Independent Communications Authority of South Africa Bill adopted; Information & Communication Technology update by Department of Labour

NCOP Public Enterprises and Communication

11 February 2014
Chairperson: Ms M Themba (ANC, Mpumalanga)
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Meeting Summary

The Committee was presented with a further draft of the Independent Communications Authority of South Africa (ICASA) Amendment Bill, including the amendments that the Committee had requested be made to clauses 6 and 9. These were explained to the Committee, and were accepted, with the rider that the issue of the appointment of a standing Deputy-Chairperson of the ICASA Council must be looked into in the future. The Committee felt strongly that there was a problem with the word “National Assembly” appearing in clause 7, rather than “Parliament”, because this would remove oversight powers from the National Council of Provinces. A Member said that it was not a Chapter 9 institution and should be accountable to both Houses, and that if this was not agreed to then it might need a mediation. However, in the interests of passing the Bill this wording was actually not pursued, but the Department of Communications was urged to address the point of oversight in the pending policy review process. Members proceeded to a clause-by-clause consideration of the Bill, as amended, including the latest amendments, and adopted the Bill and the Committee Report.

The Department of Labour (DoL) gave a presentation on the status of the information and communications technology (ICT) services in that Department. The DoL had initially signed a public private partnership (PPP) contract with Siemens, which was later bought out by EOH. The PPP contract was signed in 2002, for a ten-year period. When it ended in November 2012, a termination support period was initiated to facilitate handover back to the DoL, and this coincided with the DoL putting into operation a five-year plan for staff. The State Law Advisers had notified the DoL that it was obliged to take over certain staff from EOH under section 197 of the Labour Relations Act, although this was in conflict with the DoL’s staff plan. EOH also interpreted this transfer as allowing it to transfer to DoL any staff who were working on other government contracts. DoL was in a difficult situation because the State Information Technology Agency (SITA) who was eventually to take over the ICT matters, was not yet in a position to do so, and had EOH’s contract terminated, this would have left the DoL without any ICT support at all. A dispute was declared but was settled out of court with the parties agreeing that only staff working on the DoL’s own ICT services would be transferred. On advice from SITA, National Treasury an the State Law Advisers, DoL signed a tight, short-term agreement for six months, for EOH to facilitate the transitional phase, to complete any outstanding applications and to transfer staff, with effect from 1 December 2013. A new governance structure would be formed to oversee the proper performance of the contract by EOH. To date, 96 staff had been transferred and integrated into the DoL, who now provided the majority of its ICT services. DoL strove to ensure that their terms of employment remained constant and also that their leave accruals and pension funds were transferred to the DoL and the Government Employee Pension Fund. The transfer of ICT services had gone well, with no impact on end users or clients of DoL. SITA had been appointed in the meantime to manage the service desk, any other service gaps were filled with service providers, other entities were being migrated to the same ICT systems, and SITA was now ready to take over. The only remaining problem, which had been raised with National Treasury, was that National Treasury had revoked the allocation of R30 million to DoL for compensation of employees, because DoL had not filled the posts. It was explained to, and later accepted by National Treasury, that this failure was due to the pending legal action. DoL had sufficient resources to pay salaries until March, and was due to obtain relief under the new adjustments. Outstanding matters included the HR processes for the section 197 staff, and finalising the roll out of the ICT strategy. Members asked for clarity on the budget matters, asked for more detail of what information had not been provided that had hampered the early stages of the process, whether the main issues were now resolved, why SITA had not been used initially, and why DoL was continuing to use a company that had caused it problems in the past, as well as expressing concerns about the tendency of government departments to hire outside contractors. Members were interested in the time frames and likely completion dates, asked what positive benefits this transition showed, and whether there was any duplication of roles between SITA, DoL and the service providers, particularly in regard to the service desk.
 

