Department Telecommunications and Postal Services, Sentech, ZADNA, NEMISA, Broadband Infraco, SITA on 2013/14 Annual Reports, in presence of Deputy Minister

Telecommunications and Postal Services

21 October 2014
Chairperson: Ms T Kubayi (ANC)
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Meeting Summary

The Chairperson noted that South African Post Office had not submitted its Annual Report and this would be taken up with the Minister. The Accounting Officer of the Universal Services and Access Agency were not available to present the report.

Deputy Minister, Professor Hlengiwe Mkhize attended the meeting and gave a general comment on the Annual Report of the (then-named) Department of Communications and the entities that had dealt with telecommunications matters. The Department sought to set targets that were measurable and that resulted in people benefiting from the National Development Plan (NDP). The Department aligned with  other key priority area, and it was noted that the NDP specifically called for the development and enhancement of the ICT sector in critical areas such as network upgrades and the development of infrastructure. The Department was in the process of implementing the broadband policy which had an estimated completion deadline of 2020. The Department had several achievements, including the SA Connect Policy,  implementation of policy and amendment of key legislation, appointment of staff, notably three new Deputy Director Generals to the Department, and planned new legislation and policy. The Director General of the new Department noted the development of courses for e-skills, the launch of the integrated Ikamva National e-Skills Institute, the fact that the Department had made application for a banking licence, and the SA Connect Policy was explained in more detail. The Department participated in SADC initiatives. However, the under-achievements were also acknowledged, which included the failure to finalise the Community Broadcasting Strategy, to establish the Cyber Security Hub and to finalise international telecommunications regulations. There were delays in ensuring participation of small businesses in the Broadcasting Digital Migration, and set top boxes problems persisted. The Auditor-General (AG) raised issues around payments of suppliers, HR management, IT, supply chain and governance, but the actions taken to address this were described.

Members were .concerned, particularly, about the report of the AG, pointing out that the same issues were being raised over and over, and the AG expressed the view that there was inadequate leadership. They asked for details of staff who had not signed performance contracts, wanted more detail on the connectivity of schools, the real challenges around recruitment and what had been done to improve cyber-security. They challenged assertions of good governance, pointing to the difficulties with the South African Post Office, and expressed reservations about compliance with regulations, and the fact that the Annual Report seemed to be selective, were concerned at the under-spending and wanted more details on spending on consultants. They commented that some targets were still not realistic and were concerned that not enough had been done to support small businesses. The Committee would be writing to the Minister to get a written response on those not signing contracts. Other questions related to the appointment and resignation of the CFO between January and March 2014, legal claims, and what was done to bring ICT to rural communities.

Sentech had managed to get a second clean audit, had contributed R1 billion in shareholder value and had been able to achieve 90% of its objectives, having serviced all sites except two. Some investigations were ongoing into matters mentioned in the Annual Report. It had covered 82% of targets in respect of coverage by the Digital Terrestrial Television network and had covered gaps through the Direct-Home Satellite platform. There had been improved customer and stakeholders satisfaction and performance management had been introduced for senior executives. Governance was sound, a Corporate Social Investment strategy was focusing on schools, and risk management was being implemented. The Innovation Hub was described. The finances were now sound, with income having increased to over a billion rand, and profits to R210 million. Members said that the vacancy levels were "alarming" and called for explanations, asked about the disbursements to community radio stations, and the status of the project when SABC and Sentech had been working together on radio frequencies, as well as for explanations on the schools covered. The details of the court judgments were explained, in relation to Sentech's relationships with Zimbabwe and Botswana.

The .za Domain Name Authority (ZADNA) noted that it had achieved successes in this year, was a profitable company and was no longer reliant on government funding for its operations. It was taking responsibility for the African domain name. It had received an unqualified audit. Over 950 000 domain names were registered. It had finalised various charters and policies and was responsible to managing the dotCities project. It had developed and implemented communication and awareness campaigns, hosted conferences and launched validation systems. Members wanted more detail on the penalties which amounted to fruitless and wasteful expenditure, the payment for the Labour Court matters, the impact of one job offer that had been declined by the candidate, and what was done to secure assets.

The National Electronic Media Institute of South Africa (Nemisa) said there were a lot of challenges on the resources and budgeting constraints, the appointment of a new Chief Executive Officer had taken over a year, but there were achievements in terms of increased numbers of e-stakeholders, targeted new courses,  increased research capacity, increased awareness and better analysis of impact data to influence policy. Some of the aims for 2014 and beyond were outlined, but it was noted that whilst other countries managed to put their internet economy at around 6% of GDP, South Africa - and indeed the whole Continent - were lagging behind. The Institute established a model of collaboration to try to address this, and raise awareness, funding and the innovation base. Monitoring and evaluation particularly in rural areas, was in place. Nemisa said its teaching had impacted on about 3 500 people. It had realised that new technology of mobile apps was not being developed by those with computer science knowledge and had tweaked its programmes accordingly. The iKamva National e-skills Institute needed to be developed and enabling legislation put in place. Members asked about the feasibility of current projects, given that National Treasury had said there was no money, and questioned the non-achievement of so many targets. They questioned the payments to directors, consultants, staff costs and the high cost of insurance, particularly against the asset value, and then questioned why the assets appeared to have been under-valued. They felt that Nemisa was not accounting properly for even the small budget that it was managing.    

State Information Technology Agency (SITA) noted that there had been changes to the plans, and highlighed some of the achievements of the 2013/2014 Annual Report. Of the 39 objectives, 11 were achieved. SITA had received an unqualified audit, but with emphasis of matter, relating to a court case and to some irregular expenditure. The entity showed a surplus with a gross profit margin of 17.97%. Members wanted to know more about the profit margin, the vacancies, and the reason for so many employees in the Office of the CEO. Questions were also raised on the R16 million "scandal", the travel claims and what was being done to meet the Auditor-General's requirements.  Members wanted to know how performance was measured against objectives, what was done to assist small businesses, and whether the Board was working within its budget.

