ICASA, MDDA, Sentech & SABC on their 2014 Strategic Plans, in presence of Minister of Communications

Meeting report

The Chairpersons acknowledged the presence of Ms Faith Muthambi, Minister of Communications, and noted that Ms Stella Ndabeni, Deputy Minister of Communications, was unable to be present due to the loss of her brother in the early hours of that morning.

Sentech Corporate Plan and 2014-2017 Medium Term Expenditure briefing
Dr Setumo Mohapi, Chief Executive Officer, Sentech, said that the broadcasting industry was going through some fundamental changes, especially with migration from analogue to digital broadcasting. The rollout of the final Terrestrial Broadcasting Frequency Plan would be completed by 31 October 2015 to ensure implementation of Analogue Switch Off in June 2015. Sentech was in negotiations with broadcasters and handset manufacturers to enable the start of the DVB-T2 Lite Mobile Broadcasting Test Pilot.

Strategic goals of Sentech in the 2014-2017 over the Medium Term Expenditure Framework (MTEF) included:
- enabling maximisation of investment in the ICT sector and creating competitive business opportunities
- ensuring that ICT infrastructure was accessible, robust, reliable, affordable and secure to meet the needs of the people
- accelerating the socio-economic development of South Africans and facilitating the inclusive information society through partnerships with business and civil society and the three spheres of government
- improving departmental performance and enhancing ICTs of the State Owned Companies (SOCs) as the delivery arms of government
- contributing to the global ICT agenda by prioritising Africa’s development.

The FM signal distribution had seen marginal growth in three years while Medium Wave saw a resurgence of interest from aspiring broadcasting operators during the 2012-2013 financial period, due to lack of primary frequencies in primary and secondary markets.

The maintenance costs of the company’s Meyerton Transmitter was escalating at an annual inflation rate, as a result of expensive spare parts and declining customer base.

Finally, it was noted that although Sentech’s financial history had been tough it had got a clean audit for the first time in ten years, in the last financial year.

Discussion
Mr C Mackenzie (DA) commended Sentech on its sound financial management and urged Sentech to try to be entirely self-funded rather than relying on the national fiscus. Since Sentech said it was ready to migrate from analogue to terrestrial digital broadcasting, he asked which entity was stopping the migration. He asked how much was needed for maintaining analogue signals as the country waited for the full digital migration.

Ms M Shinn (DA) wanted a further explanation on financial risks in the ICTs. She asked if there was still need for dual illumination. She wanted to know if Sentech was going to meet the digital deadline next year. She asked for the potential impact on the broadcasting industry if signals were switched off next year, since broadcasters and the set-top box industry were delaying the matter. She was concerned with the tremendous disconnect between DTT and the regulatory environment. She asked if Sentech could go ahead to implement DTT without the broadcasters.  

Mr R Tseli (ANC) wanted to know the number of executives, and the gender balance in Sentech. He was concerned about, and wanted an explanation on, the increasing charges shown for professional and consulting work. He asked about the implications for the Pan-African channel resulting from challenges in the Company’s Meyerton Transmitter. He asked the extent to which the FIFA 2010 Legacy Project was assisting government in employment creation.

Mr M Ndlozi (EFF) asked what was holding back the migration to digital broadcasting. He wanted clarity on changes to tariffs to ensure they were reduced, and what ought to be controlled. He wanted to hear the type of innovation in which Sentech was involved. He wanted more detail on the extent to which it was pushing its limits with regards to product development, so as to be self-sufficient rather than relying on outside products. He asked the number of students taken to universities on Sentech bursaries and if Sentech was taking students from outside the best universities to strengthen innovation.

Mr M Kekana (ANC) was also concerned with consultancy charges, which were high, and wanted comment on the role of management because he did not believe with relying on consultants. He asked Sentech to agree that, from this date forward, it would cut costs on consulting and legal fees. He urged that senior managers in Sentech be subject to vetting and a skills audit. He asked how many vacant posts were in Sentech, as the goal in South Africa was to reduce unemployment, and said that vacancies may contribute to failure of government aims.

Mr H Nkoana (ANC) commended Sentech for a clean audit. He asked if Sentech had any litigation cases, and, if so, how far these were. He asked if Sentech had identified any sites for Small and Medium Enterprises (SMEs) in line with its strategic objectives. He wanted to know when the regulator would provide clarity on the future of the television (TV) broadcast market.

Mr P Mabe (ANC) asked when the digital terrestrial television (DTT) tariffs would be finalised as they were holding up the broadcasters. He was concerned with fruitless and wasteful expenditure on foreign travel. He asked if Sentech could expand network coverage and satellite capacity so that he could listen to Tobela FM when he was in Cape Town. He asked what Sentech was doing to expand coverage of official languages on television, as sports and rugby were taking too much coverage.

Ms D Tsotetsi (ANC) asked if radio coverage statistics included rural areas and, if so, which rural areas. She asked if Sentech did recruitment on it own or whether it used consultancies to do so, and wanted to know also the reason for other consultancy. She asked which people Sentech was targeting for employment. She asked how Sentech rated its contribution to employment creation. She asked if the leasing and hiring of vehicles by staff on duty was not wasteful expenditure.

Ms L Maseko (ANC) asked if it was possible to transfer the consultancy skills and phase consultancy out by Sentech capacitating itself. She asked if Sentech could substitute fibre optic cables, to minimise cable theft, pointing out that such theft affected Mpumalanga. She asked the number of jobs Sentech envisaged to create, and when this would be done. She asked if there were any monitoring and evaluation mechanisms to monitor its programmes, its senior managers and capital expenditure. She asked for strategies for monitoring performance agreements, so that there was not an undue burden in this regard at the time of audit. She wanted to know what strategies it had, and could share with other entities, to achieve a clean audit. She asked what impediments there were to Sentech realising its full potential, and how this Parliament might help. She questioned the women, youth and people with disabilities employed in Sentech, and whether it complied with the mandatory 2% disability employment.

