The Department of Telecommunications and Postal Services briefed the Committee on the process of rationalisation of State Owned Companies (SOCs). This was undertaken primarily to ensure that there was an alignment of SOCs at all spheres of government, in order to achieve the developmental objectives and aspirations of South Africa. The Presidential Review Committee (PRC)had called for a continued in-depth micro assessment of SOCs, to assist the decision on the possible merging of entities. The National Development Plan made it very clear that there should be a review of the market structure, analysis of the benefits and cost of infrastructure duplication in the Information Communication and Technology (ICT) sector. The Department of Public Enterprises was leading the work to implement recommendations of the PRC on SOEs and the Department of Telecommunications and Postal Services rationalisation work was one of the flagship projects of government shareholder model. This project was mainly centred around Principles 18 and 20 of the PRC which encouraged the collaboration of SOEs to extract synergies, and to ensure maximum impact on government objectives.
The objectives of SOCs rationalisation included the need to ensure that the ICT sector was fundamentally transformed and placed in its rightful position to support economic growth and to rationalise the roles and responsibilities of SOCs in the rollout of various aspects of the broadband capability. Administrative bottlenecks that currently constrained the rollout of network infrastructure would have to be removed, in order to yield coordinated programmes that would avoid unnecessary duplication and achieve national objectives more efficiently and effectively. This Department needed to prioritise the alignment of SOC mandates with the radical vision of South Africa Connect, and was trying to avoid undue competition between SOEs involved in the broadband value chain, as well as minimising duplications, allowing for the reuse of existing infrastructure under government control and enabling fair competition at the services layer of the broadband value chain.
The Department had established a SOC Rationalisation Steering Committee, with representatives from executive leadership of each of the SOCs. This would identify the relevant issues, ranging from policy through regulation, economics, business and technology. The Steering Committee would also focus on the operational issues that may be impacted by the rationalisation of the relevant SOCs. There was also a Technical Team, comprising officials from the Department and representatives of the affected SOCs, which had completed various activities, including an analysis of the PRC reports and the particular relevance to SOCs in the ICT sector. The Steering Committee had produced a definition of high-level principles to guide the rationalisation of SOCs in the ICT sector and an analysis of the relevant policies and legislation.
Members expressed disappointment,firstly, that once again the presentation documents were submitted late, said that this showed disrespect for the Committee and wondered if it was deliberate so that the Committee could not pose searching questions. They also asked where the delays arose, in the office of the Department or the Minister. They felt that there was too little information on how the process of SOE rationalisation was being conducted, the phases, and the ultimate deadline and felt there was also insufficient information on whether the board members of different entities and organised labour had been informed of what the process would entail. Some suggested that the Department was apparently trying to set itself up as a network service provider, in competition with the private sector, and that this was not part of radical transformation in line with SA Connect. The presentation totally ignored how the ICT policy review and SA Connect formed part of the rationalisation of SOEs. They also found it disappointing that the presentation failed to mention the input of the National Broadband Advisory Council. They commented that there was not consistent explanation on roles, made the point that Telkom was not an SOE, and said that it was of concern that the Department wanted to create a new entity, as this was expanding the bureaucracy instead of rationalising and streamlining it to make it leaner and meaner. One Member wondered if the process of rationalisation should not stand over until the revised legislation was presented. Most Members asked about what was to be done regarding the situation of Broadband Infraco (BBI) as it was noted as being in deep financial crisis. Members questioned the increase of levies charged to telecommunications service providers by Universal Service Access Fund, and felt there was confusion of roles. There was too little said about how the poor governance of the SOEs would be addressed, and there was no clarity on how the non-core assets would be disposed of. Several Members wondered how SA Post Office would function and it was suggested that public private partnerships were needed in rural areas. The Chairperson made the point that a fundamental flaw was that this presentation failed to deal with the question of why SOE rationalisation was necessary, why the .ZA Domain Name Authority was not dealt with and whether some institutions only were being targeted. Members asked about the relationship with the Industrial Development Corporation. Overall the Chairperson and Members agreed that the presentation and recommendations could not be supported in their current form.