Broadband Infraco said that it aimed to expand the availability and affordability of access to electronic communications, particularly, but not exclusively, in under-developed and under-serviced areas. It had an open access network and supported public and private investments in the telecommunications sector.  Broadband Infraco provided regional connectivity to all six neighbouring countries and had customers across the SADC region. It had around 14 000 km of geographic coverage, 162 access points, and connectivity to all SADC countries. It had implemented Phase 1 of the Enterprise Resource Planning (ERP) programme, and renewed 40% of obsolete transmission equipment. Its revenue had increased and it generated R441 million cash. It had achieved 96% shareholder impact rating and 70% employee satisfaction. It had received an unqualified audit opinion. Members asked if there were risks if Broadband had one client, asked when it hoped to show a profit and asked for details on staffing, employee costs, what had been done in respect of transgressors, fruitless and wasteful expenditure and the position of the Chief Financial Officer. They also asked about alternative sources of funding.
 

Meeting report

Chairperson's opening comments

The Chairperson noted the presence of the Deputy Minister, Professor Hlengiwe Mkhize. She noted that the Minister of Telecommunications and Postal Services had written a letter to the effect that the South African Post Office (SAPO) would not be  present its report. SAPO had failed to submit that report and the Committee would continue to engage with the Minister. There would, however, be serious consequences for SAPO if it failed to submit the report after that. The Committee would not be prepared to consider or consent to any "bail-out" of SAPO. The matters would be discussed further on 31 October.

The Chairperson then noted that in relation to the Universal Service and Access Agency of South Africa (USAASA), it was not possible to hear this presentation because the Chairperson and Chief Executive Officer had had to travel to Europe for an international conference, and nobody would have been able to be here today to take responsibility., so the presentation was cancelled. However, it was noted that the Public Finance Management Act (PFMA) did set out compliance requirements and action would be taken against this entity should it be found that it had failed to comply.

Department of Telecommunications and Postal Services: 2013/2014 Annual Report briefing
Deputy Minister's introductory comments

Professor Hlengiwe Mkhize, Deputy Minister of Telecommunication and Postal Services, thanked the Committee for the opportunity to make the presentation. The Department of Telecommunications and Postal Services (the Department) had sought to create targets that were measurable and that resulted in people benefiting from the National Development Plan (NDP). The Department was in alignment with other key priority areas such as Transport, Energy, and Food Security. The NDP called for the development and enhancement of the ICT sector in critical areas such as network upgrades and the development of infrastructure.  The Department was in the process of implementing the broadband policy, which had an estimated completion deadline of 2020.

Professor Mkhize gave the following synopsis of key achievements of the Department:

- The Cabinet approved the National Integrated ICT Policy Review Green Paper which was followed by extensive public consultation
- There had been implementation of the Policy and Legislative Programme which saw the Cabinet approve Amendment Bills for Postbank, South African Post Office SOC Ltd., Electronic Communications and ICASA
- Cabinet had approved the National Broadband Policy referred to as “SA Connect” which also contained the National Broadband Strategy and implementation approaches
- There had been a migration of all SMS and non-SMS employees into the revised organisational structure by February 2014
- Staff had been appointed to critical positions such as the Deputy Director Generals for : SOCs Oversight & Enterprise Development; Information Society Development & Research and  ICT Infrastructure Support, thus ensuring a full complement of DDGs.

The following achievements were noted in terms of the ICT Policy Review:
- The Department had established the ICT Policy Review Panel of experts to review the Telecommunication, e-Commerce and Broadcasting policies
- The Department published the ICT Policy Framing Paper for public comments and also developed and tabled the ICT Policy Review Report
- The National Integrated ICT Policy Green Paper was developed and approved by Cabinet in December 2013 and gazetted for public consultation in January 2014
- There had been a National Consultative Conference on the National Integrated ICT Policy Green Paper on 3 March 2014, and Public Hearings on the National Integrated ICT Policy Green Paper were conducted in March 2014 in Provinces.

The following achievements noted in terms of the Policy and Legislative Programme:

- The Postbank Amendment Bill was introduced to Parliament, after which public hearings and deliberations were held in September 2013. This Bill was signed by the President.
- The South African Post Office (SAPO) SOC Ltd Amendment Bill was approved by Cabinet in June 2013. The Bill was signed into law and became operational in January 2014
- The Electronic Communications (EC) Amendment Bill was tabled in Parliament in the first quarter. The Regulatory Impact Assessment report was also aligned with the latest EC Bill and submitted to Parliament
- The Independent Communications Authority of South Africa (ICASA) Amendment Bill was introduced to Parliament during the first quarter.

Director General's Annual Report briefing
Ms Rosey Sekese, Director General , Department of Postal and Telecommunication Services, continued with the Annual Report briefing.

She stated that targeted e-Skills course-ware  had been developed, in line with the National e-Skills Curriculum Framework, in collaboration with key stakeholders. The Minister had launched the virtual network on 20 May 2013. In February 2014, the integrated Ikamva National e-Skills Institute was officially launched by the Minister. The e-Strategy framework had been developed in line with the Electronic Communications and Transactions (ECT) Act and the National Development Plan (NDP).

The application for a Banking License had been submitted to the Registrar of Banks. 

The Department undertook the process of revising the National Broadband Policy through a policy referred to as “SA Connect”, which had been approved by Cabinet in December 2013. SA Connect contained the National Broadband Strategy and implementation approaches through a four-pronged approach focusing on Digital Readiness, Digital Development, Digital Future and Digital Opportunity. The Department completed connectivity to 1650 schools by connecting them to the Wide Area Network.

South Africa also participated in the Committee that developed a short-term action plan for 18 projects which were adopted by SADC Ministers in terms of the SADC ICT Master Plan. The SADC regional and national integrated broadband infrastructure project was the flagship project. Furthermore, South Africa had made substantive progress in establishing its own Internet Exchange Points, which were in Cape Town, Durban, Grahamstown, Helderberg, Johannesburg and Centurion.

 Approval had been received from the Internet Corporation for Assigned Names and Numbers (ICANN) for .ZACR to operationalise dot.Africa. The signed Agreement exchange between .ZACR and ICANN had taken place on 27 March 2014 in Singapore. South Africa also successfully hosted a meeting of the Global Standards Initiative for Internet Protocol Television (IPTV) of Study Group 16.

Ms Sekese admitted that there had been some significant under-achievements in this reporting year. She noted that the draft Community Broadcasting Support strategy was developed and internally consulted, but that it could not be finalised as the strategy needed to include a statement of financial implications. However, in the 2014/15 financial year, the Department had finalised the draft Community Broadcasting Support strategy, which was now ready for public consultation.