Co-Chairperson Ms Kubayi commended the financial health of Sentech. She asked Sentech to explain its case in Botswana, and whether it had paid all the legal costs required, and the mechanisms put in place to avoid future challenges. She asked if there was collaboration with SAPS, Eskom, municipalities and other government departments to minimise cable theft. Since Sentech was  dependent on sister entities, she wanted clarity on intergovernmental relations with South African Broadcasting Corporation (SABC), Independent Communications Authority of South Africa (ICASA), if there were any memoranda of understanding (MOUs) and whether these bodies held each other accountable. She asked for the entity responsible for low power transmission between Sentech and SABC. She asked about the risk to Sentech posed by uncertainty on policy with the regulator, and what might happen should that policy not be in place on time. She urged Sentech to come back and present its skills audit report and share its turnaround strategy.

Ms Faith Muthambi, Minister of Communications, said the President had signed the proclamation that established the new Ministry of Telecommunications and Communications on 03 July 2014, and it was now necessary for the President to transfer functions. Sentech must continue with the current tasks. She urged Sentech to expedite DTT tariffs for all broadcasters. She was concerned with the issue of dual illumination budget and lower power transmission, as citizens did not have access to radio and television, especially in rural areas. She said Sentech had difficulties in gaining access to private property, with some municipalities refusing to accommodate Sentech. She was concerned with the over-utilisation of consultancy in the past and said that she needed a full report on consultancies so as to respond to the questions on value for money.

Dr Mohapi clarified that, for DTT to work, there must be signals and receiving devices in homes. Currently, there were 8 million households that did own televisions and did not have receiving devices. The configuration in homes was a complex process. For decoders to get into homes, there were policy regulations that must be done by ICASA, channels must be ready from broadcasters and then it was necessary to have the network ready to carry signals.

In respect of the decoders, he emphasised that the process started with policy, specifications of set-top boxes, carrying decoders to homes or to post offices and then training installers for installation in homes. This needed to be done with less than ten entities including ETV, ICASA, SABC, MNET and Sentech, to get set-top boxes to 8 million homes and tariffs. Sentech was ready, and public broadcasting signals were available on the DTT network. Sentech as it tested its network with the public broadcasters when it finished with a particular province.

Responding to the question on relationships, Dr Mohapi confirmed that Sentech had good relations as ICASA had a Joint Spectrum Advisory Group that dealt with spectrum matters, where sister entities came together to talk about issues about the current reconfigurations and the future of the DTT network. Sentech’s team attended regularly at those meetings.

The tariffs were a matter between the Regulator (ICASA) and Sentech. The regulations governing tariffs were set, in that the broadcaster first must choose the signal distributor, sign a commercial contract, submit the agreement to the Regulator, and the Regulator looked at whether Sentech was able to meet the roll out target in three months. There were certain steps that the Regulator would take which allowed it to move to tariff regulations. The Regulator set tariffs under Chapter 10 of the Electronic Communications Act (ECA) but it was not at this stage although it had made significant progress with the broadcasters and there had a big meeting with leadership of the SABC. He hoped that SABC and ETV would complete by the next month, and while it still needed to discuss a lot of issues with MNET, there would be discussions with Department of Communications (DOC) and Media Development and Diversity Agency (MDDA) on the implications of DTT with regard to community broadcasting. The coverage of community broadcasting would increase significantly under DTT.

In relation to elimination of dual channels, Dr Mohapi explained that there was a network dual elimination, which meant that the first transmitter that went up in 2008 had been incurring costs. The obligations started when the Minister made a proclamation on performance agreements. The risk of running a digital network, while it had value, was that currently it was incurring a cost to provide services in the future. National Treasury had been providing money for the dual elimination cost. The risk that Sentech was sitting with involved the real costs for any kind of delays. It had budgeted R40 million for analogue related work in the MTEF period.

Dr Mohapi clarified, in relation to switching off, that it was not a good thing to just switch off, as the set-top boxes (STBs) were not yet in homes and a switch-off would be denying people access to information. Sentech could only switch off if houses had migrated. In respect of migration, it had completed the process in Gauteng, Limpopo, one site in KwaZulu Natal (KZN) and Mpumalanga and North West was not ready, and three sites in Eastern Cape were not ready. It was currently working on Western Cape and Northern Cape. While the market share dynamics was not within the purview of Sentech, it had to understand those dynamics to understand customers’ needs.

Sentech shared the same mandate with SABC on universal access and diversity of radio services. All SABC radio services were currently available on satellite, and all radio and TV services would be available on the DTT network. The intention of Short Wave was to make sure that Channel Africa continued to work. The Department of Communications provided subsidies to community broadcasters on signal distribution costs. 51% of community broadcasters paid R500 or less on signal distribution. Work would be done to enhance ability of community broadcasters to collect advertising services.

In terms of research and innovation, Sentech was doing this in a staged way. Internally, it was testing mobiles to be able to carry digital TV. It was building and testing networks, and working with people who developed devices so that the devices for mobile television were not separate from those used for communications. Externally, it had collaboration with the Centre for Scientific and Industrial Research (CSIR) on application of L band technologies for digital television, and how it could provide more efficient ways for community broadcasting without changing them. Sentech sponsored undergraduate, postgraduate and research programmes applicable to medium and long term value to the industry, at two tertiary institutions.

Dr Mohapi noted that the result of the Botswana case was that a damages award was made, and Sentech was waiting for clarity from the courts on what needed to be done. Similar problems would be avoided in the future by ensuring a sound financial basis. He explained that this case happened because Sentech ran out of money when the whole system became too old to upgrade. It was now running its finances properly well so as to cover the costs of clean maintenance. Sentech maintained regular contact with Botswana and Zimbabwe to get regular feedback should anything go wrong.

Ms Rudzani Rasikhinya, Chief Financial Officer, Sentech, said that Sentech was complying with a National Treasury directive on cost containment and it had come up with a consultancy reduction plan. The R22 million in the corporate plan included external audit fees of R4.3 million, so consultancy costs were only R14 million and out of that, some would be used to upgrade the system used for accounting purposes and to appoint internal assurance providers from an internal and external audit perspective. She noted that, in respect of recruitment, Sentech advertised vacant posts in newspapers and other media, although to an extent it used agencies for appointment of senior management positions. It had moved away from leasing vehicles to outright purchase of vehicles. In future, it wanted to further reduce irregular and wasteful expenditure.

Ms Rasikhinya confirmed that the total staff establishment was 575 and Sentech currently had a staff complement of 529, with the difference being vacant posts. It had three to four women at executive level, compared to six men and would be filling vacant senior management positions with women.

