situation was being addressed. The new structure addressed the issue of impairment. This was why the content enterprise division was now called the television division. It meant that buying would be driven by a schedule and the need for it. The channels had to say what they wanted and what they needed would be bought.

Mr Molefe said that when the SABC was trying to address this situation of impairment, they found that there were titles that were classified as expired. But, these titles had not expired. So, to really verify the expiration, the files had to be pulled up manually and the schedules had to be checked. It was a laborious and time-consuming process.

Mr Ndaba agreed that there were issues with independent contractors in the provinces. A project plan was set up that all provinces were participating in. At this point in time, an SABC project manager was going to all the regions to talk to the items included in the project plan so all the issues were captured directly from the affected individuals. The plan was started in July 2011 and would be completed end September 2011. The intention was to address all the issues such as contract problems and payment issues. A number of independent contractor issues emanated from the historical arrangements. When the SABC staff was reduced in 2008, almost a thousand independent contractors were obtained. The contractors doing full-time work were the ones that wanted to be employed on a permanent basis. Some of them had been there for ten years already.

He said it was common knowledge that the SABC was top-heavy. The SABC was looking to make a reduction mainly at top level. The strategy was not to kill the operational areas. This was where the strategy was developed. A lot of people at top-level were on a contract basis and the decision was made not to renew the contracts. The current structure that was recently approved by the board included a reduction at executive level from fourteen or fifteen to about nine. The strategy also looked at general management level that had about 81 employees, this would be reduced to approximately 56 employees over a two-year period.

Ms Newhoudt-Druchen thanked the SABC for trying to make the public aware that it was National Deaf Awareness month and for making sure the promos for deaf awareness month were being played on TV. She asked for examples of what impairment the SABC was talking about. The SABC spoke of a leadership development programme. How many staff members would be attending this programme? She noted that there were government departments that had not paid their TV licence. What was the SABC doing to ensure government departments paid their TV licences.

Mr Molefe replied that a total of 63 senior and top management officials had been trained in the leadership development programme. This number would bulge as one looked into the lower levels of operation.

Ms Killian asked if the contract with Siemens posed any possible risk to the SABC. She asked what steps the SABC had taken to avert the risks. She asked if the 24-hour news channel needed additional funding from the government. Was this the reason the shareholder had delayed its approval? Had SABC's middle management dissatisfaction been resolved? She was glad that the Committee and SABC would finally know who the people were that were guilty of “double-dipping”. What would happen to these individuals if they were still around when the Special Investigating Unit's report was tabled? What measures had the SABC put in place to avoid a recurrence of this practice? She asked how many senior management positions were acting positions and what the SABC was doing to fill the positions.

Mr Molefe addressed concerns on the 24-hour news channel. He replied that the SABC news division had been working on this project for quite some time. It was building a studio facility for this project and a lot more progress had already been made. There were areas that still needed to be addressed that resided in the control of the shareholder, which had to do with the funding of the channel. The SABC had already made submissions to the DoC for funding for the channel because it felt it was a public mandate issue, and it would ensure that the entity delivered on its own mandate to educate and inform the public. To tell the story of the country in thirty minutes at night was not enough. It was vital that the SABC moved forward with the plans to establish the 24-hour channel.

Mr Ndaba answered that the matter with SABC middle management could not really be called a dispute. There had been an issue with middle management employees since 2009, which was the year the SABC made the most loss and a decision was made to cascade the increases. Middle management’s increase was reduced to 5%. This was where the crux of the matter was. The SABC policy said that middle management was on a performance-based increase, not on an “across the board” increase. The idea that middle management thought they were entitled to a full increase was a problem for the SABC. Given the fact that the SABC's performance management system was not fully embedded, this posed a problem. This was being discussed currently. The SABC made an offer to them to say that a middle ground had to be agreed upon so middle management could embrace the SABC's approach to the matter, especially since the appraisal system was being implemented now. He hoped the matter would be resolved quickly.

Ms Muthambi addressed sports rights. She asked why rights negotiations often happened at the last minute and why it was not planned that rights were acquired three months ahead of the broadcast. She wanted to know what reasons SportFive gave for inflating the rights fees from R450 000 in 2010 to R5m in 2011. The same question applied to PSL rights fees that increased from R500m to R2bn. She asked if the people negotiating the rights fees within the SABC had the appropriate skills for the job. How much loss did the SABC incur when the South Africa versus Niger soccer match could not be broadcast? The Member wanted to know what impact DSTV had on the SABC and its revenue, especially SABC 3, which was positioned against DSTV. She addressed the review of procurement processes by Deloitte. She believed they were resident consultants within the SABC. How long was this going to go on? What was the status quo of the Deloitte contract? What was the cost to date of the Siemens contract? Were they getting paid for anything now? As they were currently situated at the SABC, what were they currently doing while the legal processes were happening in the background? She addressed the 7.8% head count reduction at the SABC, asking what the figure translated to in numbers. How many new people were employed at SABC during 2011? She asked what the impact had been on SABC's brand reputation given the negative image the entity had in the media. Why did the SABC sponsor the SAMA awards when it was an MTN initiative? MTN made billions of Rands in profit. Where did the SABC get the money to sponsor the awards?

