State Information Technology Agency Amendment Bill: briefing

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Meeting report

Local Government and Administration Portfolio Committee

LOCAL GOVERNMENT AND ADMINISTRATION SELECT COMMITTEE
17 September 2002
STATE INFORMATION TECHNOLOGY AGENCY AMENDMENT BILL: BRIEFING


Chairperson: Mr B Mkhaliphi

Documents handed out:
Presentation on provisions in the Bill
SITA Amendment Bill [B24 - 2002]
SITA Amendment Bill [B 24A-2002]
SITA Amendment Bill [B 24B-2002]

Other info:
Transforming SITA to enable service delivery in Government
Additional information on SITA and ITAC

Presenters: Mr R Ramaite (Director General DPSA); Adv E Van Schoor (Legal Adviser DPSA); Mr E Maseko (General Manager Client Interface SITA); Mr D Setshedi (CE of eServices: SITA)

SUMMARY
Mr R Ramaite (Director General: Department of Public Service & Administration) indicated that there had been a problem in the business model design of SITA as envisaged in the original SITA Act. Hence it needed to be changed. The key problem was that SITA is designed to be a comprehensive provider of all IT goods and services for the public service. The Department proposed some amendments so as to help maintain the Agency's focus on its core function. The Committee will meet again to continue discussion on the amendments.

MINUTES
Introduction to Bill by Director General
Mr R Ramaite (Director General: Department of Public Service & Administration) indicated that an evaluation of the State Information Technology Agency had showed that information sharing and inter-operability in government IT services had not yet occurred. The Agency had also not yet alleviated the IT skills shortage in government. The conclusion was that its under-performance was a primary consequence of its business model. A shift to a service delivery-oriented model was therefore necessary. Mr Ramaite reiterated that it is the Department's philosophy to improve productivity, to be cost effective and to improve citizen convenience by ensuring that there is access to these facilities at any time. The Department is committed to ensuring that unnecessary duplications are eliminated from the public service. There is also a need that communication between Departments is strengthened which is a major problem in the public service. The Director General illustrated this lack of communication by noting instances of the police looking for criminals who are already behind bars within Correctional Services.

Various guiding principles were outlined. Amongst others SITA will be the primary vehicle for the delivery of the eGovernment House of Values. Secondly, the implementation of the new business model will be done in such a way that minimises disruption of service delivery while maximising service delivery benefits.

The essence of the new business model is to limit the range of responsibilities of the Agency as provided for by the current Act. It also seeks to minimise costs of service delivery. Under the new model SITA will provide and maintain an information technology architecture that will allow departments to " plug in and play" based on their requirements. The Agency will also have a new corporate structure consisting of a holding company with three divisions. The divisions are SITA Defence Services, SITA Legacy Operations and SITA eServices. Mr Ramaite showed that the Agency is already operating on the basis of this structure.

According to the Director General the changes would allow SITA to support departments with solution development. Such changes would also lead to low costs in service delivery. The risks involved in service delivery would also be minimised. The departments would also not depend on SITA on everything. This would in turn enable SITA to focus on its main function- IT. On the financial side Mr Ramaite was of the opinion that major saving would result as costly duplications and vendor appeals would be avoided and eliminated.

Briefing on the provisions in the Bill
Adv Empie van Schoor (Legal Advisor in the Department) took the Committee through a summary of the amendments (see document). It was shown that the main purpose of the bill is to incorporate the new business model; to amend provisions dealing with the share capital of the Agency and to increase the number of the board members. The Department wants to amend the Act so as to adjust the objects of the Agency and to emphasise its role in using IT to promote efficiency in departments and public bodies. The Department also wants to amend the duties and powers of the Agency so that there would be some clarity on which services must or may be rendered by SITA (s7(1)(a) and (b). The Department proposed a new s7(6)(c) that would give the Agency exclusive rights to sell or provide authentication products or services for all departments. Should the Agency be unable to provide the required services departments must and public bodies may procure the services through the Agency from a preferred authentication service provider. There is also an amendment intended to enable departments to conclude business and service level agreements with SITA to regulate compulsory and optional service that the departments intend to use. Compulsory terms of the agreement would be prescribed by regulation. Existing business and service level agreements would also have to be phased out within 36 months.

Constitution of the Board
It terms of the current Act the board can only have a maximum of ten members with no more than three executive directors. The aim of the proposed amendment is to enable the appointment of up to six executive directors to the board. The proposed amendments also require the increasing of the maximum number of directors to a limit of 14 so as to ensure that non-executive directors remain majority in line with corporate governance. The amendments also aim to replace the limitation to three the number of executive directors with the requirement that the majority must be non-executive directors. The maximum number of executive directors would never be more than six. According to Advocate Van Schoor the rationale behind increasing the number of non-executive directors is to ensure that experts in financial management, governance and IT networks, amongst other, serve on the board. The majority of non-executive directors would form the quorum in all meetings of the board. Provision is made in the amendments for the Minister to appoint alternate members for every non-executive member to ensure that absence of a member does not prevent the board from carrying on its business. Such alternate member would serve term as the member in respect of whom he/she is appointed and also vacates office with him/her.