The National Cyber Security Advisory Council (NCAC) was appointed and the Virtual Cyber Security Hub was established. However, the Department was unable to establish the Cyber Security Hub as planned, largely due to the reallocation of funds to other priority projects.

There had been plans for the ratification of International Telecommunications Regulation, but the Department was unable to submit the International Telecommunications Regulations to Cabinet for approval.  The delays had been due to the prolonged waiting period for the International Telecommunications Regulations from the International Telecommunications Union (ITU) before South Africa could commence with the ratification process.

With regard to the implementation of the ICT Small, Medium and Micro Enterprise (SMME) Programme, there had been delays regarding the participation of SMMEs in the Broadcasting Digital Migration (BDM) value chain, which were related to the delays in the implementation of the broader BDM programme. Of most significance was the non-achievement of the roll-out of Set Top Boxes (STBs) due to the contention on the STB control system amongst broadcasters and certain manufacturers. In an effort to boost more public awareness about BDM, a Media Plan for the BDM Awareness Campaign was developed and the BDM awareness programme was implemented through numerous public events, media platforms, billboards, radio stations, exhibitions and literature distribution, as well as key stakeholder engagements.

Mr Sam Vilakazi, Deputy Director General: Administration, Department of Telecommunications and Postal Services, presented on the financial performance of the Department, setting out the annual appropriation, Departmental revenue and expenditure (see attached presentation for all figures). There had been surrender of some unspent funds. He also outlined the allocations to programmes, and noted that R4.741 million was over-spent on ICT International Affairs and Trade, which had resulted from exchange rate discrepancies in the payment of international fees. He gave a breakdown of the line items. The largest  transfer payments were made to Universal Services Access Fund (USAF) and SENTECH. Community radio stations also received payments (see attached presentation for full details) and an amount of R10.826 million was paid to the International Telecommunications Union, a subscription that he described as "spiralling out of control".

Ms Sekese stated that the Auditor-General had raised issues around the payment of suppliers, human resources management, Information Technology (IT), supply chain management, governance and expenditure management.

In relation to the payment of suppliers, the Department was currently implementing an invoice receipt register. Invoices were date stamped upon receipt. Monthly follow up on outstanding commitments were being done, and the RR101 report was used to monitor the payment progress of invoices received and captured. Follow ups on long outstanding invoices were done and exception reports were submitted to National Treasury.

In terms of actions taken to address the human resource management concerns, Ms Sekese noted that critical positions for non-SMS and SMS levels had been identified and advertised. Interviews and appointments were at various stages. The current vacancy rate in respect of funded positions was 11.2%, which represented a significant reduction from the 34% last year. As the Minister had already outlined, there had been appointments to critical positions, such as the DDG: SOCs Oversight & Enterprise Development; DDG: Information Society Development & Research and DDG: ICT Infrastructure Support, thus ensuring a full complement of DDGs.  Verification and pre-screening on all appointments was being conducted with the assistance of the State Security Agency prior to appointments.  Performance agreements for 2014/2015 had been signed, with the exception of two officials, against whom disciplinary action had been taken. This represented an improvement from the previous year when seven officials had not complied.  The CFO was appointed in January 2014 and resigned in March 2014. The position was advertised but no suitable candidate could be found. A search had commenced with interviews expected in mid-November. The previous CFO’s non-disclosure was discovered before his appointment, but it was not reported by an HR official who had since been charged and released from the employment of the Department.

In terms of prevention and detection of Irregular expenditure, Ms Sekese reported that compliance reviews had been conducted on all transactions pre and post procurement to ensure that there was full compliance with policies and procedures of the Department. The Internal Audit unit conducted regular checks on compliance with Supply Chain Management (SCM) policies and procedures, with all suppliers in the Department being subjected to pre-screening by State Security Agency.

Expenditure on projects was being monitored on a monthly basis, to ensure that funds were used in line with the allocation.

Ms Sekese reported that the Department exhausted its entire budget due to prior year commitments, ad hoc projects which were not budgeted for, reprioritization of funds, transfers and currency fluctuations on international organisations' membership fees. Audit outcomes from 2012/13, which related to management of leave, overtime, management of fixed assets, appointments made on unfunded positions and targets which were not specific and measurable had been resolved in the current financial year.

 

Discussion

Mr C Mackenzie (DA) said that the Auditor-General South Africa (AGSA) had expressed concern on the report of the Department and there was scope for improvement. He asked for clarity on the two performance contracts that had not yet been signed. AGSA noted that there was inadequate leadership capacity, despite critical positions being filled, and he wanted to hear more on that, and on whether the Department had been engaging with the South African Qualifications Authority (SAQA) on the issue of appointments.

Ms D Tsotsetsi (ANC) also asked who the individuals were who had not signed performance contracts. She asked whether connectivity of schools was being done for urban schools or rural schools, since there was a Government priority on rural development. She asked what the actual challenges on the ground were on the issue of recruitment. Finally, she needed to know whether there had been any improvements in cyber-security to prevent scams.

Ms N Ndongeni (ANC) sought clarity on what the impact of digital migration was. She pointed out that whilst the Department said that it subscribed to good governance,  SAPO had collapsed under the Department's watch. She sought clarity on the R4.7 million of  unauthorised expenditure and the figures of R1.7m on the financial statements.

Ms M Shinn (DA) asked about the under-valuation of R18 million, and pointed out that a third of a million was written off. She also needed the figures for the cost of the rationalisation, more detail on the media plan, cost of overtime, and what the spending of R0.5 million entailed. 

The Chairperson stated that there were contradictions on the Department's slides, 31 and 32 against pages 126 and 112 respectively on the Annual Report. She noted that the Department had not complied with section 77 of the EC Act and she had reservations about the Department's failure to comply with regulations. She criticised the Department on its "selective presentation" of facts in the Annual Report. The State Owned Entities had not achieved the targets. The Department's argument on the unauthorised expenditure arising as a result of fluctuating exchange rates was not plausible. The Department's increase in expenditure should have been coupled with an increase in service delivery and achievements against targets. The Department had also underspent its budget, and she pointed out that the money could have better been spent on service delivery. She wanted to know whether the spending of R44m on consultants could be justified.