Mr Molefe addressed the sports rights questions. He explained that the rights for national games were, until March 2011, held by the national football associations in the various countries. In South Africa, the rights were held by the South African Football Association (SAFA). Then in March 2011, the Confederation of African Football (CAF) gave the instruction that all rights would revert to them. So SAFA lost the rights to Bafana Bafana. The processes and agreements that SABC had with SAFA fell away. For the game against Egypt for example, SAFA had undertaken that it was going to fight the CAF decision to take over the rights and the SABC had to wait until SAFA won that battle. But, three days before the game between Egypt and Bafana on 5 June 2011, SAFA wrote to the SABC and said it was no longer going to fight with CAF on the rights issue; the SABC had to sort the matter out itself.

The rights fee of R500 000 was the going rate that the SABC had agreed upon with national associations. But, the picture was completely different now that the rights were in CAF's hands. Now, with the Egypt versus Bafana game, the SABC had a big problem on its hands. SAFA “dumped” the SABC three days before the game and told the SABC it had to negotiate with CAF. When it did so, CAF pointed the SABC to a rights agency called SportFive based in France. SportFive demanded a R5m fee. Given the short amount of time and being that it was an important game, the SABC was forced to pay the whole amount. The SABC made its position clear that it would not pay this amount again going forward. The SABC engaged with SportFive soon afterwards for the Niger versus Bafana game. The SABC told SportFive that it wanted to negotiate a full package, but SportFive declined saying the SABC could negotiate a package for the Africa Cup of Nations; the Niger game would be dealt with separately. The SABC agreed and proposed to meet with SportFive in July. They even applied for visas to go to France so negotiations could take place. SportFive contacted the SABC saying it was summer in Europe and they were on holiday for the rest of July and August. Clearly, this was tactic used by SportFive to “push the SABC into a corner” and delay the negotiations until a late stage. The media reported that SABC left the negotiations far too late; to the contrary, the SABC was the one that wanted to engage quite early in the year. However, it had to happen under conditions from SportFive. In the end, the SABC put forward a proposal of R500 000 and SportFive came back with a counter offer of R5m. The SABC told them the amount was exorbitant, unsustainable and way above the market rate. SportFive told the SABC to take it or leave it. On 2 September 2011 the negotiations deadlocked. The SABC chose to inform the public through a media statement that it had been negotiating with SportFive since May and had been trying to come to an agreement, but this did not happen. The negotiations continued and the SABC met with the vice-president of CAF to try to convince them to agree that the SABC should have the rights. But, at the end of the day, CAF had the rights to the game. The SABC was never going to agree to the offer of R5m. Approximately forty minutes before the game was scheduled to start, the SABC received a call from SAFA, the first one since 2 June 2011, saying that it would put down a R1.6m down-payment if SABC reconsidered its offer of R1.5m. The SABC gave in and moved to an offer of R2m because SAFA was going to add a total of R1.6m. This was an offer, not an agreement. At half past four, when the game was supposed to start, the picture did not come through because it had not tested satellite and whether it would get the link. This was not a SABC production, it was a SportFive production. The SABC was ready to downlink the feed. He understood that this was a long explanation, but he wanted to give the Committee a blow-by-blow account of what really happened. The SABC did its best to deliver on the mandate to cover sport of national interest. The SABC would not suffer any loss because the agreement was that SportFive would provide the picture, which it did not. The picture only came through during the second half of the game. The SABC told SportFive that it would not pay the stipulated amount because the agreement had not been honoured. He warned that the Committee had to bear in mind that the SABC would still have to negotiate with SportFive on further sport rights.

The Chairperson said it was important that the public received a blow-by-blow account of what happened, but warned that the SABC was running out of time.

Mr Richard Waghorn, Chief Technology Officer (SABC), addressed all the questions concerning the Siemens matter. He said that the SABC had been in litigation with Siemens since the end of March 2011. A position was negotiated between the SABC and Siemens at the end of June, which was being presented to the SABC board's sub-committee on technology this afternoon. Coming out of this meeting there would be a decision on the way forward.

Mr Molefe replied that the SAMA awards were organised by the South African Music Association, not MTN, although MTN did play a part in the awards. The SABC felt it needed to play a part in the awards because the SABC radio stations played a lot of music to the public.

Ms R Morutoa (ANC) said that the SABC spoke about the expansion of its services to areas that did not have coverage. She asked how many low power transmitters had been switched on. The SABC spoke about the training of its staff. It was agreed that the SABC would implement a comprehensive training strategy. How much of the training had been conducted so far and how much of the budget allocated for training was used in this quarter? She wanted to know what the total amount was that was owed by government departments to the SABC in outstanding licence fees.

