The Committee was briefed by three entities of the Department of Telecommunications and Postal Services (DTPS) on their 2015/16 annual reports. Sentech said that revenue had grown from R950 million to just over R1 billion. Although it had received a clean audit there were issues needing to be addressed, including that some Sentech product portfolios needed attention, particularly the v-set, which was already being looked into in discussion with the Board. Sentech had met nine out of its 10 strategic objectives and as a far as the DTT roll-out the SOC had completed the upgrades to the 178 sites that had been scheduled. In the 2015/16 financial year (FY) more Greenfield sites were being completed. However; it had failed to achieve the employee satisfaction target mainly because of communication challenges between the different structures in the organisation, as evinced by its employee satisfaction survey. Sentech had developed an engagement plan to see how best to communicate decisions taken at senior levels to the lower staffing levels. In addition it recognised the need to improve its relations with the labour unions, as the majority of its workforce was unionised.
The Committee wanted an explanation of the dramatic increase in performance bonuses and allowances between 2013/14 and 2014/15 FYs, and asked what happened to short-wave stock written off. They asked how Sentech ensured that there was no duplication of functions with SA Connect, and which were the schools connected. They asked when it would address the challenges in the vacancy rate and asked if risks identified were carried over to the next year. They were worried that there was no operational disaster recovery site, and asked when the full Systems Applications and Products would be operational. Members also asked for details on the closure of InfoHold and InfoSat and more detail on the legal claims against Sentech. They called for the locations of radio stations assisted, the tariffs for community radio stations, and asked it to elaborate on employment equity, particularly the disabled component. The Committee commended Sentech on the improvement of performance over the last three years but noted that the Committee had heard quite a bit around employee dissatisfaction. They asked if the VSAT would be revised, and for details on the spillage case in Botswana and on any other agreements, and for clarity on funding available and spending on the DTT dual illumination. They were worried that if funding of community radio stations was left to the private sector,local content may be compromised.
Ikamva National e-Skills Institute (iNeSI - formerly NEMISA) briefed the Committee, but the Chairperson expressed her discontent at the absence, yet again, of the Chairperson of the Board. The Committee appealed to the Department that when appointing individuals to chair Boards, it should ensure that the individuals were willing to serve properly. NEMISA had achieved 70% of targets were achieved in the administration programme. The 30% non-achievement had been mainly from vacancies that had been budgeted for but had not been filled, including that of the CEO, COO and two executive positions respectively. These positions were in the process of being filled. NEMISA had decided not to appoint permanent teaching staff because of its transition to iNeSI. They were instead appointed on a project basis around the learnerships received from the Media, Information & Communication Technologies Sector Education & Training Authority. NEMISA had been asked to establish Colabs in North West, Mpumalanga and Free State, and this was ongoing. It had activated a newsletter in print and digital formats. It achieved 66% achievement in the programme around e-astuteness, but there was a variance in respect of timing since the class years did not match the financial years. Members were worried about the outstanding debtors and non-commitments made for deliverables due to uncertainty surrounding the budget. They asked for details on the performance awards that seemed to stretch over several years, and asked for clarity on the funding from the Department as there seemed to be contradictory figures in the Annual Report (AR). They also called for details on irregular expenditure on the contract on e-literacy software and a conference and asked why interest had been paid, particularly since NEMISA was showing a bank surplus at the time. They asked for further details on the operating lease and the high escalation, and the dramatic increases in costs for student stationery and printing, and asked how and where the donated property was accounted for in the assets. Members pointed out that in a recent oversight visit, it had discovered that there was very little awareness of NEMISA in Limpopo in particular and no training seemed to be provided in that province. Members wanted to know about training in the rural areas, and placement of graduate trainees. They asked why the academic committee had sat only twice, if there were plans to address debit collection and why the performance review had been postponed. Members were worried about the underspend on conditional grants and wanted more details on assets scrapped, and were particularly concern at the high costs of administration compared to the value of the projects delivered. The Board was asked to explain why the same issues were highlighted by the Auditor-General for the third consecutive year. ~
