The Committee received briefings by the Universal Service and Access Agency (USAASA) and the National Electronic Media Institute of South Africa (NEMISA) on their 2011/12 Annual Report results and First Quarter performances.
USAASA briefed the Committee on its performance on its key targets, its financial targets and gave a summary of its audit matters. The newly elected USAASA board also informed the Committee that the organisation had not performed well as many of their projects had been delayed due to financial mismanagement problems and forensic investigations that were taking place. Disciplinary actions were being taken and a number of staff members had resigned.
The Committee noted that it was difficult to interrogate the board members because they were so new. They also saw that the presentation did not address one of the Auditor-General's (AG) concerns regarding R4 million that was taken from USAASA to pay their PAYE debts. Members were concerned that bonuses were being paid to management when USAASA had not met most of its targets and when the institution was in great trouble. The high salaries being paid to management were also concerning and it was suggested that the board consider making salary cuts. They asked how USAASA managed to spend R682 000 on overseas travel, what the Department of Communication's role was with USAASA, whether they would consider relocating their offices to a more accessible area, what the timeframes were for when disciplinary actions would be completed and why most of the entity's targets had not been achieved. Members suspected it was because there were problems with management. The Committee was particularly concerned by the amount of fruitless and wasteful expenditure and wanted assurance that those implicated in this matter would be charged criminally.
The Committee understood that the new USAASA board had been appointed a month ago and decided that they would give USAASA one month to create a new strategic plan as there was no hope that the current strategic plan could be achieved. Members did not take answers to their questions as it was acknowledged that any attempt the board made of responding to questions would just confuse Members more. However, the Committee warned that a full blown investigation was needed for every staff member that received a bonus.
The Committee stated that it did not need to hear NEMISA's presentation as they wanted to move straight to the discussion portion of the meeting. Members asked for clarity on the vacancy rate at the institution, why they did not have a shareholder compact, how they monitored how many of their graduates were employed in the industry and how effective their teaching was, why staff costs had increased so significantly, and why student accommodation costs had doubled when food costs and lecturer fees were cut by half. They suspected that NEMISA had failed to reach most of its targets because funds had not been granted for them, and that student accommodation costs had doubled because the institution had increased its intake of rural students. From the Auditor-General's report, the Committee noted that a new problem had arisen in NEMISA regarding supply chain management. They also saw that the institution had weaknesses in relation to predetermined objectives as some of them were not measurable or smart. Members acknowledged that NEMISA was not one of the Committee's “problem children” and advised them to have fewer targets and to focus on getting that right.
USAASA 2011/12 Annual Report Presentation
Ms Pumla Radebe, Chairperson of the Universal Service and Access Agency of South Africa (USAASA) board, informed the Committee that USAASA had a new board that started its term of office on 1 September 2012. The new board members included herself, Mr Sam Ledwaba, Ms Seadimo Chaba, Mr Raj Lalbahadur, Ms Charlotte Mampane and Adv Kenosi Moroka. One more board member still had to be elected by the Minister. She stated that the picture painted by the Annual Report was not as “rosy” as they expected it would be and the organisation had been “deferred” by a number of financial mismanagement problems. USAASA had been faced with dismissals and exits on the board and there had been suspensions of certain senior staff members, which were followed by a few resignations. Sometime during June 2011, the audit committee had identified problems with payments that were made and as a result a request for financial review had been conducted. This was followed by a forensic audit and in October, those that were identified to be involved in this misdemeanour were suspended. The then board was relieved of its functions in November 2011. In December, disciplinary actions were taken against management officials. The CEO and Executive Manager of Business Development resigned and other staff members were still undergoing investigations. Last week, the board received the results of the forensic report and the value for money report, which they interrogated. The board noted that the outcomes of the report confirmed that disciplinary actions should continue. Given the information they received, there was every reason to take civil action to recover the money USAASA had lost, which amounted to approximately R92 million. Linked to this was the fact that criminal action had to be taken against those involved. The board's target was to bring stability to the organisation and ensure that they were in a position to implement certain projects.