Members adopted Committee minutes from 26 May and 2 and 9 June, with amendments.
Chairperson's opening remarks
The Chairperson noted the apologies of the Minister and Deputy Minister of Telecommunications and Postal Services. She expressed concern that the Department of Telecommunications and Postal Services (DTPS or the Department) did not seem to be taking the Department seriously, because it had submitted its presentation very late, leaving Members with little time to engage with the presentation.
State Owned Companies (SOCs): Briefing by the Department of Telecommunications and Postal Services
Ms Rosey Sekese, Director-General, DTPS, stated that the rationalisation process generally implied organising or reorganising something into a logically coherent system, often to make it as efficient as possible. The Presidential Review Committee (PRC) wanted to ensure that there would be an alignment of State Owned Companies (SOCs) at all spheres of government ,in order to achieve the developmental objectives and aspirations of South Africa. The PRC called for continued in-depth micro assessment of SOCs to assist the merging of entities. The National Development Plan (NDP) also made it very clear that there should be a review of the market structure, analysis of the benefits and cost of infrastructure duplication in the Information Communication and Technology (ICT) sector. There was a need for a common carrier network, with possibilities of structural separation of vertically integrated incumbents. One of the primary objectives of South Africa Connect is to ensure that ICT SOCs could achieve better coordination through the clear definition of roles, the integration of planning, monitoring and evaluation and the development of institutional capabilities.
Ms Sekese identified a number of critical findings that had been identified by the PRC on SOEs, which included the fact that there are a lot of duplications within the government portfolio of SOEs and there is thus a need to imbue the SOEs with the developmental agenda. The PRC had also discovered that most SOEs are characterised by poor governance and a lack of clear understanding of their mandates in the context of a developmental state. The funding mechanisms of SOEs are generally very weak, leading to poor performance in the execution of their socio-economic mandates. In many cases, the rationale for establishing SOCs seemed to have largely been informed by all manner of wrong considerations. As a result of duplications, there were a lot of inefficiencies and lack of effectiveness and wastage of scarce financial resources.
Ms Sekese highlighted that the Department of Public Enterprises (DPE) had been leading the work to implement recommendations of the PRC on SOEs. The Department of Telecommunications and Postal Services work on rationalisation is one of the flagship projects of the government shareholder model. The DTPS rationalisation project is mainly centred around Principle 20 of the PRC, which directly encourages the rationalisation of SOEs as a mechanism to extract efficiencies and to ensure maximum impact on government objectives. Principle 18 also encourages the collaboration of SOEs to extract synergies and to ensure collective responsibility toward service delivery. The PRC report had advocated for the appointment of a SOE Reforms Committee that would amongst other things, develop an overarching national strategy on SOEs (with clear objectives, sector categorisation and performance measurements).
Government had a stake in a number of SOCs within the portfolio of the Ministry of Telecommunications and Postal Services and Postal Services. Some of the SOCs, such as Sentech, South African Postal Office (SAPO), State Information Technology Agency (SITA), Broadband Infraco (BBI), Universal Service and Access Agency of South Africa (USAASA) and National Electronic Media and Institute of South Africa (NEMISA) are 100% owned by government. In others, government owns significant share holdings, such as Telkom SOC Ltd (39.8% direct plus approximately 12%) Public Investment Corporation (PIC) with a shareholding of 51%. The government also owns a direct 74% stake in BBI with the remaining portion owned by government through the Industrial Development Corporation (IDC). Government owns 13.9% in Vodacom (the largest mobile operator in the country).