State Information Technology Agency (SITA) was reported to have come through some major challenges in the 2014/15 financial year, including the threat from some departments to seek a court order about using SITA services. Four board members had resigned. In this year, the intention was to create more structured programmes to improve service delivery. About 66% of government sites were serviced with 56kbps lines and so one of the programmes was aimed at improving the core network and increasing the quality of the network services to government. It also wanted to reverse the trend that around 33% of cancelled tenders were due to poor specifications. Members wanted to address the issue of performance bonuses, asking why they were awarded despite performance, and the long service awards. Members asked about the increase of group revenue yet the drastic decline in comprehensive income for 2014/15., and how it would grow its income. They asked for the names of schools connected. They wanted details of the female staff component and how SITA planned to address the deficiencies in employment equity, as also details on why the decision had been taken to remove the office of COO and have two deputy CEOs. They also wanted details of the investment into upskilling of personnel on cyber-security, and if there would be separate budget for that. Members called for more details on the cancelled project and failure to collect revenue. They asked about the difference in figures budgeted and spent on the SMS staff component. Noting the figures for irregular and fruitless expenditure, they asked if consequences would follow, and similarly if action had been taken against employees that had not declared their interests. They asked for more details on the ethics line. Members also questioned the reason that contracts were not finalised within the target periods, and wanted details on why ICT acquisitions through small enterprises had failed, on which there was an apparent contradiction between information furnished to the Committee earlier, and the annual report. Members also wanted more detail on the cancellation of tenders, and noted several personnel issues highlighted by staff during oversight visits, and asked if the Board had been aware of the deviations from supply chain management processes prior to receiving the audit report, and how far it was in reviewing its legislation.
Department of Telecommunications and Postal Services entities on their Annual Reports 2014/15
Sentech Annual Report 2014/15 briefing
Mr Mello Makgatho, Board Chairperson: Sentech, welcomed the entity’s new Chief Executive Officer (CEO), noting that it was his first day of work at Sentech. Other members of the delegation were introduced. He said that the report by the Auditor-General South Africa (AGSA) reflected the financial soundness of Sentech as at the end of the 2014/15 financial year (FY) as a going concern, and Sentech, as a State Owned Company (SOC) had identified some challenges for the future. Although its revenue had grown from R950 million to just over R1 billion and it had received a clean audit, there were some issues that needed deeper scrutiny and some of the Sentech product portfolios required closer attention. These included the e V-set which the management, in discussion with the board and some of the subcommittees, was looking into. Other matters included the cost of the Digital Terrestrial Television (DTT) dual illumination that Sentech needed to do .
As far as the staff complement was concerned Sentech had secured a CEO, but its Chief Financial Officer (CFO) would be leaving.
Unfortunately in the previous week Sentech had had an accident during maintenance refuelling where it had lost a member of staff.
Sentech had met nine out of its ten strategic objectives and as far as the DTT roll-out was concerned, it had completed the upgrades to the 178 sites that had been scheduled. In the 2015/16 year, more Greenfield sites were being completed.
The Chairperson passed on the Committee's condolences on the loss of the Sentech staff member.
Ms Rudzani Rasikhinya, Chief Financial Officer (CFO), Sentech took the Committee through the annual report. In relation to the network performance, she said that the only product offering that had not performed as envisaged was the VSAT and the reason was that Sentech still operated an old hub. However, it was in the process of developing a proper business case to see if the hub needed replacing.
She turned to the predetermined objectives. Sentech had failed to achieve the level of employee satisfaction target mainly because of communication challenges between the different structures in the organisation; as evinced by the survey. The remedial action taken was that Sentech had developed an engagement plan to see how best to communicate decisions taken by the board, resolutions of the executive Committee (EXCO) and the different subcommittees of the board to lower levels of staff within the organisation. Additionally, Sentech would have to improve its relations with the labour unions, as the majority of its workforce was unionised.