Advocate Van Schoor also indicated that some amendments seeks to regulate the transfer of assets and staff. For instance, in terms of the proposed s15 (1) SITA must offer employment to IT practitioners of departments associated with compulsory / optional service when the departments use SITA for that service.

Share Capital (s17)
The current s18 stipulates that the state must be issued with fully paid up shares in exchange of assets transferred to SITA valued on a method acceptable to the state. This requires the valuation of assets and then agreement on the value and number of shares to be issued. This section requires transfer of all assets but in reality assets are transferred from time to time. In other words there has never been a once off transfer of IT assets of all departments. This in turn makes the valuation of assets and the necessary agreement on the value and number of share difficult. The proposed amendments do not require transfer of all IT assets but only assets related to amongst other things, networks and other IT assets depending on whether one is dealing with the provision of a compulsory or optional service. It is also proposed that the Agency should have a share capital of R1 represented by one share with a nominal value of R1. Such share capital has no link with the value of assets transferred to the Agency. The state remains the sole shareholder.

Discussion
Mr K Mokoena (ANC) asked the presenter to clarify how autonomous SITA is.

In reply, it was noted that the Agency is more autonomous than government departments. However, it remains accountable to the government.

Mr P Maloyi (ANC) asked why there is no reference to the exact number of non-executive directors that the board must have. For instance, it would be safer to say 8 members should be non-executive and 6 executive. He also questioned why the department is silent on the geographical and gender composition of the board.

Mr Ramaite indicated that the composition of the board was already covered by other government policies. He added that the Chairperson of the board is a woman and that not all members of the board are from the Gauteng province. It was shown that it would not be simple to say how many non-executive directors should be appointed to the board. Fourteen merely indicates the maximum number of directors that the board could have - but there is no obligation to appoint fourteen. This means that less than fourteen may be appointed and consequently the 8 and 6 breakdown would be inapplicable.

It terms of the proposed s16, SITA must offer employment to IT practitioners of a department associated with compulsory or optional service when the department uses SITA for that service.

Ms B Dlulane (ANC) enquired why SITA had to take the staff.

The Department replied that it is only the IT practitioner who would be taken. The rest of the staff would be left with the department.

Mr R Nyakane (UDM) observed that the amendment sought to achieve centralisation of IT services. He indicated that centralisation would lead to unnecessary backlogs in service delivery. He questioned if this move was necessary. Ms C Botha (DP) concurred with Mr Nyakane.

The Department reasoned that the bill is a consequence of this realisation. However, it would try to balance centralisation with decentralisation. There would also be no major problems as the Agency's responsibilities would be limited. This would also avoid backlogs in service delivery.

Ms Botha enquired if the Agency had any link with the Department of Defence. With regard to the transfer of shares to third persons, she asked if the Department had somebody in mind.

The Department indicated that it would also provide service to the Department of Defence. However, it is necessary to distinguish between defence systems and IT systems. The agency would not deal with military affairs but only help with IT. With regard to the issue of transfer of shares no decision has yet been made. Moreover there is at present no intention to transfer shares.

Mr Maloyi (ANC) wanted to find out who would appoint the members of the board. He asked why the executive directors are excluded in the formation of the quorum.

The response was that it is the minister in consultation with Cabinet who appoints the board. According to the Department in terms of the Kings Report on corporate governance it is a good business model to have non-executives in the majority. The requirement that the quorum be constituted with a majority of non-executives helps avoid collusion by executive directors.

Mr Maloyi questioned why there is no obligation that whoever appoints the board should be sensitive to racial and gender issues given that if such issues are not properly addressed, no one volunteers to address them.

The Department agreed that in some instances compulsion is necessary. However, given the fact that one is dealing with Cabinet appointments it is unnecessary to insert a provision to this effect - since the Cabinet is the custodian of the Constitution. Hence when appointments are made, cognisance would be taken of racial and gender issue.

The reservation of exclusive rights to SITA raised some problems. Mr K Mokoena (ANC) enquired if it was necessary under the new government to create monopolies. Mr T Ralane (ANC) concurred that the proposed s7 (6)(c) effectively creates a monopoly. However, Mr Ralane was of the view that given the fact that authentication services and products involve some sensitive issues, such a monopoly was necessary.

Mr E Maseko (SITA) replied it was possible to privatise some of the services but the issue is whether there are trustworthy people who can do the job to the satisfaction of the government. It was indicated that given the corruption in, for instance, the issuing of identity documents, it is necessary to have such a monopoly.

Mr P Matthee (NNP) had a problem with the proposed Clause 7 as an obligation is placed on departments to use the services of SITA. It seemed as if a provincial administration is as bound to this as is a national department. He questioned if the amendment does not take away the right of provincial governments to legislate on matters such as planning and traffic regulations as these involve IT.

Adv Van Schoor replied that in essence the proposed amendment has the effect alluded to by Mr Matthee. However, if provincial governments legislate on such issues one would have to weigh and see which Act should prevail.

Meeting adjourned.

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