Mr Sam Vilakazi, Executive Caretaker of USAASA, briefed the Committee on USAASA's performance against its key targets for the 2011/12 financial year.
Plan and Design Broadcasting Digital Migration Programme
USAASA had established a partnership with public and private sectors and systems and processes for subsidies were designed. However, the entity did not manage to implement a pilot for systems and processes for subsidy applications due to forensic investigations that were taking place. Forensic investigations also hindered the implementation of a Set Top Box (STB) scheme-of-ownership model.
Limpopo: Meraka Institute (CSIR) – Greater Tzaneen Broadband Network
USAASA achieved its objectives for requirements gathering, consolidation of its business case and the appointment of a service provider for network design. However, it did not achieve its goals for network design and specification, the subsidy model was not approved, it did not have adequate engagement with stakeholders and ICT players, and it did not start the tender process for the appointment of the operator.
Implementation of the Rapid Deployment Strategy: Establishment of Access Centres
USAASA did not achieve its goal for establishing 20 access centres in the first quarter and 24 access centres in the second quarter. These projects were placed on hold as a consequence of the institution of a forensic audit that was taking place.
Development of Measurable ICT Access and Impact Indicators
USAASA achieved objectives such as agreeing upon ICT access and impact indicators, completing baseline research on ICT indicators, identifying important sources of information, engagements with Statistics South Africa, publishing discussion documents and inviting public input on the project.
Feasibility Study for National Broadband: Feasibility Study for Achieving 25% of Universal Access to Broadband for the Period 2011-2016
The target to have different technologies, services, market drivers and a market structure that should drive universal access was not achieved in the first quarter of the 2011/12 financial year. The project was placed on hold as a consequence of the institution of a forensic audit that was taking place at USAASA. Therefore, the targets set for the next three quarters could not be implemented.
Summary of Financial Performance
USAASA had a budget of R83.2 million of which 92% was spent during the financial year. 43% of the budget was spent on compensation of employees, 2% on capital expenditure, 47% on operational expenditure, and 8% or R7 million was not spent. The R7 million surplus was due to an unspent portion of the budget that was allocated to the Broadcasting Digital Migration (BDM) project for capacity building. USAASA had net cash flows of R15.6 million in the bank.
Universal Service and Access Fund (USAF)
The fund was allocated a total budget of R260.9 million of which approximately 98% was unspent. None of the projects that the USAF had to be spent on could get off the ground due to instability at senior management and board level. Cash reserves totalled R255.3 million at year end. The entire budget had been the subject of a roll over request that was presented to the National Treasury.
USAASA received an unqualified audit opinion with several emphasis of matter. The first was for fruitless and wasteful expenditure amounting to R1.03 million due to rental of offices not occupied, penalties and interest for late payments to SARS and for an amount paid for a venue for a cancelled workshop.
The second emphasis of matter was on irregular expenditure amounting to R42.1 million due to non-compliance with bidding processes as reported by the forensic audit, and for incidents that occurred in 2010/11.
USAF also received an unqualified audit opinion with emphasis of matter on the material under-spending of the grant amounting to R220 million, fruitless and wasteful expenditure of R3.7 million for amounts paid to Telkom and Sentech when there was never internet connectivity, and irregular expenditure amounting to R19.5 million for procurement transgressions and the unauthorised fund transfer from USAF to USAASA.
Rollover Request and other Challenges
A total amount of R266.8 million was requested by USAASA to be rolled over – R258.7 million was from USAF and R8.1 million was from USAASA. This amount excluded the R220 million that was set aside for the STB subsidy that was also unspent.
One of the challenges was that the CEO had resigned and had not yet been replaced. Three executive managers were suspended and one executive manager for business development services had since resigned. Disciplinary processes began in January 2012, but were delayed due to legal issues. The process was currently on recess due to the unavailability of the Commissioner. The process would resume in November 2012 and USAASA hoped to complete the process by year-end.