In the context of a slow rate of economic growth, it would be crucial that state resources should be effectively and efficiently used and the overlapping mandates of SOCs in the ICT sector represents an unnecessary duplication. Telkom SOC Ltd, BBI, Sentech, and SITA, USAASA and SAPO are all capable of playing a role in delivering broadband. BBI has an i-ECNS license that allows it to offer wholesale network services, but is not in possession of an i-ECS which would allow it to connect customers and offer internet service. This meant that BBI only needed to partner with another i-ECS licensee in order to be on par with the three others in terms of able to offer broadband service. This would then lead to all four SOCs (SITA, Sentech, BBI and Telkom) having similar licences. USAASA, on the other hand, is mandated to pay subsidies through the Universal Service and Access Fund (USAF) to an ECNS licensee, for the purpose of financing the construction or extension of electronic communications networks in under-serviced areas. This should be done through a competitive bidding process.
Ms Sekese took the Committee through the objectives of SOC rationalisation, which would:
Ensure that the ICT sector is fundamentally transformed and placed in its rightful position to support economic growth
Ensure proper roles and responsibilities of SOCs in the rollout of various aspects of the broadband capabilities
Remove the administrative bottlenecks that constrain the rollout of network infrastructure
Yield the benefit of coordinated infrastructure built programmes that will avoid unnecessary duplication, thereby contributing to national objectives more efficiently and effectively
Align SOCs' mandates with the radical vision of SA Connect
Avoid undue competition between SOEs involved in the broadband value chain
Minimise the number of SOEs involved in the implementation of broadband in an effort to improve coordination
Allow for the re-use of existing infrastructure that is under the control of government and enable fair competition at the services layer of the broadband value chain.
The Department had established a SOC Rationalisation Steering Committee, chaired by the Director General, with representatives of the executive leadership of each of the SOCs. The Technical Team consisted of officials from the Department and representatives and the affected SOCs to effectively facilitate the rationalisation process. The role of the Steering Committee is to identify the relevant issues, including, but not limited to, policy, regulatory, legal, economic, business, technology. The Committee also focuses on the operational issues that may be impacted by the rationalisation of the relevant SOCs, as applicable, and highlights these issues to the DTPS. The Steering Committee is supported by a duly appointed Technical Committee of legal, technical and commercial experts appointed from the SOCs represented. In executing the rationalisation process, the Steering Committee considered that the SOC rationalisation process as undertaken by the Department should fall within the guidelines of the PRC report.
To date, the Technical Committee had completed a number of activities including an analysis of the PRC on SOEs and its application to SOCs in the ICT sector. The Steering Committee has completed a definition of high-level principles that should guide the rationalisation of SOCs in the ICT sector and an analysis of the policies and legislations that enable and mandate the existing SOCs. This analysis will form part of further work that will be undertaken, and on which further advice will be sought, on how to take forward the SOC rationalisation project. During the January State of the Nation Address (SONA), the President announced the designation of Telkom as a lead agency in the implementation of broadband. Telkom will be the main but not the only company that would implement SA Connect. Telkom has also recently announced the separation of its wholesale and retail businesses and this is an important milestone. BBI has been instructed to preserve its value in preparation for the SOC rationalisation, and so it too was currently reviewing its business and financial plans. Engagements are taking place between government and the IDC (as the 26% shareholder in BBI) to share views on the future of the company. USAASA had provided broadband connectivity to four municipalities in KwaZulu-Natal (KZN), Eastern Cape, and Northern Cape and North West provinces.
Ms Sekese stated that over the past two years, USAASA had exercised management of the Universal Service and Access Fund (USAF), which is an important instrument in endeavours to ensure universal service and access to ICTs. In the 2015/16 budget vote, the Minister of Telecommunications announced an intention to increase the levy charged on telecommunications operators by USAF, from the current 0.02% to 1%. The increased levy will be utilised towards providing broadband connectivity to under-serviced areas and thus the role of USAASA is complementary to the efforts of implementing SA Connect. The SAPO possesses an unmatched network of points of presence throughout places in the country that are also under-serviced. It is the intention of government to utilise this extensive reach of the SAPO, to bring broadband closer to these communities. SAPO is now finalising the implementation plan, which includes work on its role in the implementation of SA Connect. SITA is currently working on a review to streamline its functions, in line with the intention to focus its work on the core areas of e-government, government data security and IT procurement for government.
