Sentech & USAASA Strategic Plans 2013/14; ICASA 3rd Quarter Performance; Auditor-General on Predetermined Objectives

Meeting report

Ms A Muthambi (ANC) took the chair in the absence of the Chairperson.
 
Auditor-General South Africa (AGSA) on Predetermined Objectives Audit of ICASA & USAASA
Mr Wikus Janse van Rensburg, AGSA Senior Manager: National Departments, presented the findings on the audit of the Independent Communications Authority of South Africa (ICASA). There were more indicators than targets. Half of the indicators were not clear. Half of the targets were not measurable. It was not clear on what time-lines were applicable. There were no findings on relevance. There was a format for the publication of technical indicators on the entity's website. ICASA had not done this for some time, but were now in the process.
 
Mr Janse van Rensburg said that the audit report still had to be compiled. However, AG had prepared a management report. If ICASA were to finalise its technical indicators, only a matter of emphasis finding would be made and the audit would not be qualified due to the audit of predetermined objectives.
 
Mr Janse van Rensburg said clear policies were needed for each indicator. Roles and responsibilities had to be defined. It was important that a forum be established to assist ICASA. Finally, there were stringent requirements for time-lines and AG should be brought in to help at an early stage.
 
Ms Zanele Nkosi, AGSA Audit Quality Control Specialist, presented the findings on the Universal Service and Access Agency of South Africa (USAASA). 22% of indicators were not well defined. 24% of targets were not specific. The same percentage of targets were found not to be measurable. There were no problems in the specification of time-lines. There were no indicators which had issues with relevance.
 
Ms Nkosi said that findings had been discussed with the management at USAASA. Changes would be made. She was hoping that the final documents would be reviewed shortly. AG recommended that the documents be reviewed. Technical indicators would help with setting targets.
 
Discussion
Ms J Kilian (COPE) raised a query on ICASA. Time was running out, and the technical descriptions needed to be done by the end of March. An undertaking was needed from ICASA on whether they would reach the deadline. She was expecting another qualified audit. She asked if the high percentage of unsatisfactory indicators could be corrected. She asked if the Department of Communications (DoC) would co-ordinate the suggested forum. She asked at what stage the AG had been asked to assist ICASA, and if AG was involved in the formulation of pre-determined objectives. She asked what conclusions had been made on the functionality of internal audit.
 
Ms W Newhoudt-Druchen (ANC), speaking through a sign language interpreter, wanted clarity on one of the slides in the presentation. She asked what was meant by the above and below the threshold levels quoted. She asked how AG had arrived at its conclusions.
 
Mr A Steyn (DA) felt that not enough was being done. He asked what sample size had been used. On the technical indicators, it seemed that all entities had a problem. He still could not find those for the DoC after the discussion the previous day. He felt the thresholds were too high, and this was accepting mediocrity. It was the inverse of what was happening in education. A 33% error rate was quite high. In the past entities seemed not to accept the AG's recommendations. He wondered what the reasons for this were.
 
Mr Kholwane took the chair.
 
Ms R Lesoma (ANC) asked why the AG's report was being discussed. It would make more sense to interact with the entities under review. The impression being created was that they were dismal failures with no will to improve. She felt that Members should first hear the presentations made by the entities themselves.
 
Ms Muthambi said that the report was being presented to Members, and there should be some interaction.
 
Ms R Morutoa (ANC) said that Members should ask questions pertaining to the entities. It was not correct to ask the AG these questions.
 
Ms Muthambi suggested that AG staff be asked to respond to the questions raised.
 
Ms Lesoma asked which indicators were unclear.
 
Mr Janse van Rensburg said that the rating methodology had been designed by the office. There were no auditing standards to follow, and hence the methodology had been devised. He could not explain the methodology. If ICASA published the required specifications then they could improve their situation. The suggested forum would make presentations on the reporting guidelines. AG had been involved with guidance for the previous years. Their involvement on this report had started in November 2012, and the first draft of the report had been made in January 2013. The findings were not new.
 
Mr Janse van Rensburg said that the internal audit function at ICASA was outsourced. When sampling was done, the choice of indicators was made on a qualitative basis and on the size of the associated budget. At least 50% of indicators would be used. The audit opinion would be in the management report, and there would be specific comments for each area. In the case of ICASA, all the indicators had been studied. The technical requirements must be published by 31 March 2013. He would refer the comments on the thresholds being too high back to the technical unit. He admitted that there was a degree of subjectivity. It was not an easy process. There had been extensive consultation on proposed changes to the strategic plan. ICASA had acknowledged the findings. The initial findings had been much worse that the current findings.
 
Mr Nkosini Mashabane, Auditor General Manager of Portfolio Committee on Communication, AG, said that sampling of the USAASA indicators was done on qualitative aspects and financial allocations. In the case of USAASA, all indicators had been reviewed. When sampling was used, all the indicators on the selected objective were evaluated. There had been management changes at USAASA recently. It was too early to assess if the internal audit function was being run efficiently, but it seemed that the current leadership was heading in the right direction.
 
Ms Lesoma asked if the collection rate at ICASA had improved. This had been an issue in the past, and had been identified as a risk area.
 
Mr Janse van Rensburg said that the evaluation had not been the financial audit. It would be best if ICASA spoke for themselves on this issue.
 
The Chairperson said that ICASA was losing millions through its poor revenue collection.
 
Ms Lesoma said that the nature of the presentation had been generic. Members needed more specific information.
 
Ms Kilian understood that the audit had been done on the predetermined objectives and not finances. Regarding the indicators marked as not being verifiable, she asked if this referred to information that was not supported by evidence. She asked how crucial this was. The Committee needed to know where to apply pressure. She asked what the requirements of a good performance indicator were. She asked why it was so important to have well-defined indicators. National Treasury (NT) had made technical data compulsory. She asked if it was a serious transgression not to comply with this.
 
The Chairperson noted that there had been an improvement since the AG had been called in to assist. It was important that matters be corrected now.
 
Mr Janse Rensburg said that the AG looked at usefulness of indicators. They were looking at the design of the indicators, and not for evidence. It was difficult to appreciate the evidence in cases where the indicator was not well-defined. Failure to do this had an impact on the reliability of the information. Any cases of non-compliance were important and would be reported. He could make the detail of the evaluation of the indicators available.
 
Sentech on its Corporate Plan 2013-2017
Mr Thabo Mongake, Chairperson of the Board of Sentech, introduced the presentation on the Corporate Plan for 2013 to 2017. Sentech was committed to its role in the service of the public. The Corporate Plan was in line with the National Development Plan (NDP).
 
Dr Setumo Mohapi, Chief Executive Officer (CEO), Sentech, said that one of the key drivers of the strategic plan was the provision of universal access to integrated communication technology (ICT) services. An open access platform would be provided. Communication should be affordable. Sentech was aligned to the vision of DoC. In the past year, 22 000 people had been able to tune in to public broadcasts for the first time.
 
Dr Mohapi said that Sentech was continuing to work with the South African Broadcasting Corporation (SABC), but no targets had been concluded yet. Sentech's infrastructure was available to both private and public broadcasters. The broadband sector was being targeted. The content production was changing.
 
Dr Mohapi said that an input had been made on affordability. The regulator had initiated an enquiry into the costs of wholesale signal distribution.
 
Dr Mohapi presented Sentech's strategic objectives. The first was to play its part in creating inclusive economic growth. The second was to support the multiplicity of ICT systems. Multi-media platforms were needed for digital content-based services. Sentech would contribute towards rural development. It would contribute towards the efficient use of the radio frequency (RF) spectrum. It would contribute to the further implementation of the Electronic Communication Act (ECA). There were different tariff categories for the different categories of broadcaster.
 
Dr Mohapi said that Sentech would contribute towards the skills base, and would up-skill it s present staff. It would work with the e-skills institute. It would support small, medium and micro-enterprises (SMME) by the provision of ICT services. Sentech was working on ICT research with international bodies. Sentech would increase its support to the shareholder. It was sharing its knowledge basis with African neighbours.
 
Dr Mohapi added that radio broadcasts were a key source of news and entertainment, and would probably remain so forever. This was especially true of Frequency Modulation (FM) services. Television broadcast facilities still needed to be expanded. Currently, 88% of the population was able to use all broadcast opportunities and 84% had access to public and commercial stations. There were 25 community stations. Sentech was working with the broadcasters on their relevance and sustainability. More licences should be granted to community stations.
 
Dr Mohapi explained that more ways were needed to use the RF spectrum. This was not an easy problem to solve. Sentech's trading unit would be re-organised, and inputs would be made to the public. Sustainability had to be considered in the light of some problems in the second market. There was a need to support community and small commercial broadcasters. On the FM side, ITAs had been released for the second marked. These should be finalised by the end of the current financial year (FY). Sentech had been in discussion with the regulator. No new services were being provided at present. Some thought was being given to low power transmissions. There was a lot of related infrastructure. This could be used for both existing and new broadcasters. There was a project with the SABC, but no targets had been set yet. This might come to fruition in 2014 if funding was in place.
 
