Department of Telecommunications and Postal Services & Universal Services Access Agency mandate & role in communication sector

NCOP Public Enterprises and Communication

02 September 2015
Chairperson: Ms E Prins (ANC)
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Meeting Summary

The Universal Services Access Agency of South Africa (USAASA) gave a presentation on its mandate and role in the communications sector, covering the programmes that it was currently working on and the projects which it was running, linking these to the overall strategic goals of digital migration that government had in place. Context was given to the background and current placement of USAASA and the relationship between USASSA and the Universal Service and Access Fund (USAF) which fell under the same Chairperson, and USAF essentially paid for USAASA's programmes. The presentation examined and explained some of the governance issues that USAASA had experienced in the past, and how that had affected the relationship it subsequently had with National Treasury. It was noted that the Electronic Communications Act (ECA) was the Act in which the mandate was set out, and that governed its work as an entity in the ICT sector.

The presentation went on to describe some of the programmes on which USAASA was currently working and implementing. There were a number of successes, such as the pilot sites for the National Health Insurance in certain selected municipalities and districts. However, it was stressed that USAASA faced financial limitations and constraints. A turnaround strategy had been formulated and there was much work done to improve the structure of the organisation, and it had achieved clean audits for the last two years, improving on the situation since R92 million disappeared from the coffers. USAASA had to identify gaps and find programmes to address them. Rural areas were typically described as “under-serviced” but it was also noted that this could change. The USAF would give access to those who were “needy persons” who could not otherwise afford to access ICT services. USAASA would do an evaluation and then use the funding to expand connection networks. USAASA described how digital migration would be ensured and the responsibility to provide access. The research, planning and funding stages were described. There was high demand for ICT services, but the issue was affordability of these services. Out of the 285 municipalities, 195 were still not connected, relying primarily on voice communication and in some instances USAASA was trying as a first step to ensure 2G connectivity. Service providers still tended to focus on areas with pre-existing infrastructure, were not investing elsewhere and needed to be incentivised to do so, moving investment to remoter areas. The seven programmes of USAASA to address disparity were outlined.
It was noted that in 2008 Cabinet had decided that USAF could subsidise the rollout of TVs to people then identified as “needy persons”. In the years since then, the number had risen, and when the tenders were sent out, it was pointed out that the transmission would be expensive, and that there was insufficient budget for installation and purchase of antennae. USAASA was focusing on local firms to install, with local training, and was working with the Post Office in accounting for funding. The Schools Connect project was being reviewed, and there would be building of a tower to give greater access. More attention had to be paid to increasing the revenue of the USAF or diversifying.

Members noted that the presentation had been good but the Committee would also be balancing the information given with oversight visits. They asked about the relationships with stakeholders and how they could be held accountable. Members wanted to know how many householders were included in the TV project, the legislative limitations, how partnerships were managed, and whether the 26 companies mentioned had the capability to do the work identified. Members asked how many schools would be connected, asked if USAASA worked in the private schools and who attended to hardware maintenance and where the planning responsibilities lay. They questioned the roles and mandates of  USAASA and ICASA, including monitoring and evaluation, and the impact of tariffs. Members asked what consequences were imposed on staff responsible for the losses previously, and how far USAASA was in meeting the 2030 goals. 

Members highlighted the need to have a meeting with ICASA and other relevant stakeholders to discuss their respective roles in assisting USAASA, and to address the structural limitations. Members were dismayed to hear that it was often cheaper for service providers to simply ignore their obligations and pay a fine than to put structures in place to comply, and said that this would need to be rectified, and noted that the Committee could also summon service providers to account.
 

Meeting report

Universal Services Access Agency of South Africa (USAASA): Mandate and role
Ms Pumla Radebe, Chairperson, Universal Services Access Agency of South Africa (USAASA) and Universal Service Access Fund (USAF), presented on the mandate and roles of both entities. She outlined the background of USAASA and USAF and gave some context to what would later be discussed. She noted that USAASA had a new board, which took over on 1 September 2015. The previous board of USAASA had made a presentation to the Portfolio Committee on Communications in 2012. The board was mandated to create a strategic framework which would take the organisation in a new direction. The strategic framework was created in 2013 and was finalised in 2014. The final strategy was presented to the then-Minister in January 2014 and was embraced by the new Minister of Telecommunications and Postal Services, Mr Siyabonga Cwele, after the elections.