Dr Mohapi spoke to the regulatory uncertainty and said Sentech needed to align with ICASA. The ICT policy review would influence many things.

Sentech had started using fibre optic to minimise cable theft and it had appointed an external specialist security to protect networks that it ran. It was engaging with communities to avoid problems later as they took ownership, involving the community in the building of the network infrastructure.

Dr Mohapi said that, on performance management, any outcome was supported and no one was exposed. Speaking to enterprise development, he confirmed that Sentech operated in all parts of the country and it tried as much as possible to purchase locally.

Ms Kubayi said there was need for further engagement with Sentech after the budget adoption.

Media Development and Diversity Agency: Corporate Strategic and Business Plan 2014/19 and APP 2014/2014 briefings
Ms Phelisa Nkomo, Chairperson, Media Development and Diversity Agency, said that the Agency (MDDA)
sought to contribute to the reduction of distribution costs. The strategic goals of MDDA included:
- to grow and diversify the MDDA funding base
- to deliver innovative products and services that met stakeholder expectations
- to strengthen MDDA processes, systems and procedures
- to create a learning environment and build capabilities that delivered MDDA value products.

The current challenges included lack of media diversity and lack of recognition of diversity, recognition of indigenous languages. Advertising was biased towards media houses with adequate financial resources. The community broadcasting sector had limited number of mentors and people with business administration skills, and also lacked appropriate and relevant skills in respect of marketing, management and production management. This was in part due to loss of skills from small commercial and community radios to the more lucrative commercial media and broadcast sector.

MDDA had managed to maintain an unqualified audit status since its inception. MDDA had proposed a new organisational structure. It was working in collaboration with Government Communication and Information Systems (GCIS) offices throughout the country and its target was to ensure that every district had a community radio. Finally, he confirmed that 5% of the budget went to research.

Discussion
Mr Mackenzie said that in Midrand no community reporter went to into Audrey Park, and asked if MDDA could help with funding.

Mr Mabe said community radios were unable to source advertising, and asked how MDDA could assist in breaking that barrier.

Mr Davies asked how MDDA could assist community radios, so that they were not reliant on government advertising funding.

Mr Nkoana commented on the good audit outcome and wanted clarity whether the new proposed organisational structure would be operative from July.

Mr Kekana also commended the good audit outcome. He wanted a detailed account on monitoring tools. He asked about the number of vacant posts, reminding the Committee and the MDDA that a prime goal of government was to eradicate unemployment and corruption. He wanted clarity on racial and gender balances, which were also priorities of the government.

Ms Mafulo asked if the MDDA was reaching people in rural areas, and, if so, how it did so.

Ms Tsotetsi asked how MDDA monitored its bursary beneficiaries after placements.

Ms Maseko asked for the percentage of the MDDA  budget that was put to consultancy costs. She asked for details of the number of people employed who were young, women, and those with disabilities.

Ms Moloi-Moropa asked if MDDA monitors the accountability of board members of community radio stations.

Ms Kubayi asked if MDDA had done research on the sustainability of community radio stations.

Ms Nkomo said the contract of the Chief Executive Officer (CEO) who had been serving the MDDA to date had come to an end in June, and that the MDDA would be recruiting a new CEO in three months. The new structure had been approved by the board, so it was no longer a proposed structure.

Ms Nkomo clarified, in respect of the question relating to the Midrand, that if an individual complied with the project criteria, the MDDA would assist with funding. In the next three months, it would be doing research on the impact it had made on community radios to help them to craft sustainable measures. In relation to the bursaries, she said that the MDDA would assist with content development and train community journalists on marketing and business administration to manage radio stations effectively.

Ms Duduzile Phungwayo, Manager: Human Resources, MDDA, said the gender split in the MDDA was nine males and 14 females. In the 2015/16 year it would have employed two more people. The MDDA had almost 50% young people between 25 and 30 years, and 50% of the staff compliment was between 37 to 45, with a few from 45 years upwards. At the professional and specialist level, it had employed a coloured male and a white female. Recruitment applications were driven by the equity plan and it re-advertised posts at Pretoria and Johannesburg University, should it not receive applications from all demographic populations.

Mr Nkopane Muphiri, Chief Operating Officer, MDDA, said the accountability of board members was a collaborative effort between MDDA and the regulator, and from time to time, it met with ICASA. One of the conditions for funding for funding for community broadcasters was that they must hold annual general meetings and hold their board members to account. The MDDA had developed a corporate governance toolkit that helped community radios know what they needed to do. In collaboration with the Department of Communications, it was also involved in community mapping to strengthen accountability at board level. GCIS ensured that 60% of the government adverts were flighted on community radio stations, although MDDA operated at arms length with GCIS as some community radios were in poverty nodes. To access funding, it worked closely with GCIS provincial offices.

Another member of the MDDA confirmed that 2% of the MDDA budget was spent on consultancy.

Minister Muthambi commended MDDA for contributing to the development and transformation of small media. Key issues that needed consideration were the role of executives. She reminded the Committee that the role of the Minister was limited to the appointment of board members only, in terms of the MDDA Act. Other issues included how the Agency accounted for money appropriated to it by Parliament in terms of the Public Finance Management Act (PFMA), the role of accounting authorities in the MDDA, as this was not adequately articulated in strategy and policy formulation, and the appointment of the CEO as critical elements of good governance. The funding model for MDDA remained a critical challenge, given its mandate, in line with section 15 and 19 of the Act itself regarding source of income. The independence of the MDDA was not adequately clarified, giving room for differing interpretations.

Ms Kubayi said there was need to continuously engage with the entity on its impact on community and small print media.   

Independent Communications Authority South Africa (ICASA) 2015-2019 Strategic Plan;
2015-17 Annual Performance Plan; 2014/15 Budget
Dr Stephen Mncube, Chairperson, ICASA, welcomed the opportunity to speak to the Committee, and assured the Committee of the support and cooperation of the ICASA as it exercised oversight over electronic communications, postal services, broadcasting and telecommunications. He said ICASA had partnered with the Independent Electoral Commission to make sure that South Africa was afforded free and fair elections held on 07 May 2014. ICASA provided broadcasting coverage during the build-up, as well as monitoring of the compliance of all radio and television stations, in line with rules on how media must cover elections. ICASA was extremely happy to report to the Minister and ICASA would give the necessary support, so that whatever was done from a policy perspective was followed by ICASA as a regulator. ICASA would never try to travel ahead of policy. ICASA was happy to serve two ministers, as policies defined before fell in both ministries.