Dr Mohapi said that medium wave (MW) was experiencing a resurgence due to the lack of available FM spectrum. ITAs had been issued in Gauteng, KwaZulu-Natal and Cape Town. Some infrastructure was in place but more was needed. There was a lead time of between eighteen and 24 months. Short wave (SW) transmissions had gone into decline recently. There was a digital version available, but maintenance costs of the equipment were high. SABC was still using SW to broadcast Channel Africa. Much of the equipment dated back to the 1930s, and was energy inefficient.
 
Dr Mohapi turned the changing television market. There was significant growth in the pay television market. However, as long as the introduction of Digital Terrestrial Television (DTT) was delayed, there would be an impact on growth. It was expected that the free-to-air channels would be on DTT.
 
Dr Mohapi said that there were two outstanding regulatory matters. The first was mast-sharing. This was a difficult issue. There was an allocation for a test capacity on multiplexers. Tariffs for DTT would be based on costs, and would only come into use at the end of 2014. Funds had been set aside for the migration of approximately R1.7 billion. This was only for capital expenditure. If the migration was delayed, Sentech would have to consider how to cover operational expenditure in the meantime and also had to consider future replacements. There was no crisis at present as there had been an allocation to Sentech.
 
Dr Mohapi said that there was a steady growth in the satellite sector. One of the drivers was a number of religious channels. The whole platform needed to be changed. Every citizen should have access to the public broadcaster. The philosophy of Sentech was based on being a common carrier. Indeed, this was embedded in their licence conditions. All customers had to be treated equally.
 
Dr Mohapi continued that Sentech was supporting mobile television broadcasts. They and applied to ICASA to conduct a pilot project on a new standard. This might bring new efficiencies to the sector.
 
Dr Mohapi told Members that a White Paper in 1998 had addressed the issue of multi-media. The signal distribution system had to cater for digital multi-media. A project had been launched and was being accelerated. A big step forward had been taken with the Department of Health. Systems were supporting the National Health Insurance scheme. A platform was to be built that would assist with the dissemination of information and the training of health officials.
 
Dr Mohapi moved on to wireless broadband. Content had been developed to provide information for government and public entities. The focus was not on the private sector. There was a mandate with the State Information Technology Agency (SITA). The question was on how the infrastructure mandate could be combined.
 
Dr Mohapi said that there was progress with USAASA. Many telecentres had been connected. A total solution was being provided including computers and printers. There was a good partnership. A project in KwaZulu-Natal and the Free State would now be expanded to other provinces. Their facilities were attractive to many players, and their operations were aligned to the ECA regulations.
 
Dr Mohapi said that the DTT project plan assumed that there would still be analogue transmissions in 2015. DTT was still not reflected on the budget. The target was to provide coverage for 80% of the population, while 77% was currently covered. The transmissions themselves were easy to manage, but the time-consuming part of the project was the associated civil works. The entire DTT network should be set up by March 2014. All current sites would be converted to DTT standards while four new sites would be added. Direct-to-home satellite (DTHS) systems would be used to fill the gaps. He showed maps of current, pending and future coverage.
 
Dr Mohapi continued that Sentech had asked for R418 million for DTT funding, and R106 million for operational expenditure. This had all been allocated by Treasury. Taxations issues were still being discussed. A lot of the equipment had to be imported, which raised issues of foreign exchange. There were was a need to beef up systems in order to prevent network interference. Sentech built and maintained the access roads to its facilities. A rollover of R46 million would be requested.
 
Dr Mohapi said that in terms of broadband, there had been developments since the Corporate Plan had been published. Broadband had been mentioned in the budget vote. A policy and strategy had been developed, as well as a funding model. There had been a review with stakeholders. There had been a special appropriation in 2007. R584 million had been spent on broadband services, including Value Added Tax (VAT). The Estimate of National Expenditure (ENE) had not indicated a broadband allocation, nor was it included in Vote 27.
 
The Chairperson asked why this was so. There was no plan.
 
Dr Mohapi agreed. An amount of R584 million was to be returned to the fiscus. Interest of R123 million had been earned on the money being held, and this must also be returned. Over the long term, fees for the use of the RF spectrum would increase tenfold.
 
Dr Mohapi said that the Board of Sentech had resolved that it was in the company's best interests, and in order to ensure alignment, that control of the RF spectrum be returned to the State. When the role of Sentech in this regard was clearer, the issue could be revisited.
 
Dr Mohapi said that a model had been developed to ensure that the company remained sustainable. The financial figures of earning after tax showed that the company was doing fine. Interest was not reflected on the balance sheet if it had been parked. The cost of sales and operational costs were separate. There were costs for delivery and operational cost. Administrative costs were growing slowly while the cost of sales was increasing rapidly. There had been an increase in maintenance staff. There had been an increase in maintenance, but the target had not been achieved. More would be allocated to this. The revenue increase was lower than the increase in costs. A key focus area was efficiency.
 
Dr Mohapi presented the balance sheet. By the end of the Medium Term Expenditure Framework there would be little effect of external financing. Control over equity was growing. The cash base was healthy and was being put back into operations and employee benefits. The cash flow was healthy.
 
Dr Mohapi said that R878 million had been budgeted for the capital expenditure programme, of which R464 million would own from Sentech's own sources. The key performance indicators (KPI) had been developed through a KPMG audit. Responses to oversight visits were embedded in the KPIs. Surveys showed that the staff were satisfied with their conditions of employment. The Annual Performance Plan had set quarterly targets.
 
Mr Thabo said that the strategy had been adopted for 2013.
 
Discussion
Ms Morutoa noted some improvement in the performance of Sentech. She thought there might be some spillage of RF.
 
Ms M Shinn (DA) felt there was a tremendous reality gap between what was planned and the finances allocated. The Minister of Finance had announced that there would be no allocation for broadband, and all the funds would go to DTT instead. DoC had presented a similar disconnected plan. When the plan was drawn up, surely recently, Sentech might have thought that broadband was still the top priority. Given the gaps in the coverage maps, there should have been satellite coverage for the whole country. The satellite would be available the following year. She asked why it was so difficult to get ICASA to move on DTT regulation. In the ENE, it seemed that Sentech would not be getting a grant after the following FY. She asked what the impact of having to be self-funding would be on the cash flow and bottom line.
 
Mr Steyn noted that Sentech would ensure that a comprehensive broadband programme was rolled out. He could not see how that would happen given the current situation. Google had recently done a study on how the unused portion of the television spectrum could be used to carry broadband cheaply. He asked what the satellite costs would be. The document spoke to an affordable broadcasting option. Licence fees had been reduced, but were still unaffordable for small operators. He asked if there might be reductions, or if Sentech felt that the current tariffs were affordable. On a stable funding model, he asked what would be meant by a sustainable model. He asked if there was a need for permanent subsidies.
 
Mr Steyn said that the DoC Strategic Plan made it clear that the switch to DTT would only happen during 2016. He asked what the risk was regarding the set-top box option. Targets should be linked to funding, but in some cases the source was still to be identified. Targets were set annually, and in places quarterly. This made the strategy clear. In some cases, annual targets were reported as 100% achieved by the second quarter already.
 
Ms Muthambi asked how much the set-top box would be. She asked if these would be compatible with eTV and M-Net broadcasts. It was said that DTHS would play a significant role, but this was lacking in detail. There was much talk about digital content, but there was no evidence of concrete plans. Regarding stabilisation of mobile and on-line platforms, she asked if Sentech would play a role in the broadband market, and if there was a budget. There was no evidence that there were content partners in place. There was a concern that ICASA had not mentioned some issues. In a court case, the rights of free-to-air broadcasters to raise their own revenue had been confirmed.
 
Ms Muthambi continued that DoC would only launch DTT in 2016. She asked how funds of R1.7 billion would be found. She asked how much was budgeted for DTHS platforms. She asked if the Christian channels brought in enough business. She asked what plans were in place for mobile television services, and what role Sentech would play in content. There was an elaborate mandate. Later comments in the presentation made it unclear what was meant by providing communications services. Some of the services mentioned seemed to be outside the scope of Sentech, and Treasury seemed to share this concern. Treasury had demanded that some of the public money allocated to Sentech be returned to Treasury.
 
Ms Muthambi asked if Sentech had a business plan for DTHS. She asked if there was evidence that the proposed DVBP2 system was the most appropriate for South African conditions. She asked what local manufacture was involved, if any. She presumed that the figures presented on DTT capital expenditure should be in millions and not thousands of rands. The heading of 'gross profits' was also used a line item in the slide on the financial statements. She asked why some figures had not been included in the historical financial figures. She asked how the private sector was involved in the Sentech model. On the ISDB standard, Sentech had promised to provide the figures from the court case. She asked if technical meetings were taking place. She agreed that the portion of funding that was not being used should be returned. She asked what needed to be done regarding broadband. Perhaps Sentech would concentrate on broadcasting and Broadband Infraco on the infrastructure. The private sector was not being consulted on their plans. This led to duplication. The private sector was also delivering on some aspects of the DoC and Sentech mandate.
 
