South African Post Office Bill: responses to NCOP; SABC on universal access coverage, turnaround strategy & digital migration; ICASA on interconnection rates, communications pricing, broadband

NCOP Communications and Public Enterprise

06 September 2011
Chairperson: Ms M Themba (ANC-Mpumalanga)
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Meeting Summary

The Department of Communications presented its responses on matters raised by the Committee when briefed on the South African Post Office Soc Ltd Bill [B2B - 2010] on 31 August 2011. These included the role of the Minister of Finance and why he was given prominence in the Bill and why a 75% quorum was stipulated for the delegation of powers by the Board. The Committee was not satisfied with the responses received on why the National Assembly was referenced in some instances and the National Council of Provinces ignored and why the words ‘approval’ and ‘concurrence’ were seemingly inconsistently used and decided that it needed time for further deliberations.

It was then briefed by the Independent Communications Authority of South Africa on interconnection rates, fair prices and competition policy, Broadband issues, the Broadband Infraco Licence, litigation, complaints and services in the interest of the poor and future initiatives to reduce the cost to communicate. In terms of prices and competition policy, ICASA had targeted call termination rates as those rates were passed on to the consumer and factored into the retail price and smaller operators were prevented from entering the market because of interconnectivity costs.

By end September 2011, ICASA would finalise the setting up of a Broadband Colloquium with Stakeholders and establish a nationwide Broadband committee. It planned to finalise and publish the Local Loop Unbundling Framework by November 2011. By March 2012, a possible additional 500 MHz Spectrum would be made available for Broadband wireless access and it aimed to promote the sharing of infrastructure. It was engaging with various industry stakeholders and with municipalities with regards to the installation of fibre optic cables to ensure that every region had access to broadband whether by wireless or fixed fibre optic cables. ICASA continued to allocate scarce resources, especially spectrum, ensuring that its social obligations were met, including extending rollout to areas where it was considered uneconomical.

ICASA was ensuring that the regulatory framework was in place for migration to Digital Terrestrial Television (DTT).The standard for set-top boxes had been changed to DVB-T and it was amending the regulations to deal with channel allocations. In response to questions, ICASA noted that the set-top box was not ICASA's responsibility but the Department's and ICASA had complied with all it was required to do with respect to the migration to DTT.

The SABC presented its turnaround strategy, plans for digital migration and progress on universal access coverage. The SABC had been plunged into a serious crisis during 2008/2009 which was largely about financial and governance issues. The turnaround strategy was premised on three phases i.e. recovery, stability and sustainability. The short-term priority was to improve the cash flow and to free the SABC from independent bail-outs and government guarantees. Its long-term priority was to shape the SABC for success in the future digital media environment. It was progressing into the phase of stability and in the last quarter, R140 million was raised because of the systems put in place by the turnaround strategy.

The SABC reported that at present 85% of South Africans had access to radio and television broadcasting facilities while 15% had no access to signal distribution. In partnership with Sentech, it had identified over 250 poor signal sites and it had ascertained the feasibility for low power transmitter rollout.

The SABC's move to DTT was part of the government-mandated process and had to be completed by December 2013. The commercial launch of the DTT platform was a key project as the SABC needed to remain competitive and innovative, providing consumers with an enhanced multi-channel, multi-platform service. The SABC's intention was to position itself as a leader in digital broadcasting in Africa. All SABC radio services available would be on the DTT platform as well as ancillary and interactive services. Thus it would be fully national to improve public services in areas such as language delivery, education and news.

Meeting report

Opening and welcome
The Chairperson welcomed the delegations. She observed that the National Council of Provinces (NCOP) was integral to Parliament and deserved to be recognised and respected as much as the National Assembly.

South African Post Office Soc Ltd Bill [B2B - 2010]
Mr Alf Wiltz, Director: Legal Services, DoC, noted the Department had briefed the Committee on 31 August 2011. It had given careful consideration to the questions and concerns the Committee had raised and had returned to present its response. He introduced Ms Phendile Dlamini, Deputy Director: Postal Policy who together with him responded to the twelve questions raised (see document for responses).

Question 1 asked if the Minister of Finance was involved in any way in the Bill.

Question 2 asked if there were more than one trade union, which trade union would be able to nominate two non-executive members of the Board.

Question 3 asked why the Bill only referred to the National Assembly and not Parliament.

Question 4 asked who had the power to change the Postbank into a private bank.

Question 5 asked why the role of Parliament was not clearly defined except in respect of annual reports.

Question 6 made reference to the Public Finance Management Act (PFMA) and that its application was not clear and the Bill appeared to contradict the role of Parliament in respect of financial oversight.

Question 7 asked why the Bill provided for a 70% quorum in Clause 14(1)(b) but then required a resolution of 75% of members in Clause 15(1) for certain decisions.

Question 8 asked why the Bill provided for approval by the Minister when the Board appointed executive members of the Board in clause 16(1) but only required concurrence when terminating such employment in Clause 18(1).

Question 9 asked why the word “Ltd” appeared in the Bill.

Question 10 noted that the Postbank Act involved the Minister of Finance extensively. Was such a role for the Minister of Finance necessary, as it seemed to be micromanagement?

Question 11 asked how the consultation process on the Bill had been conducted.

Mr Wiltz acknowledged the importance the Select Committee placed on ensuring that their constituencies were consulted and responded that members of the public were invited to partake in the public consultations. Various media platforms had been used and they had visited the various provinces. Specific stakeholders were consulted such as the post office, the relevant government departments, ICASA, unions and the National House of Traditional Leaders.

Question 12 asked what the relationship was between the South African Post Office (SAPO) as the holding company and the Postbank as a subsidiary. How autonomous was the subsidiary?

Mr Wiltz responded that because the one was the holding company and the other its subsidiary, they were separate and independent. However they were inter-related. The new Company's Act defined a group of companies as two or more companies that shared a holding company or subsidiary relationship. The holding company was defined as a juristic person or undertaking that controlled the subsidiary in terms of the majority of voting rights at a general meeting and controlled the appointment or election of directors to the Board. Subsidiaries were separate, distinct legal entities. In the context of the Post Office, as the holding company, and the Postbank as its subsidiary (when it was corporatised and became a legal entity), they could both be sued and sue in their own right and they would be responsible for their own operations.

In terms of Section 3 of the Postbank Act, 2010, the Post Office was the sole member and shareholder of the Postbank. The Postbank was controlled by its own Board and the Board was appointed by the Minister with the approval of the Minister of Finance and the Post Office. The Postbank would therefore qualify as a subsidiary under the Companies Act. The Postbank Act and the SAPO Bill also defined the company-subsidiary relationship. In terms of company law, the subsidiary had to report to its holding company. However the Postbank Act provided specific responsibilities of the Postbank towards the Minister such as provisions on the Annual Report, the right to inspect financial and other documents, interventions by the Minister, and regulations.

The Postbank Act applied in parallel with company law and the Protocol on Corporate Governance in the Public Sector. The requirements of the protocol included that the directors of State Owned Enterprise (SOE) keep the Executive Authority informed of the SOE's operations and its subsidiaries; that subsidiaries submit a separate budget; the corporate plan should cover both the SOE and its subsidiaries; the annual report and financial statement of the SOE had to include particulars of the financial statement of its subsidiary and these had to be audited or reported on by the Auditor-General (A-G).

Mr Wiltz reiterated that the holding and subsidiary companies were separate, distinct legal entities but they were inter-related. The autonomy of Postbank as the subsidiary, was affected by SAPO's ability as the holding company to directly and indirectly exercise control of the general voting rights at a general meeting and by the appointment or election of the directors of the Board who would control the majority of the votes at a board meeting. The Postbank Act stipulated that the Postbank Board was accountable to the Board of the Post Office and this was indicative of their relative autonomy.

Discussion
Mr M Jacobs ANC (Free State) queried the explanation for the seemingly inconsistent use of the words 'approval' and 'concurrence' in Question 8.

With reference to the response to Question 2, Mr Jacobs queried the recognition accorded to only two unions and asked if they would have to make an amendment if a third union needed to be recognised.

Mr Jacobs was unsatisfied with the response to Question 3 on the National Assembly as the committee had submitted that Parliament consisted of two Houses, the National Assembly and the NCOP. If the Bill only referred to the National Assembly, it was as if they were undermining the second component of Parliament.