Dr Mncube confirmed that the comments received in the past had helped with where ICASA was going now, as it was now doing five year plans rather than the single year plans that it used to do previously.  He was serving his last year and would leave knowing there were other expert and qualified people to move South Africa forward. ICASA had come a long way and was still going a long way to fulfil all the necessary objectives, and he hoped that the mission would move forward well. He confirmed that his team had included only two councillors, as specified by National Treasury, to avoid wasteful expenditure. Finally, he confirmed that he hoped to work in a spirit of collegiality and make ICT the mainstream of a developing South Africa, meeting the National Development Plan.

Mr Pakamile Pongwana, Chief Executive Officer, ICASA, said that ICASA had been in the process of realignment for some time, although this had never quite been achieved. The market realities facing ICASA included a limited growth in Free to Air services, television (TV) subscription dominated by one player, a declining demand in postal services, the high cost of universal access, limited spectrum for new services, the fact that significant investment was needed in electronic communication services, high input costs to build project infrastructure, as typified by Telkom’s requirement of R20 billion for 140km of fibre, limited coverage in rural areas and huge problems of acquiring impact assessments. There were different municipal laws that were not coordinated, were non-standardized and created problems for roll out of infrastructure for progress. These market realities had pushed ICASA and South Africa behind in decision making. There were few small to medium enterprises.

Mr Pongwana noted that ICASA must switch off from analogue to Digital Terrestrial TV (DTT) broadcasting by 2015, but the migration was delayed by specifications for set-top boxes. Questions that ICASA still faced included whether to subsidise set-top boxes or digital TV. Set top boxes had the potential to put people backwards. ICASA had asked TV manufacturers what was needed to manufacture TVs with DTT. He emphasised that the roll out of Smart Cards and National Health Insurance without critical ICT infrastructure would run into trouble.

Strategic goals for ICASA included:
- promoting competition
- promoting digital media
- efficient use of spectrum resources
- protecting consumers
- modernising ICASA.

ICASA had created a new post of Chief Operating Officer to enhance coordination as the divisions were working in silos. Strategic risks included legal challenges to the regulatory processes, failure to  define and document operational core processes, lack of asset replacements, resulting in the use of redundant equipment, as well as underfunding of the institution to adequately execute its mandates.

Ms Clarinda Simpson, Chief Financial Officer, ICASA, said there was a consistent decline in baseline allocations from National Treasury over the last two years, which was not favourable for ICASA as it limited it to payment of salaries and “normal” projects. ICASA was not able to fund capital acquisition. National Treasury allocated funds in the past three years to purchase vehicles, and for broadcast equipment to monitor interference and evaluation of networks. ICASA was unable to fill vacant positions pending restructuring. Additional funding was required for fixed monitoring, conducting compliance procedures and geographic mapping of broadband and consumer complaints system. Personnel were needed in the compliance and engineering divisions, and to assist the consumer affairs division in conducting measurement of quality services. ICASA would also like to establish a frequency planning and research division, but its budget was limited.  

Discussion
Mr Mackenzie said that since ICASA complained of subscription dominance by one player, it must deliver quality products to enhance competition, like Multi Choice. He urged ICASA to benchmark the cost of broadband services with other countries, internationally not just in neighbouring countries. He urged ICASA to use an incentive approach in rolling out broadband in under resourced areas. He knew of a company in Johannesburg that had 7,5km of fibre that was underutilised, and was willing to share the name of the company in private.

Ms Shinn wanted clarity on where ICASA would fall between Ministry of Communications and Telecommunications. She asked for details of programmes that ICASA needed to switch off analogue and move over to digital broadcasting. She asked for more details on what research showed that broadband prices had fallen down in ten years, and in what time frames. She said that she was tired lf hearing about ICASA’s financial woes over so many years and asked ICASA to explain if the new billing system implemented was working well. She asked how its debt collection was progressing, particularly in the case with WBS. She asked what policy directives ICASA was awaiting from the Minister. She asked what action had been taken against SABC for not meeting local content obligations. She asked for the court case outcome and the expectations on mobile termination rates.

Mr Davies wanted clarity from the ICASA Chairperson that ICASA would serve two ministers, and asked for its comment whether the split of ministries was flawed. He asked for steps taken against SABC with regard to wasteful expenditure and irregular salary increases.

Mr Kekana said the language used in the presentation by ICASA was hard for many people to understand, and this appeared to be typical of consultancy-language. ICASA had not mentioned whether its financial situation was still viable and whether it had achieved a clean audit. He also wanted clarity on court orders and legal fees. He said 59% of ICASA’s budget was going to salaries, which was not good for the running of the government entity, and implored Minister Muthambi to call for a forensic audit. He said councillors at ICASA received a salary comparable to that of Deputy Directors General in the public service. He suggested the reduction of the number of councillors to five.  

Ms Tsotetsi said the risk management of ICASA was not good, and this hampered the transformation policy as an institution funded by government. She was concerned with non-compliance in transmission. She asked if restructuring would involve retrenchments. She wanted to know what mechanisms were put in place to implement the Strategic Plan after restructuring.  She asked if ICASA attended to performance evaluation.

Mr Ndlozi wanted clarity on the compliance, during the elections, with the time allocations and criteria that ICASA had developed. He claimed that dominance of political parties tended to mean that some received more time than others.

Mr Ndlozi asked if ICASA was holding service providers accountable in terms of network coverage, and cited that, for example, in Fourways in Johannesburg there was no network even though the middle class there were not protesting.  He wanted clarification on the reference to municipal regulations that made it difficult for ICASA to roll out broadband, and why had nothing been done to hold people accountable. He was happy with ICASA’s actions on unfair pricing as this amounted to cheating consumers, and demanded a concrete approach as there was no difference in calling MTN or Vodacom. The government must consider taxing the private sector as the South African budget was based on consumer tax, even though the private sector consists of 23% of total revenue. The government must consider starting digital TV manufacturing, even though it was a challenge.

Mr Ndlozi also asked what action had been taken against SABC on local content. He hoped the President would not put ICASA under the DOC, because he feared it would become a propaganda machinery, like GCIS, and he would start doubting its independence.