The new board hoped to appoint board committees by the end of the next quarter, appoint a CEO by November 2012, appoint a board secretary, speed up the process of finalising the disciplinary hearings, enhance and tighten corporate governance measures, and review the organisation through auditing skills, reviewing the organogram and realigning existing skills.
Ms M Shinn (DA) noted that it was difficult to interrogate the board members because they were so new. The presentation did not address one of the Auditor-General's (AG) concerns regarding R4 million that was taken from USAASA to pay its PAYE debts. This money was ring-fenced and should not have been used for anything else. She asked if the board was going to take action against the person who authorised the withdrawal of this money from USAASA's funds. She addressed the bonuses that were paid to acting senior executive management. The AG had said that the accounting authority did not submit reports on time, did not ensure efficient and effective management, did not ensure performance management systems were in place, and did not take steps to prevent fruitless expenditure. The Annual Report showed that the Acting CFO received a R44 000 bonus, the acting head of business development received R49 000 and the acting head of performance management received a R48 000 bonus. These bonuses were paid by an organisation that was not performing well. This “looting” had to stop. She also wanted to know how USAASA managed to spend R682 000 on overseas travel, which was R200 000 more than the year before. The bonus payments for the year totalled R1.99 million which was a lot more than the previous year. This was in a year that USAASA was falling apart.
Ms R Lesoma (ANC) stated that USAASA should not have targets that were not measurable. She also wanted to know what the Department of Communications' (DoC) role was in assisting USAASA.
Mr G Schneemann (ANC) stated that during the Committee's oversight visit to Gauteng it had visited USAASA's head office. The office was in the most inaccessible part of Gauteng and was based in an office park off the highway near Kyalami. He did not understand why the entity was located there as it was a fancy office park. He requested that the board consider relocating to a more accessible area. It was very difficult for people to access USAASA because there was no train or taxi route to the building. During the oversight visit, Members had interacted with USAASA staff. They spoke to Members in front of senior management and appeared to be highly demoralised and highly demotivated. They raised some shocking things with the Committee which made Members question what was going on at the office. Staff indicated that they were badly treated and that there seemed to be a lack of accountability from senior management. He wondered where in the Annual Report it indicated the number of telecentres that USAASA was involved in around the country. He thought this was an important feature that had been left out of the Report. He was not very impressed with the conditions of the telecentres that USAASA was involved with. In fact, one of the telecentres he visited in a rural area was completely dysfunctional. Many of the telecentres were dysfunctional. This was something that had to be addressed as it was part of USAASA's core mandate. The Annual Report spoke of USAASA rolling 65 more telecentres in 2012/13. Before USAASA could consider rolling out more telecentres, it had to consider fixing the ones that were already there. He noted that a large number of USAASA's targets had not been achieved. This was quite worrying and he wanted to know why. He suspected it had to do with problems with management. In terms of unauthorised, fruitless and wasteful expenditure under the USAF on page 79 of the Annual Report, was also worrying. He asked if the Committee could get a timeframe for when disciplinary actions taken by USAASA would be completed. Could Members get an assurance that there would be better controls for the next financial year? The reason that there were so many incidences of fruitless and wasteful expenditure was because the controls were not there. He was also concerned about the remuneration packages that the staff was earning as they were quite high. Given the current state of USAASA, he requested that the board start considering making salary cuts. The performance of USAASA did not warrant the kind of salaries management was getting.
