Departmental audit outcomes: AGSA briefing; Department, USAASA/USAF and .zadna on their 2015 Annual Reports, in presence of Minister

Meeting report

The Chairperson noted the apologies from the Deputy Minister and Members and expressed condolences to a Member on her recent bereavement.

Department of Telecommunications and Postal Services (DTPS) and entities: 2015 Audit outcomes: Auditor-General of South Africa briefing
The Chairperson noted that the Committee had invited the Auditor-General South Africa (AGSA) to brief the Committee not merely to pay lip service to compliance, but in order to effect changes in how the Department of Telecommunications and Postal Services (DTPS or the Department) and its entities were performing, for there was general consensus on the need to ensure improvement and to check whether issues already raised by the Committee had been incorporated into their work.

Ms Zanele Nkosi, Senior Audit Manager, AGSA, indicated that the overall audit outcomes showed that DTPS, National Electronic Media Institute of South Africa (NEMISA), Universal Service Access Agency of South Africa (USAASA), Universal Service and Access Fund (USAF) and State Information Technology Agency (SITA) all received unqualified audit opinions, but with findings. Sentech received an unqualified audit opinion with no findings. Both the South African Post Office (SAPO) and Broadband Infraco (BBI) still had an outstanding audit opinion.

50% of the entities received good results in terms of the quality of submitted financial statements, but this finding was a regression from the previous financial year. 67% of the entities still required intervention in the quality of submitted performance reports while 33% did well, but this too was a regression from the previous year.  67% of the entities received good results in terms of Supply Chain Management (SCM) and 17% still required intervention. The results of 17% were of concern.

Ms Nkosi mentioned that 67% of the entities received good results in terms of financial health, and 33% were still of concern, and there was a general stagnation or limited progress when compared to the previous financial year. 50% of the entities received good results on Human Resource Management, 17% still required intervention and 33% were still concerning. This was a general improvement from the previous financial year. A total of 83% of the entities were still concerning in terms of Information Technology (IT) and 17% did well but this was a stagnation or limited progress when compared to the previous financial year. 50% of the entities received financially unofficial audit opinion with/without findings, before the corrections of material misstatements during the audit process and another 50% received financially qualified/disclaimstatements with/without findings, and DTPS, USAASA and USAF avoided qualifications by correcting material misstatements during the audit process.

Ms Nkosi added that 100% of the reports were reliable and useful, compared to 75% in the previous year. 100% of the auditees who submitted information did so in the time for the audit and there was a general improvement in the usefulness and reliability of the annual performance reports. 67% of the annual performance reports of the entities contained material misstatements, before the corrections. After the corrections during the audit process, 100% of the annual performance reports of the entities were not materially misstated. NEMISA, USAASA, USAF and SITA all avoided findings by correcting material misstatements during the audit process.

Most of the entities did not comply with legislation relating to the quality of annual financial statements, prevention of unauthorised, irregular and/or fruitless and wasteful expenditure and management of procurement and/or contracts. There was stagnation in the management of strategic planning and performance, the internal audit and audit committee. DTPS still struggled in terms of payment of contractors within 30 days and human resource management.

Ms Nkosi highlighted that the Department did well in terms of security management, while 60% of the entities also did well, but 40% were still of concern; this was an improvement compared from the previous financial year. 60% of the entities still showed areas of concern around user access management while 40% did well; this was a stagnation or limited progress. 60% of the entities did well in IT service continuity, 20% were concerning and another 20% still required intervention but this was a general improvement. 60% of the entities did well in IT governance, 20% were concerning while another 20% still required intervention; this was an improvement compared to the previous financial year.

A total of R8 741 000 was unauthorised expenditure, R19 628 487 was irregular expenditure while R9  043 352 was judged to be fruitless and wasteful expenditure.

Ms Nkosi stated that the AGSA had identified top four root causes in the Department and its entities for the problems. These included slow response by management in addressing the root causes of poor audit outcomes. The AGSA had recommended that responses to implement corrective actions should be enhanced and tracked by management. Although action plans were generally in place, their implementation was effective carried through to ensure that the issues were resolved in time. There was also a challenge of instability or vacancies in key positions and the recommendation was that stability within the portfolio should be increased by filling key vacant positions. Although there had been some improvement, there were still vacant key positions within the portfolio, and these had a negative impact on the outcomes. There was slow response by political leadership in the Department and the AGSA recommended that interventions regarding operations of public entities should be implemented in a reasonable time to allow optimal functioning of those entities so that they could meet their mandates. There was also lack of consequences for poor performance and transgressions in the Department. AGSA recommended that all officials who transgress SCM regulations should be held accountable.

Ms Nkosi noted that there had also been stagnation in the Department in terms of drivers of internal control, particularly financial performance management and governance, but there was improvement in effective leadership. The Minister’s commitments to address the root causes included the commitment to ensure stability within the staff of the Department, thereby increasing stability in the public entities. The Minister also committed to fill all vacant key positions in the Department and ensure that performance agreements were signed in time. State Owned Entity (SOE) oversight would be tasked with closely monitoring SAPO, and consideration of the budget for the NEMISA/iNeSi merger, as at the moment there was uncertainty on its future and reason for existence. There also needed to be clarification of the role of each entity, because of overlapping of functions and responsibilities.

Discussion

The Chairperson indicated that the Committee had held a meeting with the internal auditors of the Department and its entities in order to understand how they were responding to the issues that had been raised by AGSA . There was a feeling that the AGSA had raised key issues that needed to be addressed in order to assist the Department and its entities. 

Ms M Shinn (DA) expressed concern that there had not been any improvement in the quality of submitted financial statements before and after the corrections during the audit process. It was important to know how complex were the problems that caused stagnation in quality.

Ms Nkosi responded that the problems that were causing stagnation in the target to improve the quality of the submitted financial statements were not complex; this was mostly to do with reporting standards and projecting monitoring issues.