Ms Muthambi referred to the court order, ICASA and the SABC were co-respondents. The first respondent was the Minister of Communications, and the second Sentech. These parties were ordered to pay the costs. She asked who had advised the Minister to pursue the case against eTV. She asked what the impact on service delivery would be, as well as the delays in introducing DTT. She asked how Sentech was complying with the court order. There was an obligation to Nadra Vision. She asked if those responsible for misleading the Minister would be held accountable. The result of the case had been fruitless and wasteful expenditure. She asked if there would be an appeal. It seemed that long before the case had gone to trial, there had been co-operation between eTV and SABC on DTT implementation. There had been a joint initiative on equipment. Both were free-to-air broadcasters, and had the right to impose access controls. This showed that Sentech was equally to blame for the delays, and this affected the readiness of broadcasters.
 
Ms Morutoa noted that SABC, Sentech and ICASA had collaborated on the broadcasting master plan. There were community stations in the Eastern Cape, but the full spectrum was not available in many parts of the province. There were such areas in other provinces as well.
 
The Chairperson said there was a notice of fluctuating financial health in Sentech. He asked when the income and expenditure curves would meet. He asked how long the company could be sustained. Expenses were too close to income for comfort, and he asked what the position would be like in the following few years. Budget cuts might be needed. Members were concerned with the broadband issue. He felt that Sentech had not told Members the full story. Sentech had failed to meet requests from DoC and Treasury. Sentech also felt the impact of DoC failing to execute its plans. He asked how far Sentech was going to deal with broadband issues. This was causing pain to the country. Sentech did not have to bark at every tree.
 
Dr Mohapi said that the Board had resolved to return the RF spectrum to the regulator. On the broadcast master plan, the mandate of Sentech was to provide universal ICT access. There was a dispute over fees between SABC and ICASA, and as a result Sentech had halted work on some of the proposed sites. Some radio stations crossed provincial borders, and these borders should be broken. Funding was needed. The entire issue of funding private broadcasting services should be taken out of SABC. In terrestrial public broadcasting services, there was no plan to expand. DoC was convening a meeting with DoC and ICASA. Satellites should be used as a gap-filler. There was obligation at present to provide satellite coverage as an option. Sentech planned to put the same content on terrestrial and satellite based services. By the third quarter, everybody should be able to get a dish and a decoder to watch SABC channels. Radio channels would also be included in the coverage. The DoC needed to co-ordinate the work.
 
Dr Mohapi said that the indication that Treasury would recall some broadband funds had come in November 2012. This was part of the Parliamentary appropriation, and would probably need some action by Parliament to be withdrawn. Sentech could only verify the decision on broadband when the budget speech was made, but corporate plans had to be in place before then. The strategy had to be developed. Sentech would continue to participate in the broadband development plan.
 
Dr Mohapi said that most of the country was covered terrestrially. This had been the basis for the policy, and the original plan had called for a terrestrial network. The satellite option had only come into the frame later. At present 75% of the population had SABC3 coverage. In MUX2, the coverage patterns for eTV and M-Net were different. Licence and coverage conditions should be the same. The same coverage patterns would persist when DTT was introduced. It was a difficult problem to deal with.
 
The Chairperson said that some advice was needed from ICASA. It should always be possible to find a solution.
 
Dr Mohapi gave the budget for operational expenditure regarding DTT. Dual systems were already being run. Sentech would have to use its own reserves to fund the project if there was no government funding. The reserve was currently at R854 million. The reserves would be compromised if this option had to be followed. Treasury was aware of this situation. The situation was still sustainable, but there would be pressure on Sentech without external funding.
 
Dr Mohapi said that there were two elements to broadband. The bigger master plan dealt with the installation of new networks. While these were being developed, there should still be communication services. USAASA should help by creating information centres. Long term solutions could be pursued with SABC. The broadcast master plan would be developed in conjunction with SABC.
 
Dr Mohapi was aware of the Google research. The television spectrum could be used, but there must still be security of transmission. Low power systems had been introduced. Costs were distributed between consumers and SABC and Sentech on the other hand. Satellite costs were fixed, and extra subscribers did not make much of a difference to that. There was a cost for DTT decoders. In some areas there was no terrestrial feed. This was where the costs came in. There were options for rebroadcasting. After looking at various options, the DTHS proved to be more expensive than DTT. The entire network still had to be surveyed. It might be better to cover the remaining 12% with DTHS.
 
Dr Mohapi said that regarding affordable broadcasting, there were three categories. There was an entire regime of tariffs. This enquiry was ongoing. Public hearings had been held in 2012. Regarding community television, a model had been worked out. Sentech bore the signal distribution costs, which were subsidised by DoC. The current system made provision for the following two years. Work was being done to look at government structure. Advertising and sponsorship were potential revenue streams. MESIA was assisting with training. There were syndication options to save programming costs.
 
After an adjournment for lunch, Dr Mohapi said that some of the budget items were not displayed in the presentation. SITA would take over several aspects, but Sentech would still do some work in the sector.
 
Mr Steyn said that if there was an memorandum of understanding with USAASA, he did not remember Sentech being a service provider in any agreement.
 
Dr Mohapi said that the old way of operating the telecentres was now being done the right way after the system had fallen apart. The question on funding the DTT had been dealt with. Targets were typically cumulative. Where targets were fully met earlier in the year, they would continue to be reflected as 100%. This would be looked at when the following corporate plan was drafted.
 
Dr Mohapi said that there was a policy to supply satellite services in areas with no terrestrial coverage. The de Beer policy did make provision for the subsidisation of set-top boxes in certain areas, particularly in the square kilometre array telescope reception area. DTHS should complement DTT rather than compete with it. There should not be any market conflict, and public awareness would be created. This would deal with any possible public confusion. In the corporate plan, data was freely available on both satellite and terrestrial television.
 
Dr Mohapi said that Sentech was not over-stepping its mandate. It referred to past policies to understand its mandate in depth. He showed Members a document reflecting the original mandate. Access must be provided to both producers and consumers of content. It was clear that producers of content should have their work distributed on multiple platforms. SABC news broadcasts could only be viewed on the web through You-Tube at present. Viewers were able to access content through any media. On-line transmissions could be done by fixed line or wireless systems. People should have the choice on how to consume content. There were many methods to distribute mobile television. A trial was being run using a DMB standard, but there were others.
 
Dr Mohapi said that Sentech had created a team to drive innovation in the market. Two positions had been advertised for this function. The commercial case for continued DTT roll-out was a difficult one to answer. When the corporate plan was prevented in March 2011, a national business case had been presented. The network had to come first. Without that, there was no use for a set-top box. Metro Radio had been played in Kimberley over the DTT platform as a demonstration. At the same time, all the SABC radio channels could be heard via satellite. A lot had already been committed to the project, and there was one year to go. There was now clarity over roles and responsibilities.
 
Dr Mohapi said that there was a detailed plan for DTHS services. Generally Sentech did not operate broadband services. There was a technical trial being undertaken. Business plans might be developed from the trial.
 
Dr Mohapi confirmed that the figures in the financial statement were millions. Figures were cumulative. Figures on gross profit might have been a typographic error in transcribing data from previous reports. The point of the figures was to reflect the past and present financial condition of Sentech. Since 2008 it seemed that the figures in question were no longer published.
 
Dr Mohapi said that in terms of school connectivity, there was a problem. The private sector was helping, but in other cases Sentech was being asked to connect schools which had been off the grid for many years.
 
Dr Mohapi said that the only issues were around RF interference. Botswana tried to avoid interference. Sentech wanted to see its networks operate without interference.
 
Dr Mohapi said that the total legal figures were R800 000 on the e-Botswana case and on the set-top box case about R450 000. There were various protocols for cross-border areas.
 
Dr Mohapi said that Sentech would continue to work with DoC on broadband strategy and planning. He did not believe that Sentech was responsible for any delays with set-top boxes. The only reaction to the judgement was to make a proposal to the SABC when requested. In the meantime there was no obligation imposed by the judgement. There was no agreement with the manufacturer. The Minister had a legal team to advise her. The Sentech advice was based on their understanding of the situation. He understood that there would be no appeal.
 
Dr Mohapi was concerned with revenue. Various options were being pursued. The Meyerton SW facility did consume a lot of energy, and dated from 1930s. An upgraded system would consume less energy and therefore be more economical. Efficiency was embedded in the future strategy. The gap would not get smaller. The return on net assets was showing a downward trend, but there was a target of arresting the decline.
 
Dr Mohapi said that the corporate plan was structured to deal with run of the mill activities first. The next priority was dealing with plans and national priorities.
 
The Chairperson cautioned the CEO that a predecessor of his had sat in the same chair and painted a hopeful picture, but he company had soon been in trouble after that.
 
Ms Muthambi was not satisfied with the legal fees in the court cases. There had been legal fees and damages. She wanted a quantification of how the costs were made up.
 
Dr Mohapi was getting his number from the office. He asked if the legal costs could be forwarded in writing. The e-Botswana claim was for 8 million pula. The claim dated back to 2004 An appeal had been lodged. An understanding had been reached on the way forward, but the situation had changed. A response would be given after the board had come to a decision.
 