Ms Rasikhinya drew the Committee’s attention to the 44% increase in administrative expenses at Sentech, noting that the situation was a result of the SOC deciding to write-off some of its old stock which had been sitting in the organisation's books for the short wave business. It had done this so that storage costs would not be incurred. The cash and cash equivalents had also gone down, due to the fact that the DTT roll-out was at its end. That also spoke to why Sentech's current liabilities had gone down.
Mr C Mackenzie (DA) noted that there had been a dramatic increase in performance bonuses and allowances between 2013/14 and the 2014/15 FY, from R109 000 to almost R2 million. He asked that Sentech explain the rationale for this. He asked what happened to the written-off stock, seeing that SA still maintained a short wave network? He noted that the entity had not entirely achieved on the targeted demographics at top management level.
Ms M Shinn (DA) said that she noted an inconsistency in explaining the numbers in the AR. She was surprised that Sentech did not have an operational disaster recovery site, as a risk mitigator, and asked for this point to be explained. The entity had alluded to one being installed and she queried whether it was not yet operational. She noted that Sentech had said that it was busy implementing its Systems Applications and Products (SAP) but it also alluded to some risk in that regard, so she wanted to know when the full SAP would be operational.
Ms Shinn also noticed that only two of the schools in the designated OR Tambo Municipality had been connected in terms of Sentech's Corporate Social Investment (CSI) and asked if they were the same two mentioned under SA Connect. She asked how Sentech was ensuring there was no duplication of function between itself and SA Connect in that regard.
Ms Shinn asked why InfoHold and InfoSat had been closed down. She wanted more detail on the legal claims against Sentech.
Ms D Tsotetsi (ANC) asked what strategies were in place to allow Sentech to achieve fully in its pre-determined objectives. She asked for a list of the geographic coordinates of the locations of the radio stations that Sentech had assisted. She wanted to know when Sentech would address its vacancy rate challenges, and asked it to elaborate on its Employment Equity (EE) provision for the disabled.
Ms L Maseko (ANC) asked when Sentech envisaged finalising the employment satisfaction survey.
The Chairperson commended Sentech's strides to improve its performance over the past three years. During the Committee's recent oversight to Sentech headquarters, the Committee had heard quite a number of issues from employees during interactions, pertaining to human resources (HR), which was why the Committee was not surprised that the satisfaction survey was not finalised yet. The Committee needed to know what current platforms there were at Sentech where staff could address senior management.
She asked for more detail on the risk management, and asked if the risks were recurrent, or were they limited to the 2014/15 FY. She noted that questions had been raised about the thirteenth cheques and wondered if this was as yet resolved. She wanted more elaboration on the write-offs, their amounts and how they affected Sentech's overall revenue. Noting the less than ideal performance of the VSAT, she asked if Sentech would foresee a revision of the programme in the next years. She asked that Sentech also speak about the tariffs for community radio stations (CRSs). Most of them were established under the Media Development and Diversity Agency (MDDA) to bridge communications between communities, but the Committee had found that CRSs were reporting a challenge in finding consistent revenue streams. She asked how they could be made more sustainable whilst tariffs were worked out.
She asked that the Committee be updated on the spillage case in Botswana as it had been flagged as a potential risk previously. She also asked if any spillage occurred in the year under review.
Ms Shinn asked for clarity on funds available and the spend on the roll-out of the DTT dual illumination as there were contradicting figures in the Annual Report (AR).
Ms Tsotetsi (ANC) said that if funding of CRSs was left to the private sector, there was a potential of local content being compromised at the expense of funders' whims.
Mr Makgatho said that Sentech was discussing the diversification of revenue streams as a matter of fact, in anticipation that the country was at a stage where there were competing priorities for government funding.
Facilities management had been reported on, as being one focal area of leveraging Sentech's assets to essentially generate revenue streams that were outside the classical signal distribution functions. There was also an initiative around an over the top content distribution platform which would continue adding value through service provision to other broadcasters.