The Chairperson noted that the AGSA had identified regressions in general, especially in the quality of submitted performance reports and financial statements, but enquired if this happened in all entities. She asked if any action had been taken by the entities and the Department on the unauthorised expenditure, or irregular and fruitless expenditures that had been incurred, in line with the Public Finance Management Act (PFMA) prescripts. The presentation had been useful in indicating progress and regressions.

Ms Nkosi responded that the regression happened overall within the portfolio in the current financial year, so there had been an overall regression in the quality of submitted performance reports and financial statements. AGSA still needed to be briefed by the Department and its entities on the action that had been taken on the unauthorised expenditure, irregular and fruitless expenditures, as investigations were still being conducted. It must be highlighted that there had been improvement by conducting investigations but these investigations often took too long.

Department of Telecommunications and Postal Services 2015 Annual Report
Opening remarks by the Minister
Dr Siyabonga Cwele, Minister of TPS, emphasised that the performance of the Department and its entities should be measured against the Medium Term Strategic Framework (MTSF) targets. The Department would be looking to how to improve these targets for 2019. It had become quite clear that the way the Department set its annual targets was incorrect: they were either guessed, or were set too low. The Department failed to perform against the real targets set. In future, it would be scrutinising the annual and strategic plans of its entities in order to ensure that there was realignment to the MTSF. The current government was focused on the outcomes, rather than pushing for the execution of the programmes, so that targets should be to ensure that the outputs are geared towards the outcomes. The Department welcomed the report of the AGSA as it correctly reflected the status quo within the Department and its entities. He confirmed that the Department was interacting with the AGSA on a quarterly basis, as it assisted in pointing out the challenges facing the Department.

Minister Cwele confirmed that matters were improving but there were a lot of challenges that needed to be attended to as a matter of urgency, which had come out in the AGSA report.  and this was, once again, what came out in the AG’s report.  The Department had promised to finalise the appointment of the Chief Financial Officer (CFO) as this was one of the critical posts, but there were certain challenges in this regard. The Department had tried to upgrade the post in order to attract good skills but it became clear, on the advice of the Department and the Department of Public Service and Administration (DPSA) that this was going to be a lengthy process. The Department was required to provide a clear motivation on why it required the upgrading of the post, especially since it was the smallest Department. It had reached the stage now of interview and this appointment would hopefully  stabilise the Department. BBI had also not had a CFO for quite some time but the Department managed to get an appropriately qualified and competent individual on a two-year contract, and there was hope that the affairs of the BBI would improve immensely this year.

Minister Cwele reiterated that SAPO and BBI had not concluded their annual financial statements and therefore had not been able to table their reports. The Department had written to Parliament to inform them of this situation. The major challenge for both of the entities was funding, as there were doubts about their status as a going concern. The DTPS only because aware of this at end July 2015, when the auditors were briefing the Department, and it immediately started interacting with the National Treasury (NT) to get the necessary guarantees in order to get a cash injection. The processes within the NT followed their course, there was a critical meeting on 30 September 2015, and the Department was still waiting for the response from the Minister of Finance. The Department would only be able to finalise the financial statements and annual reports of the entities after the response had been provided by the Minister.

The Department had appointed a new CFO for SITA, and the new Chief Executive Officer (CEO) had already started and there is hope that the results of SITA would also improve. The Department had already appointed the CEO for NEMISA and the CFO was still in place, again this should help to stabilise the entity. He hoped that the non-compliance to the SCM prescripts and the management of procurement process from NEMISA and other entities would not be repeated again.

Minister Cwele admitted that the Department still had challenges as there were still so many vacancies in key positions, but the Department had advertised for the posts of Deputy Director-Generals (DDGs) which had been vacant for some time. It hoped to be able to attract new leadership which would change the culture of the Department. He highlighted that it would be difficult for the Department to fill the posts where there were pending disciplinary proceedings and appeals, until those had been finalised.

He noted the possible concerns that the move of the CEO from Sentech to SITA could weaken Sentech but assured the Committee that another competent CEO had been appointed at Sentech. The Department had been informed that the CEO of Sentech had resigned as he was also poached  by another SOE belonging to the Department.

Minister Cwele added that the Committee had already been informed that there was a new board at SAPO, but the critical challenge there was the lack of managers. The Acting CEO of SAPO had decided to leave, and the Department was now in the process of appointing a CEO in this position, which would assist in the implementation of the turnaround strategy. There were four to six vacancies at SITA, and the Department was planning to fill in these posts in the next 30 days, depending on the Cabinet processes. Some of the Special Investigation Unit (SIU) investigations reports had been completed, but those reports still needed to go to the Presidency.

The Department remained vigilant on he issues that had been raised by the AG. The NT had already asked all departments to identify all the key critical posts that needed to be filled as it was highlighted that the money will be taken away, if the funded posts were not filled. There were posts in the Department but there was no money to fill those posts and on this, the Department was liaising with NT.

Minister Cwele emphasised that the Department was engaging with its entities on a regular basis and the Department could only be satisfied with the overall performance of the entities after the release of the financial statement of SAPO. There was a general feeling that perhaps BBI would not pull down the overall performance of the Department, but SAPO might because of lack of effective management, but this was an area that was currently being strengthened. It was pleasing to see that the Committee had also invited the chairpersons of the entities, as this was part of ensuring that people were accounting. The Department was pushing for accountability. The integrity of the people who were involved in the SCM should be prioritised and this would be monitored. The bulk of the problems arose in the Department from those involved in SCM who failed to comply with the regulations or prescripts. SITA was merely responsible to procure for other departments and there was a need to closely monitor those involved in that procurement. The Minister and Deputy Minister were working very closely to monitor the entities like SITA, SAPO and BBI.