At the time of the 2014 presentation, USAASA had numerous administrative and financial issues which had to be dealt with in conjunction with the strategic turn-around which was being tabled. The elements in the strategic framework were the founding basis to the South Africa Connect Broadband strategy. The South Africa Connect strategy was the current government strategy for mass broadband connection. There were elements which were in the strategy for USAASA that informed the national review on outcomes on the future of ICT in South Africa.

USAASA derived its mandate from the Electronic Communications Act (ECA). The organisation was reliant on its interaction with other bodies and stakeholders for guidance and support on improving on the current performance. The organisation had two structures; being the USAASA itself as the actual organisation that performed the work on the ground, and the USAF, which financed the work of the organisation.  The revenue for the fund was derived from the revenues from service providers and National Treasury. The revenue  from service providers was paid directly to Independent Communications Authority of South Africa (ICASA) and it was directed to National Treasury, then re- directed into USAF. USAASA and USAF shared the same Chairperson, but had different methods of management and administration. The Fund was responsible for the funding of government programmes which prioritised ICT issues in what were determined to be “under-serviced areas”. The Fund had no staff as the money, under the Chair, was used by USAASA to carry out programmes. The role of USAASA was to administer the Fund through assigning applications for accessing the funding.

The Act that set up USAASA had clearly mandated USAASA to prioritise “under-serviced areas” but most importantly to have a process whereby the definition of what an “under-serviced area” was could be changed to fit the context which programmes are run. The Act also determined the direction of the programmes which the organisation initiated and set out that these programmes have to be within the mandate of the organisation.

She noted that after the adoption of the strategic framework, the organisation, under the leadership of the Chief Executive Officer (CEO), worked to improve the structure of the organisation with the continued commitment to having an efficient organisation and delivering on the mandate. The current goal of the organisation was to have clear, unqualified audits; this was a particularly important area after the organisation had R92 million disappear from its coffers.

Mr Zami Nkosi, Chief Executive Officer, USAASA, presented on the programmes which the organisation was currently running and the targets which it expected to fulfil, alongside the limitations experienced throughout the process of implementing of programmes. USAASA primarily promoted the universal access and universal services to the citizenry. The organisation was also responsible for determining the gaps that existed across all the regions in the country, through research, and from that it would create appropriate programmes to address those gaps. There was a particular focus on giving access to rural areas as they were primarily the typically “under-serviced areas” but this had since been amended to include all areas which will be determined as under-serviced. USAASA was required by the ECA to develop programmes that will address these gaps, and this must be done with the Minister, as a process that must take place every two years. The Fund was used to give access to those who were defined as “needy persons”, to provide for ICT services as it was their constitutional right. “Needy persons” can be defined as persons who cannot afford to access ICT services. There was a serious gap between the various economic classes’ access to ICT services thus it is crucial to close the gap.

USAASA evaluated an area to determine the gaps, and if there were any, then the Fund would be used to expand the connection network to enable access to diverse services. The mandate for schools and other government entities was to ensure that digital migration actually did take place. In public schools, this would mean that all students would get access to computers, laptops or tablets; allowing schools to have greater access to information and greater ability to do their work. The connection of other government institutions such as clinics, hospitals and police stations had been taking place on a small scale due to budget constraints. The role of USAASA was to create infrastructure to ensure that people were able to access. There was a mechanism called “the point of presence”, which was created by Telkom and Broadband Infraco, which allowed for access at any location within a given area, instead of the previous mechanism which did not allow for mobility with access. The responsibility of USAASA was to make the access to the network, allowing for mobility.

Implementation of the programmes, is guided by local and national planning, by the ECA and the Public Finance Management Act. With the funding acquired, the organisation would then go out on tender and would subsidise companies that were qualified enough to build these networks. The tendering process would be preceded by an extensive planning process where USAASA conducted research to determine which areas were “under-serviced”. A consultation process would take place to establish what was most needed, in terms of the network provision in the particular area. The research conducted by USAASA informed the strategic framework used to change the organisation. The research showed that there was a high demand for ICT services, but the issue was affordability of these services. Coordination was central to the implementation of programmes, and the process of monitoring and evaluation was also important.

