Department of Communications 2012 Strategic Plan

Meeting report

The Chairperson noted the apologies of Ms Dinah Pule, Minister of Communications, Mr G Schneemann (ANC) and Ms J Killian (COPE).

Strategic Plan and Annual Performance Plan of the Department of Communications (DOC)
Ms Rosey Sekese, Director-General, DOC introduced the delegates from the Department.  The Department had presented the strategic plan to the Committee on 13 and 16 March 2012.  The revised plans included the recommendations made by the Committee during the previous meetings (see attached document).

The Broadband project, Digital Terrestrial Television (DTT) project and review of the National Integrated ICT Policy were identified as the Department’s flagship programmes.  An overview of the South African ICT environment; feedback on the analysis of the strengths, weaknesses, opportunities and threats (SWOT) undertaken during 2011 and the current organisational risks and mitigating measures was provided.

The revised strategic plan for 2012/13 reduced the number of strategic goals to five, supported by twelve strategic objectives and 34 performance indicators.

Mr Sam Vilakazi, Acting Deputy Director-General: Finance and ICT Development, DOC presented the briefing on the funding requirements for DTT infrastructure investment by the South African Broadcasting Corporation (SABC), Sentech and the Universal Service and Access Agency of South Africa (USAASA).  The total funding shortfall over the period 2012/13 to 2015/16 for the DTT project of the SABC was R3.9 billion, R140 million for Sentech and R2.6 billion for the Set Top Box (STB) project of USAASA.  The Department’s funding requirements for its six programmes for the Medium Term Expenditure Framework (MTEF) period 2012/13 to 2014/15 were summarised.  The funding requirement for the 2012/13 fiscal year was R1.7 billion.  65% of the DOC allocation was transferred to the State-owned Entities (SOE’s) the Department was responsible for,

Mr Farhad Osman, Chief Director: Strategic Planning and Monitoring, DOC presented the briefing on the Department’s responses to the Committee’s reports, the Human Resources issues and initiatives and the monitoring and evaluation processes in place to assess performance in implementing the strategic plans.

Discussion
Ms M Shinn (DA) was concerned about the DTT funding shortfall, which amounted to R6.7 billion over the MTEF period.  DTT was due to start within a matter of months but the manufacturing of the STB’s had not commenced.  No reference was made in the briefing of the funding shortfall for the Postbank.  She wanted to know why projects were started before adequate funds were secured.  She asked what the current status was of the policy, roll-out plan and funding plan for the broadband project.  She noted that responsibility for cyber security had been transferred to the Department of State Security.  She asked if the policy or the framework for cyber security had been approved.  She asked what impact delays in the Department’s legislative programme would have and what target dates had been set.

Mr B Steyn (DA) said that it was evident that the SOE’s faced many challenges.  Many were in financial difficulties and did not function at optimum levels.  It was not clear what action was taken by the DOC to address the capacity and leadership issues and what the interventions were to stabilise the SOE’s.  He asked when the Broadband project would be concluded.  The DOC had identified inadequate financial resources as a major risk factor for the achievement of its strategic goals.  He calculated that only 20% of the required funding was assured.  Targets had been set on the assumption that funding would be made available.  This practice was problematical as there was no certainty that funding would be available.  An example was the DTT project, which had a target date of December 2013 and substantial funding shortfalls for the SABC and Sentech.  He suggested that the Department reviewed how the cost of the DTT project was originally calculated.  He asked for an explanation of the difference between two similar broadband-related targets and what was meant by “ICT capacity development in business, government and individuals”.  The Department’s Human Resource function was not new but the initiatives listed indicated that little had been done to date.

Ms S Tsebe (ANC) asked for an explanation of the process followed in requesting funding from the National Treasury.  The funding deficit for DTT was a major concern and she would like to know what action would be taken if the Treasury did not provide the necessary funding.  She asked who was responsible in provincial and local government entities for communication functions, for example broadband services.  In her experience, ICT was not taken seriously at those levels and she wanted to know what engagement had taken place between the three levels of government.  She was surprised to note that the DOC would be relying on data provided by the SABC to establish who qualified for the STB subsidy.  She recalled that the DOC had informed the Committee that the SABC data was not reliable.  She noted that the DOC had decreased expenditure on goods and services and asked if the low spending rate had resulted in a decline in service delivery.  She criticised the errors in the strategic plan document caused by “cutting and pasting” the previous years’ documents.