Departmental briefing
Mr Joe Mjwara,  Acting Director General, DTPS; indicated that the Department had undergone the he process of the National Macro Organisation of the State. The Presidential Proclamations confirmed the transfer of administration, powers and functions under specific legislation to the Ministry of Telecommunications and Postal Services and the newly formed Ministry of Communications. The Department developed high level implementation plans for the four pillars of SA Connect. A Broadband Steering Committee, and the National Broadband Advisory Council, had been appointed. The Department secured a funding allocation of R740 million over the Medium Term Expenditure Framework (MTEF). 

Mr Mjwara added that the Department undertook extensive public consultation on the National Integrated Information Communication and Technology (ICT) Policy Green Paper in all nine Provinces, and that this informed the development of the ICT Policy Review Discussion Paper that highlighted a range of policy options and possible policy approaches. The Department then went on to develop the National Integrated ICT Policy Recommendations Report,  which will inform the development of the White Paper on National Integrated ICT Policy.

In regard to the cost to communicate, the Department developed a Policy Directive on Price Transparency as well as a Policy Directive on Premium Content, both of which were approved by the Minister and submitted to the Independent Communications Authority of South Africa (ICASA) for consultation, as required by the Electronic Communications Act (ECA). Following a benchmarking study, the Department developed a Benchmarking Report on Mobile Data Pricing, including relevant recommendations for consideration.

Mr Mjwara stated that the Department had only partially achieved on the targets for the ICT policy review, because the Department was unable to develop the Draft White Paper on National Integrated ICT Policy as planned. This was largely due to delays caused by an extension in the deadline as well as the high volume of responses received during the public consultation which required additional time to analyse inputs. The Department also partially achieved on the National Address System Policy as poor participation by key stakeholders meant that development and gazetting of the NAS Policy could not take place as planned. There was also partial achievement on the ICT Broad-Based Black Economic Empowerment (BBBEE) Council where the appointment of Council members was delayed as there were fewer nominations than expected received. The Department needed to engage with the newly established Department of Communications (DoC) due to the reconfiguration process. The nominees to sit on the ICT BBBEE Council were approved by Cabinet on 23 September 2015 and the initial meeting for the Council had been arranged for 1 October 2015.

Mr Mjwara said that the Department had partially achieved on the National e-Strategy, where more  research and consultation was needed . Additional capacity was required in terms of data collection and analysis of data in sectors such as health, education and justice. The tender had been advertised for the service provider to develop the National e-Strategy, and there had been consultation with Limpopo, Northern Cape and North West provinces . There was partial achievement in Cost to Communicate but two Policy Directives could not be finalised due to delays in receiving comment from ICASA. However the Policy Directive on Premium Content was transferred to DoC. The study on national roaming could not be concluded due to delays in appointment and vetting of the recommended service provider.  A draft National Roaming Policy and a Draft Policy Direction on Mobile Data Pricing had been developed.

Mr Mjwara reported that the Department had fully achieved on internet strategy targets, as the development of the internet strategy was approved. The internet strategy was being implemented through the school connectivity project  being undertaken by the Department as part of SA Connect. The Department had partially achieved on the ICT research programme as the research on Content generation hubs was put in abeyance pending the finalisation of the proclamations, according to which aspects of broadcasting would be dealt with by the new DOC and the DTPS. Following the making of the relevant Proclamation, this area of work was handed over to the DOC. There was also partial achievement on ICT information management repository as the review of ICT related empowerment targets did not take place as planned. However, building on current research done and working with Statistics SA (Stats SA), it was envisaged that baseline ICT data on Small Micro and Medium Enterprise (SMME) related empowerment targets would be collated. The current status showed that the ICT Informations Management Repository was fully developed and available in a form of desktop and web-browser.

The Department had partially achieved on WSIS Country Report, and the Report would be tabled in the 2015/16 financial year, during the WSIS-2015. There was full achievement on the ICT capacity development programme on information ethics. The Department had partially achieved on digital readiness strategy. The rapid deployment policy could not be finalised as planned and the draft policy direction on spectrum for broadband could not be finalised. The draft Rapid Deployment Policy had been developed and would be gazetted for public comment by 31 October 2015. There was also another partial achievement on e-Government; here, underachievement happened because the revision of legislative and regulatory matters was not finalised and a business case for e-Government funding was not developed as planned. The corporatisation of Postbank was partially achieved since final registration of the Postbank as a company could not be finalised due to delays in obtaining authorisation from South African Reserve Bank (SARB) to establish the Bank.

The finalisation of all Board appointments was not concluded, due to finalisation of vetting for fit and proper person by SARB. The Minister of Finance had been requested to exempt Postbank from complying with the Banks Act requirements of being a public company, since SAPO is a SOE.

Mr Mjwara then moved on to discuss the problems identified by the AGSA. In relation to failure to make payment to suppliers within 30 days, AGSA recommended that invoice tracking certificates should be introduced to identify bottlenecks in the payment of suppliers. A draft procedural manual on payment within 30 days had been developed, for approval at the next OPSCOM meeting, prior to implementation. He highlighted that the Department was in the process of developing an electronic invoice tracking system.

AGSA further noted a problem of lack of a business continuity plan so one had now been developed. Finalisation of this was dependent on the outcome of the Department’s service delivery model, which was currently being developed.

The problem of poor internal controls around inventory management was also regarded as the potential threat in the Department. The Department had now developed a draft Procedure Manual on inventory and consumables verification and management, and this would be presented at the next OPSCOM meeting for approval and subsequent implementation.

The vacant funded posts within the Department had not been filled as planned in the targets, but he pointed out that the filling of the posts was dependent on funding being received. Measures were now in place to fill funded vacancies within the prescribed timeframes, through the prioritisation of critical vacancies in line with available funding.

AGSA also expressed concern that performance agreements within the Department were not concluded and submitted within the required timeframes, but now consequence management measures had been put in place to address this.

Discussion
Ms Shinn wanted to know if the national e-Strategy fell under the ICT policy review. It was important for the Committee to be given an update on the tender that had been advertised for the service provider to develop the National e-Strategy. She asked the rationale behind consulting only Limpopo, Northern Cape and North West provinces for the development of the national e-Strategy? She wanted to know who was responsible for conducting the market structure study that was undertaken on wholesale open access network, and whether the Committee could get a copy of that study.