The Chairperson said that it appeared from the presentation that they had only consulted with seven provinces. What about the others? She asked if there would be roadshows to educate the public on the implementation after the Bill was passed.

Mr Jacobs referred to the response to Question 7 on the 75% quorum needed for some decisions of the Board. Practically it meant that if there was no quorum, the meeting would have to be postponed and it would result in fruitless and wasteful expenditure as board members were paid to attend the meeting. Why could it not be 70% in both cases?

The Chairperson referred to Clause 18 of the Bill that dealt with the termination of the employment of the Chief Executive Officer, Chief Financial Officer and the Chief Operating Officer. She wanted further clarity on Clause 18(2) on the suspension of these senior managers pending the findings of any misconduct proceedings as sometimes people were suspended for a very long time.

Mr M Sibande ANC (Mpumalanga) was concerned about the consultation that had been conducted in relation to Question 11, as this consultation usually took place in the cities and urban, developed areas.

Mr Sibande concurred with the issue of two unions raised by Mr Jacobs. He wanted to know how many non-executive Board members were indicated in the organogram and how this number affected the unions.

The Chairperson observed that it seemed as if they were closing the door to other unions. She called on Mr Wiltz for his response and for the State Law Advisor to contribute as well.

Mr Wiltz said that Mr Smuts could assist with the query about 'concurrence' and 'approval'.

Mr Wiltz noted that the Bill referred to 'recognised' unions and said that they had inherited it from the provisions in the memorandum and articles of association of the Post Office. They took the existing governance provisions of the Post Office, which were spread over a number of laws and brought them forward into one law and where necessary improvements had been made. If the number of recognised trade unions changed, the non-executive board members could change and the trade unions would have to caucus on the matter. He thought it should not prove a major problem if it was one or three trade unions as long as they were recognised.

On the issue of the National Assembly, Mr Wiltz said that they wanted to steer away from that question in a respectful way. After the Department introduced a Bill to Parliament, it was Parliament's Bill and it became Parliament's process and it was difficult for the DoC to respond to decisions taken in Parliament. They had said that the Portfolio Committee had introduced certain amendments and they had made reference to the National Assembly. When the Department had introduced the Bill they had only made reference to Parliament.

Mr Wiltz said he had not been part of the consultative process with provinces but his colleagues had informed him that all nine provinces had been consulted. It had been an oversight that all of them had not been named.

On the issue of the roadshows, Mr Wiltz said he did not forsee any, bearing in mind that the Bill captured in law, things that already existed. The Post Office existed as a legal entity and some internal governance and other changes would take place such as the declaration of financial interests by Board members. There was no direct external legal effect and in principle it was not necessary to have roadshows and the normal official announcement process should suffice.

Mr Wiltz said there was a general quorum of 70% and the 75% requirement was specific to the delegation of powers by the Board. This was linked to SOE's and the seriousness with which Parliament viewed Boards in charge of SOE's. Due to development at SOE's over the years, it was critical that Board members were held accountable and exercised the utmost care in the execution of their fiduciary duties. That was the context for the portfolio Committee's proposal of a quorum of 75%. From a practical perspective the members would know upfront that there was a critical matter requiring a quorum of 75% and they should ensure that it happened.

Mr Wiltz addressed the issue of suspensions of senior managers as provided for in Section 18, and said that the procedures were subject to the Labour Relations Act and the relevant legislation governing disciplinary procedures and it was not required that it be dealt with in the Act.

Returning to the issue of consultation, Mr Wiltz noted that they had apologised to the Committee in the past on not consulting with them. There had been one process of consultation on both the Post Office Bill and the Postbank Bill and it had limited their interaction with the Committee. However they were committed to involve the Committee more fully in the future.

On the question of the organogram, Mr Wiltz noted that currently the Bill provided for eleven non-executive Board Members and three executive Board members. The Bill made provision for two of the eleven of the non-executive members to be nominated by the recognised trade unions.

Mr H Smuts, State Law Advisor, noted that the words 'approval' and 'concurrence' both implied that there should be a meeting of minds. Clause 16 dealt with the appointment of the relevant officers and the word approval meant that the Board would supply the names of their choice and the Minister would or would not approve. Clause 18 looked at a graver situation where the one or more of the officers' employment could be terminated. The word concurrence was used, which was derived from its Latin root meaning 'to run together' and in the context it implied that there had to be a process before the termination could be effected. The Board would make their recommendation and the Minister's approval would be part of a process undertaken and the Board and the Minister had to agree on the termination.

Mr Jacobs stated that he was not satisfied as his understanding was that approval carried more weight than concurrence. He still maintained that there was no consistency.

Mr Smuts said that in the end the effect was the same and if there was no concurrence the Board might not agree to the termination. Concurrence implied that the Board must consult with the Minister in a process that led to a decision being taken on the termination of the services of an official. He cautioned that the Board might be subjected to litigation and the proper processes had to be followed.

Mr Jacobs suggested that they discuss the issues further in Committee.

The Chairperson thanked the department for their clarification and said they would discuss certain issues further at a Committee meeting in the near future and would communicate with the Department at a later date. They did not merely want to rubber stamp the Bill without understanding it fully as they had to inform their constituencies.

ICASA on interconnection rates, communications pricing, broadband
Councillor Thabo Makhakhe who led the delegation, extended apologies on behalf of the Chairperson, Dr Stephen Mncube and Councillor Willie Currie who were unable to attend. He said that ICASA's councillors would address the issues that the Committee had indicated in their invitation such as those of broadband, Broadband Infraco licencing, litigation, and billing and complaints. Mr Makhakhe noted that ICASA's strategy for 2011/12 financial year, re-focussed on their vision statement of advancing the building of a digital society as it was pertinent to the migration from analogue to digital technology that was currently underway. Their mission was to ensure that all South Africans had access to a wide range of high quality communication services at affordable prices. The Vision and the Mission were encapsulated in the objects of the Electronic Communications Act (ECA), the primary object of which was to provide for the regulation of electronic communication in South Africa in the public interest.
 
The new regulatory approach of ICASA, moving into the future, was to encourage market entry especially for small and medium sized enterprises and to respond to any developments that inhibited effective competition. This was done through ex anti regulations for entities with significant market power in order to anticipate whatever problems there might be in the market. It was important to respond to complaints speedily and transparently and to be pro-active in compliance monitoring. Where competition was effective, fair and sustainable, regulation could be withdrawn. They continued to allocate scarce resources, especially spectrum, ensuring that their social obligations were met, including extending rollout to areas where it was considered uneconomical.

Councillor Fungai Sibanda addressed the issue of fair prices and competition policy, which was part of the mandate of ICASA. This was in line with Government policy as provided for in the Competition Act of 1998 and the Electronic Communications Act of 2005. The implementation of policy and regulations was to prevent bottlenecks, barriers and impediments to competition and to facilitate the entry of smaller players into the market and to help ensure their sustainability. The competition authorities also counteracted high prices through collusion and ensured affordability through various measures including price regulation. ICASA regulated prices where they found competition to be ineffective in particular markets and intervened to remove barriers where they existed. They looked at the whole value chain in the electronic communications sector and identified problematic areas. Where there was market failure, they intervened to assure that the market functioned as if there was effective competition.

Cllr Sibanda said that one of the areas identified by the Committee, was on the work ICASA had done on interconnection rates or what they referred to a call termination rates. He elaborated on the process of call termination and retail prices. He said that the retail price of calls consisted of three components i.e. the cost of originating the call where the call was routed via a particular network, the cost of terminating a call on the same network or another service provider's network and the Mark-up. The call termination rates or interconnection rates had to do with a call being originated in one particular network and then terminated on another network. The termination rates of calls across networks were controlled by the service provider in whose network the call was terminated. This gave rise to what was called market power.

 The process of regulating termination rates started in 2008 and they were still grappling with the Electronic Communications Act and finding out how they could intervene in the market. The Minister, at that time, had tried to negotiate with operators and this resulted in a voluntary reduction of call termination rates by operators in 2010. At the same time they were still busy on the call termination regulations that would bring about price control. They finalised the process in 2010 and the regulated rates became effective in March 2011. The way ICASA was regulating call termination rates was referred to as a glide path. This was a three-year period over which prices would come down gradually as they felt that the system needed time to adjust naturally. The glide path commenced in 2011 and the end result was that it would be reduced to 40 cents by March 2013 (see presentation attached).