The Chairperson said that there were matters of competition involved, and there should be some sensitivity to the information imparted.
 
Mr Muthambi said that more care was needed in making comments. Some of the financial figures had not been provided since 2007.
 
Dr Mohapi said that Sentech had ceased to report on certain of the numbers. The figures were taken from previous Annual Reports. He would confirm the figures in form.
 
Mr Gift Buthelezi, Acting Director-General (DG), DoC, said that the legal fees were R579 000.
 
Ms Muthambi still wanted to know who had advised the Minister, and if these people would be held accountable.
 
The Chairperson said that it seemed that DoC had veered from its own policy, and this was the basis for the court case.
 
Mr Buthelezi preferred to answer this question in writing.
 
The Chairperson accepted this request.
 
Presentation by USAASA on 3^rd Quarter Performance 
Ms Phumla Radebe, Chairperson of the Board of USAASA, introduced the delegation.
 
The Chairperson said that an advertisement had been placed for the vacancies on the SABC Board. Applications would close the following day. The problem was now that more than one Board member had resigned, and the Committee would have to reconsider its options.
 
Ms Makhotso Mokoa, Performance Management: USAASA, said that there had been a vast improvement in performance since the new Board had taken office. Five out of seven targets had been fully achieved and the others partially. In terms of community access centres, 41 had been opened against a target of 50. There would be a second phase of another 78 sites in the fourth quarter.
 
Ms Mokoa said that the second target was connectivity upgrade programme. 41 centres had been connected. There was a commercial partnership to continue this programme into the fourth quarter. The third target of providing needy households with access to digital television had not been achieved. USAASA had been unable to finalise this. There was a need to map population data to post offices. This work was 98% complete.
 
Ms Mokoa said that the implementation of universal access and service strategy had not been achieved. The scope was limited by the ECA, focusing entirely on broadband. The scope had been widened. International benchmarking had taken place. Engagement should be possible with stakeholders in the fourth quarter. The target of multi sectoral networks had been partially achieved. A public relations agency had been appointed to create awareness and mobilise people to use them.
 
Ms Mokoa said that the fund operating guidelines had been partially achieved. Public consultation had not taken place. A complete fund manual had been completed and would be presented to the Board the following day. On HR support there had been some challenges. The major target on the progress of the organisation had not been achieved. The support of the Board was crucial, and the board had not been in place for much of the time.
 
Ms Mokoa said that the target on information technology support had been partially achieved. The implementation of a corporate governance model had been achieved. A secretary had been appointed and would take office on 1 April 2013. The target of comprehensive legal support had been achieved..
 
Ms Mokoa gave an overview of the Universal Service and Access Fund (USAF) projects. A spend of 84% against projects would be reported at the end of the FY. This excluded DTT funds, which were reliant on DoC.
 
Discussion
The Chairperson said that there had been some turmoil. Meaningful engagement would happen when the strategic plan was engaged.
 
Ms Lesoma appreciated the progress made, and the honesty of the presentation. She asked what level of support USAASA enjoyed from DoC.
 
Ms Shinn asked if the 78 additional sites included the nine not achieved. The delegation indicated that they were. She asked what disciplinary action had been taken against members of the administration.
 
Mr Steyn was not clear on whether third quarter targets had been achieved.
 
Ms Newhoudt-Druchen said that the overview of projects was in the fourth quarter, whereas the report should have been for the third quarter. On oversight visits Members had found that centres had computers but were not linked to the internet.
 
Ms S Tsebe (ANC) found the font on some slides very small. There was a problem in that there was no date on the slide.
 
Ms Radebe said that USAASA had to conduct a stabilisation process. One of the major issues had been to address the matters raised by the AG. Internal audit was now giving the board an oversight capacity. There was interaction with DoC. It was not a case of a mother body fussing over USAASA, but more one of them calling in expertise to assist them in preventing further occurrences. On the disciplinary matters, three cases were still ongoing when the new board was appointed in September 2012. The advocate found the Chief Financial Officer (CFO) guilty of a number of offences as was the Senior Manager for performance management. The Supply Chain Manager had been found guilty on a minor administrative offence. He had been demoted by about four levels, with a ruling that he not be allowed to work in a financial capacity. This person had resigned with effect 31 March 2013, but the board had subsequently learned that he had been employed by the Railway Safety Regulator since 1 December 2012. Attempts were being made to recover his salary. The CFO had been dismissed, and would still be held liable for some of the costs. The executive member had been found guilty of even more offences, but the recommendation was nothing more than a final warning. The Board was taking this matter further. The Board had resolved to undertake an exercise to recover the stolen money.
 
Ms Radebe said that when she had taken office at USAASA, she was under the impression that the terminology 'partially achieved' was not acceptable. The fourth quarter overview was presented to show that a lot of energy had been spent to reach targets. There were still a few days to go in the year and the figures could improve further. A decision had been taken that when USAASA presented to Parliament, the 84% of budget that was out of Usage's control should be reported separately. This was the case with money budgeted for DTT and broadband.
 
Ms Shinn wanted more clarity on the disciplinary matter. She asked if criminal charges had been contemplated. So often public servants escaped the consequences of their misdeed by resigning and moving on. She asked if any of those involved would be given 'golden handshakes'.
 
Ms Radebe said that the Board had resolved to take criminal or civil action. A final decision would be made when the board met the following day. There were no golden handshakes. Handcuffs might be a more appropriate send-off for those involved.
 
Ms Mokoa said that 119 centres were contemplated at the end of the final quarter. All the new access centres deployed were complete, including cabling, equipment and connectivity. Where there were delays, 3G connections were used on a temporary basis.
 
Ms Linda Ngcwembe, Acting CFO, USAASA, presented the variance report for USAF. Of R273 million allocated only 2% had been spent by the end of the quarter. 84% of this was allocated for DTT and would not be spent at present. Most of the money was committed. A lot of the centres would be connected by the end of the FY. The variance report for USAASA was not complete. There was a budget of R59 million. Of this, about 70% was spent by the end of the third quarter. Legal fees reflected a projected overspend, but she expected that the legal bills would reduce since most cases had been finalised. Lease payments might be incorrect as the budget had been revised downwards. The other area was capital expenditure. This reflected 60% spending by the end of the quarter. Much of the money had been spent on refurbishing regional offices. Overall she felt that spending had been tight but there were no major concerns.
 
Mr Steyn read a total expenditure of 5% by the end of the third quarter. This was extremely low. He asked what the total expenditure was at the end of the third quarter. He had the impression that leased offices had been standing empty.
 
Ms Radebe said that the unused DTT funds skewed the figures..This took 84% out of the total budget allocation. The question was how much was spent of the remaining 16%.
 
Mr Steyn asked if the 5% was of the global amount, or of the available fund.
 
Ms Ngcwembe said it was of the global amount.
 
Ms Radebe listed the regional offices. There were staff in Limpopo, but the office in Mpumlanga was standing empty. She had been visiting sister entities and making agreements to share office space. In KZN a facility with ten offices was occupied by a single person. In the Eastern Cape they had an office in some dark corner, and were trying to negotiate a better deal. In some cases landlords have been willing to change contracts without penalty.
 
Ms Ngcwembe said total expenditure was R14 million, which was 70% of the total allocation excluding DTT funds.

Afternoon session

Universal Service & Access Agency of SA & Universal Service & Access Fund (USAF) strategic plan
Ms Makhotso Moila, Acting Executive: Performance Management – Universal Services and Access Agency of South Africa (USAASA) informed the Committee that there was excitement with regards to smart access devices for e-learning which was about progressing with technology and questioning whether the physical access facilities were still relevant and the impact this would cause.

On the annual performance plan for 2013/14, Ms Moila said that the first project was the Digital Terrestrial Television (DTT) programme for which the target was to achieve 300, 000 set-top boxes (STBs) and aerials installed in approved households representing 6% and based on the allocation for 2013/14. The intent was to oversee the deployment of the STBs and aerials as quickly and efficiently as possible in addition to managing and overseeing the procurement, logistics and uptake of product in accordance with accurate and interactive data maps and Sentech rollout. This would enable the reconciliation of project accounts against delivery. 

For the access centres in schools, the target was 30 universal access cyberlabs with connectivity established in underserviced areas. The intention was to support the Strategic Integrated Project (SIP) 15 (Expanding Access to Communication Technology) and the National Development Plan that called for the transformation of the lives of the poor via technology. There would be active support for the Department of Education in delivering 21st century education to the poor. The implementation of the various aspects of connectivity was being handled through a forum with the Department of Communication, ICASA and the Department of Education. 

About the access devices for e-learning, the target was one municipality with Grade 10 learners provided with devices for connectivity and e-learning. The reason behind this was that there had been a study on the implementation of the use of tablets and smart phones in different parts of the world, more particularly in Kenya, and the beneficial impact it had in the improvement of education results. 