She concluded that there will be still further work to be done, including the assessment of various options, synergies and an optional plan of implementation of SA Connect. Exploration of various elements, including technical, legal and financial aspects of the rationalisation transaction is ongoing. There will be an evaluation of a number of rationalisation options and to assess the short, medium and long-term sustainability of each option, and the creation of an integrated strategic entity that will best serve the ICT national interest and SA Connect.
Ms J Kilian (ANC) welcomed the presentation by the Department and mentioned that the presentation was very extensive but was conflating the current roles of the individual entities, especially their connection to SA Connect. The presentation also provided very little information on how the process of SOE rationalisation was being conducted, the phases of the process and the ultimate deadline for the completion of the whole process. It appeared that there was not enough information on whether the board members of different entities and organised labour had been informed of this whole process and what it entailed. The Committee needed to know about the financial implications of the process of SOEs' rationalisation and what was currently being considered in this important process.
She said it is well known that some of the entities had not properly exercised their mandates according to the legal prescripts, as they had verged close to other terrain. It will be crucially important to know what is to be done on those entities. ICT is clearly an important driver of economic growth and therefore it will be important to streamline the entities so as to do their work and perform their mandate effectively. The Committee wanted to get the feeling that the Department was firmly in control of the whole process of rationalisation of SOEs. However, this presentation left more questions than answers.
Mr E Siwela (ANC) wanted to know whether there was any particular reason for the delay in the submission of the presentation and whether this was caused by the fact that the Minister may have signed off and submitted the presentation late. This was not the first time that this had happened, and it seemed clear that there was somebody delaying the presentation, between the Minister and the DG. It was indeed difficult to understand how such an important presentation did not set out the crucial details on the phases of rationalisation of SOEs and the timeline for the completion of the whole process. He wondered if omission of this important detail was intentional. It essentially denied the Members an opportunity to perform an effective oversight.
Ms M Shinn (DA) commented that this had been "the most depressing" presentation by the Department, as it lacked a clear vision of what the Department was trying to achieve with the rationalisation of SOEs. It seemed that the Department was trying to set itself up as a network service provider, in competition with the private sector, which was not part of radical transformation in line with SA Connect. The radical transformation of SA Connect was to address the broadband backlog and establish a national network company that would leverage both SOEs' and privately owned networks' infrastructure in the country. The presentation totally ignored how the ICT policy review and SA Connect formed part of the rationalisation of SOEs. She also found it disappointing that the presentation failed to mention the input of the National Broadband Advisory Council, and she commented that this Council had been totally ignored since it had been established.
Ms Shinn felt that the Department was trying to be a deliverer, instead of being a facilitator or the inspiration to the service providers. She wanted to put it on record that Telkom was not an SOC. This company is listed on the Johannesburg Stock Exchange (JSE), and government is merely one of the shareholders. It was confusing that the Department wanted to enable fair competition at the services layer of the broadband value chain, but was also trying to control the whole competition.
Ms Shinn disapproved of the fact that the Department was to increase the levy charged on telecommunications operators towards USAF from the current 0.02% to 1%, as this was detrimental to the turnover of the private sector to fund their competition. She felt that there was, overall, an absolute confusion of roles in the presentation. It would be difficult for the Committee to accept the whole process without getting a clear picture of what the Department wanted to achieve.
Mr C Mackenzie (DA) stated that the presentation spoke about the need to address poor governance of the SOEs but there was little or no information how this problem would be addressed, nor of the reason for that poor governance. He thought that the process of SOE rationalisation would be about identifying problems that would then be rectified or cut out, in relation to the SOEs, and what could be brought to the Department and achieve economic growth. The process should also be about making a "leaner, meaner and more efficient machine" for the delivery of the mandate, but this was totally lacking from the presentation. The presentation seemed to focus primarily on SA Connect, although the rationalisation of SOEs was clearly more than SA Connect. It was of concern that there had been a lot of meetings and talk-shops on what still needed to be done, while the pace of technology, knowledge and development was moving rapidly fast.