The reason why ICASA had targeted call termination rates was because the networks charged each other for calls across networks but those rates were passed on to the consumer and it was factored into the retail price. They thought that they would intervene at that level, as not only would they be affecting the retail price but also they would be removing a barrier to entry because if call termination rates were high, smaller operators were prevented from entering the market because of interconnectivity costs.

ICASA had also found that the ability of smaller operators were hampered by existing commercial terms in interconnection agreements whereby bigger players demanded high bank guarantees that smaller players could not afford. Secondly, they had high minimum monthly traffic volume requirements for smaller operators. ICASA found that this was unfair to new players and that it was hampering competition in the market and this affected consumer choice and prices.

ICASA formulated regulations to deal with these issues. The call termination rates had been reduced as from March 2011 and networks now had more control over pricing and could charge lower retail prices. The high barriers to entry had been removed and networks could now effectively compete on price. Some major networks had removed the requirement of up-front bank guarantees and had upgraded their networks and were offering more modernised interconnectivity. Smaller licencees had reported higher call volumes due to the reduction in call termination rates and were now in a position to expand their services. Retail prices from fixed lines to mobile had also been reduced by the reduction in call termination rates. This was also the case for mobile-to-mobile calls brought about by the voluntary reduction in call termination rates by service providers in 2010 and the regulated reduction, which came into effect in March 2011. Mr Sibande referred to the graphs in the presentation to illustrate these trends and he reported that there had been a 27% reduction in overall telecommunication prices since January 2008 till July 2011 (see presentation attached).

Councillor Marcia Socikwa addressed issues concerning Broadband and said ICASA had adopted a holistic approach to unfolding Broadband in the country. They had set deadlines for the current financial year in collaboration with the DoC. By September 2011 they would finalise the setting up of a Broadband Colloquium with Stakeholders and establish a nationwide Broadband Committee. They planned to finalise and publish the Local Loop Unbundling Framework by November 2011. By March 2012, a possible additional 500 MHz Spectrum would be made available for broadband wireless access and they aimed to promote the sharing of infrastructure in this respect. They were engaging with various industry stakeholders and with municipalities with regards to the installation of fibre optic cables to ensure that every region had access to broadband whether by wireless or fixed fibre optic cables. They would involve the Committee in these initiatives as well.

Councillor William Stucke dealt with the multiple initiatives for successful broadband penetration and take-up. He identified four regulatory factors that affected this i.e. infrastructure sharing, Spectrum allocation, Digital Dividend and the removal of barriers to network rollout (see presentation attached). In terms of infrastructue sharing, there were two initiatives, which were firstly, local loop unbundling, and secondly, ICASA was developing a framework for infrastructure sharing between licencees. In terms of spectrum allocation, ICASA would assign and release all available spectrum for wireless broadband. In terms of the Digital Dividend, ICASA was exploring the opportunity for three possible digital dividends for wireless broadband including the 790-862 MHz band that was currently being used for analogue broadcasts. Barriers to network rollout at local level included environmental assessment studies, municipal regulations and a lack of awareness of local officials of ICASA's mandate. They were identifying these barriers to their rapid rollout guidelines and adopting corrective measures.

Cllr Makhakhe dealt with the issue of the Broadband Infraco Licence and he noted that a document detailing the processes had been produced by ICASA and was available to members. He explained that there had been a Ministerial Directive to ICASA in February 2009 on the licensing of Infraco. In March 2009, ICASA had invited Infraco to make application for an individual Electronic Communications Service (ECS) and an Electronic Communications Network Service (ECNS) in terms of the Electronic Communications Act (ECA). Infraco submitted their application in April 2009 and it was published, as they had to invite comment from the public. ICASA received five written submissions and they then held public hearings in June 2009. They then deliberated on the outcomes of the hearings and the submissions. Before they could make their recommendations to Council, the Minister of DoC at the time issued a draft policy directive, amending the directive that had been issued in February 2009.

 Council had made a decision on Infraco's application by January 2010, which was that Infraco should be granted a licence for an individual ECNS licence but that an Individual ECS licence be denied. The reasons were based entirely on the merits of the application. They had looked at two things in the application, firstly at the issue of affordability and secondly, the issue of universal service and access. Infraco had indicated that they would offer affordable prices to end users, but when they analysed the application they found that their target market was going to be large corporates and government departments. ICASA had enquired how the end user would benefit from affordable pricing taking into account pricing strategy and the target market. ICASA was not satisfied that Infraco had met the requirements for an ECS licence. In terms of universal service and access, ICASA questioned how Infraco would promote universal service and access, if their target market was large corporates and government. Infraco had not presented a convincing case to warrant an ECS licence in terms of broadening service and access and as the regulatory authority, ICASA took a decision in January 2010 refusing them the ECS licence.

The Minister issued a final policy directive in May by which time ICASA had already finalised the licensing process. In April 2010, Cabinet had issued a statement confirming the directive of the policy amendment that Broadband Infraco be issued with an ECNS licence only. Mr Makhakhe alluded to the misreporting on the Infraco licencing in
the media and that there had been a retraction by those responsible.

 Councillor Miki Ndhlovu dealt with the issue of litigation. She noted that ICASA only had a budget of R366 million and they were regulating a multi-billion rand industry that was very litigious. In many cases they tried to settle out of court due to the financial implications. If they were to lose a case and wanted to appeal, they would still lose because they did not have the money to proceed further. In 2009, there had been 27 cases of which they settled five with the complainant, two had been withdrawn and two were referred to the Complaints and Compliance Committee (CCC). This was ICASA's quasi-judiciary section that dealt with some cases such as complaints against another operator. The CCC deliberated on the cases and referred their recommendations to the Council for their approval. The balance of the cases was still in progress. She reported that some cases had been dragging on since 2006 as the operators had the money to drag out the process.

In 2010, they had 21 cases of which 14 had been settled out of court and they had referred two cases to the CCC. She noted that one of the cases had been in the media and involved the SABC. She noted that more cases were conducted at the High Court in Gauteng and Cape Town as the major operators were nationally based and had their head offices in Gauteng and Cape Town. They had 16 cases at present that they hoped could be settled by the CCC instead of them going to court to defend themselves.

Ms Ndhlovu also dealt with the issue of Complaints as illustrated by the graphs and statistics supplied by ICASA (see presentation attached). The types of complaints included billing, contract terms and conditions, faulty handsets, network coverage, fault reports and data services. The majority of complaints were registered in Gauteng while the Northern Cape registered the lowest and this was indicative of challenges there. The statistics on complaints across licencees indicated that MTN was highest in terms of complaints registered. MWEB and Neotel were the lowest in respect of complaints.

Councillor Joseph Lebooa dealt with the issue of communication services in the interest of the public and he noted that the greater part of the public were the poor. In terms of the licencing framework, ICASA ensured that every licence that was issued had a Historically Disadvantaged Individuals (HDIs) empowerment component. Normally, they used 30% as a benchmark and they had issued in excess of 1,300 ECS and ECNS licences and 1,000 plus additional Spectrum licences. They were doing a review of the status quo, to ensure that the licences that had been issued still had their HDIs empowerment status and to reconcile this with the licencing and other information. They would also be conducting an audit on the HDIs status of the sector in terms of ownership and other factors.

In the same licensing framework there were issues relating to universal service. Normally they issued targets on the licence itself, such as rollout targets for rural areas that the licensee had to meet. They monitored this to ensure compliance. There were challenges, such as infrastructure in rural areas and unequal access to electricity in disadvantaged areas. Mr Lebooa stated that a more profound and comprehensive strategy on universal service rollout and more permanent infrastructure was needed on the ground. He commented that the country had wasted a lot of money in terms of universal service access initiatives. There had been a failure to stimulate interest in the demand side of the service and many countries across the world had done more in this area. Through their current business plan and rollout strategy and by putting a national broadband grid in place ICASA was working towards ensuring that all South Africans, even in rural areas, had access to Broadband connectivity by 2019 as had been stated by the Minister.

Mr Stucke concluded ICASA's presentation by dealing with future initiatives to reduce the costs to communicate (see presentation attached). He identified infrastructure sharing by licencees, reducing the cost of services paid by end users by fostering competition between licencees on service costs and innovation, which would drive prices down. ICASA could also introduce price controls and Mr Stucke noted that this was more effective at the level of wholesale pricing instead of retail pricing. He also emphasised the importance of market reviews.