The Chairperson noted that once again, a problem of lack of internal controls had been noted by the AGSA, as it had also in preceding reports. Staff posts had not been filled within the 12 month period prescribed by the Public Services Regulation. Inadequate work had been done to support SMMEs. The issue noted by the AGSA that the Department was a Department driving IT policy but lacking IT capacity itself was quite serious. The Department had set too many targets which were not realistic.

Ms Sekese replied that on the point of internal controls, everyone had a duty to ensure that rules and regulations had been complied with.

Ms Kirthi Pillay, Chief Director: Human Resources, Department of Telecommunications and Postal Services, said that in the current period, only  three performance contracts had not been signed, and this was a reduction on the seven in the previous period.

The Chairperson said that the Department needed to convey the exact number of people who had not signed by 31 May 2014.

Mr Themba Phiri, DDG: Policy, Department of TPS, said that in terms of the 86 members of SMS employed, 40 had signed, and disciplinary steps had been taken against those who had failed to do so.

Ms Sekese replied, in relation to the comment on inadequate leadership capacity, that the Department was working on leadership development. With regard to SAQA, the Department forwarded candidates' credentials to SAQA for verification. On the matter of Broadband connect, the Department was currently dealing with a couple of issues, but was working with National Treasury on securing funding to advance the programme.

Mr Sam Vilakazi, DDG: Administration, Department of TPS, said that there was expenditure incurred in relation to the ICT Policy Review and the process involved interaction with companies. Consultants were appointed on that basis to assist with the process.

Mr Phiri noted that where fruitless and wasteful expenditure was concerned, there were procedures to check whether the employee had been negligent, and where the employee was found to be negligent s/he would be asked to reimburse the money. However, sometimes it cost more to recover the money through legal means and it would not be prudent to attempt to recover. He explained, in relation to the R4.7m overspent, that there had been expenditure that exceeded the R16m budgeted for.

The Chairperson asked for further clarity on the R4.7m, saying that this did not appear to be a satisfactory explanation.

Ms Sekese said that the Department had experienced cuts, and previously the money allocated for the process had been R21m.

The Chairperson noted that the Department had failed to reprioritize, after it had experienced budget cuts.

Ms Sekese replied that the budget had gone down but the commitments had remained the same and what was needed was a scaling-down of costs in order to avoid a repeat in the 2014/15 budget.

The Chairperson asked what the status of the 112 toll free number was.

Ms Sekese replied that the project had not taken off the ground and the money had subsequently been repossessed by the National Treasury so that plans needed to be made to reacquire the money from the National Treasury.

The Chairperson noted that the project should have been completed before the 2010 world cup to ensure that tourist had a direct hotline to call to access help services.

Ms Pillay said that on the issue of leadership and development programmes, that the Department had done research into the matter, and was on track to implement programmes to enhance skills in existing posts. She added that, in regard to the issue of pre-screening, the Department was in a process of working on verification of qualifications with SAQA.

The Chairperson asked whether it was correct that only six SMS members had signed performance agreements.

Ms Pillay replied that, at that level, four4 agreements had been signed and there were two outstanding agreements.

The Chairperson asked whether this was on DDG level and who the DDGs were who were involved.

Ms Pillay responded that she did not have that information at hand.

The Chairperson stated that she would ask the Minister to respond in writing, on who did not sign, and what action had been taken.

Ms Pillay confirmed that the Chief Financial Officer position had been filled in January, however the CFO had subsequently resigned in March.

Ms Sekese said that the candidate had a disciplinary matter that was under way old where he had previously worked, in the Northern Cape, and the Acting Chief Director who had not disclosed this had also had disciplinary action taken. The CFO resigned when informed that disciplinary action would be taken against him. Technically, when he was interviewed, he was not Chief Financial Officer, but the Director of Internal Audit.

Ms Pillay said that, in terms of the vacancies that had been open for more than twelve months, an annual Persal clean-up had been initiated.

Ms Tsotetsi said that there were no reasons given as to why people had been rewarded and on when performance appraisal had been conducted.

Professor Mkhize asked what was being done to bring ICT technology into rural communities.

Ms Shinn asked for clarity on the employee settlement of R425 000 and the legal claim of R800 000.

Mr Vilakazi said that various legal claims had been made in the current year, so this figure was not limited to a single claim, and the Department was happy to provide a list of all the claims involved.

Ms Shinn said that only one claim related to the R804 000.

Mr Vilakazi said that the Department would provide a list of all claims and their descriptions.

Ms Pillay replied that she could not offhand recall who was the individual involved in the claim, but she was happy to respond to the committee in writing.

The Chairperson said that the information should be lodged with the Committee by 24 October 2014.

The Chairperson stated that there were people being paid to conduct their duties but were failing to do so.

Sentech 2013/2014 Annual Report briefing

Mr Thebo Mongake, Chairperson, Sentech, gave some opening remarks. He said that one of the highlights of the current financial year under review was that the entity had managed to get a clean audit for the second year running. The entity also continued to realise and contributed R1billion in shareholder value.


Mr Setuno Mohasi, Chief Executive Officer, Sentech, gave a presentation on the Annual Report. The entity was able to achieve 90% of its objectives. All sites had been serviced except two. One of the sites was the one in Clifton where negotiations were under way with the Council, to put into place a site without actually disturbing the look and the feel of the environment. The other site was in the Eastern Cape, where the problem was to secure power to the site from Eskom.

In terms of the Audit opinion, there were no findings on pre-determined objectives and on compliance. The report did note that there were investigations on matters mentioned in the Annual Report which were still under way.

Ms Rudzanayi Rasikhinya, Chief Financial Officer, Sentech, said that the entity had achieved 82.13% of its targets in terms of the population covered via the Digital Terrestrial Network.  A gap-filler platform had been created through the Direct-Home Satellite gap filler platform, which resulted in 100% coverage. The Broadband Master Plan Programme had also been submitted.

In terms of VSAT terminals, there had been a target of 50 installations, but 137 installations had been met. There was also improved customer and stakeholder satisfaction. Performance management was also introduced, with all senior executives signing performance contracts.

Mr Mohasi spoke to the governance targets. He noted that the company continued to design and implement the necessary governance systems to ensure compliance. In terms of human resources, an integrated performance and development management system had been successfully implemented at executive and management level.