Mr MacKenzie noted that the Minister of Finance spoke a lot about the need to dispose of the non-core assets. The presentation seemed to create the impression that BBI would be part of those non-core assets, but there was general secrecy on what exactly those non-core assets are. There had been little talk about what was to be done to BBI. It had already been noted that the entity was in deep financial crisis. He highlighted that SAPO’s main business was not SA Connect, but delivery of mail, and he would hate to see the situation where the entity diverted from its core business of delivery of mail and the improvement of logistics and e-commerce. The increase of the levy charged on telecommunications operators by USAF was quite substantial. He suggested that it would be helpful for the Department to get rid of the extensive board, and rather put that money into paying the private sector, and having Public Private Partnerships (PPP) to roll out the infrastructure in rural areas. The service providers like MTN and Vodacom had gone out to the African continent, where there was simply no infrastructure, and had rolled out a whole cellphone network with complete coverage.
The Chairperson also felt that the presentation did not address the gaps, nor had it addressed a number of questions on the rationalisation of SOEs. The Department needed to clarify, firstly, why the process of SOE rationalisation was necessary; she had the impression that it was a big waste of money and time. It was of concern that the .ZA Domain Name Authority (zaDNA) was not mentioned as part of SOE rationalisation. That raised the question whether there are specifically targeted institutions that are part of the process. The DPE had done a review process on the SOEs rationalisation, and she wondered if now the DTPS was not simply duplicating functions. She also felt that the substance of why the Department needed this process of rationalisation of SOEs was lacking. It was quite true that it left Members with more questions than answers.
The Chairperson commented that Ms Sekese had pointed out that there is a Steering Committee involved in the process, but the panel members in the Committee were not present in the meeting. She too wondered if the delay in presenting the documents to Members was intentional, to deny Members the opportunity to peruse the presentation and possibly send it back to supplement the gaps. She also noted some inconsistencies, saying that government is a shareholder in both Vodacom and Telkom, but these entities are treated differently.
The Chairperson further commented that the presentation ignored what the Act said about SAPO and its core functions. SAPO was not part of SA Connect. SAPO was also currently battling to perform its own core functions and it would be unfair to overload that entity with other responsibility. The Committee had not even tested the turnaround strategy that had been implemented on that entity. It would have been impossible for the Committee to approve the allocation of the budget for the process of SOEs' rationalisation if this presentation had been made before the budget vote of the Department. She said there should have been more focus on the future of BBI and how the entity would be incorporated on the whole process of SOE rationalisation. She wanted to know whether the Department had a cordial relationship with IDC, as the impression was created that there might be animosity between the two.
Ms Shinn mentioned that much about the rationalisation of the role of government and private sector in the ICT sector is laid out in the ICT Policy Review. She wondered whether, given that the Department would be processing that legislation in the next year or two, it would be helpful to leave the SOE rationalisation to be dealt with as part of this process.
Ms Kilian added that the main problem was that some entities just departed from their mandates, because of lack of effective oversight by the Department, which appeared to be one of the weaknesses.
Ms Sekese firstly responded that the Department had a good working relationship with the IDC and the reason to show the shareholding of IDC was to distinguish its ownership from that of BBI. In relation to the question on SAPO, it is important for the Committee to note that one of the key elements of the strategic turnaround of SAPO lay in diversifying its business to address the retail side of the entity. The retail side of SAPO had been one of the areas that had been draining SAPO financially. This project is seen as a revenue diversification, but one that does not take SAPO away from its own core business. The intention was also to get more businesses into the retail space, so that the business could be sustainable.
She said that the Committee had been briefed previously on the incorporation of the recommendations in the ICT Policy Review. This process had already started and there would be a White Paper coming out very soon. The Department did not ignore the recommendations in the ICT Policy Review, and there were a number of engagements led by the Project Management Office (PMO), with different branches interpreting the recommendations.