Discussion
Mr Sibande referred to the migration from analogue to digital and asked if ICASA was ready.

Mr Sibande observed that ICASA was responsible for ensuring that appropriate broadcasting services were extended to all citizens. In the provinces, people were still confined to the barracks of the former homelands in terms of access to only some radio stations, while some radio stations like 'Radio Sonder Grense' and SA FM, had signal coverage everywhere.

Mr Sibande noted that ICASA regulated radio frequencies and queried who issued licences for radio hams and how many people had them as they were very sophisticated and users could communicate with any country without being monitored

Mr Sibande commented that ICASA's vision was to be a catalyst in transforming the country into an information oriented society and a knowledge based economy. In the media there had been a focus on the challenges faced by a community radio station in the Northern Cape and he asked what ICASA could do to ensure its sustainability.

Mr Sibande said he did not want to sound xenophobic but he had observed that foreigners were controlling most of the broadcasting frequencies and he wanted to know if there was a proper monitoring system in terms of frequency.

Mr O De Beer (COPE, Western Cape) said his question related to the financial constraints faced by ICASA and their appearance before the Standing Committee on Public Accounts (SCOPA) in May 2010. They had been subpoenaed by the A-G as they did not get a clean audit report for the 2009/10 financial year. The findings were on non-performance, non-compliance with the PFMA, non-compliance with National Treasury Regulations, No Performance Agreements were signed by the Chief Executive Officer and other senior managers yet bonuses of R8 million were paid out. He asked if there were systems in place to prevent this from recurring.

Mr Z Mlenzana (COPE, Eastern Cape) said his question related to social networks such as Facebook and Twitter and he asked if ICASA played a role in its control and regulation.

Referring to the call termination rates, Mr Mlenzana asked if they could have more specifics on the Glide Path as call rates had been in the public domain. They needed more specific details when they went back to their provinces. He wanted further clarity on pricing and competition policy.

Mr Mlenzana referred to the major operators in the sector and noted that some of them were vested in foreign financial institutions. He asked how ICASA ensured that it was not drawn into the controversial political and other issues surrounding major licencees. These major players could be seen to be suppressing smaller operators.

Mr Mlenzana asked what was the relationship between ICASA and the Media Development and Diversity Agency (MDDA) and how it impacted on community broadcasting stations whether Television or Radio. Who was responsible for monitoring and supporting community radio stations?

Ms L Mabija (ANC, Limpopo) noted that there was a typographical error in respect of Limpopo Province which was incorrectly indicated as NP on page 30 of the presentation. She asked how many licences had been authorised for provinces, especially in the rural areas.

Mr Jacobs raised the issue of litigation and out of court settlements and agreed that it was difficult to challenge court rulings as the operators were well resourced. Were they not compromising themselves and were there no preventative methods that could be adopted.

Mr Jacobs asked what control measures ICASA had on the use of cellphone technology such as Blackberry in crime.

Mr Sibande wanted an explanation on the settlements that had been made out of court and more detail on the money spent on court settlements.

Mr Sibande stated that it was alleged that prices were inflated if it involved the government, such as in the sale of land. In terms of technical work done for government, it was alleged that people made deliberate mistakes in a scam whereby their friends would rectify it at a cost to government.

The Chairperson asked how far they were in terms of the Broadband Colloquium with Stakeholders planned for September 2011. She queried what criteria would be used to determine who would be part of the nationwide broadband Committee and how they would involve the provinces. She asked ICASA to elaborate on initiatives between provincial and local government. The Chairperson noted that there were places in the rural areas where there were no signals at all and Telkom had not penetrated there either. She asked how ICASA was dealing with the most remote rural areas where this was prevalent.

Mr Makhakhe said that the Councillors would respond to the questions as indicated.

Mr Stucke responded that ICASA was ready and had been ready for some time, to the question on whether ICASA was ready for the migration to digital communication. He was asked to elaborate on this.

He said the requirements ICASA had to fulfil were to ensure that the regulations were in place and to ensure that Spectrum was available. There was a joint spectrum advisory group who would deal with issues between different broadcasters. Some broadcasters were ready and others were not. The set-top boxes (STBs) were not ready.

Ms Socikwa added that they were in the process of amending some regulations.

Mr Jacobs said they had asked a question about the state of readiness and Mr Stucke had said they were ready yet there were no set-top boxes and they were key in changing from analogue to digital.

Mr Stucke said that there were two separate issues on set-top boxes and while the DVB-T had been chosen, there were related standards that were not yet settled. There had been some controversy around the issues, such as why there was need to encrypt a free to air signal, as it had not been done anywhere else in the world. The other issue was the financing of the set-top boxes and a suggestion had been made that the Universal Access Fund to which operators contributed could be used to subsidise it, but this was controversial. Mr Stucke expressed a personal opinion on subsidising set-top boxes when they could be bought on the open market at a greatly reduced cost.

Mr Mlenzana said that they did not want personal viewpoints to be entertained, as he did not want ICASA to be held accountable as a collective for an individual's personal opinion. He was looking at the primary role of ICASA and he wanted to know who was responsible for the set-top boxes.

Mr Stucke noted the Councillor responsible for this area, was absent. However, ICASA was not responsible for the set-top boxes but the DoC was.

Councillor Sibande clarified the matter and said that the role of ICASA was to ensure that the regulatory framework was in place for digital migration and in that respect they had done their part. The Standard had been changed from to DVB-T and they were amending the regulations to deal with channel allocations. When it came to set-top boxes, that was a policy matter that had to be sorted out by the DoC as well as the Department of Trade and Industry.

The Chairperson said that this was what they wanted to hear. She requested that the Committee be taken seriously and that they be given the relevant responses.

Mr Stucke said that the start date for the dual signal arrangement was April 2012 and the switch off date for the analogue signal was December 2013.

Mr Makakhe apologised for the previous miscommunication. He responded to the question on areas where there were problems with radio signals and requested some time to respond to this in writing. He responded to the question on the issuing of licences for radio hams and their monitoring. He proposed that they give a comprehensive response in writing.

The Chairperson asked when they could expect the response.

Mr Makhakhe responded that it would be by the following week.

Councillor Socikwa responded to the question of the sustainability of the community radio station in the Northern Cape. She noted that it had been reported in Parliament by the SABC and they had received funds to set up additional transmitters in the Northern Cape to support the communication needs in that area. They were also cooperating with the Department of Science and Technology in terms of the prohibition of signals within certain parameters in the Northern Cape to support the South African Large Telescope project. They issued community radio stations with frequency in line with the availability of Spectrum and if it was not available immediately they would look at the matter more closely, post digital migration. Community radio stations often did not have the funds and there were three role players, the MDDA, ICASA and DoC and further meetings between them were necessary to reprioritise funds. As an institution they were also reviewing all legislation pertaining to the broadcasters and this would also feed into the regulatory environment that supported community broadcasters. Communities had different needs and regulations in this critical area would emerge from comprehensive discussions. Councillors would be working across all provinces to engage with communities on their broadcasting needs.

The Chairperson commented that the process of MDDA and ICASA working together was long overdue and they would like a timeline and the names of the councillor allocated to the various provinces.

Councillor Lebooa responded to the question on frequency monitoring and he admitted that their equipment was very archaic and inadequate for the number of licencees they had. Most of their monitoring efforts were inappropriate, to a large extent, and they depended on licencees for most of the information. This was a budgetary item outstanding for a number of years and it was on their request list to National Treasury for funding. There were cases relating to this with the CCC and he admitted that frequency monitoring was an area of many challenges.

Councillor Socikwa responded to the questions about the audit report and the findings of the A-G. She stated that they had recently appointed a new CEO and he had signed a Performance Agreement and they had ensured that all staff had signed performance agreements as well. The way that bonuses had been awarded had been revisited and it was now linked to performance. A performance management system had not been established previously, which had been reflected in the audit findings. She noted however that they were legally bound to pay bonuses to general managers. Councillors were still waiting to have their Performance Agreements signed and it was with the Portfolio Committee on Communications. The organisation was going to be assessed from the top to the bottom.

Compliance with National Treasury regulations had been problematic and they had to dismiss their Chief Financial Officer (CFO) for non-performance. They hoped that with the assistance of the special Committee within their audit and risk Committee and three accountants, that the Acting CFO would be able to address the problems identified by the audit findings. They could submit a report to the Committee by the end of September on progress made.