Meeting report

Independent Communications Authority of South Africa Amendment Bill: Deliberations
Mr Alf Wiltz, Director: Legal Services, Department of Communications, presented the latest draft of the Independent Communications Authority of South Africa (ICASA) Amendment Bill, pointing out that clause 6 now had new wording, and clause 9’s wording was as agreed to in the previous meeting. Both clauses were read to the Committee. Clause 6 related to the election of  an Acting Chairperson when the Chairperson of ICASA was absent or unable to perform Chairperson’s functions, and noted that the Acting Chairperson would be vested with the ability to perform all the functions of the regular Chairperson.

Discussion
Mr M Jacobs (ANC, Free State) said that he was happy with the clause, but that he was concerned that the position of a permanent Deputy Chairperson had not actually been created by the Bill, as had been discussed previously. Nonetheless he said he was willing to accept the proposed wording.

The Chairperson then asked the Department of Communications (DoC or the Department) whether this issue would be looked into in the future.

Ms Rosey Sekese, Director General, Department of Communications, committed her Department to looking into this issue in the future during the more thorough review process.

Ms L Mabija (ANC, Limpopo) asked if there had been any problems with initiating the process to have a Deputy Chairperson for the ICASA council.

Mr Themba Phiri, Deputy Director General: Department of Communications, responded that the Department had understood the Committee’s instruction to be that the Department should deal, in the Bill, with the powers of the Chairperson of the ICASA Council to appoint the Deputy Chairperson, and limit the extent of that power, so that the Deputy Chairperson was entitled to fulfil all the duties of the Chairperson, and not only those as described by the Chairperson. Therefore, the Department had merely sought to amend section 5(2) in the manner proposed.

Mr R Tau (ANC, Northern Cape) then reminded the Committee of the Department’s engagement with a policy turn around, saying that one of the focus areas would be the functioning of institutions such as ICASA and the South African Broadcasting Corporation. He suggested that a more comprehensive amendment would be better done during that process. He suggested that the Bill could be adopted in its present form.

Mr M Sibande (ANC, Mpumalanga) agreed with Mr Jacobs’ stance, and Mr Tau’s suggestion to move on to the clause by clause reading of the Bill, without repeating the previous week’s debate.

The Chairperson agreed and moved to a clause by clause reading of the ICASA Amendment Bill [B18B-2013].

Clauses 1 to 5 were agreed to.

Clause 6 was agreed to, with amendments just proposed.

Clause 7 was questioned by Mr Jacobs, who made the point that the Committee had previously agreed that the words “National Assembly” ought to be replaced with the word “Parliament”.

Mr Phiri replied that the Senior State Law Adviser had given an explanation to the Committee previously and that the Committee had agreed to that.

Ms Mabija asked for a repeat of the explanation as to why the words “National Assembly” were considered more appropriate than “Parliament”.

Mr Phiri responded that the appointment of ICASA councillors was done by the Minister of Communications, in consultation with the National Assembly. This is a typical example of the manner in which the current ICASA Act was structured, and it would require the amendment of many sections of the Act to have consistent accountability to both houses of parliament.

Ms Sekese supported Mr Phiri, pointing out that the words “ National Assembly” appeared in section 5 of the principal Act.

Mr Tau said that ICASA was not a Chapter 9 institution and therefore it should be accountable to Parliament. He doubted whether there would be time to do so now, but said the proper solution would be to change all references to the “National Assembly” in that legislation by references to “Parliament”.

The Chairperson reiterated that this issue had been raised at the very first briefing on the ICASA Bill and the Department of Communications had responded that it would be taken care of. She reminded the Department that this issue had even been debated during the 2000 amendment process. The absence of a reference to “Parliament” hindered the NCOP, as a legitimate house of Parliament, in performing its oversight function over ICASA. She even suggested that if the Department could not agree, that a mediation could be held.

Ms Mabija suggested that the Committee had a duty to not pass the Bill until it was satisfied, and that would only happen when the word “Parliament” was included in the Bill.

Mr Tau proposed a caucus of the ANC, which was seconded by Mr Jacobs and Ms Mabija.