Ms Moila said that for integrated rural broadband, two sustainable integrated rural broadband networks had been initiated with the intention of delivering on SIP 15 and also in terms of section 88 of USAF's mandate that talked to the subsidisation of the deployment of new networks as well as the extension of existing networks. The targeted areas would be underserviced areas as declared by ICASA. 

In terms of research, awareness and social mobilisation, the target for rural connectivity was 260 centres including school cyberlabs and access centres connected to subsidised internet by the end of the fourth quarter and their maintenance. USAASA would be paying for the connectivity of the 260 centres for each quarter  of 2013/14. 

For job creation through the DTT programme, the target for 2013/14 was 100% jobs (3500 direct jobs) created through installations of the set-top boxes following Sentech's DTT infrastructure roll-out. USAF was also targeting 30 SMME support initiatives as a means to mobilise people to the centres and facilities which would in turn help in measuring the uptake and usage within rural communities. 

The Committee was informed that the target for getting 5% usage of accessible and affordable ICT services in underserviced areas was from a baseline created by the census. In terms of rural connectivity, USAF was targeting 10% adoption and usage of ICT technologies for 2013/14. This would be relevant for measuring the use of smart technology in the communities and the impact on livelihoods. 

For broadcasting digital migration and DTT, the target for 2013/14 was 100% of projects funded under USAF in compliance with the manual that would have been approved by then. 

On the financial plan for USAF, Ms Moila said that the access centres had been accommodated inclusive of an allocation for broadband infrastructure in underserviced areas. This allocation amounting to R21.5 million was directly from National Treasury. The allocation for broadcasting and digital migration was R240 million and the project costs stood at R2,195,000 million. The total allocation for USAF projects was R285 188 000 and the Universal Service and Access Agency of South Africa received a R60.1 million allocation for the administration of the fund. 

USAASA strategic and annual performance plans: 2013-2016
Ms Moila said that USAASA's objectives were:
▪ to effectively and efficiently manage the Universal Service and Access Fund;
▪ promotion of an effective, efficient and well-resourced organisation; and
▪ upholding the principles of good corporate governance.

The key projects within USAASA from a three year view were:
▪ the national strategy on universal service and access,
▪ organisational development/re-alignment in response to the findings of the strategy,
▪ organisational performance management,
▪ drilling down of risk to operations,
▪ technology review; and
▪ reputation turn-around and awareness creation. 

On the performance plan, Ms Moila said that USAASA would be expected to deliver eight approved quarterly reports, one sustainability report, two approved strategic plans and two annual performance plans. With regards to the research and relevance component, there would be social and ICT data profiling in municipalities in addition to mapping it. There would also be a Universal Service and Access Strategy with a view to becoming a foundation for USAASA's sister companies and the sector in terms of directing them on where to go and how to effect universal service and access. USAASA would also be looking at reviewing the definitions of ‘universal service and access’ in a bid to ensure that they were still relevant. About reputation management, USAASA would be looking at 60% cumulative improvement on stakeholder perception. For corporate support, the targets were: 80% satisfactory employee relations, 100% compliance to human resource policies, implementation of an approved compensation and remuneration strategy, 100% access to electronic and print documentation; and a 5% reduction from the previous year's legal expenditure. 

With regards to the financial plan, there would be the mapping, operationalising and automated standard operating procedures of the Fund Manual, 98% availability and uptime of applications for the optimal functioning of USAASA as well as mapping and automating business processes throughout the organisation in terms of technology. On the finance side, USAASA was targeting 100% compliance in management and financial reporting according to Generally Recognised Accounting Practices. For supply chain management, USAASA was looking at 100% compliance to procurement compliance, the Public Finance and Management Act and Treasury regulations; 80% Opex budget spending in line with Broad-based Black Economic Empowerment standards. For operational assurance, the internal audit had been strengthened. USAASA would be carrying out finance and supply chain management audits, general divisional audits; and performance information audits. For project performance monitoring, there would be monitoring an evaluation framework reporting in addition to board oversight. 

Ms Moila said that the independent project impact analysis was looking at 100% compliance in management and financial reporting according to Generally Recognised Accounting Practices. This would see reporting on expenditure against performance. The Auditor General would be checking the general and performance audits of USAASA as per the mandate.

Discussion
Ms M Shinn (DA) asked if the 260 schools mentioned in the rural connectivity strategic objective would be connected in the first quarter of the financial year. She wanted clarity on the 100% direct jobs created by the DTT and Broadcasting Digital Migration – what was the source of the numbers? 

Ms R Morutoa (ANC) encouraged USAASA to keep it up in terms of the disciplined usage of taxpayers” money. How were USAASA's plans going to help DoC's priorities? Had a need analysis been conducted of all the underserviced areas with the aim of developing a priority list for implementation? How was the process of finalising definitions for universal service and access of rural areas? How relevant was the underserviced areas list published by ICASA in 2012 considering South Africa's census results – was there a plan to review and prioritise?

Ms R Lesoma (ANC) referred to the telecentres and asked what the picture was in terms of value for money throughout South Africa. She asked about the relationship of USAASA with the Government Communication and Information System (GCIS) and the closure of some of the centres. 

Mr A Steyn (DA) said that the one problem he had with USAASA was that he never knew how to treat it for it was almost like 'an abused child' that he had to be careful with lest it break. He pointed out that the Auditor General in his Audit Report on USAASA’s Predetermined Objectives, said that not all their targets were time bound and 24% of the targets were not specific. Mr Steyn said that he did not agree with this. He gave the example of the 260 schools that were to be connected, saying that they could not all be connected within the targeted time unless the connectivity was going to commence at the same time. The target on this objective was not realistic. There was also no baseline for measuring most of the percentages indicated in the report. 

Mr Steyn wanted clarity on what was meant by 100% access to electronic and print documentation. 

Ms Morutoa (ANC) said that she was disturbed by Mr Steyn's use of the words 'abused child' in reference to USAASA. She wanted clarification on what was meant by this. Did it have gender connotations or was it sarcasm considering that USAASA was led by women?

Mr Steyn (DA) replied that his use of the phrase was in light of what the previous management of USAASA had done and the fact that the new management now had to take accountability and responsibility for any faults they found in place. Against that background, he said that when you find an abused child, you have to take a cautious approach. He apologised for the use of a statement that was misinterpreted. 

Ms S Tsebe (ANC) asked if the ‘connection of telecentres’ included the existing ones and their maintenance. Had any memoranda of understanding been signed with other departments including municipalities? 

The Chairperson asked if USAASA was diversifying service providers, especially SMMEs to avoid the delay of implementation of projects and services. 

Ms Phumla Radebe, USAASA Chairperson of the Board/Caretaker CEO, replied that one of the questions that the USAASA board asked about putting up telecentres was: what was the sustainability programme to have the telecentres performing in accordance with the USAASA mandate and what was the uptake of such telecentres? This led to the development of a Sustainability Strategy that would be shared with the Committee. According to the strategy, a telecentre was not a telecentre until there was connectivity, all the relevant equipment and infrastructure was in place. This also included the issue of maintenance of the connectivity itself. She said that in terms of its mandate, USAASA had committed itself upfront to a two year subsidy of connectivity. For instance in the Eastern Cape, a number of schools had been equipped following discussions with the Department of Education and role players. Upon handover of the telecentres, handover forms spelling out the obligations for the entity taking over, would be signed. 

The Caretaker CEO said that Sentech's role in the handover of the projects was to determine what type of connectivity would be needed in a particular area. About the 260 schools, she said that this was the total number of schools that would have been completed in terms of connectivity as at 1 April. The USAASA Board had spent the last quarter going through several policies (some were new while others had been reviewed) as part of the stabilisation process of the organisation. 

In terms of information readily available, USAASA could not tell the Committee about the location of the telecentres by province and by region. This information would be plotted on a South African map and sent to the Committee. 

Ms Moila responding to the question on direct jobs said that these projections had been received from the Performance Management Office. This had to feature in the business plan because it was in USAASA's interest to track if these jobs had indeed been created and to what extent. On whether USAASA's plans were going to assist the DoC, she said that they would and that USAASA had closely worked together with the DoC before finalising its plans. The National Strategy would then allow USAASA to influence what needed to be done – having a full view of where the gaps were and the cost of the gaps.  A needs analysis had been done prior to USAASA's planning. Regular research and profiling was done of municipalities to determine the basic ICT indicators. On the relevance of ICASA's list of underserviced areas, this had to be revised because there was reason to believe that it was no longer relevant considering that the research on which it was based had been done in 2008 and gazetted in 2009. With regards to a flagship programme for 2013/14, she said that there was the smart access device for e-learning. 

Ms Moila said that a survey of uptake usage was to be made available to the Committee. About the relationship with GCIS and the anticipated closure of some centres, it was a combination of factors: either GCIS wanted to end the relationship or the location of a centre was not central enough and so in consultation with municipalities, some centres were being relocated to ensure that there was better access by the communities. The 5% usage in the presentation referred to the usage of infrastructure by municipalities for purposes of delivering services. The 10% adoption and usage of ICT technologies related to the extent individuals were adopting technologies. The baseline in this sense was approximately 2-3 million (figures would be provided on this). USAASA wanted to be able to measure an improvement of 10% and this would bring it to 300 000. The 100% access to electronic and print document  referred to a dual system that would involve the backing up of information so that it would be readily available when needed –something that would greatly improve the relationship with the Auditor General. 