Ms Shinn requested that the Committee be provided with the breakdown of how almost R700 million that had been allocated for the roll-out of digital development implementation, from 2015 to 2018 would be expended. She wanted to know the kind of facilitation that was done by the Department on the Annual General Meetings for Telkom and Vodacom, as these were Johannesburg Stock Exchange (JSE) companies and she could not understand why it was involved.

Mr Mjwara responded that the process of looking for the provinces that would be leading in the development of the national e-Strategy began in the early course of the year. Initially there was advertising for a service provider to do the work, but it was later decided that the work should be  done internally instead of sourcing an external service provider. The process for utilisation of the coordinating structures of the SA Connect had started, in order to discuss the implications of the e-Strategy. However,it was then realised that there was much deeper involvement of government at all levels, both provincial and national, and so a structure had now been activated to consult all the provinces in the development of an e-strategy.

Mr Mjwara said that the purpose of he market structure study was to feed into the elements of the ICT policy, with a focus on the rapid deployment, open access, networks and open access regime, the regulation of prices and the entirety of the national networks. The study had already been done and it, together with other studies, were being used to input into the final stages of the National Integrated ICT policy. He reminded the Committee that when SA Connect was finalised there was also an expectation that the Department needed to build a business case and costing before moving to phase 2. The business case was dependent on several things, including the deployment of the infrastructure throughout South Africa, the proximity and non-proximity of the government facilities and the technologies which could be used.

He said that because the Department held shares in Vodacom and Telkom, government was mandated to participate in the Annual General Meetings (AGMs) with these JSE companies. He clarified that the Department was not facilitating the AGMs, but facilitating government’s participation in the AGMs.

He said that there were many other government departments that were leading in the national e-Strategy. The Department was currently trying to determine the objectives, strategies and policies in regard to that e-Strategy. There were many players but the Department would need to assign specific responsibilities to each of those role players, which it was currently doing. The Department had met with the DPSA which was responsible for the national e-Strategy. The Information Technology (IT) systems that are within government were to be used as tools of trade for people who were employed in government, therefore, the standard of IT systems within government departments still needed to be determined. However, there was also recognition that there were other aspects which DTPS could not be able to determine, like the whole question of the networks which are linking the government service with the individual or the citizen who is outside.

Mr Mjwara added that the security of the information in government departments would need to be safeguarded by another separate department. In essence, it was impossible to have a single department to be leading in the implementation of the national e-Strategy. The transfer of SITA to DTPS was also complicating the whole issue of the e-Strategy. The Electronic Communication Transaction Act (ECTA) was also dealing extensively with national e-Strategy but the application of the e-Strategy lay in various government departments, and that was why the Department needed to coordinate with various structures.

Mr C Mackenzie (DA) expressed disappointment that SAPO had not been able to present its annual report; this was similar to last year when also this entity had been flagged by AGSA as a doubtful going concern. He thought, contrary to the Minister's assertion that there was “incapable management”, that it was rather a question of “incapable leadership” since the management had remained in their posts during the labour strike.

He asked who was leading the e-Strategy and e-Governance, for it seemed like the DTPS was playing a secondary role instead of leading.

Ms N Ndongeni (ANC) wanted to know the time frame for the development of the draft business continuity plan, and the time frames for filling of vacant posts and development of IT governance. It was important to know the stage at which the Senior Accounting Officer should take remedial action against persistent non-performance. 

Ms D Tsotetsi (ANC) appreciated the fact that the Department had managed to identify all its challenges and had made commitments to take action to address those challenges. However, the Committee should be provided with an explanation why some of the remedial actions that had been proposed by the AGSA had not been implemented. She was worried about payment of suppliers in 30 days, and asked the reason for paying personal bonuses to staff who had not signed their performance agreements. She asked if there were competent staff in HR, for leave issues and prolonged recruitment seemed to be problematic.

The Chairperson acknowledged that the Committee had been given notice on the late tabling of annual reports of both SAPO and BBI. It was unfortunate that the Committee would not be able to incorporate BBI and SAPO recommendations into the Budgetary Review and Recommendations Report (BRRR

She wanted to state categorically that the Committee did not recognise “partial achievement” - targets were either achieved or not. Since the 2014/15 financial year had already ended it was incorrect to refer to “partial achievement”, although this might be possible for quarterly reports. Similarly, the “new findings” tag on slide 7 was incorrect; these were findings already flagged in the 2013/14 financial report that was tabled in Parliament.

The Chairperson expressed concern that the Department had said that there were no bonuses paid to Senior Management Staff (SMS) although the Annual Report reflected that three SMS members had been paid bonuses. She asked how this conflict happened, and what positions those members held? She also said that more detail was needed on the legal costs, the total amount,  and what they were for. In relation to the amounts that had been written off, the Committee needed to know what amount had been irrecoverable and what efforts had been made to recover before writing off. Finally, she commented that it was strange that the Department reported that SAPO had achieved eleven new points of presence, 6 post offices and 5 new mobile Postbank deposits, while the Annual Report of the entity had not been released.

The Chairperson mentioned that an Annual Report was retrospective. It was clear that the Department had 28 performance targets and only achieved 8, yet 148 staff members had received bonuses. It was particularly concerning that the programme of SOE oversight had achieved zero targets, and this once again painted a picture of the Department that was failing. The Department was reporting on legislation which did not fall within its portfolio; the Protection of Personal Information Act fell under the security cluster. She asked if there were any international agreements that had been ratified and if so, what they were.