Mr Jacobs said he was concerned about State Owned Enterprises (SOEs) as people wanted to enrich themselves without being accountable. They complained about insufficient funds but mismanaged what they had. What justified them saying that the money was too little? He was not sure that measures had been adopted to prevent the problems recurring. R380, 000 had been used without the necessary approval and it was unfortunate that the CEO as the Accounting Officer, was not present as they needed the financial problems to be solved.

Mr De Beer said the response was unacceptable and the Board was responsible for oversight and that included putting systems in place. In terms of the financial management of the institution it looked as if there was maladministration. It was not only about performance agreements but also procurement issues. He noted that the PFMA had been in effect since 2007 and systems were still not in place. Their term would end and nothing would have changed.

Councillor Socikwa agreed that systems and internal controls had not been in place. There were challenges with their CEOs in the past. The bigger challenge had been the CFO whom they had to dismiss in line with the repeated findings of the A-G and they had attended to that matter. She indicated that a further challenge had been the legislation itself and this matter had been raised with the Deputy Speaker of Parliament. In terms of the PFMA, the CEO was the Accounting Officer but in terms of the ECA, the Chairperson of Council was the Accounting Officer. Other Chapter 9 institutions were in agreement that the conflicting bits of legislation on who had the final responsibility and who was accountable for the lack of internal controls, had to be addressed.

 They had appointed a chief auditor in ICASA but they had challenges with the appointment. They were going to correct it by ensuring that the skills set, support base and resources were provided. The CEO would provide a written report by the end of the month on corrective actions, which they would share with the Portfolio Committee and the DoC.

Mr De Beer said that the CEO was accountable to the Board and was actually the technical advisor to the Board. Anything that the Board wanted to know about the operational issues of ICASA came via the CEO and the Board was the platform where issues should be raised.

The Chairperson queried why the issues and the need for an amendment to the legislation had been raised with the Deputy Speaker of Parliament and not the Minister.

Councillor Socikwa said that the A-G had discussed it with the Minister and the previous Minister and there was an attempt to address it in legislation by the previous Director General of the Department. What she had attempted to do, was to introduce a Chief Operational Officer (COO) so that the conflict would be resolved. The issue had been raised with the Deputy Speaker because Chapter 9 institution had been invited to make comments on the Kader Asmal Report a few days previously. They had been engaging the Minister and the DG was fully aware of the matter.

The Chairperson said they needed a written response on that matter and the Committee could ask the Minister what was happening.

Mr Mlanzana added that it should include definite proposals.

Councillor Sibanda responded to the question on the social networks issues, which he noted was a topical issue. The role of ICASA was to ensure that South Africans had electronic communications services, internet services, they licensed internet service providers and allocated spectrum. They did not have any mandate or authority to regulate on content published on internet sites. However there was the internet governance forum but there was currently no regulatory mechanism on internet content. With respect to broadcasting, ICASA's role was to approve the code of practice that had been developed by the Broadcasting Complaints Commission of South Africa, which was a self-regulatory body.

Cllr Socikwa responded to the question on foreign ownership of elements of large operators and she commented this was becoming dominant. The lack of legislation in the ECA allowed operators to have their shareholdings to be taken over by foreigners. They had taken this to the DoC and proposed amendments to the legislation. They had also raised the issues with National Treasury. Complexities that had to be considered were, where the dividends flowed, the enormous profits, what percentage went to infrastructure development and the distribution countrywide.
Government had made a commitment to the World Trade Organisation, that they would cap the foreign ownership in the Telecommunication Sector but it had not been followed through in legislation. In the Broadcasting sector, foreign ownership was contained by legislation to 20%.

Mr Mlanzana said that this was the second time that blame was placed on legislation. The Committee expected them to communicate this to them and identify the limitations in the legislation and other hindrances. The Committee could then make the necessary follow up and interventions.

Cllr Sibande responded to the question on the call termination rates and the Glide Path by referring to the applicable slides (see presentation attached).

Cllr Socikwa responded to the question on the relationship between the MDDA, ICASA and the DoC in supporting community radio stations. She commented that there was a need to refine the regulations so that there was a structural relationship between them so that they did not only engage when there were complaints. They had indicated to the CEO of MDDA that they would meet with them to discuss funding and support.

Cllr Makhakhe apologised for the typographical error of the abbreviation for Limpopo that had been raised by Ms Mabija.

Cllr Makhakhe responded to the question of how many licences had been issued for each province especially in rural areas and requested that they supply the information in writing within two weeks, as they needed to consolidate the information.

The Chairperson requested that the information be supplied by the following Monday.

Cllr Ndhlovu responded to the questions raised about litigation and if they had implemented preventative measures.
 She said they had implemented regulations that would not have to be tested in court but unfortunately some of the litigation was about the regulations they had issued. Referring cases to the CCC was also a measure to avoid litigation and the money that entailed.

Cllr Stucke responded to the question about crimes committed using Blackberry and he noted that it emanated from a report in the media that government was considering following the lead of Britain and Saudi Arabia in calling for decryption of messages if crimes were committed using the Blackberry service. The Regulation of Interception of Communication Act (RICA) covered these issues and ICASA did not have a direct role to play.

Cllr Makhakhe requested that the questions on the settlements made in litigation and the question of possible corruption based on wilful error, be responded to in writing.

Cllr Socikwa responded to the question of how prepared ICASA was in terms of the arrangements for the Colloquium in September. She said that there were projects that they and the DoC had identified in their business plans and the Portfolio committee had suggested they merge them and coordinate it to be cost effective. The Colloquium was one of them. They decided on a nationwide colloquium, which would be funded by the DoC, and it was still underway as far as they were aware. In terms of coordination of infrastructure, they were collaborating with the DoC and this was critical as DoC had access at a national level to key role players such as heads of municipalities and Premiers. ICASA would endeavour to see that the select Committee would be invited so that they had an integrated approach towards Broadband nationwide.

 In response to the Chairperson's question on the criteria for the composition of the nationwide Broadband Committee, Cllr Socikwa said that the DoC would set it up and they would determine that.

It was agreed that improvement of infrastructure initiatives by coordination between provincial and local government had been addressed.

Cllr Makhakhe requested that they respond in writing to the question of remote rural areas where no communication signals were received and where no networks operated.

The Chairperson indicated that the timeframe for the response to all questions raised was the end of the following week.

Speaking in her capacity as the whip of the Committee, Ms Mabija told the delegation from ICASA that she did not want a repeat of what had happened at the meeting. They had a bad experience on their oversight meeting of ICASA in December 2009 and she did not want the Committee members upset once more. She requested that they show respect and were businesslike in all their future meetings.

The Chairperson thanked ICASA for their presentation and reiterated her concerns on the lack of communication services in the rural areas and that more research should be done into this.

SABC on universal access coverage, turnaround strategy & digital migration
Dr Ben Ngubane, SABC Chairperson, said that it was the SABC's first interaction with the NCOP since the new Board had taken over in January 2010 and this was a positive development. He had been a participant at the multi-party talks at CODESA where the NCOP had been conceptualised as a way of bringing the provinces into national recognition in terms of the new democratic dispensation. There were many issues that had to be addressed at a provincial level such as the procurement process, risk management and the promotion of the SABC brand to the people of South Africa and this had to be explored further and strengthened. They had been passive thus far and he hoped that a new chapter would begin in terms of their relationship with the NCOP.

He noted that the current turnaround strategy had been developed by the SABC to ensure its recovery, stability and sustainability and to enable the organisation to deliver on its mandate. The SABC was operating in an increasingly competitive environment that was evolving with the adoption of digital technologies and a new creative economy. They needed to adapt, change and respond accordingly. The turnaround strategy was aimed at returning the organisation to a reputable public service broadcaster that all of its stakeholders could be proud of. The key objective was to ensure the SABC's financial viability, strengthen its governance controls and to meet the requirements of its audience through driving public value. Progress had been made in meeting the SABC's challenges by the implementation of initiatives to stabilise the organisation. The provinces were central to the turnaround strategy and meeting the Committee was indicative of a new relationship and a more prominent role for the provinces in the SABC.