Mr Vilakazi explained that the Department’s requests for additional funding were led by the Minister of Communications.  The SOE’s advised their funding requirements and the requests had to be supported by business motivations.  In most cases, the National Treasury had declined to approve the additional funding.  The matter was reported to the Minister, who had held discussions with the Minister of Finance.  As a result of the Ministerial engagement, the SOE’s were requested to improve on the business cases for re-submission to the Treasury in July 2012.  An analysis of the funding requirement for DTT indicated that the SOE’s had a certain amount of funding available but this was not sufficient for completing the project.  It was estimated that 5 million South Africans would qualify for the STB subsidies.  The DTT project had commenced and STB;s would be available for distribution in 2013.  Sentech was engaged in providing the necessary infrastructure and a digital content library had been started.  The DOC hoped that sufficient funding would become available over the MTEF period to implement the DTT project,

Mr Norman Munzhelele, Chief Director: ICT Policy Development, DOC explained that the Broadband project included different elements.  The review of the policy on broadband had commenced, consultation with stakeholders was taking place and the review was expected to be finalised by the end of 2012.  The outcomes of the review would allow for the development of a business plan.  The DOC was considering alternative funding models for the necessary investment in broadband infrastructure, for example public/private partnerships and investment by the private sector.  The recent colloquium had highlighted the need to amend the Electronic Communications Act (ECA).  Most legislative changes would be aimed at clearing existing bottlenecks, resolving issues concerning inter-connectivity, sharing and competition in the sector.  Legislative changes would allow for future policy development.  Other matters concerned the efficiency of the Independent Communications Authority of South Africa (ICASA) in meeting its mandate and the issue of the funding of the Regulator.

Mr Jabu Radebe, Acting Deputy Director-General: ICT Infrastructure, DOC explained that the policy framework on cyber-security was decided by the security cluster.  The DOC had commenced the development of the policy three years earlier.  The policy had to cover cyber-crime as well as cyber-security.  Critical security issues were identified during the process and it was necessary to develop a fully-fledged security strategy, resources and capacity.  Subsequently, the State Security Agency (SSA) was mandated to develop the cyber-security policy framework and implement it.

Ms Sekese added that cyber-security could have implications for National security.  The decision to transfer responsibility to the SSA did not undermine the DOC.  The process to fill critical vacancies at the SOE’s was under way.  It took time for new appointees to settle down in their positions.  The DOC was in continual engagement with the SOE’s to ensure that the organisations remained stable.  In addition, certain Ministerial interventions had been put in place.

In response to Mr Steyn’s query, Mr Osman explained that one target referred to the development of the broadband policy and the second referred to the implementation thereof.  The ICT rural development targets were split into co-ordination amongst all stakeholders, the actual roll-out of initiatives and the monitoring and evaluation of the roll-out.  The Human Resource strategy included several new initiatives, for example the introduction of a bursary scheme to help address the skills shortage issue.

Mr Vilakazi advised that USAASA, SAPO and the DOC had recently formed a committee to deal with the distribution of STB’s.  The Department was not entirely reliant on the SABC’s data and had determined that reliance on a single source of data was not advisable.  He apologised for the inadvertent duplication of a paragraph in the strategic plan document.

Mr Gift Buthelezi, Deputy Director-General: ICT International Affairs and Trade, DOC advised that the Department had established inter-departmental forums to promote the implementation of ICT policies.  The provincial MEC’s responsible for economic development would include ICT in their plans.  The Department of Cooperative Government and Traditional Affairs (COGTA) engaged with local government entities to discuss the role of ICT in the social agenda.  ICT was not a funded mandate of local and provincial governments and these entities approached the private sector for funding projects.  The DOC had a rural development strategy, which included DTT, skills development and the establishment of local and digital content hubs for municipalities.

Mr Buthelezi explained that certain indexes were used to measure growth in the ICT sector.  The performance of the business sector, government sector and individual businesses was assessed.  A number of elements were taken into consideration.  The results were compared to other countries.  The target queried by Mr Steyn concerned the streamlining of measurements that were used for the reports submitted to the International Telecommunications Union (ITU), World Trade Organisation (WTO) and World Economic Forum (WEF).