Mr Nkosi noted that out of the 285 municipalities, 195 were still not connected. “Still not connected” meant that the municipality predominately relied on voice communication (2G) and did not have access to data and internet.

24 136 public schools were still not connected thus they did not have access to internet and other ICT infrastructure. There were 482 schools for persons living with disabilities that were also not connected, along with 250 local government facilities which are still not connected. There were 1 135 police stations which were not connected, and this was an area of particular concern, because there was a great need for centralised information systems for security. The service providers tended to focus on areas which had pre-existing infrastructure for network provision, thus they were saturated in the big industrial and urbanised areas. They were not investing in the areas that did not have infrastructure. It was the role of USAASA therefore to incentivise investment in these areas, by building infrastructure in order to address the current gaps and disparities between regions. The network coverage in provinces was widely varying. Limpopo sat at the lowest level, with 51% coverage whilst Gauteng had 79% coverage. There was a need to address these disparities to ensure that eventually there would be 100% coverage everywhere. The current access showed that the market frontier could be moved but it did not exceed 1% without incentive. It remained important to improve infrastructure but also to move investment to the most remote parts of the country.

USAASA had undertaken seven distinct programmes in order to address these disparities in access to connection, in a manner which sought to address specific contexts which remained problematic for the organisation, as follows:
- Community and Institutional Broadband Access would provide access to ICT services through government institutions. Communities could use ICT services when visiting government institutions, which included schools.
- Universal Basic Mobile Telephone sought to give 100% mobile voice network coverage, this would ensure the whole of South Africa had 2G network access
- ICT training and capacity building access was intended to give all people the opportunity to have knowledge of basic ICT services and equipment
- ICT Content and Applications
- Universal Access to Broadcasting
- Affordable ICT services
- Access to those with disabilities

The map provided in the presentation (see attached slides) showed that there were many areas defined as “under-serviced”. The districts which the President announced to be the National Health Insurance (NHI) pilot districts were prioritised by the Department of Telecommunications and Postal Services (DTPS) as areas in which digital migration of the health system would be attempted . A clinic in Tala was one clinic that was connected that did not formerly have any ICT equipment and the staff had no ICT training. The connection of the clinic allowed for integrated service provision and clinical management, and this was what USAASA hoped to achieve in all the NHI pilot regions and overall nationally.

Summarising the projects to date, he reported that Mothala district had been connected and there was a continued effort to connect all the NHI pilot clinics and the rest of the country. The aim was to work towards connecting the rest of 195 municipalities which were currently not connected. There had been three towers built in the Vhembe district, which connected all government institutions and households, and this had introduced 4G network in the area.

The Cabinet, in 2008, decided that USAF would subsidise the rolling out of TVs to the people who were then identified as “needy persons” but this project still had not taken off. The budget for the project was R2.6 billion, and that amount would be fed into USAF to service this project. The project was revived in July 2014, and the process was tendered out, but the responding companies pointed to the fact that the boxes need to transmission would be too expensive. The other issue was that the given budget was not enough to cover installation and the purchasing of antennae. The installation of the boxes would be done by local installers and the organisation was working with 10 000 installation companies nationwide. The first batch of boxes were to be delivered in November 2015. Installation  of the boxes would lead to the training of local people in the work of installing, and thus would provide job opportunities. The Post Office had developed a system which would assist USAASA to account for the funds to be used in the rolling out of this programme. The system would account for every financial transaction made between service provider and the organisation. Access centres were an integral phase of the project but there had been a move away of this model because they were not universally accessible. Now, it was intended to establish connections in the households through the mass scale broadband centre. Msinga and Emalahleni districts had ICASA-certified networks which allowed the whole areas to access 3G and 4G networks. This had made connections to networks easier for the communities.

In Ratlou, in the North West, there was wifi in schools which allowed for school children to do their work more efficiently, due to their access to ICT services. The same had been done in the John Morolo district in the Northern Cape, but the poor electrical infrastructure was problematic. The Mothala district had been finalised, and the Albert Luthuli project had just began.
To speed up the process of connecting schools, there needed to be greater coordination with the Department of Basic Education. The Schools Connect programme was being reviewed, due to the limited access it gives, and there was now an intention to build a tower that would allow for greater access in the schools.