On the HR matters, the major challenges were the union negotiations that were going on in the year under review. The Board had had a nominations and remunerations subcommittee which had then been transformed into an HR, nominations and remunerations subcommittee, so that the Board could have access to the HR reports where the executives of HR could track grievances.
In relation to VSAT, there had been technology that had been used historically, and findings and submissions were made to the Board to the effect that this technology, whilst it had been geared for resilience from a broadband delivery capability, had in fact been under-performing. Management had then decided to look at alternatives: KA-Band and KU-Band. That had then brought Sentech's core business to the fore. Discussions ensued on whether the SOC would be positioning itself as a reseller of service, or whether as an SOC it would be better for it to be more infrastructure –centric in outlook. Those questions had then been submitted to the technology and regulatory subcommittee of the Board of Sentech. Senior management (SMS) was still involved in the process of addressing these questions. There was, however, a remaining responsibility to some clients, as broadband was currently being delivered to some community broadcasters. The VSAT infrastructure had reached its end of life. Sentech was interrogating whether it would need to build two bands, KU and KA, as there was a need for higher resilience as well as there being a market need for high capacity broadband, This would also involve discussion on how Sentech's business case would need revisiting.
He then answered the questions on costs to CRSs, especially on DTT and the delivery mechanism. In considering the cost base where Sentech would take the cost of infrastructure and the number of transmitters that would be needed for the community television broadcasters, the SOC had observed doubling, even quadrupling, of costs for some of the broadcasters. As a result Sentech was exploring other mechanisms, through the executive, for stakeholder management.
Ms Zodwa Mbele, Chairperson: Audit Committee, Sentech, said that there was a context to the incentives matter. Sentech had been migrating from an environment of rewarding people with a guaranteed salary, which included the 13th cheque. As part of the projects that were looking into the HR matters, and also with the aim of making it into a high performance-culture entity, the SMS introduced the incentives scheme coupled with performance management. The difference was that in previous years there were allowances, and in the year under review Sentech had introduced the incentives scheme. Of course there had been tussles with the introduction of the new system, as it was not guaranteed allowances. Sentech had managed to get 100% of signatories to agree to have a performance management contract for 2015/16 FY, the first time in which the incentive system would be applied.
She said that the nature of the risks was based on the strategic objectives. Some could be recurring and others would be once-off, such as the implementation of the Enterprise Resource Planning (ERP) systems, where the risks would fall away afterwards. Most would remain, as they were inherent to the nature of the business at Sentech. However, the Risk and Audit Committees kept an eye on emerging risks so that they were adequately mitigated.
Ms Rasikhinya said that Sentech had a disaster recovery site in NASREC. However, the SOC wanted to duplicate the core system. In Sentech's Corporate Plan (CP), the company said it was confident it would deliver such a replicated system by the end of the 2015/16 FY. The Board had also given guidance on how Sentech could deliver an off-site disaster recovery site.
She noted that the winding up of InfoHold and InfoSat was a result of both companies being dormant for quite a period. InfoSat was a wholly owned subsidiary of InfoHold and both companies held a similar license as Sentech which was why it had been decided to wind them up.
Regarding the non-achievement of the 10% targets; there were two questions that had to be addressed. One related to the reasons behind that, and the second to the platforms that there were for communication at Sentech. An analysis of the survey showed that what emerged most prominently were communication and performance management challenges. In terms of communication; the general labour force had to be consulted before matters went to governance structures. Moreover it had become apparent that sometimes executives from different divisions spent more time with EXCO instead of in their respective divisions. As a result Sentech had now introduced a structure which sought to ensure that all divisions had divisional meetings monthly and that regions also met so that information could filter down to the different regional centres.
At the failure of all those initiatives there was the additional unresolved matter of the 13th cheque which saw employees going on strike. Since the resolution of that matter there had been an additional forum where the Chief Executive Officer (CEO) would address staff on a quarterly basis on any outstanding staff matters and quarterly results reporting. The newly developed engagement plan was led through focus groups, which would include shop stewards, and the different levels of staff would deliberate issues and draw up resolutions into the future.