Minister Cwele responded that the real problem facing SAPO was short-funding and cash flow problems, and the priority of the Department was finding ways to assist the entity in acquiring funding. The Department had signed a lot of guarantees which would enable SAPO to go and borrow, in order to inject  cash. The cost of borrowing for SAPO was so high that it would not be sustainable for this type of business, and so banks had been reluctant to offer funding. He highlighted that most of the problems at SAPO did arise because of management, which had been responsible for the projections of finances and management of HR, and could have avoided the labour strike. The responsibility of the Board was to oversee and make sure that the company functioned property.  The Department had taken action in cases where the Board of SAPO had failed to execute its mandate, but this on its own was not adequate in dealing with challenges that were facing SAPO. 

Minster Cwele added that the Department had prioritised getting capable and qualified management in all the entities and this was part of plan in the filling of vacant posts. There was general consensus that staff members should not only be tied by contracts, but also by performance agreements, to ensure accountability.

He agreed that it was unfortunate that SAPO did not submit its Annual Report last year. The Department had now appointed a new Board and there was hope that SAPO would have a stable management by the end of November 2015. One of the senior managers at SAPO was still undergoing disciplinary measures and the Board had been notified that there was a need to move swiftly to finalise this.

He noted that the Department and its entities had been heavily reliant on consultancy and this was a matter that needed to be resolved by utilising internal skills.

Mr Farhad Osman, Acting Deputy Director General: Administration, DTPS, said that most of the posts in the Department had been advertised, as the Minister had indicated. The candidates for the position of a CFO in the Department had been advertised and the Department was developing a list of critical skills that still needed to be filled. The deadline for those posts was 1 December 2015. The Department was also doing the costing of the vacant posts that still needed to be filled, based on the available budget until the end of the financial year. The Department had already commented on some of the findings of AGSA and formulated an action plan to address those findings. The deadline for implementing that plan was the end of the calendar year, and the same deadline applied to the  business continuity plan, vacancies and IT service continuity plan.

In regard to the issue of payment of suppliers within 30 days, Mr Osman said the Department had instituted several action plans to address this challenge, which mainly related to invoices and banking details with incorrect information. The staff members who did not sign performance agreements would not be receiving bonuses; in order to be assessed on possible qualification for such a bonus, the agreements had to be in place. The Committee could be provided with information on the names of the staff members who had received bonuses in the Department, and their rankings. The bonuses were in respect of the 2013/14 financial year, but the two staff members that qualified for bonuses in that financial year received payment only in the 2014/15 financial year when they had been promoted to the level of SMS.

He noted that the Department was advised by the AGSA to use the language of “partially achieved” when describing targets, and the rationale behind this was to qualify any target by the action that had been taken towards achieving it. The structure that appeared in the Annual Report was not the structure during the full period under review but the structure at the time of tabling of the document.

Mr Rebolang Soldaat, Director: Financial Management, DTPS said that irrecoverable amounts included some cases where staff members had left with the assets of the Department on a short notice. There were processes instituted to try to recover, using tracing agents, but sometimes the Department would reach the stage where it became uneconomical to recover an asset, when it would be written off.

Mr Mjwara said that the Department had reported on two programmes, in cybersecurity and DTT. The Department had made a commitment at an African Union (AU) level in 2010 to conclude on the Cyber Convention and this was concluded by the Minister, and approved in June 2014. No international agreements had been ratified within this reporting period and the Department was in the process of signing a number of Memoranda of Understanding (MoUs) with countries like India, Cuba, Namibia and Zimbabwe.

Mr Osman said there were a number of additional issues picked up by the AGSA on HR which were significantly different from those in previous financial years. The confusion on whether the Department had new findings in HR arose because the presentations previously did not go into full details. New findings identified would be brought into the action plan which was currently being implemented.

Mr Mjwara added that the Department usually met immediately upon receiving the list of remedial actions needed to address the audit findings. There was also a meeting with the management, identifying those responsible for the issues that had been highlighted in the audit findings, and this was part of the consequence management. The Department had realised that often the problem lay not with individuals but with the management system that failed to address the challenges timeously and to hold people to account. The Minister had already indicated that there was a problem with targets that had been stipulated, as they looked like wish-lists that were not supported by HR and the allocated budget. There were cases where targets were not achieved because of poor planning, not necessarily because the individuals did not do what they were mandated to do. 

He added that there was a general observation that DTPS had been over-committing to targets in the last three years, so that it failed to prioritise, given the limited resources, and to focus. Consequence management was now in place and people who were under-performing would need to be dealt with urgently.

Ms Tsotetsi wanted to know why there was no explanation on the repeat findings, and why targets from the DoC were included.

Ms Shinn asked if the Department was about to conclude a MoU with Cuba, as this was not stipulated in the Annual Report.

The Chairperson suggested that there would be a need to review some of the targets of the Department, to focus more specifically on its mandate. She asked who was championing the Techno Girl Programme and the role that this supporter played in the programme. It was also unclear if the targets on the Techno Girl Programme had been achieved or partially achieved. She said that transfer of funds of entities was not desirable and should be corrected. AGSA's findings highlighted that the Department needed to ensure that the performance systems were in place. She asked why one of the dismissal cases was withdrawn, and what was the basis of the three dismissals that did happen. She asked how the Department would account for the incoming financial year on the previous financial year.

Mr Ali Mashishi, Acting DDG: ICT Information Society and Development, DTPS, responded that the Techno Girl Programme fell under the programme for Gender, Disability, Youth and Children mainstreaming. It was partially achieved because some of the programmes like Early Childhood Development had been delayed. All project activities related to Access to Broadcasting by people with disabilities were suspended, due to the outcomes of the Presidential Proclamation. The programmes under Gender, Disability, Youth and Children mainstreaming would still be done in future, as their importance was recognised, but they would fall under the Digital Opportunity Programme, so that the impact could be countrywide.

Mr Mjwara admitted that the Department had indeed made an error in terms of reporting for the incoming financial year on the previous financial year and this would be rectified. No MoUs were ratified in the 2014/15 financial year.