The only way to ensure that the White Paper could be effectively implemented was for the Senior Management Staff (SMS) of the Department to interpret and understand the recommendations in the ICT Policy Review, as this Department must ultimately implement those policies. The Department was currently flooded with many complaints from government departments regarding the operational challenges of SITA, especially the Department of Higher Education and Training (DHET) and the Department of Home Affairs (DHA). There was a concerted effort to resolve the challenges at SITA. DTPS was currently engaging with the Chief Executive Officer (CEO) of the entity to try to address these operational challenges. The Department would return, at an opportune time, to address the Committee on some of the operational challenges experienced at SITA, and the plans that are being put in place to address these challenges.
Ms Sekese assured the Committee that there was no intention to totally ignore zaDNA, or to regard it as if it was not the entity of the Department. The issue was to address the roll out of infrastructure. The presentation was not approached in the context of getting deeper into issues of governance, like the appointment of board members and government frameworks which are also raised in the PRC report.
Mr Sibongile Makopi, Deputy Director General: Shareholder Oversight, DTPS, explained that the decision had been taken that the recommendations of the PRC review must actually be implemented, and this had led to the formation of the government shareholder model which was being led by the DPE. It would be important for the Committee to be aware that one of the flagship programmes of the government shareholder model is the SOEs rationalisation within the ICT sector. He told the Committee that there was no contradiction in the implementation of the SOE rationalisation, as this was a continuation of the work of the government shareholder model.
Mr Makopi responded to the question on USAASA, by saying that a lot had been done by the entity to implement broadband programmes in the districts like Umsinga, Emalahleni and two other districts in the North West and Northern Cape respectively. The entity was now doing some work in Mpumalanga and Limpopo to improve broadband connectivity in the country. USAASA is mainly implementing broadband in districts, and the question that had to be asked was whether the entity is implementing broadband according to the standards and norms that had been set out in SA Connect, which were intended to ensure that broadband standards are equalised across the country. This is one of the focus areas of the whole SOE rationalisation and implementation of SA Connect. USAASA is managing the USAF, and therefore it would be difficult to respond to the question of the increase of levy from 0.02% to 1%. The important work that is being done by USAASA had to be factored into consideration, within the broader SA Connect approach.
He added that it would be important to acknowledge that most of the companies that had been implementing broadband in various districts were private companies and not the SOEs. For this reason, it was not quite correct for Members to assume that the Department was forcing the SOEs to lead in the implementation of broadband. It was well known fact that SAPO had a network that exceeded all the other networks, in terms of the number of outlets, and it also stretches to other areas that are under-serviced, with post offices being found in many rural areas and townships. For this reason, the inclusion of SAPO in SOE rationalisation was planned, to take advantage of the existing infrastructure that was not optimally utilised at the moment. The Department had noted the lack of sufficient product lines being sold in various post offices, and the plan was to use the existing capacity to provide broadband. The core business of SAPO was indeed the mail, but it was also a sad reality that the mail volumes were increasingly declining, meaning that SAPO would need to incorporate its main business model with other products like broadband connectivity.
Mr Makopi indicated that the Department was in discussion with BBI, as the entity was in a very difficult financial position to try to deal with the current predicament. The Department and IDC had a meeting with BBI, which was still reviewing its business plan. .IDC had requested the opportunity to look closely at the books of the entity and apply its mind on the future of BBI. This also served to highlight that there was no animosity between the Department and the IDC, who were collaborating with each other to solve the issue of BBI. It would be important for the Department to urgently consider the position and future of BBI, as the entity was in a unique financial difficulty and this would not be easily resolved. Part of the rationalisation of the SOEs was to deal with the current predicament of BBI. It had been initially specifically established to deliver broadband connectivity, and so it was necessary to deal with roles and responsibilities in trying to implement SA Connect and conserve resources by doing away with duplication.