USAASA had been working on improving its governance structures and the entrenching of good governance values. In the last two financial years, it had received clean audit, with only one  administrative issue raised. He noted that it was a key priority to keep the financial situation strong, but also to improve on what had been done correctly and to address any shortfalls.

USAASA noted that there was still a problem with the revenue of the Fund, and a way would need to be found to get network providers to pay more, or to find other methods for the diversification of acquiring revenue. USAF could not rely on National Treasury only, there needed to be diversification.

Discussion
The Chairperson said that listening to the presentations was refreshing, because there had been negative perspectives put forward on service delivery. The presentations made by agencies of the Department were always good but the Committee needed also to balance presentations with oversight visits. She asked about the relationship between USAASA and relevant stakeholders, and wondered if there was some way to hold stakeholders accountable when they did not adhere to contractual obligations.

Ms B Masango (Gauteng, DA) asked how  the organisation located itself in the scheme of public entities responsible for the ICT sector. She asked how many households were involved in the TV project. In the legislative environment, she wanted to know what limitations  the organisation had experienced. She asked how partnerships with network operators were to be managed. She also sought clarity on the 26 companies mentioned, and whether they were qualified to provide the service.

Ms C Labuschagne (Western Cape, DA) asked how many schools would be connected by the end of this financial year, and asked what role USAASA would play in regard to the maintenance of hardware infrastructure at schools. She asked if there would be collaboration between the Department of Basic Education and USAASA with regard to planning for schools. She also questioned whether USAASA or ICASA was responsible for the monitoring of internet at schools, and wondered what role USAASA felt it should play. If the duty was that of ICASA alone, she wondered whether the process of monitoring and evaluation would be adequate. Finally, she wanted to know the impact of using tariffs on stakeholders.

Mr J Parkies (Free State, ANC) asked whether there had been any consequences against those individuals who were responsible for the irregular expenditure of R92 million. In terms of the policy matters of the organisation, he wanted clarity on the relationship between USAASA and the DTPS. He questioned the criteria used to identify an “under-serviced area”. He wondered whether private schools were under the mandate of the USAASA.

Mr O Sefako (North West, ANC) asked how far USAASA would find itself along the route to achieving the 2030 goal set by the National Development Plan. He asked how it was intended to give access to the most rural of communities, and how progress would be measured.

Mr L Gaehler (Eastern Cape, UDM) asked whether all the schools in eMalahleni had been connected. Once the project in eMalahleni was completed, he wondered if other areas would be looked at, especially municipalities that were larger than eMalahleni.

Ms Radebe responded to the question of the R92 million irregular expenditure. This incident occurred before the previous board was in place, but the matter has been handed over to the legal authorities. The people involved were either suspended or fired. SA Police Services would be keeping the organisation updated on how the cases would proceed.

Ms Radebe noted that when identifying “under-serviced areas”, USAASA would make a recommendation to the Minister of DTPS. The research done would be conducted in order to observe what, in the present conditions, was found to fall below par.  This meant that what may have been a serviced area a year ago could be an “under-serviced area” today.  The research on this was purely empirical and it was given to the Minister for final definition. The issue of monitoring was clear - that it lay legally within the jurisdiction of ICASA. However, USAASA had seen lately that service providers did not adhere to contracts but the penalty ICASA enforced was in fact cheaper for them than incurring costs to do the actual work. The important question was thus who was monitoring the function, between ICASA, DTPS and service providers. Still, in terms of the legislation, the function of  monitoring lay with ICASA.

She clarified that the amounts that ICASA received in revenue from service providers was not the same amount that USAASA received. Due to budgetary constraints, USAASA was only able to service one or two areas per annum. USAASA reported to Parliament through both the Portfolio Committees of Communications and Telecommunications and Postal Services. The CEO of USAASA was able to make presentations to National Treasury, but financial support was needed to fulfil USAASA’s mandate. It was important to note that no private schools were being serviced by USAASA.

Ms C Labuschagne picked up on the issues of fines, and asked why they were not an effective accountability measure – she wondered if this was because the money was going straight to National Treasury and essentially being almost replaced in the budget and thus having no real effect. She asked if USAASA had the ability to change this, and to introduce more stringent penalties for service providers which could go beyond their current formulation.