Mr Osman clarified that the APP was for the cycle 01 April 2014 to 31 March 2015, but the proclamations setting up the two separate departments came into effect in July, September and December 2014, when the APP had already been developed and budget allocated. Some project had been put on hold by DoC pending the transfer of resources to the DTPS.  Because the Annual Report must mirror the APP, the DTPS still had to report on these projects.

Universal Services and Access Agency of South Africa (USAASA) 2015 Annual Report briefing
Mr Zami Nkosi, Chief Executive Officer, USAASA, indicated that USAASA had achieved 79% of the targets but failed to achieve 21%. However, if the Digital Terrestrial Television (DTT) linked targets were discounted, then USAASA had achieved 85% of its targets. He described the governance, and said that four Board and committee meetings  and the minimum of twelve Executive Committee meetings had also been conducted. The strategic plans and Annual Performance Plans (APP) of USAASA and Universal Services and Access Fund (USAF) were developed, approved and submitted to DTPS and Parliament. The approved quarterly reports had been submitted to DTPS within the regulated time, and the USAASA and USAF Annual Reports were tabled to Parliament.  Areas of non-achievement related mainly to stakeholder engagement, finance, human resource and risks associated with litigation against the entity. USAASA was currently engaging NT and ICASA to revise its percentage contribution to USAF to 1%. 95% of the actual expenditure spend was in line with the allocated budget.

Mr Nkosi mentioned that placement of orders in the beginning of quarter 2, for set-top-boxes and related antennas ,would trigger the expenditure of USAF subsidies. The entity was planning to reduce the risks associated with litigation against it by 5%. This target was part of the monthly operational risks plan and it would be continuously monitored in order to bring down the costs below 5%.

The organisation had a staff complement of 58 for the 2014/2015 financial year and 15 unfunded vacancies remained unfilled for the 2014/2015 financial year. The organisation had seven  terminations, three resignations, one expiry of contract and three staff who left for other reasons, and the staff turnover rate for 2014/2015 was 12%. The entity had received an unqualified audit opinion with findings on compliance. The concerns related mainly to financial and performance management and leadership.

Mr Nkosi added that USAF had managed to connect the two designated broadband sites; Ratlou Local Municipality was installed in full while Joe Morolong Local Municipality was installed in part. The additional 63 connections effected on the new rolled network included eight schools and 18 clinics in Ratlou (North West) and ten schools and 27 clinics in Joe Morolong (Northern Cape).

In terms of Broadcasting Digital Migration (BDM), USAF did not have any achievement on this target as no orders were placed or processed in the 2014 /15 financial year, although considerable work was undertaken in preparation for the eventual implementation of the project. A total of ten schools from the mainstream and five schools for persons with disabilities were connected to ICT services. Five out of the six planned broadband sites were completed at local municipalities and over 120 schools from the mainstream and for persons with disabilities were connected to ICT services.

USAF also received an unqualified audit opinion with findings on compliance and the concerns were mainly on financial and performance management and leadership.

Discussion
Mr Mackenzie wanted to know how much of the taxpayers' money  had been used to produce this “fancy and well-furnished” annual report of USAASA. It was important to know if the Board members were remunerated separately, between USAASA and USAF. He asked if USAASA was certain to achieve the strategic objective of facilitating the roll-out of broadband infrastructure in 195 identified under-serviced municipal areas, by 2020, and he asked if the two under-serviced municipalities that were currently being connected were included in this number. He asked what plans there were to ensure that this strategic objective was in fact achievable. The ICT review had suggested that USAASA should be dissolved, as the entity was spending almost R60 million (two thirds of the budget) on staff wages although it was unclear at the moment as to what would be an acceptable ratio to be spent on staff members.

The Chairperson responded that there was nothing “fancy” and “extravagant” in the Annual Report that had been produced by USAASA. There was a level of professionalism in the way the report was compiled.

Ms Pumla Radebe, Chairperson, USAASA, responded that the entity had noted the concern of Mr Mackenzie regarding the package that had had produced the Annual Report, and this would be one of the issues that would be taken on board. She noted that although Board members had two separate meetings, one for USAASA and one for USAF,  there was no duplication in remuneration of Board members.

Mr Nkosi added that the box that was used to cover the Annual Report was not paid for; USAASA had developed a culture of being able to persuade suppliers to give extra without extra payments. USAASA was not wasting taxpayer’s money and was frugal in spending, particularly in regard to travel. USAASA was recovering money of close to R157 000 from 15 employees who had been granted bursaries but did not complete their studies. The consequence management was very clear, and stringent action would be taken against any board member causing financial loss.  He noted that the division of Board meetings between USAASA and USAF came out of the AGSA findings of 2012/13 year when it was stressed that because these were two separate entities, they needed to have two boards. He confirmed, however, that there was no duplication in remuneration of Board members.

Mr Nkosi said that research was undertaken when USAASA developed its turnaround strategy for the national e-Strategy, as well as for the development of e-Connect, The research gave an indication that there were 195 local municipalities that were under-serviced but the entity was currently connecting only two local municipalities because of lack of funding to spread to others. SA Connect now had the responsibility to connect the rest of the other local municipalities that were still not connected. He highlighted that SA Connect had not yet come up with the eight district municipalities when the plans were put in place and the plans of the Department were not aligned to SA Connect at the particular time. USAASA would connect those targeted and under-serviced local municipalities against the backdrop of 8 identified in SA Connect.

He said that USAASA was the administrative arm of USAF and the entity had employees who were mandated to ensure that USAF was operating effectively and efficiently. USAASA did not have the correct technical skills required for the entity to operate optimally. It was recognised that USAASA was spending more money on non-technical skills. 