Ms Maseko said ICASA dealt with issues around taking the country forward and there was potential in dealing with the economy and eradicating unemployment. She asked for the number for potential jobs if ICASA unleashed its full potential. She asked what stopped ICASA from rolling out broadband in rural areas. She wanted clarity on monitoring and evaluation mechanisms on compliance. She  expressed a particular concern at the large allocation of budget – 60% - for salaries and asked how ICASA could work on a turnaround strategy.  She asked for the percentage of the budget being put to payment for consultants. She asked which sustainable funding model there was to sustain ICASA. She wanted to know the number of women, disabled and youth in ICASA.

Ms Maseko noted that ICASA was not obliged to answer any comments on the department under which ICASA would fall, as the President was still to make arrangements following the proclamation on 03 July 2014 on the separation of departments.

Mr Mabe asked if any efforts were made by ICASA to standardise municipal laws that affected environmental impact assessments, to achieve greater coordination. He was concerned with network problems in rural areas. He urged ICASA to find alternative models of funding, rather than its currently heavy dependency on the national fiscus which he felt was holding ICASA back. He was excited by the benefits of the DTT network, commenting that there were no longer cinemas in townships. He asked what ICASA would do for matters of local content, as their actions contributed to the greater empowerment of society.

Mr Mabe was concerned with Vodacom offering free calls at 12am, and asked for comment in the light of ICASA’s mandate to protect consumers from unfair business practices. He urged ICASA to resolve this problem. There was greater dominance from networks that were started in the 1990s and initiatives such as the Regulation of Communications legislation (RICA) and number porting did not work as they should, although he thought that these were intended to facilitate the introduction of new players in the market. He asked if a threshold could be put as 8.ta could not survive the challenge created by dominance. As long the dominance was allowed to continue, South Africa would struggle to introduce an African owned player that responded to the challenges of the 21^st century.

Ms Kubayi urged ICASA to go back to the drawing board, saying that she did not have confidence in a bright future for it. ICASA need to reposition itself and re-strategise on how to survive in the current environment. There were a number of issues at ICASA and its financial situation did not give comfort to the Committee. She asked when the Committee could expect some mechanism to improve at ICASA, as the situation was not what the Committee would like to see. She was particularly concerned with non-compliance issues, and other issues raised by the Auditor-General, such as posts with no job descriptions and no performance agreements being signed. She wanted clarity on the national revenue administration assets. ICASA met only 33% of its targets, and that was the main reason why it must go back to the drawing board. ICASA needed to pay urgent attention to the matters and tell Members how it was going to turn around the situation. The Committee, together with the Minister, had to push hard to get ICASA where it needed to be. The current situation could continue any more, as ICASA held the key to the success of other entities, who were reliant on it for their own effective functioning.

Ms Kubayi was concerned by references to the King III Report on Corporate Governance, pointing out that that this was already published in September 2009, and should thus already have been implemented in 2010, not now. She was concerned that ICASA was still dealing with a comprehensive compliance report requested by the previous Committee, as mentioned in the Legacy Report of the Fourth Parliament. She was concerned with the turn around on complaints, the ability of ICASA to deal with complaints and monitoring of licensing. At Vodaworld, all other networks were cut off and this problem had been persistent. She asked what role the Chief Internal Auditor played. Again, she repeated that ICASA must go back to the drawing board to reposition itself and come with a new report.  

Ms Moloi-Moropa was also concerned with issues raised in the AG’s report, particularly noting that  material collection was still a problem, as no corrective measures were taken.

Dr Mncube said the Committee’s comments were taken seriously and were good points. Given the scope and magnitude of work at ICASA in the past three years, a lot had been done, but there was a lot still needing to be done. ICASA was not concerned which Ministry it would fall under, but would report to the government. He took issue with the statement that GCIS was propaganda machinery and said its implementation was in fact changing the propaganda machinery that existed in the past. It was a government instrument to inform people. People who were in the COMTAS team were luminaries in the field where they worked and would have recused themselves if this was indeed a propaganda machinery.

Dr Mncube said that the ICASA turnaround had succeeded in many ways, but the previous turnaround cost ICASA a lot. ICASA had good people, and where they were not highly educated, it had good managers and researchers who could be trained accordingly. ICASA had done a skills audit. The ICASA retention policy was to reengineer people through lifelong learning, especially for those people who were 50. It had an agreement with UNISA, University of Johannesburg and Wits University on training people. He had turned ICASA into a knowledge base institution through various  activities that moved towards that direction.

He said that to some extent matters cited in this presentation had been stated in the past, because ICASA was not changing radically. Members’ concerns were correct and ICASA had suffered from 20 years of building without cleaning. ICASA had now approved a new structure that was beginning to find its feet and it was not being populated carelessly. He hoped that it would have a chance  to meet again with the Committee and provide information on where ICASA came from to help Members to understand the current challenges.

Mr Pakamile confirmed that ICASA needed to provide an updated report on changes made after the submission of the strategic plan, such as the unbundling of the local loop. ICASA’s responsibility with ensuring viability of the SABC was because it imposed local content obligations. There were issues that the ICASA council said needed to be done, such as network price differentials and ICASA had no choice. Some of the concerns had been imposed by ICASA whilst reviewing other issues that affect consumers. It had realised that promotions were misleading to entities. He said that Members should give consideration to payment options; more was needed than a premium subscription to Multi Choice. Minister Muthambi had told ICASA to develop some of the policy directives that needed to be developed, during its previous meeting.

Mr Pakamile conceded that there had been a problem in the past with lack of consequences, but ICASA was now rectifying that in relation to performance measurement. The present structure of ICASA was a historical structure dating back to 2000, when two structures had been put together, and when the Postal Regulator was added, it became the sum of the three. There had been no rationalisation of the structure. There had been an assessment of skills already within and still required at ICASA. There was a lot of duplication of tasks, and there were many people who were being highly paid compared to the market. The problem emanated from the perpetuation of certain structures, so now ICASA was trying to shrink its structures. There was no way the ICT sector could work without consultancies, and ICASA uses these mainly for cost modelling that was done every three years.

Mr Pakamile said that ICASA would respond to some of the questions in more detail in writing.