In relation to Corporate Social Investment (CSI), SENTECH endeavoured to focus its resources in the ICT sector with special emphasis on connecting institutions of learning. This related to the provision of VSAT connectivity to primary and secondary schools in rural and/or under-serviced areas. Within this strategy, and in instances where the school did not have computer facilities, the CSI provision was further extended to computer hardware and software. The period of sponsored internet connectivity was five years, after which the Department of Education and/or the municipality in the area would take over the account. This was agreed upon prior to installing the Computer Labs. SENTECH also continued with its investment in Mindset Learn.

The Risk Management Policy Framework was revised and adopted, a Fraud Prevention Plan and Assurance Process Plan were prepared and adopted, and risks linked to Key Performance Indicators (KPIs) were identified and assessed.

The Audit and Risk Committee (ARC) ensured that SENTECH had an effective risk-based and independent Internal Audit Function (IAF), governed by an Internal Audit Charter, which was approved by ARC. SENTECH also had a full-time Compliance Officer who reported directly to the Executive Internal Audit. During the period under review, the Compliance Unit conducted the monitoring of health and safety requirements; developed a Promotion of Access to Information Act (PAIA) Manual which was approved by Exco and the ARC; developed a Compliance Plan for 2014; and prepared a high-level awareness document in relation to the Promotion of Administrative Justice Act (PAJA), PAIA and Protection of Personal Information (POPI).

At the beginning of the 2013/14 financial year, SENTECH resolved to establish the Innovation Hub, specifically focus on the development of new platforms and business solutions that would enable the company to take advantage of these new opportunities. Over the past year, the Innovation Hub had focused on the new product roadmap that formed part of the Digital Terrestrial Television (DTT) Business Plan. Key to this new product roadmap was the development of platform services for digital TV that incorporated the upgrade and renovation of the SENTECH Direct-To-Home Satellite Service. In this regard SENTECH created a platform brand, FREEVISION, to host the services of different customers.

Ms Rasikhinya said that Group revenue from operations increased by 8.4% to R975 million. Total income for the Group increased to R1 062 million while Group operating profit from operations increased by 4% to R201 million. The cash generated from operations decreased to R47 million from R226 million. The Broadband funding, including interest net of taxation, of R622 million was returned to Treasury during the period. R110 million was spent on additions to Property, Plant and Equipment in 2014 using SENTECH’s own funds. Other Income of R41 million had resulted from the settlement of the Post-Retirement Medical Aid Benefit. The taxation expense decreased due to the deduction of amounts paid to National Treasury for Broadband and Eassy. Cash flows from financing activities decreased due to the repayment of Development Bank of South Africa loan in full, and payment of the ICASA settlement liability, the repayment of the Broadband and Eassy funds to National Treasury, and payments made to employees who agreed to the settlement of their post-retirement medical aid benefit obligation. In the future financial periods, Sentech planned to spend R645million on Capital Projects over the next 3 years, using its own funds.

Discussion

Mr Mckenzie stated that the vacancy levels were alarming. He asked what effect the lack of classification of the DTT was having on SENTECH’s business. He wanted more details on the R1.9million disbursement to community radio stations.

Ms Tsotsetsi asked the status of the judgement, and what role SENTECH was playing in the availability of educators.

Ms Ndongeni asked about the status of the project that ran in the 2011/12 financial period, when Sentech assisted SABC with frequencies.

The Chairperson said that vacancies, in terms of the Public Service requirements, should be below the 8% mark, and also required an explanation. An explanation was also needed on why three schools had been left out, in terms of the targets. She asked for more detail on the status of the Low Power Transmission Project, which seemed to have been abandoned, and the status of the SAP programme that the company had planned to upgrade. The strategy to resolve issues around IT and monitoring must also be set out in more detail.

Mr Mohasi replied that vacancies were high, however the company was making an effort to make appointments and to date several more appointments had been made. Skills that were required by SENTECH were not in abundance in the sector. In addition, the broadcasting sector was changing and the company was making an effort to work with institutions of higher learning to attract the skills that were needed. Hopefully, by the time SENTECH next made a presentation to the Committee, this problem would have been resolved.

In relation to DTT, he explained that there were two issues of dual elimination, the first being minimum performance of the period and the issue of the running of a dual network to ensure that all areas were covered. Discussions had been taking place, with National Treasury, particularly in relation to how to reduce costs. For 2014/15 the National Treasury would provide the money to eliminate the dual elimination cost.

He explained that in relation to community broadcasters, each community radio station received a subsidy of R8 000 monthly.

He then moved to the details of the court judgement. SENTECH was in compliance and had taken two trips to Zimbabwe and Botswana, where negotiations with the regulators there had been held, to ensure that the SABC signal was not accessible in these countries. In Botswana, there had been about five cases reported, however arrangements had been made with e-Botswana to report any future occurrences. There was a need to keep systems upgraded. These incidents had occurred at a time when SENTECH was in financial difficulty and had thus not been able to update its systems.

SENTECH was indeed interested in the training of educators Discussions had been held with ICASA, to work together on the matter and formalise the ideas discussed.

On the issue of FM expansion, the company was trying to align itself with SABC. SABC would, however, not be able to utilise all the 197 frequencies.

On the point of schools, only 11 of the targeted 14 schools had been connected and SENTECH was now working with the Department on the matter.

The Low Power project was divided into two parts - one in relation to TV and the other in relation to the radio. SABC would procure the necessary satellites on behalf of the communities and install them.

Mr Mohasi said that, with regards to the SAP facility, a decision had been made to upgrade it and functional upgrades were in the process of being made.

Professor Mkhize asked whether SENTECH could provide a better way to account for its targets that was more suited for the lay person.

The Chairperson asked for clarity on the issue of investigations.

Mr Mohasi said that the company worked with small businesses in two ways,firstly as a supplier of goods and services and secondly when they used SENTECH’s systems in the provision of their services. SENTECH used open access systems. It generally took a lot for a company to be capacitated in the industry.

The issue of targets as percentages was a very difficult one. This was because of feedback from the AGSA which required that targets be specific and measurable. However, the company would work to address this and possibly try link the percentages to other data, as had been done in the past.

.za Domain Name Authority (ZADNA) : 2013/14 Annual Report briefing
Dr William Rowland, Board Member, .za Domain Name Authority (ZADNA), noted, in his opening remarks, that ZADNA had had a very good transitional year. There were almost ten domain names that were operational. The company was now profitable and no longer relied on government funding for its operations. ZADNA was also taking responsibility for the African domain name.
 