Ms Shinn asked if the entity was spreading the networks wider and raising the levy, since there were  negotiations at one stage to revise the percentage levy of 0.25% towards the Fund. She asked if the school connectivity projects would be overlapping with the SA Connect; the entity still needed to connect to 195 underserviced areas in the next four years. She asked about the civil litigation instituted against USAASA on policies, a point not covered in the presentation. She was concerned to see that the performance rewards for the staff members, mainly the bonuses, had reached R2 million while the performance of the entity had been declining. USAASA apparently had a vacancy rate of 40% in both top management and 14% in professionally qualified vacancies, and she asked why it was not able to attract competent and qualified staff members. She further questioned how such a small entity had paid R274 000 for the penalties on Pay As You Earn (PAYE) from the South African Revenue Services (SARS). However, she did want to note that USAASA had improved dramatically from the state it had been in 2012, when it was “riddled with corruption, financial mismanagement, backstabbing and no one trusted each other” and she paid tribute to the Board for stabilising it.

Mr Nkosi replied that USAASA was supposed to be funded from the levy that was raised from Telcos and although they were paying that levy, of 0.25% to ICASA, the money was not coming to USAF but being paid to the National Revenue Fund. USAASA had been permitted to increase the levy  to 1% so that USAASA could use that money to roll out broadband in under-serviced local municipalities. The civil litigation was launched by a company who had done work at USAASA from 2010 to 2011, but who was stopped after a forensic investigation by USAASA. The company claimed that USAASA owed  R40 million, but there was no documented evidence of that claim. The matter was sitting with the State Law Advisers. There was also litigation anticipated out of the BDM project as E-tv was threatening to interdict the orders that had been placed on DTT; if an interdict was granted, USAASA would have to halt the roll-out of DTT. USAASA was engaging with E-tv which had suspended the  litigation for the moment. 

Mr Nkosi clarified that the bonus paid to managers was in respect of the 2013/14 financial year and it was not directed to a single individual. USAAF had a performance policy and performance management system, and prescribed conditions had to be met before bonuses were paid. The performance management bonus acknowledged the staff members that had done well for the company.

He clarified that there were 15 positions in the organogram that are unfunded, which made it difficult for USAASA to fill posts, although it had filled two vacancies for senior managers. It had appointed the executive manager for performance management and the executive manager for corporate services and a manager to assist with legal matters.

Mr Nkosi agreed that USAASA had paid R274 000 for penalties on PAYE from SARS, including interest, and this was regarded as fruitless and wasteful expenditure. The amount stemmed from the mistake in 2011 when the quotations for car allowances were incorrectly captured in the system. The employee responsible was dismissed and the entity had introduced measures to deal with the capturing of quotes in the system.

He noted the concerns of the Chairperson over the “partial achievement” of some targets, and took the comments on board. He noted that USAASA had made sure that 80% of its funds were used for BEE companies, and could provide the breakdown of the BEE levels. Litigation included Commission for Conciliation, Mediation and Arbitration cases where dismissed employees challenged their dismissal. Assets disposed of included old computers and broken furniture and these were sold off to the employees, to maximise USAASA's office space. Concerns around the surplus had been noted.

Ms Tsotetsi asked for the breakdown by provinces, and rural/urban spread of the 250 identified under-serviced areas that should be connected to broadband by 2020. She wanted to know if USAASA had capacity to achieve 100% connectivity of cost effective public centres, primary healthcare facilities and government institutions in under-serviced areas by 2020.

Mr Nkosi responded that the Committee would be provided with the breakdown, and assured the Committee that USAASA would be ready to deliver on its mandate of broadband rollout in the underserviced areas.

The Chairperson agreed with Ms Shinn that the entity had improved drastically in terms of operation and financial management and whilst the current Board was to be commended this was not an opportunity to chastise  the previous Board that had not performed so well. The task of the Committee, together with the current Board, was to ensure that USAASA did not regress but would improve significantly from the state it was in before. She reiterated once again that the 2014/15 financial year had passed already and therefore it was impossible for the targets to be reflected as “partial achievement”. It was encouraging to see that the entity was sitting with performance above 80%, but there was always room for improvement. She asked if the reference to 80% of USAF and USAASA procurement from BBBEE was focused on compliance from companies, and asked how that compliance was in SMMEs.

The Chairperson asked about the risks associated with litigation faced by USAASAA and the way those risks had been addressed. She asked what assets had been disposed of. She stressed again that it was important for the Committee to know if the Board members of USAASA received the same compensation, and how this correlated to attendance at Board meetings. She asked if USAASA had any surplus as money was needed to execute other projects in the pipeline. The Committee had raised a concern about the fact that there are instances where entities would not spend the money budgeted for a particular project and then record it as a surplus.

She expressed concern that the entity had condoned the amounts on irregular expenditure, and said it was worrying to note the nature of these deviations, especially around SCM policies and expiry of contracts.  She asked what action there had been to address such deviations. It was of concern to note the delays in infrastructure deployment pending the passing of the Infrastructure Bill, and said the DTPS would probably need to help USAASA in that regard. The Committee would follow up on findings flagged by the AGSA.

Ms Radebe responded that the entity was using the same payment structure provided by the Department for the compensation of Board members; the difference arose with those members who did not attend committee meetings. The discussion around the terminology of “partially achieved” and “surplus” was noted. USAASA welcomed the encouraging words about its improvement; this had not been an easy road, and it was recognised that there was no room for complacency as further improvements were needed.

Ms Shinn indicated that she was aware that USAASA was allowed to increase the levy from 0.25% to 1%, but wondered if there was no possibility of widening the networks in order to get the other networkers as well as the Telcos to contribute, whilst being aware of the need to be careful not to over-burden people who were making the communication sector more functional in the country. 

Mr Nkosi responded that the increase of the levy was dependent on ICASA and USAASA would not be able to effect this change without the approval of ICASA. Widening of the networks could be a good idea, as this would allow the entity to execute its mandate in terms of connecting under-serviced areas.