Ms Radebe said that the issuing of fines was also the responsibility of ICASA, falling under its mandate and was linked to how it issued operation licenses. USAASA was a public entity created by a statute, and the legislation was very clear about what the mandate of the organisation was, and the  role USAASA was expected to play in the ICT sector. The board created a governance agreement with the Minister of DTPS, which gave  power to monitor the activities of the board throughout its tenure. The criteria to select these areas is determined largely by the empirical research.

Mr Nkosi said that the response by National Treasury to request USAASA to attend to promoting good governance within the organisation was an appropriate response, considering the previous irregular spending. There was a need to produce clean audits and clean business audits before USAASA could  undergo a budgetary review by National Treasury. The system created by the Post Office would allow for greater accountability in expenditure. The current arrangement with ICASA with regard to funding was counter intuitive because the money went through Treasury before reaching USAASA. The problem with this was that National Treasury could always reprioritise the money instead of giving it to USAASA. The other issue was that ICASA needed to enforce service providers paying 1% of revenues instead of the current 0.2%. If the 1% could be enforced, Vodacom would have paid R650 million in the last financial year, if their books were observed. This was serious potential revenue for USAASA and he stressed that it was currently not being collected, and should be accounted for through the Minister and Parliament before it is used.

South Africa Connect was clear on what were the intended targets and expectations set out for the organisation. Full coverage could be achieved in 2019, if budgetary constraints were addressed. There was some infrastructure which lay dormant in some areas, waiting for some sort of maintenance and innovation, and the use of this was sorely needed, so there was a need to prioritise. The pilot areas of NHI were highly prioritised, and the current focus area was the Thabo Mofutsenyane district in the Free State. Funding was the main concern around implementing the project.

The relationship with the Department of Basic Education was not consolidated and there was a greater need for coordination in that regard, because there was limited interaction, even though their goals were aligned. By the end of the quarter, the organisation would be able to give Parliament a breakdown of the various schools which had connectivity and those that did not. eRate is what paid for half of the work in the projects, but this was a constraint that needed to be addressed with ICASA.
There was a process followed for the tender, where companies responded. Out of those who did respond, USAASA had assessed that only 26 were fully qualified to do the level of work needed for these programmes. The 26 companies had 10 000 installers and these companies were expected to ensure that they trained local people to become installers, instead of calling in installers from other parts of the country. 26 was not a good number, and so USAASA was looking to increase that number. It would, however, do so only on merit, and companies would have to qualify to offer such services.

Mr Nkosi noted that when the TV project was approved by Cabinet in 2008, as part of the overall digital migration agenda of government, 5 million households had been identified. However, due to rises in unemployment in the last seven years, the number of households to be covered had now  increased because non-income households qualified for this project, and the number had risen from the initial 5 million in 2008, to 8 million. He repeated that the assigned budget did not include installation and antennae costs, and that was why there was such a great shortfall.

Mr M Rayi (Eastern Cape, ANC) said that the presentation given was a progress report but there seemed to be lots of issues which were brought about externally and were beyond USAASA's control. There was a need to bring together the necessary stakeholders - ICASA, Department of Communications, and DTPS -, to address the issues discussed today. He noted that Parliament could summon service providers to account for their roles in all of these issues, and the constraints to implementation. ICASA needed to come up with a report about the roles not fulfilled by stakeholders and subsequent recommendations about dealing with constraints. The issue of penalties needed to be addressed, especially the issue of the fines being cheaper than actually doing the work.

The Chairperson said it was critical to remove the constraints, to help fast-track the implementation of the programmes and projects.

Ms Radebe said that she appreciated the encouragement expressed, but also said it was important to ask whether the work that on connecting schools and other government institutions had actually been actually done. It was important to assess the impact USAASA could have in communities, through its work, and to bring together stakeholders to address the bottlenecks in the system. Again, the organisation would need to be specific with National Treasury about why it needed money and not just have money freely available at its disposal. This would encourage accountability and good governance. She encouraged the Committee to invite USAASA again to present on the work being done and to report on the plans.

The Chairperson said that pressure should be applied to National Treasury to grant more funding, and  there needed to be a process where the conduct of service providers was addressed. She agreed that it would be important to have another meeting about this issue.

The meeting  was adjourned.

 

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