Mr A Steyn (DA) asked that Mr Schneemann make his suggestion that USAASA consider salary cuts a formal proposal so he could second it. He was also going to put forward certain proposals once all the entities' Annual Reports were considered by the Committee. He noted that the board wanted to address the instability within the institution. The fact of the matter was that there was some people who were appointed in November 2011, which gave them time to address the instability. It was clear that the “holes” in the institution had not been addressed. He wondered how much time the board needed before there could be movement from the organisation. Should USAASA be shut down for two or three months so all the holes could be plugged? It was suggested that too many targets were set that were not achievable. He imagined that targets were set against the budgets that entities had. USAASA was not doing its homework in terms of aligning its targets with the money that was available to it. He expected that 12-14% of USAASA's budget should be spent. But the entity spent most of its budget without achieving their targets. It seemed that the money was being spent on salaries and bonuses. It was getting to a point where the Committee was going to stand up and start to “toi toi” and ask for resignations. USAASA said that there was very little money in the budget for projects and it seemed most of it was used for operating expenses, which he found to be ludicrous. The reason for USAASA's existence was because there were very specific projects that had to be completed. The entity also said that it could not continue with offices that were not being used. This could not happen. It should never have happened in the first place. He concurred with Mr Schneemann's statement that USAASA should fix the telecentres that were dysfunctional. Also, it seemed that the performance reward guidelines were rejected by the dissolved board; however, performance rewards were still awarded. He asked which guidelines USAASA used to allocate those rewards. There were targets for four quarters regarding the internal audit, but not a single one was achieved. It sounded to him that the people responsible for this did not address the problems that were identified in the previous financial year. One of the critical problems that the AG identified was the lack of IT capacity. What hope did USAASA have to communicate properly with its provincial centres? He noted that USAASA did not achieve its targets regarding the disaster recovery plans. If the building had to burn down, it would not have any way of recovering the information. In the Annual Report, the Audit and Risk Committee of USAASA confirmed that it had complied with its responsibilities. He wanted to state that the Audit and Risk Committee did not know what its responsibilities were. How could they make a statement like this based on the report that was before the Committee? USAASA was the first entity that the Committee noted to have a “PFMA Checklist” (Pg 48 of the Annual Report). All the right boxes we ticked off except where it said “Any losses recovered or written off” – it was deemed as not applicable. How could it be said to be not applicable? If the money was not recovered, it had to be written off. He wondered if the board had looked at the Annual report before it was sent off into the public domain. If it had, then perhaps the board should be replaced again because it was not doing its work.
Ms Lesoma interjected saying Mr Steyn was perhaps a little out of order as this was a new board.
Mr Steyn continued saying that the financial statements showed that there was a 25% increase in transfers and subsidies that were received from the previous financial year. However, staff costs were fairly high at 41% of USAASA's total budget. Staff costs had also increased by 42% from the previous year. He did not know how they could justify the increase in staff costs. USAASA only achieved 9% of its targets, yet it was awarding performance bonuses. Legal fees had also increased dramatically and operating lease charges had almost doubled from the previous year. He noted that the previous CEO had been awarded R770 000 as settlement upon his resignation. He presumed the CEO was there when all the rot set in. Given that, why was he given a settlement? In fact he should have been fired, not given a settlement.
Ms J Killian (COPE) wanted an assurance that officials who had been implicated regarding irregular expenditure, and who subsequently resigned, would be charged criminally. Would they be hunted down? The Committee wanted to bring a stop to the looting of public funds. When discoveries were made regarding irregular expenditure, the CFO was already on suspension and USAASA said he could not be disciplined further. Subsequently, the CFO then resigned. She asked if these penalties would be recovered from him. According to the PFMA, the accounting authority had to demonstrate that he/she had taken steps to recover the money or that he/she had made efforts to charge the relevant people. The rental of office spaces that were not being used was disconcerting. She wanted to know who entered into these lease agreements. Fruitless and wasteful expenditure totalled just over R1 million, which was a significant amount. The Committee could not brush over this matter. What steps were in place to prevent an occurrence of this? She addressed the Code of Conduct of the Board of Directors Corporate Governance Report on page 41 of the Annual Report. She suggested that they say that what was contained in the Report did not bear testament to what was contained in the Code of Conduct. However, she commended USAASA for some of the honesty that it gave the Committee regarding the Annual Report. The statement that USAASA had complied with the requirements of the PFMA whereby quarterly reports were presented to the shareholder was worrying. What the Committee saw was a dysfunctional body that consumed money for salaries. In fact, some of the top officials earned close to what the President of the country was earning. Yet, USAASA was running out of finances. The entity could not just exist to pay salaries to a few individuals. This spoke to complete mismanagement of funds and ineffectiveness. They Committee wanted to know what USAASA was doing to prevent malpractice as far as procurement was concerned. Employees were paid packages to perform but they were under-performing. So, perhaps the entity should be asked to give some of its funds back to the government. If the entity was not performing, what was the reason for its existence? USAASA was supposed to drive access to ICT. Last year, the Committee considered closing USAASA down, and she wanted to suggest that the Members reconsider this option unless the board stated that it would turn this institute around.