Mr Vika Mpisane, Chief Executive Officer, ZADNA, said that ZADNA had received an unqualified audit. In terms of the ZADNA policy and regulation, this applied to registrants, registrars and registry operators, who fed into the domain names such as Co.za, Net.za, Org.za, Web.za, and Law.za. In terms of growth, 950 156 domain names had been registered. In terms of performance against objectives, considering policy and regulation objective, ZADNA finalised the SLD charters and policy. In terms of the dotCities policy, ZADNA was responsible for managing the list, with the permission of Internet Corporation for Assigned Names and Numbers (ICANN)

In terms of promotion and development objectives, he noted that ZADNA had implemented communications and awareness campaigns, used media and social platforms and redesigned the website. A campaign on the dot cities policy was launched to increase stakeholder relations, and improve marketing and awareness. In terms of the infrastructure enhancement objective, the DNSSec deployment planning had been finalised but implementation had been deferred to 2014/15, due to the dotCities launch. Considering data redundancy, local ZACR registry data escrow was deferred to 2014/15 due to the dotCities launch. On the internet governance objective, there was continued participation at ICANN and South Africa subsequently hosted the ICANN-47 Durban conference. On the point of rights protection, the Alternative Dispute Resolution (ADR) process continued to grow. Close to 200 disputes were resolved, most of which resulted in domain name transfers.  The ADR Fund was, however, under utilised. The mark validation system was launched and allowed for upfront protection of intellectual property rights.

Looking at financial matters, revenue came from the ZACR SLD domain name revenue. ZADNA was now self-funding and no longer received money from the government. If any money was to be received in future it would be used for special projects. Surplus revenue was to be invested as a contingency.

Discussion

Mr Mackenzie asked about the R229 000 penalties that were assessed as having amounted to fruitless and wasteful expenditure, and the R208 000 in relation to the Compensation Commissioner.

Ms Shinn asked about the reduction in income and the increasing of domain names. She asked whether the computer system had been changed.

Ms Tsotetsi asked about the fact that a manager had declined an offer, and the impact the small budget had on the business.

The Chairperson asked what was being done about asset management, to prevent the untimely extinction of the business.

Mr Mpisane explained that the reference to the Compensation Commissioner was money paid to the Department of Labour. ZADNA had 930 000 users and was upgrading from the old system. The new system was charged less, in order to facilitate users migrating to the new system. In terms of the manager, the appointment process had taken too long, and the candidate had changed his mind. The company was taking surplus funds and investing them so that it could continue to survive for a time if the number of customers dropped.

Professor Mkhize asked about the mandate and internal governance objectives of ZADNA, and how it fed back to national processes.

Mr Mpisane said that the mandate of ZADNA came from the ECT Act, and the policies were dealt with by the Department. The ECT Act however required ZADNA to advise the Ministry.

National Electronic Media Institute of South Africa (Nemisa) 2013/2014 Annual Report

Dr Molatelo Maloka, Board Chairman, Nemisa, gave his opening remarks. He said that there had been major leaps taken, and there were a lot of challenges on the resources and budgeting constraints. Appointment of the Chief Executive Officer had taken over a year.
 

Dr Harold Wesso, Acting Chief Executive Officer, Nemisa, said that the Institute was working on building e-astuteness in order to address unemployment, inequality and poverty. Some of the major achievements were the increased number of e-stakeholders, targeted new courses, increased research capacity, increased awareness and better analysis of impact data to influence policy.

Looking at 2014/15 and beyond, there was a need to better align collective e-skills efforts, develop evidence based policy, youth intervention and increase funding. Internationally, some countries' internet economy constituted about 6% of the Gross Domestic Product, but in South Africa the internet economy only contributed 1.4% of the Gross Domestic Product (GDP). Europe was always working on a target by 2015 that 90% of the jobs would require e-skills. As a continent, Africa was falling behind. There was a lack of e-skills human capacity on the continent as a whole. Locally, the Institute was gaining more momentum and importance amongst the key stakeholders. The Institute’s model of collaboration allowed key stakeholders to become actively involved either through direct investment of human resources, access to global expertise or global networks. More importantly, there was an evident need for a national catalyst to drive a coordinated e-skills discourse.

 

Programme 1 focused on Multi-stakeholder collaboration which brought together all stakeholders across government, business, education and civil society, to address the e-readiness rankings of South Africa. Programme 2, Teaching and Learning, focused on the implementation of targeted courses to address e-skills gaps to impact directly against the NDP and connect South Africa.
Programme 3: Research and Innovation aimed to build an innovation base for e-skills. Programme 4: Aggregation attempted to resource, and test the impact of assessments against NDP at all levels (community, provincial and national).
 

In terms of ICT for Rural Development, the Institute was trying to innovate, and monitoring and evaluation of programmes was in place. The Annual Report 2013/14 showed that in terms of deliverables, the Institute was lacking capacity and was trying to effectively integrate the three entities. The Institute had six co-labs and was in the process of trying to launch three more co-labs. There were a number of people with whom the Institute was collaborating, and who were interested in the work that the Institute was doing. The impact of its teaching reached out to about 3 500 people. The Institute had identified smart communities’ knowledge centres, where it was in the process of building e-astuteness. In Gauteng, the Institute was hosted by the University of Pretoria. The Institute was working on tweaking research by doctoral students so that it could relate to ICT.

Dr Wesso noted that, in relation to advocacy and awareness, the Institute was doing well in its campaigns and workshops. Students who were developing mobile apps were not generally from the science faculty, but rather from law and business faculties. He noted that the current developments indicated that a person did not have to have a degree in computer science in order to build a mobile app. An app simply needed to focus on the needs of the community and be simple to use by any lay person

Dr Wesso noted that in the future, the Ikamva National e-skills Institute needed to be developed and enabling legislation put in place for iNeSi to carry out its mandate. An appropriate funding allocation  needed to be made available to young people not employed (NEETs) as set out in the NDP, and deep rural, rural, and peri- urban communities.

During the year the Board also approved the Code of Conduct, approved the Health and Safety policy, and put in place a risk management policy. The Institute now had a functioning Internal Audit that had been outsourced to ORCA and applied a combined assurance model, taking into account three tiers of assurance namely, management, internal audit, and external audit in terms of the King Code III.
 