He noted that the previous court case had been settled, and could be regarded as finalised. ICASA had improved on performance evaluation. Performance management need to be improved.  The way regulations had been set had created problems. ICASA was getting what it was not supposed to be getting because of the use of highly judgmental terms such as “gross profit” which was subject to differing interpretations. Spectrum regulation was also broad in application and so ICASA was busy with revisions on that. It could not be assured that the revenue that it was collecting was the actual revenue that it should collect.

Ms Simpson said there was a billing system in the engineering division that accurately and completely calculated the actual invoices. Legal disputes were legacy issues emanating from flawed regulations, predominantly the spectrum radio regulations. ICASA could not apply all the regulations in the spectrum regulation - for example it could not sue a fellow government department even though it impacted on its revenue collection. There were some government departments who took time to settle their debts.

Ms Simpson said that ICASA had adequate policies and procedures in place against wasteful expenditure. The PFMA prescribed the action to be taken against perpetrators. ICASA had followed the process with regards to wasteful and irregular expenditure. It had not received an unqualified audit last year.

Ms Simpson confirmed that ICASA would need to lay off staff should it need to racially balance the staff. It had budget constraints to retrenching people. There were over 700 licences, half of them fully compliant. The budget for consultancy was 5.6% of total budget. ICASA had implemented the cross cutting measure directive from National Treasury on travel, consultancy and entertainment. Currently ICASA was government funded. It had software that allowed it to cost its activities, called activity based costing, and was able to assess the cost that needed to be an efficient and sustainable regulator. ICASA was limited, in its expenditure, by the government grant it received. Decisions were needed on ICASA’s funding model for the future.

Mr Peter Grootes, General Manager: Markets and Competition, ICASA, said the prices of a call had decreased by 75% over the past ten years. The broadband price had decreased from R199 in 2012 to the current R99. The Courts had ruled that there must be new regulations on call termination by 1 October. ICASA would finalise the regulations as it got full information from licencees. It may have to use legal procedures against agencies that were non-compliant

The Chairperson said there would be an intensive follow up by the Committee on matters raised.

Minister Muthambi said she hoped that court decisions on call termination rates were fruitful, lawful and valid. She too was concerned with high legal costs. She was looking forward to an ICASA that makes transparent and well-informed decisions, that was professional and promoted the public interest with universal access and low prices. ICASA was waiting for the transfer of functions following the Presidential proclamation. She agreed that ICASA had been ineffective in the past and that transformation was needed. She commented that it was undesirable that there was an entity responsible for regulation that was hindered by policy matters, and the President would deal with when he made his announcement. She would help address the difficulties with councillors as the entity moved forward and would ensure that ICASA fulfilled its mandate.

South African Broadcasting Corporation (SABC): Corporate Plan 2014/15-2016/17 briefing
Ms Zandile Tshabalala, Chairperson, SABC Board, said the newly constituted board resumed duties this year and SABC was working hard to resolve the challenges that lay ahead. She invited the Committee to visit the SABC premises.

Mr Tian Olivier, Acting Group Chief Executive Officer, SABC, said that SABC had a financial crisis in 2008 and it needed two more years to get a  clean audit. It was in the process of an audit at the moment. The targets outlined were in line with the S-M-A-R-T principles.

He noted that a tender had been approved for digital migration. SABC was expecting R1 billion from TV licences and expecting a possible tariff increase. It was looking forward to exploiting its archives and the challenge it faced was to convert archival content into files. It was trying to manage and contain SABC expenditure. SABC was concerned with a decrease in audience specifically for SABC 3.

He noted that the Acting Chief Executive Officer had started building a new digital platform and it was finalising the digital storage. SABC was thus ready for digital migration. South Africans overall had migrated. Current TV coverage was 90% and with DTT, it would be 100% coverage. SABC was looking forward to removing bottlenecks in procurement policies. Human capital was important, so SABC was making sure everyone had a job description. It was looking forward to instituting performance rewards, talent retention, promotion, retraining of staff and mandatory coaching of managers. The Asset Finance department had been mandated to detect areas of theft and accounting data.

Mr Olivier said that SABC was improving on the financial morale and it had a target of a minimum surplus of R150 million out of R8 billion. There was, however, difficulty in the budget for sports, as TV Sports Rights ideally needed R930 million, and here there was a shortfall of R500 million, which SABC could not afford to cover. Given this situation it would only able to sustain sport broadcasting for about one year from now.

SABC was currently able to fund advertised posts. SABC had a stronger balance sheet than in previous years. There were pension and medical aid challenges, and there was demand from the unions for more salaries. The potential ban on alcohol advertising would have grave consequences on SABC finances and it was the biggest budget risks. There were 300 vacant posts and the SABC was currently in recruitment processes. It was looking forward to foreign exchange gains.

Finally, Mr Olivier repeated the invitation and said that he would look forward to a visit by the Committee.

Discussion
Mr Ndlozi was worried about the leadership crisis at the SABC and the AG’s report that SABC had done nothing with the Public Protector’s findings. SABC must take its own laws seriously.  He asked how SABC was going to stop wasteful expenditure when it could not even respond to its own leadership challenges. He was very worried that SABC had not acted on the damning findings from the Public Protector. He had lost confidence in the SABC, for retaining in a senior position a person who had lied about his qualifications for many years. He had lost confidence in SABC’s capability to take itself from the crisis it had been since 2007. He wanted to know when Mr Hlaude Motsoeneng (Chief Operating Officer) would be fired, and he believed that he should not have been present in this meeting. SABC was not taking people and itself seriously. He was of the opinion that the entire staff of SABC did not have confidence in the current leadership.

Mr Ndlozi was very concerned at reports that SABC wanted to licence journalists, who must be the defender of the freedom of expression and the media. The Committee must set aside a full day for SABC to prove, in a quantifiable way, how it would turn itself around and to explain the problems it was facing such as finance, DTT and leadership. He urged SABC to fill Acting positions, quipping that this was a prime example of enacting a drama every morning. SABC could only restore legitimacy if it responded to the Public Protector’s findings and leadership crisis.