’Existing centres’ these referred to centres that existed before the start of the financial year while ‘new centres’ referred to those rolled out in the financial year. On the diversification of  service providers, she said that this was in the plans and would be largely facilitated by the approval of the Fund Manual. 

Independent Communication Authority of South Africa (ICASA): 3^rd Quarter 2012/13 Performance
The ICASA team was led by Dr Stephen Mncube, Chairperson of the ICASA Council. Mr Themba Dlamini, ICASA CEO, introduced the other members of management. The CEO said that because of the new councillors on the board, there was a change in the structure of the organogram of ICASA. The Committee was informed that the post of General Manager: Human Resources was currently vacant but efforts were on-going to ensure that it was filled.

Speaking on the strategic and operational deliverables that were not achieved in the third quarter, the CEO said that ICASA had “not achieved a lot” in terms of what it had planned to do. Out of the 167 activities for the financial year 2012/13, 47% had not been achieved in Quarter 3. On strategic predetermined objectives, of the Quarter 3 deliverables totalling 38, 32 had not been achieved reflecting 84%. From a forecast view, based on a target of 43 targets, ICASA would still end up not achieving 25 targets representing 58%.   The non-achieved deliverables were as a result of either internal or external reasons with internal reasons including procurement processes. Internal reasons represented 56% while external reasons were 44%. On budget versus the actual expenditure, the CEO said that Programme 1 on Governance and Administration had a budget of R2,5 million with actual expenditure sitting at R879,613 reflecting a total spend of 21%. This represented a spend of 30% of the total projects budget of R6,532,490 with actual expenditure in quarter 3 at R4,628,897. This was an indication of slow spending. On the grand total 3rd quarter budget of R363 million against the actual expenditure of R80 million, ICASA was at 62% total spend.

The CEO said that there were some key achievements in Quarter 3 such as the radio frequency licence fees that came into effect from April 2012; the General Licence Fee Regulations that were under review (it was agreed by the Council that these should be published.); the completion of Parts 1, 2 and 3 of the Broadcasting Regulatory Framework towards a Digitally Converged Environment; the resolution of the head office relocation (a five year plan had been devised.); the completion of the Frequency Migration Plan that was only awaiting ministerial approval; and the completion of the Broadcasting Covering Plan.

The Committee was informed that in quarter 4 (licensing and compliance) there were a number of focus areas that were expected to be completed by the end of March 2013. However, with regards to the approval of a service provider for the Postal and Broadcast Monitoring Equipment, one would be completed (Broadcasting Monitoring Equipment) but there would be a delay because of a process that ICASA had to take on the Postal Monitoring Equipment. 

The CEO said that for the quarter 4 deliverable of licensing of subscription broadcasting services, the gazetting of a public hearing notice and finalisation of the analysis of applications had been done and the same applied to the licensing of primary markets and secondary markets. With respect to the procurement of Broadcasting Monitoring Equipment, they need to procure a service provider whose expertise did not necessarily reside in the country. 

For quarter 4 focus areas for Engineering and Technology, the CEO said that the development of Frequency Migration Plan and Regulations and the review of Broadcasting Frequency Plan had been completed and the Final Migration Plan and Regulations gazetted and this applied to the Final Terrestrial Broadcasting Frequency Plan. He added that the National Frequency Plan (Band Plan) as well as the Final Type Approval Regulations (Framework) had been published. 

The CEO said that on the Routine Spectrum and Type Approval Licensing, one vacant post of Radio Frequency specialist had been filled during quarter 3 and that by the end of March 2013, the second appointment would have been made. In terms of management of research collaboration, there was a renewal of contract with Wits University and the University of Pretoria for 2013/14 on research collaboration. However, the software was not yet in place for efficient spectrum management and licensing. For quality of services monitoring, USAASA had completed a quality of services monitoring in KwaZulu-Natal and there was also a monitoring of 'white spaces' in terms of the 470-694 band. 

On the markets and competition focus areas for quarter 4, the CEO said that a Final Report would be finalised in the fourth quarter of the financial year of 2012/2013 and published on 28 March 2013 with respect to a broadcasting regulatory framework to support the digital environment. On the regulatory strategy for Electronic Communications Service (ECS) that promotes effective competition and greater network coverage, the DoC had identified the service provider with contracts only signed in January. The Markets and Competition division had completed a comprehensive report on the audit findings in the third quarter in preparation for the release of the public report in quarter four. On the new licensing framework for postal services, a draft report on the South African Post Office and the Universal Service Obligation (USO) had to be finalised. 

Speaking on consumer affairs and the review of the End-User and Subscriber Service Charter, the CEO said that existing regulations were under review and that publication for public consultation would take place in quarter two of 2013/14 and this also applied to the Revised Code on People with Disabilities (PwDs). There was a finalisation of a draft Accessibility Framework for PwDs and that in terms of consumer advocacy, this was an ongoing programme. Clarity was needed on the approval of a service provider for the Postal and Broadcast Monitoring equipment. On the collection rate and the issuance of licences – there seemed to be biasness by ICASA in this regard.

Discussion
Ms R Lesoma (ANC) asked if the overlapping roles of the non-executive members had an impact on the overall performance thus far for non-deliverables. She hoped that the vacant post of the General Manager: Human Resource did not mean that the programs and projects under that post were stalled. There was a concern about the low level of expenditure especially the internal reasons that were contributing greatly to the non-deliverables. 

Mr A Steyn (DA) said that the targets in the report could have been put in a simpler way for ease of reference by the Committee. The inclusion of quarter four performances in the report had also taken the wind out of the sail because some of the non-deliverables for quarter three had been achieved in quarter four. He was however concerned with the expenditure: the operating expenditure for the third quarter was 91% with the projects at 71% – it appeared that most of the budget had been spent while the work had not been performed. There was still going to be an under expenditure in quarter four – more clarity was needed on this as well as on the head office relocation. About the strikes that had rocked the postal services, he was surprised that ICASA in its monitoring never came out to make a statement. 

Ms M Shinn (DA), referring to the delays in achieving the strategic outcome-oriented goals and that 66% of the delays were for internal reasons, said that this was a sign of a dysfunctional organisation that was not performing better. To this end, what steps were being taken to address this state of affairs? What steps were being taken to correct the spectacular failure in licensing and compliance? She asked for details on the value of the contract and who was chosen (referring to the Procurement of Broadcasting Monitoring Equipment). More details were required on monitoring of 'white spaces'.

Ms J Kilian (COPE) asked about the nature of the internal problems in the roles of the councillors and of management. How was ICASA maintaining its record of licence holders? She asked for more details on the efficient spectrum management and licensing (procurement of basic software modules). 

Ms W Newhoudt-Druchen (ANC) said there was not much explanation on the internal and external reasons. 

The Chairperson asked about the relationship between the development of an accessibility framework for People with Disabilities (PwDs) and the revision of codes. On the success rate in terms of consumers, he said that the network was unreliable in some areas over the weekend in addition to poor quality of service from service providers such as MTN, Vodacom. ICASA as a regulator was not saying anything about this. He asked for the rationale for adding an extra councillor onto a programme that was achieving as opposed to one that was not achieving? Reference was made to Consumer Affairs that had not achieved 17% of its targets and Markets and Competition that which had not achieved 76% of its targets. Was this not an indication that such a programme needed more help? The Chairperson said that he was mindful that some questions overlapped into the strategic plan that was going to be presented. 

Ms R Morutoa (ANC) wondered why the Committee Members had been given black and white presentations.

The Chairperson in response said that the entire Committee Section in Parliament had no colour printer. So documents coming via the Committee section of Parliament were in most cases in black and white. Coloured copies of presentations were printed by the entities and departments. The Chairperson said that the issue of colour copies of presentations would be pursued with Committee Section of Parliament. 

In his response, Dr Mncube said that there were few institutions were non-executive members were working in the same premises with managers. This would always create tensions, especially on the location of work with managers saying that they do the work while the non-executive members got the credit. 

Ms Lesoma (ANC) said that Dr Mncube and the CEO of ICASA should behave like other entities that had appeared before the Committee in responding to questions put to them. 

Ms A Muthambi (ANC) asked for the effect of the new structure of ICASA on the new CEO's position. Was the postal monitoring equipment the same as the global monitoring system? Was ICASA going to ask for more funds as a result of under spending? What did the review of the general licence fee regulations entail and would this see an increase in the revenue of ICASA? Would it also lead to an increase in the licence fees and how would the licensees be affected? She asked for elaboration on the regulatory strategy for ECS that would promote effective competition and greater network coverage. Did the End-User and Subscribe Service Charter regulations give effect to the different technologies and would they affect licensees ability to comply? 

Ms Morutoa (ANC) said that given ICASA's performance, it was unrealistic that the outstanding issues representing 55% of the audit findings were in progress and that they would be resolved by the end of the financial year as of 31 March 2013. ICASA had to take some of these issues seriously. She also wanted to know why the councillors were to be responding to questions. 