Upon resumption of the meeting the Chairperson said that the Committee felt strongly that in any legislation, the words “National Assembly” should be replaced by a reference to “Parliament”. She  requested that the Senior State Law Advisor encourage his colleagues to adopt a similar attitude. However, having made that point, the Committee needed to pass the legislation and felt that pending a full review of the Act, it would be acceptable to leave the wording as “National Assembly” for the time being.

Mr Tau wanted to emphasise the point that as an entity which formed part of the Department of Communications, ICASA derivatively received its funding through the Public Finance Management Act (PFMFA) process, and was thus accountable to Parliament as a whole. The reason the Committee was prepared, nonetheless, to accept the Bill as it stood was that it was aware of the policy reform process which was under way in the Department. He hoped that the issue of oversight would be addressed during that process.

Clause 8 was agreed to.

Clause 9 was agreed to, with amendments.

Clauses 10 to 32, and the Memorandum on the Objectives of the Bill were agreed to by the Committee.

The Committee adopted the full Bill.

Adoption of Committee Report
The Chairperson then read out, and the Committee approved the Committee Report, noting that the Select Committee on Labour and Public Enterprises, having considered the subject of the Independent Communications Authority of South Africa Amendment Bill [B18B-2013] from the National Assembly, section 75, reported that it had agreed on the Bill.

Chairperson’s Closing Remarks
The Chairperson emphasised that the Committee was concerned about the wording of the ICASA Act, which excluded the National Council of Parliament from the oversight process, and asked for the Department of Communications to ensure these issue were dealt with during the forthcoming review process

Information and Communications Technology Update by Department of Labour:
Mr Sam Morotoba, Acting Director General, Department of Labour, gave a presentation on the status of the information and communications technology (ICT) services in the Department of Labour (DoL or the Department). The presentation focused on the status of the public private partnership (PPP) contract that DoL had signed with Siemens, which was later bought by the company EOH, the current status of the Department’s ICT services and its future plans in this regard.

The PPP contract was concluded in 2002, for a ten year period. When this contract ended in November 2012 a termination support period was initiated to facilitate the handover back to the Department of Labour. This occurred parallel to a five year ICT plan being approved by the Director General, aimed at capacitating the DoL for the hand over. Legal advice provided by the State Law Adviser to the DoL indicated that section 197 of the Labour Relations Act obliged the DoL to take back certain staff from EOH. This, however, conflicted with the five-year plan of the DoL for the hiring of new staff as part of the process. The State Information Technology Agency (SITA) was not ready to take over the ICT services, resulting in a situation where the DoL would be without ICT services from the 30 November 2013.

The section 197 transfer of staff posed a problem, because EOH interpreted the section as allowing it to transfer to DoL any staff working on other government contracts, for example those working on the South African Broadcasting Corporation’s ICT services. This led to a legal dispute that was settled out of court after the DoL filed for a declaratory order in the Pretoria High Court. The parties eventually agreed that only staff working on the DoL’s ICT services would be transferred.

In November 2013 the DoL consulted with SITA, National Treasury and the State Law Advisers on appropriate direction for the DoL to take. DoL was advised that SITA was not ready to take over ICT services and that it should sign a tight, short term agreement with EOH to facilitate the transitional phase, which would be supported by National Treasury. This  resulted in a six month agreement being signed with EOH under which EOH would complete outstanding IT applications for which it had already been paid for, would transfer the identified staff from 1December 2013, and that a new governance structure would be formed to oversee the proper performance of the contract by EOH.

Mr Morotoba then described the progress of the staff transfer. Currently, 96 staff had been transferred and integrated into the DoL, and they and now provided the majority of its ICT services. All these employees were directly involved in providing ICT services to the DoL. The DoL strove to ensure that their terms of employment remained constant and also that their leave accruals and pension funds were transferred to the DoL and the Government Employee Pension Fund.

From an operational point of view the transfer of ICT services was “seamless”, with no impact on end users or clients of the DoL. ICT service gaps were identified, and mitigated, and where necessary direct service contracts were signed with service providers. SITA, under a service level agreement, was also appointed to manage the DoL’s IT service desk, which was now based at the SITA offices. The Sheltered Employment Factories was in the process of being migrated, which would allow for universal licence procurement rather than individual, and which would also allow that structure to benefit from the DoL’s more stable ICT infrastructure.