Ms W Newhoudt-Druchen (ANC) noted that USAASA said its role in the public domain still had to be discussed. She asked if the DoC had clarified what the role was and if the public was clear on what USAASA's role was. USAASA requested for a total roll over of R266 million. Part of the amount was R220 million for the Set Top Boxes. This meant that there was a R46 million difference. There were a lot of targets that had not been achieved because of ongoing forensic investigations. She asked for timeframes for when these investigations would be finalised. There was work that had to be done. She asked USAASA to clarify what it meant by “provision for impairment of financial instruments”. She noted an incident of fruitless and wasteful expenditure for money paid to Telkom and Sentech for internet connectivity of cyberlabs and telecentres, when in fact there was no internet connectivity on these sites. Had Telkom and Sentech paid these amounts back to USAASA?
Mr C Kekane (ANC) stated that when the Committee visited the telecentres, they noted how important they were for the rural areas. It made sense to fix the telecentres that had already been rolled out. Part of the reason they were not functional was because there was a problem with leadership. Directors of the telecentres seemed to avoid the Committee when it visited. One of the arguments was that local government was not supporting the telecentres as they should be doing. He suggested that the Committee should ask SALGA to put this matter on its agenda as poor communities were suffering. He did not think that USAASA should be shut down as the entity was needed by communities. The board had to speed up the process of filling acting posts. He also suggested that the board take “hard action” against those that have acted wrongly within the institution.
The Chairperson stated that the fact of the matter was that USAASA was in trouble. A new board was appointed and Members had raised questions from bonuses to the location of USAASA's office. The Committee was asking that the board consider moving its office to a more accessible location. The issue that Members had with the bonuses was that they did not understand what management did to deserve bonuses. USAASA was not meeting any of its objectives but bonuses were being paid. What were the considerations for bonuses to be paid out? They were supposed to be based on performance. The Committee raised a lot of questions and it was time for them to decide how it would move forward with USAASA. Most of the questions could not be answered by this new board. Members needed to understand that the budget, which it had approved as a Committee, was being put to good use. Members would have to debate USAASA's issues and agree on what would be included in its recommendations for the entity. The Committee needed to know from the board how much time they needed to understand these issues, and they would have to go back and table a new revised strategic plan. There was no hope that the current strategic plan could be achieved. The role of the DoC within USAASA was an issue that seemed to come up frequently. The DoC had a responsibility to ensure that its entities were operating optimally. The DoC should have picked up problems that USAASA was experiencing a long time ago. USAASA had to give the Committee a revised strategic plan that Members could monitor going forward. This was his proposal as he thought that any attempt the board made of responding to questions would just confuse Members more. However, he warned that a full blown investigation was needed for every staff member that received a bonus.
Ms Lesoma suggested that the revised strategic plan had to be completed before the second quarter report was released.
Ms Shinn proposed that the board be given a month to produce a revised strategic plan.
Ms Radebe thanked the Committee for their comments. There was clear direction in terms of what the Committee expected from USAASA. She acknowledged that a month would be sufficient for the board to revise the strategic plan. She was sure that USAASA could achieve some of the objectives set out in the Annual report.
The Chairperson interjected saying that what the board had to do in its revised strategic plan was to say how it was going to turnaround “this mess” it was in. The Committee wanted to be able to monitor the entity going forward. He thanked the board of USAASA as well as Mr Vilakazi, warning that there would come a time that Mr Vilakazi would have to leave USAASA.