Ms Sekese responded that the delays in submission of the presentation lay with the Ministry. There was a challenge in that office to ensure that the documents were signed off on time and submitted to the Committee. There had been s an Executive meeting on 15 June 2015, specifically to deal with the delays in the submission of documents to the relevant committees, and there was an agreement that the Minister's office would assist the Department in processing the presentations.
The Minister had also indicated that there would need to be a meeting with the CEO of BBI on the future of the entity and the plans for the future.
Mr Rendani Makhado, Chief Director: Broadband, DTPS, stated that the creation of the integrated strategic entity talked of an open access entity, which was often the most favourable model in the private sector. This would try to achieve a sector that would be regulated and have one exit price and this enabled the retail part of the other private sector companies to be able to play in the market. This model also would deal with the monopolistic behaviour of a vertically integrated company. The rationalisation of the SOEs would look at the reorganisation of the entities, after first determining their viability, and would consider if there was a way to combine some of the entities to avoid duplication of the functions. The issue of BBI was essentially about taking out all the current duplication, then considering whether it will be possible to integrate the entity with other entities that had similar functions.
The rationalisation of SOEs would also be about taking out different components that are broadband-related, from different entities, and housing them in one integrated entity. This was not necessarily about changing the business model of other entities like SAPO to do broadband connectivity, but was about rationalising the components that would be needed for the fulfilment of SA Connect at the back of the open access entity. The creation of the open access entity was not meant to compete with the private sector, but to enhance the private sector participation and their role in the market structure. The PRC spoke to all the SOEs, but what the DTPS was trying to do was to start with the rationalisation of ICT SOEs. The PRC had recommended that all the entities should be channelled and put in a way that they would be able to intervene into the market, and enable the market to function better. The process of rationalisation of SOEs will not interfere with the core business model of the entities, as the focus is specifically on the realignment and streamlining of the ICT SOEs in order to perform at the optimal level. It was not anticipated that this should take too much time. However, the issue of BBI would be more complicated, as the entity has its own legislative mandate and this was one of the issues that needed to be looked into in the process of the creation of the open access entity.
Mr Makhado emphasised that the model of BBI is built at the back of Eskom and Transnet servitude rights, and this is one of the issues to be considered by the Department. The issue of ICASA licensing also needed to be taken into consideration by the Department when engaging in the process of creating an open access entity. The creation of the open access entity was likely to be a very complicated process in itself, as a rigorous process would need to be followed.
Mr Kefilwe Madingoane, Chief Director: Broadband, DTPS, pointed out that the intention of SOE rationalisation was not about fixing companies, but creating government capability that would stand the country in good stead for a broadband ICT future. This capacity would have to be created across the value chain by looking at international connectivity and national connectivity. BBI and Telkom had done sterling work in this regard. There was a tremendous gap in the access network and this needed to be addressed promptly. The process of rationalisation of SOEs will also specifically focus on delivering of broadband in under-serviced areas where there was limited to nil existence of infrastructure.
Ms Sekese ensured the Members that the Minister had met with all the Chairpersons of the Department's entities and took them through the whole process of SOE rationalisation. They were now expected to brief the Board members. The Department was currently in the proposal phase and the Minister still needed to brief the Cabinet on the decision or recommendations to be taken, before the Department could brief the entities on the implications of the SOE rationalisation. The Department could not afford to jump the gun before the Cabinet had taken a decision on the matter, but there was pressure to move on the first phase of the proposal, and this related to BBI. The disposal of non-core assets would be handled by the National Treasury (NT) and it would be difficult for the Department to comment on the process involved.
Ms Sekese assured Members that there was certainly no intention of delaying the presentation and the Department took note of the fact that Members thought the standard of the presentation was below par.