Mr Morotoba then set out how the DoL’s five year ICT strategy was to be financed. During the 2012/2013 Estimates of National Expenditure process the DoL unbundled the ICT allocation from that of an operational lease, to cater for the transfer of staff. This resulted in an allocation of R30 million for compensation of employees. During the 2014/15 allocation process National Treasury removed this money from the DoL’s budget because it had not filled the positions outlined in the ICT strategy. However, due to the section 197 transfer of staff from 1 December 2013, this resulted in a deficit. This was brought to the attention of National Treasury, but was yet to be finalised, although R100 million had been made available in 2016/17.

Mr Morotoba concluded that the outstanding matters still to be completed were the human resource processes for the section 197 staff, and the finalisation of the requirements for the roll out of the ICT strategy, including post completion under the EOH contract, in tandem with SITA, where its expertise was superior.

Discussion
Mr Sibande asked for clarification on bullet 2 on the slide titled “Transfer of staff under section 197 of the LRA”. This had suggested that the process was hampered by a lack of information from the service provider. He asked who had paid the costs of the legal action that had resulted from the disagreement. Finally he asked whether the section 197 transfer staff had their terms of service continued, because if not, this could have a negative impact on the staff.

Mr Morotoba responded that certain information was not been provided by Siemens/EOH, at the time when EOH had bought Siemens. It had attempted to make use of section 197 to selectively transfer staff, which had eventually led to the legal action. However, the court proceedings did not transpire, because the company realised the seriousness of the matter and settled, also paying the legal costs. The terms of service issues were ultimately narrowed down to pension benefits. When the staff were transferred, DoL had invited a representative from the Government Employee Pension Fund to explain matters to the new staff. A buy-back option was included, where the staff could use their pension payouts to buy back years of service. It was up to the staff to decide whether they would like to do that, or whether they wished to start as new employees.

Mr M Jacobs (ANC, Free State) referred to the past issues that SITA had faced, and asked how those had affected the DoL. He also asked specifically why SITA was not used in the first place, seeing that ICT was now being handled internally. He finally wanted to know whether the DoL had money in its budget for the new section 197 staff.

Mr Morotoba replied that SITA could not have been used when the PPP contract was signed in 2002, because at that time SITA lacked the capacity to provide the services that the DoL had required. SITA now was far more capable, under the direction of its new Chief Executive Officer, Mr Freeman Nomvalo, which was why it was now being used for the ICT services and procurement. With regard to the budget, he said that the DoL had been paying in the region of R16 million per month to the service provider, and this would be used to cover the expenses of running ICT services internally. The only issue was the R30 million which had been allocated to compensation of staff, which had been revoked by the National Treasury. The DoL had indicated to National Treasury that the section 197 legal dispute was the reason why DoL had delayed in recruiting, and that funds would be required to remunerate about 130 staff members who had been hired under the ICT five year strategy, as well as the additional staff transferred from EOH. At the moment DoL was able to fund them until March, and the further funding would be dealt with in the budget adjustment estimates.

Mr H Groenewald (DA, North West) asked for timeframes and deadlines with regard to the next steps to be taken.

Mr Vikash Sirkisson, Acting Chief Information Officer, Department of Labour, replied that most of the processes had been started and some had even been completed. The remainder of the processes were expected to be completed by the end of the financial year, when the DoL would have a new budget, resources and operating model. By that time, everything should be running smoothly.

Mr Sibande referred to his earlier point concerning issues with service providers, and raised the question why the DoL signed direct service contracts to mitigate the gaps in its own ICT services. He asked who these service providers were, and why DoL would sign a new contract with companies that had been problematic in the past. He also expressed his dissatisfaction with the tendency of government departments to use consultants and technocrats, rather than using their own resources. He also asked for clarity on the description of the transition as “seamless”.