NEMISA 2011/12 Annual Report Presentation
Ms Molatelo Maloko, Chairperson of the National Electronic Media Institute of South Africa (NEMISA) board, thanked the Committee for the opportunity to present the organisation’s Annual Report results. She asked Members to note that the board was supposed to be made up of seven non executive members, but there were only four for now. Board resignations had been communicated to the DoC and the Minister, and they were dealing with the vacant posts. There was only one board member that had been there for four years who had institutional memory, so this obviously affected continuity. She was happy to note that NEMISA received an unqualified audit report from the AG and informed the Committee that it had been working on a new business plan which it would present to the DoC at the end of this month. She requested that the Committee invite NEMISA to Parliament to present their business plan as well.
The Chairperson thanked Ms Maloka saying that it seemed that NEMISA was one of very few institutions with very little fraudulent and wasteful expenditure. He stated that the Committee would not be taking the full presentation as Members were ready to head straight to the discussion portion of the meeting.
Ms Shinn stated that she was a bit confused about the staff complement at NEMISA and she needed clarity on what its vacancy rate was. There was no shareholder compact signed, which made raising funds difficult. One of the reasons for NEMISA failing to reach most of its targets was because funds had not been granted. She wanted to know why NEMISA was not allowed to raise money when there was no shareholder compact in place to receive funds. In terms of vacancies, it seemed that staff cost increased considerably, especially for an entity that had very little money available to it. This gave the Committee the impression that NEMISA existed to pay salaries. Student accommodation costs also doubled from the previous financial year, yet food costs were cut by half. Lecturer facilitation fees were also cut by half. The Committee needed to know what was going on here. She suspected that costs had increased due to NEMISA taking in more students from rural areas. Was NEMISA financing the migration of students from rural areas to the campus? There was no real clarity on how effective NEMISA's teaching was. There were three programmes that were created at NEMISA. She asked if these had aired and what the feedback was on it. She wanted to know how effective NEMISA was in creating material that was saleable and if they had any way
of monitoring how many of their graduates were still employed in the industry.
Ms Maloka addressed the vacancy rate saying that the board was concerned that there was only an acting CEO. NEMISA had created an integration strategy that it would present to the Committee in the future, which speaks to employing a full time CEO.
Mr Takalani Nwedamutswu, Chief Operating Officer of NEMISA, added that the problems with the budget forced it to hold back on filling some of the vacant posts. He reported that the key posts had now been advertised and were about to be filled. For most of the posts, the gender equity priority was being fulfilled.
Mr Nwedamutswu addressed the query concerning student accommodation. NEMISA had over-extended itself in terms of providing services for underprivileged students. The enrolment rate compared to the previous year was much higher. This high number of students could not be sustained in terms of the facilities and teaching capacity at the campus. Secondary to this, due to the fact that students were recruited from outlying areas, most of the students could not afford to pay their way through and had to be housed in paid for accommodation. Hence, the budget for accommodation doubled. The lecturer facilitation fees dropped as well as many lecturers worked on short term closed contracts.
Dr Harold Wesso, Acting CEO of NEMISA, explained that as far as he knew, with the type of institution that it was, it did not need a shareholder compact.
Ms Moira Malakalaka, Chief Financial Officer of NEMISA, concurred that NEMISA had a business plan and did not need a shareholders compact, but they had taken it upon themselves to be recognised by creating an agreement of some sorts similar to a shareholders compact.
Dr Wesso stated that as far as teaching was concerned, NEMISA had tried very hard within the budget to ensure that students were not neglected and that they received the best education.
Mr Nwedamutswu added that NEMISA's strategic objectives did not say anything about teaching and learning. The assumption was made that learning was NEMISA's core business. The full complement of what NEMISA did was not really reflected in the strategic plan.
He stated that in terms of saleable production material, there were opportunities for graduates to get hands on experience. There was a definite need for critical skills in the area of broadcasting. Training of graduates was linked to actual production. NEMISA was involved in producing certain projects that could result in there being extra revenue for the institution. He could not the Committee how many of NEMISA's graduates were employed exactly but he predicted that just over 50% were employed in the industry. However, he could say that all of NEMISA's students were employment-ready and needed minimal training in order to be productive.