The Department also noted the inconsistencies in how it treated the shares of Vodacom and Telkom. There was no intention to treat these service providers differently, as they were both State assets. Organised labour would only be informed of the whole process of rationalisation of the SOEs once the decision had been taken by the Cabinet, especially since this it was related to BBI. The modus operandi would ensure that jobs will not be lost in the process of rationalisation of SOEs. There was always an anxiety when one entity was integrated with another, and the onus was on the Department to manage this process in the shortest possible time, so as not to prolong the anxiety, for this would have an impact on the morale and productivity of the people in the individual entities.
The Chairperson wanted to put it on record that there was certainly no logical reason to support the programme of the Department, especially when looking at the tools for oversight and how the programmes would be supported. The Department needed to go and rework its presentation on the process of rationalisation of SOEs. She commented that the current presentation could not be supported.
Mr Mackenzie added that it was alarming that the Department wanted to create a new entity and it was clear that the Department was expanding the bureaucracy instead of rationalising and streamlining the structure to make it leaner and meaner. He also supported the suggestion that the Committee should not presently accept the whole programme of rationalisation of SOEs, as it was clear that there were number of issues that still needed to be addressed.
Ms Shinn corrected that it was not the role of the Department to create a government entity that delivered government capability . The ICT Policy Review correctly pointed out that the national broadband network was the responsibility government and private sector. The focus should be on finding ways to encourage the investment of the private sector in delivering broadband in the country.
The Chairperson reiterated that the Committee would not be supporting the presentation in its current form and there was no need for further debate.
Adoption of Committee minutes:
Committee Minutes of 26 May
The Committee considered the Minutes of 26 May.
Ms J Kilian (ANC) noted that the word “agenda” on page 2 in paragraph 4 should be replaced by “programme”.
The Chairperson expressed concern that the Committee programme had been constantly changed but promised that this issue would be resolved to ensure that there is consistency.
Ms Kilian agreed that it was indeed of concern that the Committee programme had not been , but urged that those entities that had serious problems should not be moved out of the programme.
Ms Kilian asked if there had been any developments regarding the directive of the Committee that the Chairperson should write to the Minister and ask her to conduct an inquiry about the absence of the Director-General from one of the most important meetings of the Committee. This was intended to prevent the recurrence of such behaviour. The primary responsibility of the Members was to keep the executive and the organs of state accountable.
The Chairperson responded that she had alerted the Minister to the Director-General's absence. In general, there seemed to be a sense that the Department was not paying due regard to the Committee. The Minister said she had ensured that the Director General would be regarding the available for critical meetings.
Ms Kilian indicated that there were rules on contempt of Parliament. She believed the absence of the DG should be regarded as a very serious offence. Parliament is the institution that is elected by people and those officials who had been appointed to serve in the public sector are accountable to it.
Ms M Shinn (DA) asked if the oversight visits were paid for from the budget of Parliament or were sponsored, as there seemed to be secrecy on the matter.
The Chairperson responded that all the expenses for oversight trips were paid from Parliament’s budget. This included the training and the accommodation provided.
The minutes of 26 May were adopted, with amendments.
Minutes of 2 June
Ms Shinn pointed out that the phrase “Transformation Charter” on page 3 should be replaced by Information Communication and Technology (ICT) charter. She suggested that every matter related to the Independent Communications Authority of South Africa (ICASA) should be removed from these minutes and be directed to the relevant Committee.
Ms Kilian suggested that the should be a separation of the matters that had been highlighted in the presentations, clearly indicating those noted by this Committee so as to avoid the situation where the bullet points were at odds with the headings.
Mr Mackenzie corrected that the post offices were more profitable in rural areas than in urban areas.
The minutes were adopted, with amendments.
Minutes of 9 June
Ms Kilian mentioned that the Committee had already received a presentation by the Special Investigation Unit (SIU) on the investigation in respect of all entities. No reference should thus be made to the SIU under the paragraph dealing with investigations still to be conducted.
She again pointed out that there should be a separation of the matters that had been highlighted in the presentations and those that had been noted by this Committee.
The minutes were adopted, with amendments.
The Chairperson stated that the Research Unit wanted a shorter version of the minutes, which was more concise and to the point.
The meeting was adjourned.
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