Mr Morotoba replied that the reason that DoL had chosen to sign direct service contracts was because the 30 November 2013 deadline was approaching. Had there not been any contract in place, the DoL would have lacked ICT services altogether. He reiterated that during its consultations with SITA and National Treasury, DoL had been advised to sign a tight, short term contract with EOH. In addition EOH still had some work to do, to finish the applications for which it had been paid already, and to complete the section 197 transfer. Had SITA been ready to take over the ICT services, the DoL would not have signed this short-term contract. In the meantime, EOH had also improved its performance, having realised that its past performance and dealings with DoL could, if this was to be repeated, result in the company not being included on SITA’s IT procurement list. He explained that the direct services contracts with service providers were for matters such as licences. This saved the DoL money by avoiding any administrative mark-ups. In future, SITA would be taking over these procurement operations, and would be acquiring bulk licences for programme that were used by multiple departments, such as the SAP accounting system.

The Chairperson asked how the ICT services transition had improved the services. He wanted to know whether it had lessened the possibility of fraud, and whether the transition had been completed.

Mr Morotoba replied that had the transition not gone through, regardless of the interim impact and issues, the DoL would otherwise have come to a standstill by end November, with complete lack of ICT services. He also indicated that there were still issues to be dealt with, but that the processes to complete them were under way.

Mr Sirkisson added that about 90% of the transition was completed. The IT services had been continuous, the section 197 staff had begun working, and the service gaps have been identified and work had started to address them.

Mr Sibande was worried about role duplication between SITA, the DoL and the service providers. Referring to bullet two on the slide titled “Current Status: Operations Service desk”, he asked if there was duplication in the oversight role with regard to the service desk and the service level agreement.

Mr Morotoba said that the service desk question had previously been run by EOH, but when their contract ended, the DoL did not have the infrastructure to run it. SITA, however, did, so it made sense to use SITA, as a specialised agency, run the desk and do other specialised ICT work. He did not feel that there was an issue of duplication. The transition of staff did not mean a transfer of infrastructure, so EOH was still used. SITA would provide whatever services it was able to, and it would run tender processes for the services which it could not provide itself. DoL staff would be trained on the maintenance of the services, to minimise reliance on external parties. Lastly, the issue of licences was an unavoidable external expense for which all departments were forced to pay external service providers.

Mr Sibande then asked for clarification on the R30 million allocation and why vacancies created to absorb the section 197 staff had still not been filled.

Mr Morotoba explained that, in terms of the agreement signed with EOH in 2013, the transfer of the section 197 staff would be effective from 1 December 2013. This process was completed by end January 2014.  The budget allocation letter was received in October 2013, but in it, the National Treasury revoked R30 million because the DoL had underspent on staff until then. He reiterated that the reason for the underspending was the legal problem with the section 197 staff. During the consultation that later took place National Treasury accepted the DoL’s explanation, and said that the shortfall created by the revocation would be corrected by the budget adjustment process.

Mr Bheki Maduna, Acting Deputy Director General: Corporate Services, DoL, also wanted to comment to clarify the issue surrounding the R30 million. Realising that the PPP contract was coming to an end, the DoL reallocated money that it would otherwise have paid to EOH, to compensation of employees, because the ICT services would be handled internally. However, because of the legal dispute surrounding section 197 that R30 million in fact remained unutilised from April until December, when the settlement was reached. National Treasury decided to revoke the R30 million because it was not used, but had not taken into account the staff to be transferred under section 197. he repeated that the Dol had sufficient budget to pay their salaries until March, and National Treasury was aware of this.

Currently, the DoL had enough money to cover itself until the end of the financial year in March and this has been brought to the attention of Treasury and he hoped that this would yield results because the money was meant for the staff which are now in the DoL.

Chairperson's Closing Remarks
The Chairperson raised an issue unrelated to the current discussions. She expressed her concern that the DoL office in Hazyview,  her constituency, was still without the necessary resources and was open only once a week. She recognised that there were many offices around the country which faced similar problems and asked the Department of Labour to ensure that adequate resources were deployed to these centres.

The meeting was adjourned.
 

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