Mr Davies agreed with Mr Ndlozi that the Committee must have a full day’s meeting with SABC. He also asked what was preventing SABC from suspending Mr Motsoeneng. He asked for the progress made with an investigation against the Chief Executive Officer of the SABC, who had left prematurely, and when such investigation would be completed. He wanted a full explanation on the comment by Mr Motsoeneng that he wanted to licence journalism, on the grounds that it only reported on corruption because there was a black government. He wanted an explanation on this and if this implied that SABC would no longer flight any reports on corruption, and whether the people must only hear news that was happy. He asked how the Minister’s centralisation of authority on board appointments would impact SABC operations. He asked how much SABC was going to increase on licence fees.

Ms Shinn asked what SABC had done with the PriceWaterCoopers (PWC) skills audit report of 2013, which had shown that the majority of staff did not have confidence in SABC’s management and board, and that the majority of executives did not have the required skills, experience or strategic vision to run the corporation. She asked what action was taken by the board to ensure that qualified people with skills were moved into the SABC. Alternatively, she suggested that all existing staff should be forced to resign or reapply on a competitive basis. SABC was losing its market share, audience, and money from advertising was going elsewhere because of the perpetual crisis at the SABC. There was a need for injection of talent, and experienced corporate management to change SABC into a viable institution.

Ms Shinn asked for an explanation why SABC sent a leader to study and why SABC must continue sending executive management on three months study courses, and expect to come back with experience to manage a R6 billion corporation. She asked how the SABC was going to recover lost audience market perception. She was concerned with an ANC office at SABC and said that this implied that SABC was an ANC mouthpiece.

Ms Shinn said that the PWC report noted no strategy to outsource content locally and asked if SABC would have enough commissioned material for digital migration by June 2015. She asked what was left for the archives that SABC gave to Multi Choice, since it mentioned commercialisation of archives in the presentation. She asked why the 24 hour entertainment channel was not active. She asked if any negotiations were ongoing with National Treasury to produce relevant material for digital migration. She asked about he impact of the 24 hour digital channel. She asked how SABC was going to market its material to lost audience. Finally, she enquired how much budget was needed to promote the SABC digital channel.

Ms Maseko commended SABC for having the most watched television station and radio stations that were performing beyond targets, especially Khozi FM which was the second most listened-to radio station in the world.

However, she expressed her concern with the audit disclaimer. She was concerned with vacant senior management positions. She asked if any SABC employees disclosed their business interests. Since SABC had not achieved all its targets, having previously set targets that were not achievable, she urged SABC to consider better SMART targets and an improved performance plan. She was concerned with wasteful and irregular expenditure at SABC and non-compliance with PFMA. She asked if SABC was vetting those in supply chain management. She wanted clarity on financial policies that were in draft form. She asked if any action was taken against line managers contributing to negative audit outcomes.

Ms Maseko was happy with the rendition of the national anthem as it instilled social cohesion, patriotism and unity. SABC must play the national anthem and hosting of the national flag which was the most unifying symbol. She was embarrassed by South African players who mumbled when singing the national anthem.

Mr Mabe said that he struggled to get a signal to listen to Tobela FM in Cape Town, when he wanted to listen to late night stories. Nelson Mandela had fought so that people of Nzingi Nzingi in Venda, Lamakahle in Limpompo and Mandalay in Cape Town had equal access to information, yet the  SABC report lacked any recognition of meeting the struggle for universal access as it moved forward. He commended the SABC’s 24 hour news channel, which entrenched empowerment and connected citizens with the outside world. He urged SABC to put time lines to its targets. He appreciated SABC for acknowledging the challenges it was facing, and hoped SABC was developing mechanisms to solve them. He said SABC must become a broadcaster of choice in Africa. He asked for more detail n SABC’s intention of creating a mass information hub that allowed diversity when it migrated to DTT, to avoid recycling. He hoped SABC would be capable of uniting all South Africans, in line with the vision of Nelson Mandela.

Mr Nkoana also commented that he felt isolated when he was in Cape Town, through not being able to access Tobela FM, and said that this smacked of apartheid policies in reverse. He raised his concern about the number of acting positions, and the fact that this had lasted too long at SABC. He was also concerned with the audit outcomes, saying that Parliament expected SABC to comply with standard for a world class institution. He wanted clarity on high compensation for employment and benefits, and consultancy fees.

Mr Mackenzie told the Chairperson that there were no “comrades” in this Committee, only honourable members and colleagues.

Mr Mackenzie said that the audit disclaimer meant SABC was moving towards the end. He urged SABC to benchmark its standards against other international countries and not only neighbouring countries as he needed SABC to be a world class institution. He also commented that the figures for employment compensation and benefits were too high. He too asked how much was spent on consulting.

Mr Kekana said he would be very happy if the rendition of the national anthem was done on all radio and television stations around 7am. He was concerned with ‘professional and consultancy churches’. Commenting on the vacancies at the SABC, he asked why SABC was not employing people in line with the National Development Plan and State of the Nation imperatives to eradicate unemployment. It was shameful that there had been four ministers in one term, who resigned because of the trouble caused by ICASA and SABC. He hoped that the current Minister would stay in office for the whole term.

Mr Kekana wanted to know more about the issue of Mbuso Mbembe. He urged SABC to promote all cultures on national TV, saying that he was confused when people wore hats, as he was not able to tell whether they were male or female, and said SABC was not depicting all cultures.

Mr Ndlozi noted his objection to this comment, which he thought was sexist.

Mr Kekana said SABC must collect licencing fees no less than R3 billion. He urged a check on whether SABC employees and all government employees were not paying their licence fees. He suggested that it would be useful for inventors to come up with a tool that switched off the TV if licence fees had not been paid, similar to DSTV.

Mr Kekana was not happy to hear about the audit disclaimer, was shocked at the financial report, and hoped that the Minister, board members and management would all help with the situation. He also called for the prevalence of acting positions at the SABC to come to an end, and suggested that acting positions should end after three months. He asked how many disciplinary cases SABC had, and how they took to finalise. He urged the SABC Chairperson that if she founds something wrong in any department, to ensure that “heads must roll”.

Ms Tsotetsi was concerned with the wasteful expenditure and said that if anyone got a performance bonus, then she believed it must be repaid. She too was angry with SABC, but urged her colleagues that their anger should not push them to utter irresponsible statements. She was insulted and felt undermined to hear that there was an ANC office at SABC. She urged members not to play politics unnecessarily, and focus on whatever was benefiting the tax payer. 