Ms Shinn stated that she was not satisfied with the response to how effective NEMISA's training was and she wondered if it could give the Committee a report on how many students it had trained over the years, what they were trained in, and how many graduates were recruited into the sector.
Ms Killian noted that according to the report from the AG, the Committee understood that it was the first year that there had been a regression in NEMISA and that a new problem had surfaced regarding supply chain management. The Committee noted that NEMISA received an unqualified audit, but this did not necessarily mean that it had a clean audit. To have a clean audit, there had to be zero findings by the AG. However, NEMISA was not one of the Committee's “problem children”. NEMISA was an important body, but it had to focus on having fewer targets and getting those right before creating targets that it did not have the budget for. When it created unachievable targets, it set itself up for failure and this had a negative impact on management morale and staff morale. NEMISA had to do the critical things right and ensure that it did not slack on financial management. The entity had to be able account for everything that they spent public money on. NENISA said it wanted to establish a secure campus. She asked what the current status of this was. Was it renting property? It was important for Members to understand where NEMISA was starting from and what challenges it had with its current campus. She asked if the chairperson of the audit and risk sub-committee was a board member or non-executive board member. She stressed that there should be distance between the accounting authority and the audit and risk function. This was important for NEMISA to note as it was part of the National Treasury's regulations which stated that the chairperson of the audit and risk committee had to be independent and could not be the chairperson of the accounting authority. From the AG's report it was clear that NEMISA's weakness was in relation to predetermined objectives. Some of the objectives were not measurable or smart. She suggested that NEMISA go back and revise its strategic plan. Achieving 58% of their objectives was not a good score. She suggested that it was because NEMISA had so many targets that they could not achieve all of them. Procurement seemed to be a problem for the institution which they had to attend to before it became a major problem. In terms of reimbursements and payments – she had never seen a specific allocation for this before. She asked if this was a common practice and if all public entities had it.
Mr Nwedamutswu answered that when NEMISA's strategy was developed, a new CEO had just been appointed and the majority of board members were also new. There was a lot of excitement that new things would be achieved. Unfortunately, the convergence of planning between NEMISA and the DoC did not materialise. He agreed that there should be fewer targets and that NEMISA made a mistake by setting so many. The entity realised that it had made a mistake and it would change it.
Mr Nwedamutswu stated that the National Treasury gave NEMISA a lot of support when it had discussed the matter of acquiring a new campus. National Treasury had pointed out buildings that had the facilities that NEMISA needed. The institution would be following this up with the necessary entities. With the current property that NEMISA had, most of its expenditure was on rental because it did not own the buildings. It would make a lot of difference if NEMISA owned the building it was in as it would free up more money for other projects.
Ms Malakalaka addressed regression in terms of procurement and supply chain management. It was first time NEMISA had any regression of this sort. During this time, the institution did not have a procurement administrator. There was a gap in the procurement policy, which was where the incident of irregular expenditure came from. NEMISA then took it upon themselves to put measures in place to ensure that it did not happen again. The institution tried to follow all the correct policies and procedures.
She explained that reimbursements of payments were for board members who were travelling to meetings such as parliamentary meetings. NEMISA included it in the financial statements instead of hiding it. This practice was the norm in other entities. It was also on the Minister's directive regarding how board members should be paid.
Mr Schneemann noted that it was worrying that NEMISA had only achieved 58% of its targets. Page 30 of the Annual Report showed three stories about how graduates had benefited from training at NEMISA. The organisation had to look at ways of publishing these in the public domain. If he was not in this Committee he would not have known about NEMISA. More students could benefit from NEMISA, but they did not know about the entity. He asked if all of NEMISA's staff had signed contracts. If not, what was the reason for this? NEMISA was certainly one the entities that did not trouble the Committee much. He thought perhaps the Committee should pay more attention to it and the good work it was doing.
Ms Maloka explained that the board was looking at ways to market NEMISA and get the rest of South Africa to know about the great things that were coming from the institution.