Mr Phil Molefe, Acting Group Chief Executive Officer, thanked the Committee for the opportunity to present the work of the SABC with special reference to the provinces and how the SABC sought to reach people on the ground. It was very important for the SABC to continue to deliver its mandate, which principally was about informing, educating and entertaining South Africans. The NCOP was an important House of Parliament and he agreed with the Chairperson that its activities must be reflected. The SABC as the national public broadcaster carried that responsibility. They could not leave it to any other media house as they had the constitutional obligation to do so. He was inspired by the SABC's plan to launch a 24 Hour news service as that would afford them with unlimited opportunity and access to the activities and business of the NCOP and to transmit this to South Africa. They had tried in limited ways to do so in the past and aimed to improve on that. They took the Chairperson's earlier remarks on the lack of coverage seriously and the 24 Hour news service would enable them to do so.

Mr Molefe outlined the presentation and said that he would deal with the turnaround strategy followed by reports from the provinces so that members would have a clear view of what was happening there. By way of introduction, he noted that strategy was critical as it enabled them to achieve their vision. The turnaround strategy that had been adopted by the Board in 2010 and subsequently presented to the Portfolio Committee on Communications, was a strategy which sought to turn things around at the SABC and to ensure its viability moving forward.

The SABC had been plunged into a serious crisis during 2008/2009 which was largely about financial and governance issues. The turnaround strategy was premised on three phases i.e. recovery, stability and sustainability which they were currently rolling out (see presentation attached). The short-term priority was to improve the cash flow and to free the SABC from independent bailouts and government guarantees which was the result of the financial crisis at the organisation. It was public knowledge that the SABC had to seek financial assistance in the form of a loan and they wanted to create an SABC that was free from those obligations. There long-term priority was to shape the SABC for success in the future digital media environment in order to deliver distinctive and compelling programming through sound business practices.

The turnaround strategy had been developed in November 2010 and Mr Molefe elaborated on the internal matters, regulatory and legal context and other consideration that informed their financial performance recovery plan (see presentation attached). In terms of the Government Guarantee they had received, certain conditions were attached and the Minister of Finance had prescribed guarantees that had to be adhered to. Further considerations were the Shareholder compact and the stipulation that the SABC adhered to the corporate plan of the organisation.

Mr Molefe identified seven pillars of the corporate plan which were: programming quality; platform management; news (the core business of the SABC); governance (to ensure best practices and good governance); people (as they were central to its operations); finances; and stakeholder management; and provinces. Mr Molefe emphasised that provinces were important in the strategic plans of the SABC.

Outlining the regulatory and legal environment they operated in, Mr Molefe noted that the Constitution of the Country was fundamental in everything, followed by the Broadcasting Act in terms of which the SABC existed. The Treasury Regulations, the PFMA and the Companies Act were there to ensure good corporate governance.

Mr Molefe noted that they were in the stability phase of the turnaround strategy. The SABC had recovered from the crisis of 2008/2009, by developing an operational framework based on efficiencies and good governance and in which risk management was embedded at all levels. Their financial statement for the current quarter indicated that their revenue was on the rise and that they were containing costs. When they had formulated their budget for 2011/12 they had budgeted for a loss on expenditure because of historical trends and galloping expenses. Because of fiscal discipline they managed to come out of that loss and were in fact showing an improvement in the managing of expenses and they had a positive variance on their cost management. Their operating profit and loss was also looking positive. Mr Molefe observed that they were not out of the woods yet but there were positive indications that the organisation was moving in the right direction.

Mr Molefe briefly indicated the key themes of the Turnaround strategy which were leadership and governance; financial management and controls; reorganisation and people alignment; human capital development; improving return on programming operations; and restoring the credibility of the SABC brand (see presentation attached).

Mr Molefe said that the SABC hoped to continue on its present trajectory from recovery to sustainability. They had adopted a new operational model which set out the functions and value chain of the organisation and which would drive efficiencies. The Board had approved a new structure, which was intended to be lean at the top and included devolving authority to the lower levels of the organisation and extending responsibility to the provinces. The first quarter of the year had been about the local government elections and for the first time they had developed a process of active stakeholder involvement in local content. The successful FIFA World cup coverage and coverage of the 150 anniversary celebrations of the arrival of Indians in the country were proud achievements of the SABC as were the numerous awards it received. The SABC reached more than 70% of the population everyday and touched the lives of more than 24 million people everyday through their 18 radio platforms and three television channels. Mr Molefe noted that a large measure of this was possible because of the support and contribution through the provincial broadcasters and provinces were the strength of the SABC's radio services.

Mr Hlaudi Motsoeneng, Group Executive: Stakeholder Relations and Provinces, called on Ms Mmabatho Ramagoshi, Provincial General Manager to lead the presentation from the provinces and to address the issues of universal access and people with disabilities. She noted that the SABC had offices in all the provinces and some had more than one with the office in Gauteng regarded as the headquarters. The operations of the provinces were informed by the corporate pillars, which Mr Molefe had indicated. To operationalise the corporate goals there were seven key drivers. These included putting broadcasting and broadcasters in the forefront, building brands that reflected excellence and the South African identity and ensuring editorial integrity in the programmes and particularly in the news content. The goal was to build an organisation that was economical, efficient and effective and the performance of the organisation at all levels and holding individuals accountable for delivery was central to achieving this.

On the issue of universal access, Ms Ramagoshi said the SABC acknowledged that it was the constitutional right of all South Africans to such access. At present 85% of South Africans had access while 15% had no access to signal distribution. They were using this opportunity to lobby for the support of the select Committee in addressing this challenge. In partnership with Sentech, they continuously identified communities without access. They had identified over 250 sites and went there physically to ascertain the feasibility for low power transmitter rollout. Their annual target was for 100 sites per annum for the period March 2012 to March 2014. This would impact 1,5 million people which equalled to 3% of the population who currently did not have access. She noted that they would supply the Committee with the names of the sites that had been identified and when the rollout would take place.

The SABC was also committed to implement the policies on transformation in the constitution. In respect of people with disabilities the provinces had met the target of 2%. On their platforms they had dedicated programmes for people living with disabilities such as SA FM, Radio 2000, Ligwalagwala FM, Phalaphala Fm and Thobela FM. Accessibility to the SABC buildings were disability friendly but more needed to be done and they were continually upgrading to improve on this. DTT afforded them the opportunity for improved subtitling capability and could potentially provide audio descriptions capability and close signing.

Brief inputs were made by the Provincial General Managers of the nine provinces due to time constraints (see presentation attached).

Ms Ramagoshi addressed the issue of digital migration and said the SABC's move to DTT was part of the government-mandated process whereby all analogue terrestrial broadcasters were to migrate to DTT. The migration had to be completed by December 2013. The commercial launch of the DTT platform was a key project, as it would provide consumers with an enhanced multi-channel, multi-platform service in a digital environment. The SABC needed to remain competitive in respect of its audience and revenue. Its focus on increased public service delivery required the rollout of more services and the use of new technologies that would, for example, enable better language delivery. The SABC's intention was to position itself as a leader in digital broadcasting in Africa as an innovative public broadcaster. The SABC would thus have to think and behave as a digital broadcaster in a multi-platform, multi-channel environment.

 The SABC would make all SABC radio services available on the DTT platform as well as ancillary and interactive services and thus it would be fully national. This would improve public services in areas such as language delivery, education and news. Revenue and job opportunities were possible through new inventory and innovative commercial offerings such as interactive advertising. The SABC would be investing in an upgrade of its broadcast facilities and develop a new multi-channel playout facility.

Ms Ramogoshi noted that one of the biggest challenges in the provinces was money. Besides being owed money from other stakeholders, they had challenges in collecting money from their key stakeholder, which was government. The provincial General Managers appealed to the select Committee to intervene in order to get this much needed cash. They would supply the Chairperson with the details.

Mr Moetsoening said that provinces had to do more to cover events at community and provincial level and the NCOP should inform them of their activities and projects so that they could get coverage and in so doing they would make people aware of the role of the NCOP. Programming should focus more on positive 'good news' stories especially for the youth and the SABC should have a presence in the provinces and in the rural areas. He noted that employing people with disabilities was not enough but they should be represented in senior positions. Similarly, women should also be empowered.

Discussion
Ms Mabija commented that the New Growth Path adopted by Cabinet called for the creation of 5 million jobs by 2020 and she had not heard anything on the SABC's contribution to that goal. She asked if they could report on that indicating how many jobs had been created per province.

Mr Sibande referred to the passing on of a radio personality in Mpumalanga who had played a leading role in SABC radio yet he had received no recognition. This had happened in other cases and reflected badly on the SABC.