Ms Mafulo urged members to look for where the problem lay, and come up with solutions, rather than simply suggesting that people must resign, and she too suggested that Members not play “dirty politics”  She asked what measures had been put in place against those who did not follow procurement procedures. She asked on measures taken by SABC to regain revenue that might be lost by the ban on alcohol advertising.

Mr Tseli asked why the commitment between SABC to cater for the deaf and otherwise disabled was not honoured. He was concerned with R1.5 billion collected on licence fees that could not be accounted for, as raised in the AG’s report. He wanted an investigation on what happened to the money. He was concerned with contracts and quotations awarded to suppliers whose tax matters had not been declared to the South African Revenue Services. He asked if any procedures were taken against employees who did not disclose their business interests.

Ms Kubayi was concerned with the technical team appointed who had not turned around the situation at SABC. She too was concerned with the acting positions, asked if there were any processes in place to rectify the situation and for explanations for delays. She asked if SABC had mechanisms to find out whether a person had a TV but was not paying for its licence. She urged SABC to consider finding ways of funding itself, to cover itself should the ban on advertising proceed. She was concerned with SABC’s non-compliance with Treasury and PFMA regulations which meant the institution was operating unlawfully and asked for mechanisms put in place to correct this problem.

Ms Moloi-Moropa said the SABC must remove itself from the “hanging dark cloud” as a credible national broadcaster was needed. SABC must transform society and educate the nation. She appealed for SABC to go through a self-cleansing process.

Minister Muthambi said the SABC matters were not new, and she was paying urgent attention to ensuring that SABC served the interests of the nation as a whole. SABC would submit a report to her, on issues raised by the Public Protector, on 28 July 2014. She was equally upset with some of the matters at SABC and this was in the public domain. SABC must comply with the Public Protector’s recommendations. Human resource issues raised by the Public Protector were also being addressed. Financial issues were being attended by the audit committee of the body. She would assist the board in implementing remedial issues in paragraphs 11.1, 11.2 and 11.13 of the Public Protector’s report.

The Minister stated that the time was right to review the shareholder compact in SABC, the performance of the board of directors, current governance policy, and ensure leadership and full compliance with PFMA and deal with all issues raised by the AG. The process of suspending, terminating and appointing am SABC director was a long process, following the legislation. Any interventions that she would take would take into consideration the fact that SABC was a public broadcaster and needed a balanced approach to deal with issues and maintain its independence. She wanted a SABC that performed properly on its full mandate and complied with being a true public broadcaster. She would address SABC corporate management and human resource issues urgently. A broadcasting policy would address restructuring of the SABC to prioritise public services in digital broadcasting, look to the opportunities digital broadcasting would bring to SABC, increase the funding of SABC and formulate a long term strategy for the SABC.

Ms Tshabalala said there were certain external factors contributing to problems at SABC. She assured the Committee that concerted efforts were being taken to respond to issues raised by the Public Protector. There had been eight CEOs and four Ministers over the last five years, and this had affected the morale of employees, some of whom  had resigned. In relation to the disciplinary hearings, she noted that some employees sought to have lawyers intervene and this prolonged the process of the hearings.

Ms Tshabalala said, in response to questions about the Chief Operations Officer, that SABC had no basis for suspending Mr Hlaude Motsoeneng, and in fact he was performing better than expected.

Ms Tshabalala noted that the commercial networks that SABC built were done by people. She urged the Minister to inform SABC of issues in writing rather than going to the media. SABC was still rectifying issues captured in the skills report and it had taken full ownership of the report. Some issues raised in the report were alleged not to be true and the methodology employed did not resonate with the employees, who claimed that it was not factual. SABC had some employees who did not have matric, but it must be remembered that it had never switched off. It had advertised for positions and robust measures were being taken to make sure acting posts were filled. SABC needed a complaints division to deal with negative publicity.

Ms Tshabalala said that during her term, SABC did not flout any compliance or regulations. The current SABC financial statements were not yet ready. There had been problems with supply chain, but it did have policies in place to rectify the situation.

Ms Tshabalala welcomed comments on the rendition of the national anthem. The favourite radio stations would be accessed everywhere on DTT. SABC was building relations with neighbouring countries and had visits from Mozambique and Botswana. She clarified that Mr Mbuso Mbembe brought action against the Department of Communications and not SABC, but it had negative consequences on SABC.

She confirmed that having a reward system for innovation was very critical as there were many people at SABC who had come with good innovations, but never received accolades. Management had convinced the board that a ban on liquor advertising would not affect it so much, as it would allow for bringing other adverts on board.

She confirmed that SABC had been reprimanded a lot on its disability policies, and programmes for disabled access were now being supported. There were few people with disabilities employed by SABC but they were receiving all the necessary support. SABC was cooperating with the Minister on the shareholder compact and the Memorandum of Incorporation (MOI), which had embarrassing clauses in it.

She assured the Committee that SABC would to be financially sustainable. SABC had invested a lot in its employees and it return back with good benchmarks on what it had done.

Ms Theresa Geldenhuys, Company Secretary, SABC, said that the SABC had asked the Special Investigating Unit (SIU) in 2008 to do investigations into declaration of interests and there were 454 cases of non-declaration reported, but only 127 were found guilty. SABC had written a conflict of interest policy, which employees had to adhere to. Employees registered their interests annually within or outside SABC. There was strict disciplinary action against those who did not declare their interests. Board members declared their interests annually as well as being able to report at any time in every meeting, and signed declaration forms that no agenda item was in conflict with their interests.

Mr Hlaude Motsoeneng, Chief Operating Officer, SABC claimed that in fact SABC over performed and over delivered on the target for local content, by 20% on TV and 70% on radio. Some people could not produce local content, because only Western Cape, KwaZulu Natal and Gauteng had production houses. SABC was sustainable and measures had been put in place to continue this. SABC was not influenced by the ANC on what to broadcast. Everyone had access to archives, including Multi Choice, as it was information available to every citizen and international broadcasters.

Minister Muthambi clarified that in regard to the Group CEO, the SABC had requested an extension of 90 days, with conditions. She also commented on the Mbuso Mbembe matter, saying that it had been found that he had obtained a court order to bar the appointment of a CEO, and SABC had not appealed against that.  

Mr Olivier said TV licences increases would be inflation-linked and the implementation needed approval from the Minister.

The meeting was adjourned.