Mr Nwedamutswu agreed that there was a need for more publicity regarding NEMISA. The entity was changing young people’s lives, which was quite substantial for students living in very poor conditions who have now become professionals in the industry. The problem was that people did not really know about NEMISA. Part of the problem was due to a limited budget which stopped the entity from having a proper marketing plan.
He stated that as part of the re-organisation of NEMISA, the board identified that one of the weaknesses was that some of the Human Resource policies were not compliant with legislation. In some cases, the content of the staff contracts were contradictory with the basic conditions of employment. NEMISA was now focused on getting compliance issues correct.
Ms Lesoma stated that she did not see anything about performance bonuses. She asked if NEMISA did not pay some of its staff.
Dr Wesso replied that he worked at NEMISA for free because he was so excited about the work it was doing.
Ms Malakalaka addressed the query about provisions for performance bonuses. She stated that there was a provision but this did not mean that it was something that was paid out. There was a performance management system in place, but this was just a provision.
Mr Steyn stated that he looked at NEMISA's targets and a lot of the ones that were not achieved were dependent upon additional funding. It was important to link targets with the budget. He suggested that the organisation set specific targets linked to funding. In addition to this, NEMISA should have a wish list that would look at what it would do if it received additional funding. NEMISA mentioned that its internal audit function was outsourced. Perhaps it was not such a bad thing but he wondered if they had plans to acquire the skills within the organisation. He asked if there were organisations within the industry that would sponsor students to study at NEMISA. He proposed that NEMISA start talking to the Department of Higher Education and Training about identifying students with an aptitude for the kind of courses that NEMISA offered. This would help NEMISA's success rate. He noted that NEMISA suffered a deficit this financial year. He asked how it planned to finance this deficit.
Ms Maloka replied that NEMISA was looking to change its targets and the way it went about setting them. The issue of budget was an important issue that the board was looking into.
Dr Wesso noted that the issue of targets was quite important. He thought there was a good reason for the non-achievement of targets. He agreed with Mr Steyn that it was very risky to plan in anticipation of what the budget was going to be as well as in terms of human resource capacity. A strategy was developed and a new CEO was employed during the financial year. It was anticipated that the DoC would fund NEMISA's projects, but this did not happen. There were times when nothing happened because there was a lack of internal capacity and resources. This was evident in the Annual Report. However, with the new business plan, the strategy was going to change.
Ms Malakalaka explained how the deficit would be addressed. In the past, because NEMISA functioned on an accrual basis, there were years that the institution accumulated a profit. The deficit would be funded through accumulated surpluses. If the Committee looked at page 45 of the Annual Report it would see that the net accumulated surplus moved from R9.4 million to R3.9 million. This was how NEMISA preferred to finance their deficit.
Ms Malakalaka stated that due to the small size and capacity of the organisation, NEMISA outsourced its internal audit function. The institution could look at getting one board member to coordinate the internal audit, but due to the small size of NEMISA and the small budget, it might not be beneficial to the organisation.
Ms R Morutoa (ANC) noted that the picture painted by the AG's report was quite pleasant. She though NEMISA was doing well but was worried that most of the female employees were at lower levels of management.
Mr Schneemann stated that there seemed to be a high turnover of CEOs within the organisation. He asked if NEMISA was looking into this issue.
Dr Wesso noted that the CEOs seemed to be changing all the time. He would have to do research on why this happened.
Mr Nwedamutswu added that NEMISA realised that most of the CEOs it hired were already in high demand in the sector.
The Chairperson thanked the NEMISA board and executive for their presentation. He stated that there were certain issues that the Committee had to consider, such as why DoC did not want to give NEMISA certain work when it was part of the DoC. This was a critical matter that had to be resolved as the DoC should not be keeping NEMISA idle. NEMISA also had to look at how they were being utilised by the SABC and the MDDA, which were other public entities that could make use of NEMISA's services. These were key policy issues that would be addressed.
The meeting was adjourned until 14:15pm when the Committee would meet with the SABC to discuss its 2011/12 Annual Report results.
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