Mr Sibande raised the issue of the high turnover of CEOs and Chairpersons at the SABC and he asked if the Committee could be assured that this would not happen again. Peter Harris had resigned despite the fact that there was a turnaround strategy and he wanted to know why people resigned before the end of their contracts. Was it because of money?

Mr Sibande raised the issue of commercials and adverts and the money generated and used the example of 'Soccer Zone' and asked who paid for it.

Mr Sibande asked who controlled the risk management at the SABC.

Mr Sibande asked what the relationship was between the SABC and Sentech.

Mr Sibande asked why the SABC's coverage was negative to government in terms of coverage of demonstrations but they were invisible when positive things happened. He complained of the lack of coverage and follow-ups in the provinces and commented that events were only covered if senior government officials or the President was there.

Mr Sibande asked, according to the National Treasury, how much money did the SABC owe.

Mr Sibande asked what mechanism they had to deal with the resignation of managers. Some of them could possibly be implicated in the financial mismanagement that had occurred and they should be held accountable.

Mr Jacobs thanked the SABC for bringing provincial representatives to the meeting. He noted that the turnaround strategy was a positive step and they had to turn theory into practice and ensure its implementation.

Mr Jacobs was concerned about the vacant posts such as the CEO and others and said that there should be timeframes by when they would be filled.

Mr Jacobs noted that the NCOP had complained about their lack of coverage by the SABC at a strategic workshop and had tasked the select Committee with bringing it to the SABC's attention. The National Assembly and the NCOP were equal Houses and the percentage of coverage they received should be equal. The NCOP had important programmes as they were taking Parliament to the People.

Mr Jacobs concurred with Ms Mabija that there was no indication of job creation. He noted the number of independent contractors indicated by the provinces in terms of their staff complements. He asked why this was so. It was an opportunity for job creation by turning them into permanent positions. The SABC should also be assisting government in providing skills for people. State Owned Enterprises (SOEs) like the SABC could play a critical role in skills training through artisanships, learnerships and internships.

Mr Jacobs raised the issue of the failure of the SABC to secure a deal for the coverage of the recent match featuring the National soccer team. The SABC needed to be a reliable service provider and satisfying the public was important.

Mr Jacobs asked about the payment of TV licences and he noted that people were not paying. What strategies did the SABC have to ensure that people paid? He noted the levy added to the petrol price and said that the SABC should think of a system whereby people paid indirectly.

Mr Jacobs said that the SABC had a critical role in recording the history of the people especially the lives of the older generation who had made contributions in terms of sports, culture and politics and there should be programmes teaching the youth about their history.

Mr Jacobs asked how the SABC determined their listenership and viewership figures.

Mr De Beer asked about the banning of alcohol adverts on SABC that had been reported in the media. He noted that alcohol adverts and other commercials generated the bulk of the SABC's revenue. How would the SABC recover the financial loss if that were legislated?

Mr De Beer raised the issue of tariffs and licences and noted that for the past year there had been no increment in the tariffs. While the public should not be penalised for the SABC'S financial setbacks, the tariffs had to be reviewed if they wanted to be sustainable and not overly reliant on the states coffers.

Mr De Beer asked about job security in the institution as a lot had been said in the media. It was said that the SABC was considering giving retrenchment and early retirement packages to people, which was in contrast to the government's strategy on job creation.

Mr De Beer asked for clarity on reports that an amendment had to be made to the SABC's articles of association when the Acting GCEO was appointed.

Mr Mlenzana referred to revenue generation and the issue of TV licences, and said that there had been a debate about the mode of collection at the SABC. He noted that the set-top boxes were not the SABC's responsibility but revenue generation through the TV licences was. They could check if people were up to date with their TV licences when the set-top boxes were instituted.

Mr Mlenzana mentioned the 'Touching lives' programme on SABC and he asked that it should be monitored so that all provinces received coverage.

Mr Mlenzana noted that all the slides indicated provincial input did not give them what they wanted. It did not tell them about gender, youth and people living with disabilities. The Committee demanded that information and when the SABC responded they had to indicate the timeframe by which the information would be provided.

Mr Mlenzana asked how the morale of the SABC's workers was, especially after the contradictory statements on retrenchments.

Mr Mlenzana asked who were the independent contractors, what was the breakdown in terms of gender, youth and people with disabilities? What were their PDI status and were they enriching the rich?

The Chairperson noted that he had covered her on the gender breakdown of personnel in the provinces.

The Chairperson commented that in the A-G's report it had been stated that the SABC worked in silos and she wanted to know if provinces were fully independent or did they have to report to Auckland Park and if the answer was yes, when were the provinces going to have independence?

The Chairperson said that provinces were where the citizens were. What was the role of the provincial offices in ensuring that local stories were heard and that there was local content in programmes? Will there be job creation at local level?

The Chairperson noted that the presentations from the provinces did not mention community radio stations except Kwazulu Natal. She noted that she was mentioning that as they intended visiting community radio stations and that Mr Molefe had said that they were holding meetings in provinces. She said that if they gave them their programme early, then the Committee could integrate their programme.

She congratulated all the Provincial General Managers and especially KZN for their good work.

The Chairperson informed Mr Molefe that they could supply the information that they did not have at hand in writing.

As background information to the questions on retrenchments at the SABC, Mr Molefe said that due to the financial crisis of 2008/9 the SABC had obtained a loan of R1 Billion from Nedbank. As part of that facility being made available to them, National Treasury had made a guarantee to commercial institutions. That guarantee was on condition that the SABC met certain stipulations and there were a whole range of them that were part of the guarantee. One of the conditions was that the SABC had to manage its head count. Managing the head count was something that could be done in many ways but there was recognition given to the fact that the SABC could be bloated in certain respects and there could be duplication of duties. It did mean that the SABC should achieve more with less and that they had to drive efficiencies. Managing head count did not automatically equate with massive retrenchments and it was unfortunate that it had been reported in the media in that way. They were managing head count and the new structure that had recently been approved by the Board, ensured a lean management at the top and avoided a bloated top structure.

The SABC was also paying serious attention to government's objective of job creation and how they could make a contribution. One of the areas they could make a contribution was in the rollout of DTT and as they commenced the process about 375 jobs would be directly created. With DTT there would be 1,000 more that would be indirectly created. These were jobs that would be created because with the SABC having more channels and platforms more content would be commissioned, more production houses would produce content and in the process, jobs would be created. The SABC had approximately 600 interns in their internship programme who received training. They were empowering people with skills that made it possible for them to be considered for employment by the SABC or elsewhere in the industry. The SABC was the only broadcaster as far as he knew that ran a continuous internship programme and they were the training ground for broadcasting in South Africa. There was thus a conscious effort to contribute to job creation.

On the issue of 'Soccer Zone', Mr Molefe responded that he did not know who sponsored it and it fell into the whole basket of revenue stream at SABC. They generated revenue in many ways through classical advertising and sponsorships. They had programmes that were sponsored as a way of generating revenue but they also had programmes where classical advertising was invited so that the SABC could sustain its operations. The question that was raised had to be understood in the context of the funding model of the SABC. That was a critical question and it was one that had to be answered by government and it had to be addressed by the select Committee and other Committees, the ruling party and other governance structures. Mr Molefe stated that the SABC derived 80% of its income from commercial revenue and only 20% was derived from public funding. Of that 20% a mere 14% was from TV licences and the rest was from direct funding from government. 2% was for funding for educational programming and capital expenditure for the SABC's operations. 80% of the SABC's funding was from commercials and yet the SABC was expected to deliver a public mandate. It was the only institution in the world that was expected to deliver a public mandate and yet it was funded through commercial funding. It was dichotomous and it was contradictory in terms, to take commercial funds and deliver a public mandate. The question of the funding model had to be addressed as it touched on a number of things on which the SABC was expected to deliver. He said that he could not emphasise enough, that to run an institution the size of the SABC, they needed to have a very stable funding base.

On the questions about who performed risk management, Mr Molefe replied that they had risk management at all levels of the organisation. They had established structures in all the divisions and departments and they determined and detected potential risks to the organisation at an early stage to prevent the organisation being exposed to serious risk as they had experienced in recent years. Risk management was intended to ensure that when they procured and commissioned content, risk was taken into account to ensure that the organisation was not exposed to any risk. Such risks were irregular expenditure and fruitless expenditure.