The CEO in response to the question raised on the effect of the absence of a General Manager: Human Resource on the human resource component, said that the vacant post was not affecting the human resource component. There was a senior manager in place but who had since resigned and ICASA had subsequently advertised both positions (senior manager and general manager).

Ms Morutoa (ANC) wanted to know why councillors would be responding to the questions raised by the Committee Members. Ms Lesoma agreed and said that the administrators should be the ones responding to the questions with the councillors filling in any gaps left. 

 Dr Mncube in response said that the issue of councillors being part of management had been experimented on and found to be working. Different councillors under the relevant programmes would be called upon to make responses. 

Ms Lesoma (ANC) said that there was a need to separate the role of the Council from that of the CEO and the CFO. Councillors were not part of management and so the CEO had to respond to the questions raised.

The Chairperson said that the only body under the DoC that had an executive board was ICASA unlike SABC and the councillors, who were part of the executive board, had an administrative responsibility. The executive board was full time. It was preferable for the General Managers to respond to some of the questions. 

Ms J Kilian (COPE) said that the council under the Act was mandated to appoint a CEO suitably qualified for purposes of assisting the Authority. The CEO was also the chief accounting officer. The Committee was trying to establish were the problem lay in terms of performance as according to the predetermined objectives, there was no performance. The council was mandated to appoint an acting CEO in case there was a void. Councillors were not appointed to head divisions in ICASA. In terms of reporting it was the General Managers to report on why certain objectives had not been met and what the constraints were. 

The CEO responding to the question on internal and external reasons said that these were detailed. He singled out markets and competition where at the conclusion of a bidding process, you would find that the bidding process was not satisfactory, prompting a re-run of the whole process. Budgetary constraints or skills constraints were also some of the other internal reasons for the non-achievement of the deliverables. The external factors were policy related directives. 

Councillor Currie responding to a question on general licence fee regulations said that these had been finalised and were only awaiting publication. There was a qualification from the Auditor General as to whether ICASA could verify completeness of information on the annual licence fee from licensees. The problem with the previous electronic regulations passed in 2009 was that it used a measure of a percentage of the gross profit of the licensees. The Auditor General pointed out that this created inconsistencies and incompleteness in the numbers that ICASA was receiving. This led to a three month review process of the regulations that would come into effect on 1 April 2013.

Mr Sipho Tsotetsi, General Manager: Licensing and Compliance, referring to the skills resource as an internal factor and more specifically the financial skill resource, said that ICASA had to engage the services of an external service provider which required going through the supply chain management process to procure these services. The procurement process to get the services on board took time explaining why there were delays in the achievement of certain targets. Efforts had been made through the DoC to ask for additional funding to have the finance skills on board but the response was that there was additional budget to increase the operational capacity – ICASA was still engaging with DoC on this. External factors included the licensing of the individual electronic communication network licence project that was supposed to be undertaken in 2012/2013. This was to support the pay TV services that were supposed to be licensed. A request had been made to the DoC for the Minister to issue a policy directive. This was on the basis that ICASA could not issue an ITA for network licences until the Minister had issued a policy directive. Engagements were still on-going with DoC to see how this project could be part of the 2013/2014 financial year. 

On the transformation of the ICT sector, Mr Tsotetsi said that the challenge here was legislative and more specifically section 13 of the Electronic Communications Act that limited the powers of ICASA to develop regulations across the sectors that it was regulating. The DoC sought to remedy this challenge via an Amendment Bill to the Electronic Communication Act by giving ICASA the required power to be able to make the regulations to address issues such as the Broad-Based Black Economic Empowerment. 

In terms of engaging with SAPO to ensure that there was no duplication of equipment, Mr Tsotetsi said that when ICASA was developing the terms of reference for the acquisition of the postal monitoring equipment, there was an engagement with SAPO. Two challenges were being faced such as reliance on licensees to give ICASA the information so that it could monitor them. Such information could not be accurately relied upon and so ICASA had set aside funds to procure the postal monitoring equipment. The focus was not only on postal delivery. ICASA wanted to measure if SAPO was complying with licensing terms and conditions from the main delivery centre to the individual that was supposed to be receiving the mail. 

On the expenditure for licensing and compliance, Mr Tsotetsi said that a broadcasting monitoring equipment contract had been signed with the service provider but the money would only be utilised in the next financial year 2013/14. On the under-expenditure and in particular the 9% total spend on licensing and compliance which was on licensing projects, ICASA had set aside R6 million to appoint a service provider that would be able to assist the Authority in analysing the financial aspects of the applications that had been received. When the bids came through, the amount quoted by the successful bidder was far lower than what ICASA had budgeted for, explaining the under spending. 

Mr Peter Grootes, General Manager: Markets and Competition, clarifying the regulatory strategy for Electronic Communication Services (ECS) that promoted effective competition and greater network coverage, said that ICASA was looking into a study on the competition and the level of coverage for both voice and data and any further over the top services. The acronym could be changed so that it could easily be understood. Speaking on the internal challenges, he said that there was a delay in filling vacant posts which had a negative impact on delivering on time. A significant amount of effort had been applied in improving the quality of the documents that the division delivered and this had in itself extended the time documents took from one stage of approval to another in the Authority. 

Mr Grootes said that there were challenges in procurement of services such as the bids for a review of local content that was critical for digital migration. Some bids were double or triple the money that the Authority had budgeted for and in terms of number portability; it was so high that it had to be pushed to the next financial year and this explained why the R2 million had not been spent. He added that the Authority had a good relationship with DoC about the cost to communicate project in the sense that the Authority consulted DoC on the modalities of the project, including funding. A memorandum of understanding was signed to that effect although the consultation and discussions took some time. 

The Committee was informed that external challenges included the change of the broadcasting policy directive that led to a delay in the passing of the Digital Migration Regulations leading to ICASA signing a certain capacity of Max 1 to SABC, a certain amount of capacity to eTV and MNet. The policy directive amended the amount of time required to finalise the regulations within the financial year. 

The development of Rapid Deployment Guidelines on how licensees could access ‘right of way’ from municipalities and entities so that they could lay infrastructure and how this could be addressed was delayed because of input from industry. The Guidelines had since been finalised awaiting sign off and a policy recommendation. There was also a delay on local loop unbundling. Neotel had lodged a complaint to the Complaints and Compliance Committee (CCC) on how far the obligation to lease facilities could go (did Neotel have right to access the local loop or not?). The CCC decided that Neotel had a right to access the local loop creating delays for ICASA. Telkom had sought an urgent interdict on the implementation of the CCC decision. This is what delayed the implementation of local loop unbundling. 

Councillor Marcia Socikwa said that due to budget constraints, the quality of service monitoring unit had R1000 a month for the SIM cards that ICASA used for monitoring of quality of service. This amount was not enough because this covered monitoring only for 24 hours. ICASA was compelled to rely on operators that were willing to provide SIM cards at no limit to monitor quality of service. She added that there was inadequate monitoring equipment with ICASA currently monitoring only voice and not data. The expectation was that this would be addressed in the next financial year. In terms of trying to compute how much the operators owed on spectrum, the lack of software posed a great challenge because this had to be done manually –
hence causing much delay and discrepancies. The way forward was buying the whole package of the software and not doing it in bits and pieces. 

Mr Ronald Seeber, General Manager: Engineering and Technology, commenting on the software woes, said that R16 million was required to get the software for spectrum management. The current challenge was that paper storage was a risk in case of a fire outbreak that could wipe out all the data stored. On the 'white spaces', he said that ICASA was involved in an experiment at Tygerberg involving Google and CSIR with equipment imported from the United States. The experiment was successful in that six school were being reached at the same time and at high bit rates which meant saving wastage of spectrum. This would be vital in reaching rural communities that did not have broadband. This was still under consideration. 

Mr Seeber said that the paper method of processing applications would work but that it would affect the turnaround time, given the staff resources.

Mr Phosa Mashangoane, General Manager: Consumer Affairs, on the internal challenge of quality of experience, said that a survey was going to be undertaken throughout the country and it was only then that most of the questions on consumer protection would be answered. On the budgetary constraints, ICASA had received a ring fenced budget of R1.1 million. The bids were advertised but the service provider that was to undertake the work needed R1.6 million which meant waiting for budget reprioritisation. 

On the revised code on people with disabilities and the development of an accessibility framework for people with disabilities, Mr Mashangoane said that these two deliverables would be addressed in 2013/2014. The framework would guide the Authority on how to protect people with disabilities in relation to ICT services. He added that the review of the End-User and Subscriber Service Charter regulations would address issues such as the quality of services in terms of dropped calls. There were gaps in the current regulations that were being enforced.