Ms Shinn asked what the strategic objective regarding enterprise development referred to in the strategic plan document had to do with the promotion of tourism and women in business.  She asked for more clarity on the STB project and what was meant by ‘business hubs’ at municipalities.  Given the critical lack of funding available, she wondered if the DOC’s plans for ICT infrastructure were realistic.  The subsidy paid to SAPO for meeting its Universal Service Obligation (USO) would be discontinued from 2014.  SAPO had indicated to the Committee that it could not fund the provision of USO services without a subsidy.  USO was essentially a government mandate.  She asked if the DOC had engaged with SAPO on the matter.

Mr Steyn queried the 6.6% decrease in employee compensation costs, which appeared to be an error in the revised document.  He noted that the number of targets had been reduced but queried if targets had been simply combined.  It was easier to monitor and evaluate performance if the targets were broken down into clear components.  He was concerned that the revised document listed fewer risk factors than what was listed in the earlier version.  He asked for an explanation of the changes made to the revenue and expenditure amounts for the SOE’s.  He asked for a copy of the BDM policy referred to in the briefing.  He listed several examples of discrepancies between the original and the revised strategic plan documents.  He asked if an ICT indaba would be held on an annual basis in future.

The Chairperson advised that the previous strategic plan had been withdrawn.  The revised plan had been re-submitted to the Speaker of Parliament.  The Committee would only consider the revised document.

Ms Sekese verified that the Department would only respond to questions on the document submitted to the Speaker on 20 April 2012.

Mr Osman said the Department’s focus was on the strategic risks.  Operational risks were not dismissed and were taken seriously by the Audit and Risk Committee.  Specific, measurable quarterly targets had been set and were used to assess performance.  Care was taken that no strategic objective was lost.  The planning framework developed for the National Treasury allowed for the Department’s performance to be measured against the financial targets set for the year.

Mr Vilakazi explained that the figures in the strategic plans were the estimated performance as at 31 March 2012.  The annual report of the Department due later in the year would reflect the actual performance.  The issue of the SAPO USO subsidy was related to the funding challenges faced by the National Electronic Media Institute of South Africa (NEMISA) to extend training into the rural areas.  The Ministers of Communication and Finance had held discussions on how the Treasury could provide assistance and what the best alternative funding solutions would be.

Mr Radebe referred Members to page 31 of the strategic plan document, where the role of the SOE’s in implementing the Broadband Master Plan was detailed.

Ms Sekese understood that the ICT indaba was an annual event.

The Chairperson said that the issue of the SAPO funding shortfall was important but appeared to have been omitted from the Department’s strategic plans.  The Postbank was a national priority but its establishment could be compromised if sufficient funding was not available.  The Postbank Act was passed two years ago but the process of applying for a banking license had not been completed.  There was no merit in including strategic objectives if there was no funding available.  He asked for more information where the DOC planned to deal with the funding requirements of SAPO.

Mr Steyn noted that the DOC’s quarterly targets for 2012/13 only listed consultation with the National Treasury over the Postbank (see page 79 of the strategic plan document).

Ms Shinn referred to the overview of the 2012 budget and MTEF estimates (see page 36 of the strategic plan document).  She asked for an explanation of the significant increases in expenditure for consultants and professional services, given the increase in staff expenditure during the same period.  She queried the need for the expenditure on entertainment, venues and facilities.

Mr C Kekana (ANC) remarked that the Committee would benefit from a more detailed strategic plan for the Postbank, including the number of outlets and the services that would be offered, in particular to people living in the rural areas.  These areas were not currently served by the commercial banks and there was a need for pension deposit and savings facilities.

Mr Vilakazi advised that the matters concerning the Postbank had been included in the discussions between the Ministers of Communications and Finance.  SAPO had submitted a funding request and business case for the Postbank for R1 billion.  The funding was required to allow the Postbank to apply for a banking license.  He said that the matter was high on the agenda of the DOC although the strategic targets were limited to consultation with the Treasury.

Mr Vilakazi advised that most of the work was done internally by DOC personnel.  The expenditure item for consulting services referred to the Broadband and 112 Emergency Call centre projects.  The funding for these two projects was ring-fenced.  The payments to Sentech and the DOC’s private sector partners for the emergency call centre project were reflected as consulting services.

Mr Munzhelele said that the implementation of the Postbank Act was progressing.  The DOC had established the necessary structures and a working committee had been established with members from SAPO and the National Treasury.  The Postbank needed to have certain prerequisites in place before the banking license could be applied for.  The Memorandum of Incorporation had been finalised, the appointment of the Board of the Postbank was progressing and the process of separating the Postbank assets from the SAPO assets was under way.  The investment and borrowing policies of the bank had been finalised.  SAPO would be able to provide more information on the roll-out plans for the Postbank.  The intention of the bank was to provide banking services to under-serviced sectors of society.  In the interim, the current business of the Postbank was continuing as before.