On the question of managers who were implicated, Mr Molefe stated that the office of the A-G had conducted investigations into the financial affairs of the SABC and the management and governance processes. The report revealed serious findings and serious allegations had been made against staff, including senior members of the organisation. After the report had been produced, the Board, under the Chairmanship of Dr Ngubane, invited the Special Investigations Unit to take the work of the A-G further, within a set timeframe. There was still a lot of work to be done and the SIU proceeded to make further investigations on the allegations that had been made. This had just been completed and handed over to the Board and they had instructed the relevant authorities and the arms of the law to look into the allegations with the intent that further action must be taken. They had also brought in their own internal audit systems to follow up some of the cases. Even if people had resigned because they had been implicated they would still be pursued, once the matter had been handed over to the police.

Responding to the question on the implementation of their strategy, Mr Molefe stated that strategy was not theory, it was practice and they were beginning to see the fruits of the turnaround strategy. In the last quarter, debtors’ money payable to the SABC that had already been written off was recovered and R140 million was raised because of the systems put in place by the turnaround strategy. The recovery phase from which they had just emerged and their progress into the phase of stability, was a practical undertaking and not just theory. It was work in progress with tangible results and tangible deliverables.

On the question of independent contractors, Mr Molefe explained that the nature of the organisation was such that at times people with certain technical skills were brought in for a limited period or for a limited number of days. They were not really needed for five days a week. These were people like graphic artists, studio camera operators who came in for specific time slots for programmes like 'Morning Live'. The SABC could not employ all these people, as it would run at a loss. They had a pool of skills to perform certain duties that would not require full time employment. Some of these people worked on outside productions such as sports matches held over the weekend and were not needed in the week. This was a universal practice not unique to the SABC and it was the nature of the broadcast business to have independent contractors. This also applied to presenters.

On the question of Sport 5 and the match between Bafana Bafana and Niger, Mr Molefe said that media reports had been full of inaccuracies. The rights to broadcast an event was not in the control of the SABC as the transmission rights were held by international or continental agencies and if the SABC wanted to broadcast the event, the rights had to be acquired from the holders. Historically the rates had been R500,000. This applied when the rights had been held by national football associations but in recent times the Confederation of African Football took these rights away from the National Football associations and the fees were inflated. Sports 5 asked for R5 million which was ridiculously exorbitant and unsustainable and way above the universal market rate. The SABC could not continue to pay that amount every time the national team played. They had engaged the rights owners to secure the rights to broadcast to make sure that they could bring the sport to soccer loving South Africans and the negotiations were continuing.

On the issue of alcohol advertising, Mr Molefe said the SABC had not advanced a position and the media had elected to speak on their behalf. He noted that when cigarette advertising had been banned in the country in 1996, the SABC had been the first to support that initiative and they were sensitive about the matter.

On TV licences, Mr Molefe welcomed Parliament reopening the debate on how this revenue stream could be improved but it came back to the issue of the funding model for the SABC. He was not sure whether licence fees were sustainable. There were broadcasters in developed economies that got a 100% funding from the state. They had advanced proposals to look at a levy and they had come up with a range of models, but it had not delivered results.

Responding on the 'Touching Lives' initiative, Mr Molefe noted that it was not confined to one province and it was about social partnerships, the SABC and the communities it served. They would welcome any suggestions on how they could improve the use of the programme.

Mr Molefe said they would provide written answers to all the questions that had not been answered.

Mr Richard Waghorn, Chief Technology Officer responded to the question on Sentech and ICASA. He stated that ICASA awarded frequency and if there was any available to the market, there would be an invitation to apply and ICASA managed the process of who would be awarded the frequency. The SABC would make a request to ICASA for the use of a frequency in a defined area and ICASA would approve the application or not. If they approved, the SABC was issued a licence which set out the technical parameters in which they could operate. He then contacted Sentech to provide the infrastructure for the SABC to operate on that frequency.

On the question of the collection of revenue in relation to the set-top boxes, Mr Waghorn responded that the set-top boxes would have the technology in them that would prevent them from being exported outside of South Africa and would also limit the use of grey imports. This would protect set-top manufacturing industry in South Africa. That technology allowed communication to the boxes and they would be able to send messages to the viewers such as reminders to pay their TV licence. Through the sale of set-top boxes they would be able to make sure that they had peoples details to follow up on the payment of their TV licences, the same as when a new TV was bought.

In terms of provincial channels on DTT, Mr Waghorn stated that policy required that the SABC had what was called regional channels and it would be part of the channel line up when they migrated to DTT in April 2012. Initially they would operate a single network, but Sentech was investigating putting in regional transmission infrastructure, which would enable SABC to provide provincial services. With Multiplex, 9 versions of broadcasts were possible to cater for local news and content but this would not be available when DTT was launched but it could be built into the rollout.

Mr Motsoeneng noted that provinces were independent and the turnaround strategy addressed this issue as in the past they were not. They were able to take their own decisions and the NCOP could deal directly with them.

On the issues mentioned about recognition for sports legends and actors and others, Mr Motsoeneng said it was a painful situation when they passed away and their families were struggling. SABC were having meetings with them
and the relevant union and finding out how they could contribute. The SABC was also addressing the issues of promoting South African stories and drama.

In respect of staff morale at the provincial level, Mr Motsoeneng said they had addressed the issue of retrenchment as they had explained that it would not happen at operational level. They had empowered the provincial managers to communicate with the staff on the issues. He noted that they had freelancers in the province who produced dramas and these freelancers also represented the SABC and they helped to uplift the community.

Mr Ndaba, Training Manager, said that the government had to be commended for providing funds for the training of young people. They received funds from the Sector Education and Training Authority (SETA) and had partnerships with other stakeholders as well. They offered internships to more than 600 people and they were the training ground for the broadcasting industry.

In his concluding remarks, Dr Ben Ngubane said that it had been a useful exchange and they had noted the Committee's concerns and areas that needed clarification. The SABC had gone through a terrible period and there had been a debt of R900 million. They had reduced their debt significantly by the end of the past financial year to the region of about R200 million and they were beginning to grow their revenue and they hoped that by March 2012 they would have a profit of R12 million or more. There was not enough money to do all the things that they wanted to do and that was why they had emphasised that the public mandate of the SABC should be funded by government. They could not be dependent on advertisers who could say that they did not like a programme and decide not to advertise resulting in a loss of revenue for the SABC. They needed the Committee to address these issues and substantial government grants would enable the SABC to do more to develop communities.

In terms of the vacancies, Dr Ngubane noted that they had interviews and had sent the results to the shareholder and they were awaiting his decision on the candidate the Board had selected. If he did not approve of their candidate, they would have to restart the process.

With regard to the Chief Financial Officer, the Minister had given them a name of a candidate that he recommended should fill this position and the Acting GCEO, would be finalising the process.

The position of the Chief Operational Officer was subject to a court ruling. The problem related to a former Minister of the DoC who had rejected the Boards preferred candidate and the candidate went to the High Court with a ruling that the Minister had made an invalid decision to reject the recommendation and that Cabinet should have been responsible for the decision. The matter was still pending and they were dealing with the shareholder to try and resolve it. All the key positions were almost filled and it was a matter of processes that had to be followed. They had appointed a senior group executive to the position of Group Executive for Human Capital Services. The Internal Audit position had been filled as well.

Dr Ngubane noted that the government Guarantee placed the SABC in the onerous position of having to reduce personnel expenditure and there was a percentage they had to be reached in reducing personnel.

The Chairperson said that people in the provinces complained that the signal reception was very poor and not available 24/7.

Mr Jacobs said that the question about equal coverage for the National Assembly and the NCOP had not been answered.

Mr Molefe said the principled answer was that they did not do quotas in terms of coverage but on the newsworthiness of an event. He took the point raised by the Chairperson that greater attention should be given to the NCOP but they could not guarantee 50% coverage for the National Assembly and 50% for the NCOP. There were editorial considerations on how stories were lined up. The NCOP should be covered when they did oversight in the provinces as they were taking Parliament to the people. They would look into it and provide a written answer on how many stories were covered in a certain period of time.

Mr Waghorn asked for the details of where the poor reception was occurring.

The Chairperson noted that it was not only in one province but all provinces, especially in remote rural areas and they would provide the information.

The Chairperson thanked ICASA and SABC delegations and all the participants in the meeting.

The meeting was adjourned.

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