Discussion

Ms Sekese said that the National Treasury had said that there was no new money and the Institute had to shift and reprioritise in order to execute its new projects. The current plans of the Institute, based on that premise, were not feasible.
 

The Chairperson said that the Institute had failed to achieve the majority of the targets.
 

Ms Sekese said that it was a great initiative, however there was a need to go back to the drawing board and rework some of the finer points. There was a need to look at existing money, such as the National Student Financial Aid Scheme (NSFAS) special projects money and see how it could be reallocated to the Institute. This was a critical policy meant to also assist people to penetrate into the SMME platform.
 

Mr Mckenzie asked about the large amount of money paid for Director emoluments, the monies paid to consultants, staff costs, the insurance amount of R1.45m, particularly when viewed against assets of R2.8m, and on receivables.
 

Ms Tsotsetsi asked how the Institute ensured that information filtered down to people in the communities.
 

Ms Shinn pointed out that Institute had very little funding but it was failing to account properly for the small budget that it had. She asked about the staff incentives, and the fact that a Director earned more than a Chairman.
 

Ms Ndongeni required an explanation on the vacancies and the status of the CFO.
 

Ms Sekese noted that it was good for the Institute to have aspirations however they had to be viewed in moderation.

Dr Wesso replied that there was nothing new in relation to the budget. The Institute had been set up by the Department of Communications (as it then was) in 2008. It had been a flagship project for the Department. Before integration, Nemisa had a budget of R37 million, which had remained more or less the same after integration with two more entities. The Institute was, however, working closely with the private sector and received about R32 million from the private sector. The Institute had also managed to execute most of its programmes with the assistance of host universities. The Institute was now working on a business case that would include models for funding. The Institute could not fall into the existing categories and it was a hybrid pilot programme based on 21st century modelling and benchmarking. The Institute was developing programmes that were unique to South Africa.

Ms Moira Malakalaka, Chief Financial Officer, Nemisa, stated that when Nemisa started it had a budget challenge. It was educating about 135 children and now was experiencing more pressure on resources because of the two additional entities  whom it had merged: ESI and ESSA. The Institute was now working on ways to cut costs and lessen the burden on existing resources.

She explained that the thirteenth cheque did not apply to all employees. Each employee had the discretion to structure his or her salary in the manner that they could receive a thirteenth cheque.

Ms Malakalala said, in regard to property, plant and equipment and insurance, that the uniqueness of the situation was that the Institute worked with delicate and expensive equipment to simulate the work environments where the students would eventually be dealing.

She noted that, in relation to Director’s emoluments, the figure in the Annual Report not only included directors but executives and senior staff. She explained that the apparent discrepancy between the figures of Director and Chairman arose because the Directors were paid per meeting, so the more meetings they attended, the more they would be paid.

In terms of invoicing, she noted that the Institute had managed to get 25% of the debtors to pay, and was working on a strategy to have students sponsored by donors instead of them paying individually. The canteen had been abolished as it was very costly to maintain.
 

In terms of staff, the Institute was working on having staff dedicated to each Province instead of having staff rotate between provinces. The use of consultants had been kept in check and Nemisa had only employed the services of consultants for accuracy systems and audits.
 

Mr Mackenzie again asked for an explanation on the high cost of insurance, given that the assets were valued at under half a million rands.

Ms Malakalaka replied that the premises Nemisa was using had been donated to the Institute and had been accounted for as such in the notes to the Annual Report.
 

Mr Mackenzie asked why the asset was being valued at less than its actual value.
 

Ms Malakalaka replied that this was due to the asset valuation model being employed by the Institute.
 

State Information Technology Agency (SITA) 2013/2014 Annual Report briefing

Mr Jerry Vilakazi, Chairperson of the Board of Directors, SITA, gave his opening remarks and said that the Board had made a decision in 2013 to change the way that things were being done in order to be able to meet the Annual Performance Plans (APP) for 2013.
 

Mr Freeman Nomvalo, Chief Executive Officer, SITA, said that some of the existing members at the time had been charged when the Siyashesha intervention was made. He set out the achievements of SITA in the past financial year, saying that it had:

- Maintained and supported the Movement Control System
- Securely protected voters roll by hosting voters’  data on behalf of Department of Home Affairs (DHA)
- Supported the custodian systems of the identities of citizens and residents of the Republic i.e. NPR, and HANIS
- Maintained and supported systems that pay social grants
- Enabled banks to verify authenticity of IDs of South Africans on the National Population Register (NPR) through the government network
- Annually issued Grade 12 results and certificates as per schedule
- Successfully printed Government IRP5 and IT3 certificates for the 2012/2013 financial year, bus tickets for Tshwane and Grade 12 and Higher Education certificates

Mr Nomvalo said that, as at 31 March 2014, there were 39 performance objectives on the scorecard, of which 11 were achieved, 10 partially achieved and 18 not achieved. He pointed out which targets had been met and not met (see attached presentation for details). SITA received an unqualified audit opinion, with some emphasis of matters. He explained that SITA was a defendant in several legal matters, and there had been irregular expenditure of R28 million. There were also additional matters raised by the AGSA in terms of several instances of non-compliance with the laws and regulations pertaining to the procurement process, contract management and adherence to internal control. Revenue had increased from the previous year, and was compared to the 2010 figure. The net assets had also steadily increased since that date.

In terms of financial performance, the entity had a revenue of R4. 692 billion, a net surplus of R45 million, total assets of R2.587 billion and capital expenditure of R356 billion. The gross profit margin was 17.97%


Discussion

Ms Shinn asked about the "generous" profit margin of 18%, the vacancies, and the large number of employees in the CEO’s office. She wanted more detail on the R35million irregular expenditure, the R16 million scandal by employees, ad hoc payments to board members and large travel allowances.
 

Ms Ngongeni asked what was being done to ensure compliance with the recommendations of the AGSA.
 

Ms Tsotsetsi also asked why the office of the CEO had so many staff and noted that a pattern of non-compliance was developing in the entity.
 

Ms J Kilian (COPE) asked the entity to have clear, measurable goals, and wanted to know whether the staff had performance contracts. She asked what steps were being taken to improve the everyday lives of people in the public sector.
 

Professor Mkhize asked about the point raised by the AGSA on the procurement officer and findings on ICT industry growth.
 