Mr Waghorn addressed the questions on low power transmitters. As at the end of June 2011, there were 37 low power transmitters. In the last few weeks eight were completed so there were 45 low power transmitters. The key thing was that new sites were being identified all the time. A recent trip to the Northern Cape identified 17 new locations. The SABC was working closely with Sentech to design site specifications for the transmitters. This would be submitted to ICASA. Currently, there were approximately 270 sites identified.

Ms Ndabeni said that she appreciated the improved work by the SABC. The entity said that the reason it did not achieve DTT was due to the impact of competitive markets. She asked what impact this had on the SABC? What plans did the SABC have to attract more listeners? She noted that the SABC had not achieved on its objective to review the delegation of authority. She asked how this affected the provinces. When the Committee performed its oversight over provinces, it was informed that SABC provincial heads had gotten their powers back, but the review on delegation of authority had not been completed. Had the SABC undergone a skills audit that informed its training strategy? Or, what had informed the SABC's training strategy? How many people had benefited from it? Since the entity was under-going a head count reduction, was it not worried that it was wasting money on employees that might be retrenched?

Mr Waghorn focussed on the DTT question. He explained that the SABC was in the process of putting together its DTT business plan, which would be looked at during the group executive meeting on 29 September 2011. The plan said that the SABC would be providing eighteen channels including SABC 1, 2 and 3, as well as all its radio services on the DTT multiplex. The channel offering that SABC was providing was about attracting and retaining existing audiences so the entity can remain a competitive organisation in a digital marketplace.

Mr Molefe apologised for running out of time before he could answer all the questions. The SABC would respond to the unanswered questions in writing.

The Chairperson agreed, but he had to tell the Committee when the SABC was going to formally appoint a CEO, and when it was going to advertise for the CFO and COO. He asked the SABC to keep the Committee informed of what was happening.

Ms Killian noted that there were many other acting positions at senior level that had to be filled.

Mr Ngubane replied that interviews had been conducted for the position of Group CEO in early June 2011. A report was submitted to the shareholder regarding the preferred candidate. However, in late June 2011, the shareholder asked for a special annual general meeting where the articles of association were revised. The shareholder was now no longer a “post box” to Cabinet, he had to make up his mind about any appointment at the executive director level. He had asked the SABC for a new report to help him make the decision. The decision was still pending. National Treasury had given the SABC the CV of a person to act as a CFO. The SABC had already planned interviews for CFO applicants. If the person from National Treasury was used, then the interviews would be delayed until there was better clarity. This issue of the appointment of COO was with the shareholder. The previous person was recommended for the position but was turned down by the late Minister as being unsatisfactory. The person then went to the High Court, and obtained an order saying the Minister did not abide by the proper requirements. It was Cabinet that should have made the rejection, not the Minister. The SABC hoped the matter would be resolved quickly as it needed a COO. A Head of Internal Audit was hired and the SABC was happy with what was happening in that department.

Ms Ndabeni said that she did not know why the SABC Board and shareholder was taking so long to resolve this matter as it was hampering the progress that had to be made at the SABC.

The Chairperson asked if the SABC was going to hire the person recommended by Treasury for the CFO position or if it was going to interview the person first.

Mr Ngubane replied that the SABC had taken a look at the person’s CV and it was happy with what it saw.

The Chairperson asked when the person would start working at the SABC.

Mr Ngubane replied that discussions were under-way and it hoped it would happen soon.

The Chairperson said the Committee had come across a report that showed the SABC was not performing well when it came to minorities. When the Committee visited the Northern Cape, it was confronted with people saying the SABC was not doing enough for the coloured community. This matter had to be dealt with. Also, whenever the Committee visited the SABC regional buildings, there seemed to be some sort of trouble with them. The Committee wanted a full report on the status of regional SABC buildings and what it intended to do. There were problems raised during the discussion that had to be looked at more closely such as the top-heavy SABC management, and the retrenchment of employees. This had to be communicated clearly to all SABC employees so everyone had a full understanding of what was happening.

Mr Ngubane answered that Prof Pippa Green, SABC Board member, went to the Northern Cape to address the concern raised by the Chairperson. Prof Green was the chairperson of the sub-committee on public broadcasting services. A report was submitted to the Board and the matter was in good hands.

He acknowledged that the SABC had many properties but it did not have a strategy to deal with them. The SABC would need support from the Committee when it asked the Minister of Finance to help them dispose of its properties.

Mr C Kekane (ANC) added that the Committee and SABC could not continue talking about the vacant posts. The Committee had to give the SABC a deadline by which all important vacancies had to be filled. Some important decisions had to be made.

Ms Killian asked the SABC to note that the issue of “double-dipping” had not been answered.

The Chairperson noted that the remaining unanswered questions had to be submitted in written form to the committee section. He thanked the SABC for its presentation.

The meeting was adjourned.