Briefing by .ZA Domain Name Authority (zaDNA)
Mr Vika Mpisane, Chief Executive Officer, .zaDNA, stated that the entity had achieved 75% of the targets, mainly achieving 20% on enhanced policy and management regime, 15% on developed centre of operational excellence, 30% on inclusive Domain Name Community and 10% on inclusive internet governance. The entity had equity and liabilities totalling R9 137 233 in 2015, compared with the R7 369 440 in 2014. In terms of standardising policy framework, the general policy of the entity had been approved and the dotCities policy framework was being finalised and implemented. The entity was still dependent on the DTPS for the extension of ADR regulations. The proposed ADR regulations amendment had been deferred to 2015/16, in line with DTPS plans.

Mr Mpisane highlighted that Authority was also focused on improving access and quality of registry data, and expansion of “Whois” database to other second level domains (SLDs) led to edu.za, net.za, org.za & web.za registry data updated for accurate Whois purposes. The quarterly release of .ZA statistics across different SLDs led to an update of registration statistics, especially in smaller, non-ZACR SLDs. The annual research report release had been deferred to the 2015/16 financial year. There was a focus on implementation of name-space operational standards, the adoption of shared registration standards across SLDs: such operational standards would be finalised for implementation in 2015/16. The provision of Extensible Provisional Protocol (EPP)-standard registration interface to smaller SLDs: edu.za, net.za, web.za registration was automated, and the increased Whois participation: alt.za and edu.za was included.

Mr Mpisane added that .ZA was planning to implement a marketing and awareness strategy in order to increase visibility and awareness of the entity by the general public. This could be achieved through industry and media channels and engagement of key stakeholders through industry events and ICANN, internet governance and ICT Policy Review processes. The pre-launch and launch awareness and advertising would be carried out through registrar, online and industry channels.

Discussion

Mr MacKenzie indicated that he had always been impressed by how .ZA was being run and its business model. It was profitable, was not a drain on the fiscus and this should be commended. The new Board needed to continue the sterling work that had been started by its predecessors. There was a general concern that the entity was not known to the general public, and this was the issue that needed to be addressed through awareness programmes.

He requested more details about the DoC funding of R357 000, as this was referred as an operating expense and this funding had increased dramatically through 2014. The Committee should also be provided with further details on the R846 520 that was described as “meeting reimbursement”. It was of concern to him that the Directors' fees had quadrupled from 2014/15 and the Committee should be provided with the rationale behind this increase. He wanted to know the purpose of the R29 000 that was paid to the credit card, as there had been an abuse of credit cards by SOEs and government departments.

Mr Mpisane responded that the last time the entity received any funding from the Department was in 2013, and this funding came late in that financial year and it was decided that it should be carried over to the next financial year. The entity had decided to use the funding for awareness and the management of dotCities. In essence, the R357 000 was the split of the DoC funding, to be split between the dotCities and .ZA awareness programmes.

The reason for the quadrupling of Director fees was that the entity had fees that had been approved way back in 2005, but never changed since then. There was a feeling that these must be reviewed in 2014 as the entity was increasingly becoming self-funding. He noted that there was already a policy for the use of the company credit card; it is primarily used for travel expenses and accommodation and the CEO was the only one in possession of a credit card. The credit limit for the company was R100 000 a month, and staff members would be compelled to pay for any expenses that had exceeded the credit limit.

Ms Ndongeni also expressed concern that .ZAd was unknown in the general public and this was something that needed to be addressed promptly. She wanted to know if there was any particular reason why the management and registration of dotCities and dotAfrica was more focused in Cape Town, Durban and Johannesburg local municipalities. She asked what was the procedure that was follow for the registration of any local municipalities for dotCities and dotAfrica?

Adv Motlatjo Yvonne Ralefatane, Chairperson of the .zaDNA Board,  responded that the entity was still going to other provinces in terms of management and registration of dotCities and dotAfrica but there were still limited resources at the moment. The awareness programme was the first thing that had been identified by the new Board, as this was about popularising the entity in the general public.

Mr Mpisane added that the reason why only three cities were targeted for the management of dotCities and dotAfrica was because of the size of these cities, destination marketing potential and the costing; all had been calculated in the management of dotCities. The Board would do an assessment on whether some of the other providers were interested in the management of dotCities and dotAfrica Reserved Name List (RNL) processes. The entity was cognisant of the fact that its awareness had not been up to scratch, and this was an area where more focus and resources would be dedicated.

Ms Tsotetsi also congratulated the entity for its sterling work in management of public funds and showing value for money.  She also echoed the concerns of the Chairperson regarding the stipulation of “partial achievement” in the Annual Report. It was indeed of concern that the entity was generally unknown, even in urban areas, and the situation was probably worse in rural areas. She asked how it was aiming to address this challenge, in order to increase its popularity? The fact that .zaDNA could afford the payment of performance bonuses perhaps implied that the entity was now able to operate independently without any assistance from the Department.

Mr Mpisane also recognised the need to look again at the reference to “partial achievement” in the Annual Report, and recognised the comment that a target was achieved or not.

The Chairperson asked for pagination of future presentations. She asked why some of the targets had been deferred. She wanted to hear more about the coordination between the Department and the entity, as there was an indication that some of the targets were not met because of delays in the promulgation of amendments by the Department. She asked what had been done to prevent a recurrence of this challenge. She noted that the entity was doing well in terms of management of public funds, as indicated already by other Members, and any achievements beyond 70% were to be commended, although of course there was room for more improvement. Issues of staff complement, capacity in terms of staff members were all important.

Mr Mpisane responded that indeed there were some targets that the entity committed to without consulting the Department as to the feasibility of those targets, which was why it later decided not to proceed with them. Planning in the new financial year was aimed at addressing these challenges. There was attention paid to the person who would be responsible for heading the awareness campaign in order to ensure that the entity was well-known throughout the country.

Adv Ralefatane appreciated the comments of Members regarding the overall performance of the entity, and agreed with the comment that there was room for confusion.

Mr Mpisane apologised for any confusion by no page numbers; this would be corrected in future.

The Chairperson concluded by expressing appreciation for improvements that had been shown, but noted concern about some aspects, particularly the late submission of SAPO and BBI annual reports.

The meeting was adjourned.