The Chairperson asked a question about how performance was measured against objectives, and whether SITA was reconfiguring its objectives. She asked SITA how it was managing the budget.

She asked SITA whether it was putting mechanisms in place to assist SMMEs, what was being done to alleviate the vacancy rate and matters highlighted in the report of the AGSA. She also wanted more comment on the issue of corruption, post retirement employee benefits and whether the Board was still working within its budget.
 

Mr Vilakazi said that SITA was, at one stage, in a crisis and there had been need for intervention. The Board had to meet frequently with various stakeholders in order to take control of the situation, and this had resulted in the high expenditure by the Board.
 

With regards to the staffing position, the board was currently discussing the matter, and still needed to engage with the new minister.
 

Mr Nomvalo said that SITA had identified cost reduction as a critical issue. The entity hoped, in the next four to six weeks, to write to the Committee. In terms of availability of information, the entity had an internal verification process. He explained that where legislation had not been complied with, SITA had taken the necessary action against offenders and SITA was in the process of establishing culpability against offenders. In terms of the travel allowances, SITA had disciplined two staff members on abuse of this facility.

Mr Nomvalo noted that SITA had 2241 full time employees, 561 contractors were employed, and 56 interns. In terms of people resigning after corruption, he noted this was a policy question, and there was a need for a Public Sector blacklist to prevent such people from simply moving to other positions.
 

Mr Jobo Moshesh, Chief Financial Officer,  SITA, spoke to questions on the post-retirement medical aid fund. He noted that, after a merger, some staff members had come with the Fund which SITA was obliged to continue.
 

Broadband Infraco 2013/2014 Annual Report briefing

Mr Mandla Ngcobo, Chairman of the Board, Broadband Infraco said that the mandate of the entity was two-fold. The legislative mandate was set out in the Broadband Infraco Act No.33 of 2007.Its main aims were to expand the availability and affordability of access to electronic communications. This was specifically:
- including, but not limited to, under developed and under serviced areas
- in support of projects of National Interests
- in accordance with the Electronic Communications Act and commensurate with international best practice and pricing
- to be done through the provision of electronic communications network services and electronic communications services.

 

Ms Puleng Kwele, Chief Executive Officer, Broadband Infraco, said that Broadband Infraco boasted of an open access network and supported public and private investments in the telecommunications sector. Broadband Infraco was the neutral supplier of infrastructure to Cell C and Neotel. It also provided links for dominant players like MTN and Vodacom. Broadband Infraco also had a policy to ensure that there was no duplication of infrastructure with other telecoms infrastructure providers like Telkom, DFA, and FibreCo. Broadband Infraco provided regional connectivity to all six neighbouring countries and had customers across the SADC region.
 

As at 31 March 2014, Broadband Infraco had 13 000 km of geographic coverage, 162 access points, and connectivity to all SADC countries. Phase 1 of the Enterprise Resource Planning (ERP) programme had already been implemented, with thirteen sites planned for the oncoming financial year. The entity also managed to renew 40% of its obsolete transmission equipment.
 

Mr Iemrahn Hassen, Chief Financial Officer, Broadband Infraco, said that the entity had received a revenue of R302.4million, up by 27% from the previous financial year, and generated cash worth R441 million, which was an increase of 28.8% compared to the previous financial period. A shareholder impact of 96% was attained, together with a 70% employee satisfaction rate. The entity also managed to receive an unqualified audit opinion from the AGSA.
 

Discussion

Mr Mackenzie asked about the risks associated with having one main client. He asked when the entity anticipated to make a profit. He wanted more details on employee expenditure, and the impact of the reduction in marketing costs.
 

Ms Ndongeni asked about the status of the Chief Financial Officer post, the fruitless and wasteful expenditure, and what was being done to mitigate the expenditure.
 

The Chairperson asked about what had been done against transgressors. She wondered about the, possibility of revenue loss due to service migration, asked for more comment on the issue of the accumulated deficit, and the payment of the Chief Financial Officer as a consultant.
 

Professor Mkhize asked whether there were any alternative sources of funding.


Ms Shinn asked about whether the coverage of cables on the ground was 13 000km or 14 000km.


The Chairperson asked about the use of credit cards by employees.
 

Ms Tsotetsi asked a question on the costs.
 

Mr Ngcobo said that on the issue of ECNS licenses, the entity had applied for a licence but had not received one and was looking for a partner who had a licence.
 

Ms Kwele said that, in relation to the drop in marketing expenditure, Broadband Infraco had decided to focus on interventions which would provide value. In terms of vacancies, she noted that these existed in the posts for Chief Marketing and Sales Officer, as well as the recently created post of Chief Operations Officer, and the entity had had challenges in filling technical posts such as engineers and was in the processes of appointing interns who would grow with the institution.
 

She noted that there had been some challenges in relation to some sites, and one example was Durban where a tender had been advertised three times without takers. There had also been some difficulty in relation to transforming operational targets, but the entity now had a plan. In relation to the ECS licence, she agreed that Broadband Infraco had struggled, even when it had secured a deal with Microsoft, but did not have an ECS license, so Microsoft had to find a local partner with an ECS license.

She noted that Broadband Infraco was engaging with various commercial banks in relation to finding alternative sources of funding. She noted that the distance covered was now closer to 14 000km.
 

She explained that, in relation to irregular expenditure, competent people had been recruited by the organisation, and existing employees had to reapply when the new policy was effected.

Mr Moshesh answered the question about the risks attached to having only one client and said that Broadband Infraco had been working on growing its customer base to 14, and was no longer reliant on one company. The company should be able to realise a profit within the next two and a half years. The targets had been reached, and for this reason, Broadband Infraco had been entitled to pay a bonus. In relation to questions about possible loss of revenue due to migration, he said that this was not significant since the entity had various product lines.

Mr Moshesh said that credit cards were used by Broadband Infraco to  manage petty cash for divisions in other regions away from the head office. Use of the credit cards had now been discontinued.
 

Ms Kwele said that after the CFO resigned, Broadband Infraco had applied for secondment from audit firms after another manager in the department had subsequently resigned.
 

Ms Sekese asked about the ICT policy and said that on the issue of the ECS licence, the matter needed to be raised with the Minister. Ms Sekese also emphasized  the need for collaboration.
 

The meeting was adjourned.

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