Mr Mpilo Ngxingo, Acting General Manager: Legal and Complaints and Compliance Committee, commenting on the postal and monitoring equipment, said that the Authority received only two bid applications from the public of which one was disqualified by the Bids Evaluation Committee for the lack of a  tax clearance certifcate. The remaining application had two companies involved (South African as a main contractor and a foreign company registered in Sweden as subcontractor). The problem with this structure was that it would expose ICASA to a financial risk in case of a dispute. Supply Chain Management including the Bid Adjudication Committee decided that they either re-advertised the bids or negotiated with the two parties with a view to changing the structure to a joint venture to create liability for the South African and Swedish company in case of any problems arising. 

Councillor William Stucke, in response to how the industry was growing, said that from a qualitative point of view, all the mobile operators were making use of the existing spectrum to roll out LTE (a new technology to give one faster download speeds). ICASA had almost completed an initiative to collect its own data that would make it possible to give an objective position based on the data it collected. MTN and Vodacom were both investing over R13 billion per year in the industry. The research by World Wide Works indicated that the ICT sector not only made up a significant portion of the economy but that its proportion to the economy was growing by half a per cent of the GDP per annum. 

Councillor Joseph Leboa who was overseeing the Regional Offices said that the management letter from the Auditor General had 83 audit issues but an update as at 19 March 2013 left the outstanding issues at 50 issues representing 60% of all the issues. There was a problem with non-resolution of the outstanding issues was that of the opening balances on the financial statement and that ICASA was still engaging Oracle to resolve this. This was related to the interface between JDE which is the Authority's financial system and the spectrum management system. Unless the software was sorted out to create a proper interface, this problem of the opening balances was likely to continue. 

On the spectrum debtors, he said that these were in excess of 20,000 licensees and that ICASA was currently pursuing them to pay, a process that started in January 2013. ICASA had a database of more than 65,000 spectrum licensees that needed to be categorised into operational, not operational, existent, non-existent among others. The Regional Offices division was in the process of verifying the existence of these licensees based on the addresses at the issuance of the licences and shutting down those with no licences. The Finance division had handed over to the Regional Offices more than 20,000 spectrum cases to pursue. He added that there were 740 licencees (ECN and ECNS) that could not be accounted for in the sense that they had not paid licence fees or user fees in previous years. On the ECN and ECNS licencees, a strategy had not yet been reached but one of the possibilities was shutting them down and the other being taking them to the complaints and compliance committee which would take long to sort them out. A quick break down indicated that 294 licencees were operational (non-compliant), 259 had the licences (but non-operational) and 197 were known. The strategy was to go after those that were operational and have them closed down. There also a concern that there was also no record on what spectrum the Electronic Communication Networks occupied.

On the enforcement and the high legal fees bill, the Chairperson said that the matter had been reported to the Committee and the Minister had also been duly informed and that a report was being awaited. This matter was sensitive and under investigation. 

Ms Kilian (COPE) in a follow up question on the capital expenditure on licensing and compliance together with engineering and technology wanted to know if the equipment was budgeted under the amounts indicated. On the management letter, asked the Council to get a list of all the spectrum debtors that had been tracked down so far as well as the ECN and ECNS licence holders that were non-compliant. It was indicated in the previous audits that money from the licences had to be paid within 30 days to the National Treasury – it was one of the areas were ICASA could not get a clean audit. If the Committee got this information, it would allow for adequate follow up. She added that no one was supposed to operate without a valid licence. ICASA was within its mandate in closing down those that had not paid in addition to seizing their equipment. 

Ms Newhoudt-Druchen (ANC) said that with ICASA dependent on the operators, what would happen in case of complaints? There was also no money spent on Consumer Affairs. What was the total in rand value of the licensees that had not paid licence fees?

Ms Shinn (DA) asked if the software was going to come from the capital expenditure and if a decision had been reached. She also wanted to know in terms of the 20,000 in excess of how much money was at stake. 

Mr Steyn (DA) wanted to know what ICASA was doing for the last 10 years without the software. He was also concerned that R144 million was unspent and yet there were issues that required money. ICASA was definitely not thinking outside the box. He added that if it were possible, he would have asked the Minister to put the Authority under administration. 

Ms Lesoma (ANC), on the qualification of the councillors against the output, she said that there was no performance owing to a skills gap. On paper-filing and the eventuality of fire, she asked why ICASA had not attended to this previously. 

Ms Muthambi (ANC) asked what ICASA's checks and balances were on under spending. There was no need for ICASA to get postal monitoring equipment because SAPO already had this and it would be duplication. Had ICASA consulted SAPO on this? There was need for a written response from SAPO. She asked Dr Mncube if he had observed any progress in terms of industrial growth statistics in Quarter 3 compare with the previous quarters. Following the court order, when would the tariff regulations be published by ICASA? What was the measurement of ICASA's performance? 

The Chairperson said that there was need for a report when Parliament gets back from recess on ICASA's core challenges and how these were to be resolved. There was a problem of basic administrative principles that had to be dealt with. 

Dr Mncube said that the ICASA was dealing with critical incidents. There was a need to understand the historical continuity and that at the time that data relating to collection (ICASA not having been paid by 700 or so people in licence fees) was not available back then, some aspects could not be addressed overnight – but may be in certain backgrounds were things happened 'miraculously'. This he said with reference to Mr Steyn and asked where he was when the struggle was going on. 

The Chairperson intervened said that struggling did not mean absence of good corporate governance. Using the word 'struggle' did not mean that Committee Members were ignorant and that they did not know processes. 

Ms Lesoma (ANC) said that there was no need in getting emotional when dealing with issues. She appealed to Dr Mncube to refrain from getting emotional because it presented a different picture from a leadership perspective. ICASA should make responses directly related to the questions raised by the Committee Members. 

Ms Steyn (DA) said that he understood that there were historical legacies but the fact of the matter was that in his opinion, ICASA has been operating for 10 years and that most of the issues affecting it would have been dealt with then. Blaming it on the something that happened 21 years ago was unrealistic. These issues could not be ignored without finding solutions to address them.

Ms Kilian (COPE) aligned herself with what Ms Lesoma had said. All Members and those that appeared before the Committee had to weigh their words but she was also mindful that South Africa was a democracy. Nonetheless, the Committee had an obligation to oversee the entities as its function and she hoped that those that appeared before the Committee appreciated that. At times the Committee was critical because it did not fully comprehend the problems of the entities. On the other hand, the Committee Members were agitated because so much time had been spent in attempting to get to the root cause of the problems that the entities were facing and for that, she said that the Committee would 'not apologise'.

The Chairperson said that the easy way was for ICASA to respond to Members' questions so that the Committee could appreciate its difficulties. 

Councillor Currie, referring to the 740 ECN and ECNS licences that had not paid licence fees or user fees in previous years, said that there were two categories of these licences: 247 were operational, 156 were not operational (due to amongst others, the non-availability of spectrum as they were not paying licence fees) and 70 had slipped off the radar and were still being tracked. Of the class ECN and ECNS licence, 47 were operational, 103 were non-operational and 117 had slipped off the radar.

Ms Kilian (COPE) asked what the position was for the holder of a licence that was not operating. What was the law because it would mean a database of licence holders not operating and in the process hindering those that would want to actively use such licences? 

Ms Lesoma (ANC) said that the responses from ICASA were not in unison and yet all its members were responding to one document.

The Chairperson said that Mr Steyn had left the meeting as a result of the insulting comments of Dr Mncube. The facts would be verified to see if there was a transgression of the Rules of Parliament and the correct measure to take. 

Mr Tsotetsi said that ICASA had issued notices in the gazette inviting all licensees to report to ICASA and provide information to enable ICASA ensure that there was compliance with payment of what was due to ICASA. In terms of ICASA's licence fee regulations, not all licence-holders were supposed to pay licence fees. Licence-holders making a profit of less than R30 million, were exempted. 

Mr E Kara, Chief Audit Executive, said that he could be called upon to verify information given to the Committee. The Internal Audit was an independent division that was not part of management and the Council. He added that the audit function of ICASA was not fully operational and the Authority had been found wanting in terms of assurance. 

Dr Mncube said that ICASA was making all necessary efforts to address all the challenges but that there was a need for a day to talk to all the challenges that are still unresolved. 

Mr Gift Buthelezi, Acting Director-General: Department of Communication, said that he was disturbed by the performance of ICASA as well as its presentation before the Committee and that it was not immune to being called to order. There was a clear lack of respect for Parliament in addition to failing the poor people of South Africa. 

He had observed policy directives were not responded to on time and that it was time for ICASA to admit that there was a problem. The Acting DG said that South Africa was not a rich economy and so other options like scanning documents were available while funds were being gathered. ICASA had to get itself in order in terms of managing spectrum. 

The Chairperson said Dr Mncube had expressed his apology following his comments that prompted Mr Steyn to walk out of the meeting and that in the absence of a strict Parliament rule, the matter was considered closed by the Committee. But this did not exempt Mr Steyn from pursuing the matter through other means. He added that ICASA had to build itself together because there was no united front from the councillors. The DoC and ICASA should present a joint report on how to address the matters faced by ICASA especially around equipment and human resources. He added that ICASA could not proceed to the strategic plan presentation because Members' questions were still pending as a result of the current environment. ICASA would be continuing with the responses to the questions and the strategic plan and budget at the next meeting. 

The meeting was adjourned.