Mr Kekana said that it was not acceptable for the Department to omit the Postbank from its strategic plans.  It was not good enough to acknowledge it as a priority in the briefing.

Ms Sekese undertook to provide a detailed status report on the Postbank to the Committee.  The Department’s strategic plans were supported by SAPO’s plans and the DOC would be monitoring the performance on an ongoing basis.

Mr Vilakazi acknowledged the error in the strategic plans on page 26 of the strategic plan document, as pointed out by Mr Steyn.  He explained that the increased budget provisions for entertainment, venues and facilities expenditure items were related to the planned colloquium, indaba, SADC ministerial forum and international conferences.  South Africa would be hosting and ITU event.

The Chairperson advised that SAPO had indicated that an amendment to the Postbank Act might be necessary but this had not been included in the planned legislative changes of the DOC.  During oversight visits, the Committee had found instances where the promised equipment from the DOC was not provided to community radio stations.  It would appear that the DOC had not authorised the release of the equipment.  He noted that the Department had spent only 47% of the available funding and wanted to know what the problem was and when it would be resolved.

Mr Vilakazi replied that a contractual problem had arisen with the distribution of equipment by the service provider.  The matter had subsequently been resolved.  The DOC planned to develop a community radio support programme, which would include a schedule indicating which station would be dealt with by what date.

The Chairperson asked for details of the contractual problem and reminded the Department that the matter concerned taxpayers’ money.  Any irregularities had to be brought to the Committee’s attention.

Mr Vilakazi explained that the service provider had demanded up-front payment before the equipment could be delivered.  The Department had refused to do this as such practice was contrary to the PFMA and the risk was too high.  A contract with the service provider was in plance and it had taken some time to resolve the matter.

Ms Sekese referred Members to pages 106 and 110 of the strategic plan document, where the targets had been set for the community radio station support programme.  She undertook to provide a detailed report to the Committee on the issues concerning community radio.  The matter had been discussed with the SABC as well.  The DOC was not prepared to pay 60% of the invoiced amount before the goods were delivered, as demanded by the service provider.  However, the Department was willing to accommodate the service provider to a certain extent if an equipment audit was done.  The Department decided to terminate the contract with the service provider and now deal with more than one supplier.

The Chairperson asked when the subsidy for community radio infrastructure would be transferred to Sentech.

Ms Sekese advised that the existing arrangements with Sentech applied.

Mr Kekana asked about the non-functional public information terminal (PIT) in the Parliamentary post office.  He asked when the Department would be addressing the senior management vacancies at the SOE’s, for example one person was responsible for one permanent and two acting positions at SAPO.

Ms Tsebe requested a written report from the DOC on the issues highlighted in the report on the Committee’s oversight visits.

Ms Sekese advised that there were three vacant positions on the SAPO Board.  The term of office of three other Board members expired at the end of February 2012.  As a result, the SAPO Board had no quorum.  The DOC had prioritised the stabilising of the SAPO Board and a chairperson and new Board members were appointed.  The DOC was concerned over the vacant CEO, CFO and COO positions and had requested the SAPO Board to finalise the appointment of new incumbents by the end of July 2012.  She expressed appreciation for the input from Members of the Committee and the efforts made to assist the Department in developing and realising its strategic plans.

The Chairperson deferred discussion on the Committee’s oversight report to a later date.  The Committee would like to see more detail on the SAPO funding issue in the Department’s strategic plans.  The Committee awaited the reports on the Postbank, oversight matters and the community radio programme.  The Committee would check with Sentech and confirm the subsidy arrangement.  The major issue concerning the SAPO executive management vacancies was the governance implications as the same person was both the Acting CEO and the Acting CFO.  Another manager filled two key positions.  In effect, two persons at SAPO occupied five key posts.  He asked the DOC to address this issue as a matter of urgency.

Other Committee Matters
The Chairperson had received a letter from the Minister of Communications concerning an SABC Board enquiry. A copy of the letter would be circulated to Members.  The Parliamentary Legal Services division had been requested to advise the Committee on which entity had legislative responsibility to investigate the matter.  The response of the Parliamentary Law Adviser was awaited.

The meeting was adjourned.