She then addressed the vacancy rate and said that Sentech had stalled the filling of some vacancies because of its organisational redesign towards the end of the 2014/15 FY. In terms of the EE people with disabilities positions, Sentech agreed that this was an area it needed to work on. In the 2015/16 FY it had identified positions where it would need to shortlist candidates for the positions, with the assistance of a forum for persons with disabilities.
Sentech had connected some community broadcasters to the Parliamentary channel using the VSAT, which was just the first step in terms of the tariff matters raised by the Chairperson. That would be followed by ensuring that the CRSs would be able to source revenue from local franchisers such as retail giants Shoprite and Pick n Pay.
Mr Kganki Matabane, Chief Operations Officer (COO), Sentech added that an additional step in assisting CRSs with revenue generation was looking at syndication of advertisements. For example, if a franchisor wanted to advertise simultaneously in multiple CRSs, Sentech's technology would make that possible. Recently the Department of Communication (DoC) had developed what was called the Community Broadcasters Support Scheme and Sentech had made a submission during the public comments process.
Mr Matabane said Sentech would improve its reporting on the targets for community broadcasters in the future, by including a map showing where they were based.
He reported that money was reflected under the Botswana litigation matter. Sentech had been taken to court by e-Botswana, and Botswana had won the case regarding spillage. However, that matter was concluded. In relation to spillage into the future, Sentech had confirmed that in Botswana, Mozambique and Zimbabwe, there was now no spillage since the installation of Sentech's CA system.
Mr Obrey Nekhavhambe, Finance Executive, Sentech, said that the SOC had realised R107 million worth of Dual illumination recoveries in the year under review. However, the funding received from government at the time had had a balance of only R3 million which had been rolled over into the 2015/16 FY. The 9% had actually been the R100 million off of the R1.1 billion allocation from government that Sentech had received.
The write-off of the short wave tubes was a matter involving redundant technology, so it was necessary to ask the question whether it was correct to reflect those items at a certain value in the stock, which was also related as to whether Sentech could in the future go back and use that stock to generate revenue. Sentech had then felt that in terms of its accounting standards it would be prudent to note that it would never recognise anything from those tubes. After write-off ,Sentech had needed to get a separate service provider to assist with the disposal process through its Disposal Committee of its EXCO. Through that process Sentech was not expecting any financial return from that disposal.
Ms Maseko commented that if the employee satisfaction survey was to depend on shop stewards then the results would not be reflecting the true feelings of the general work force and therefore the survey had to target that workforce.
Ms N Ndongeni (ANC) said that during oversight in Limpopo, the Committee had been informed that the DTT site had been 50% complete, and she asked that Sentech give an update on that. She also noted that there had been an issue around a connecting company that had been paid upfront without actually connecting the school.
Ms Rasikhinya said the R9 million payout was for the e-Botswana litigation that Sentech had lost. There were also legal claims from former employees which had taken Sentech to the Labour Court. Sentech had made provisions which could or could not be realised depending on the outcomes of those legal proceedings.
The DTT site in Burgersfort was one of the Greenfield sites. There were four that had not been included in the migration. Two had already been completed and because of the unrest in Burgersfort, Sentech had not been able to complete that site; a State Security letter which had barred Sentech from sending contractors there.
Mr Matabane said Sentech had connected a school in Burgersfort, but the service provider had only connected ten instead of twenty computers before going bankrupt. Sentech was currently in the process of appointing a new service provider, and it had also introduced a control mechanism whereby, after connection, the project manager, school principal and the service provider had to sign that everything was working properly.
Ms Tsotetsi said that Mr Matabane’s explanation on a service provider going bankrupt was not convincing.
Mr Matabane interjected that Sentech would send the actual report of what had happened in the matter and the progress following the matter.
iNeSI (formerly Nemisa) Annual Report 2014/15 briefing: Moving towards Ikamva National e-Skills Institute (iNeSI)
The Chairperson expressed the Committee's displeasure at the absence of Dr Molatelo Maloka, the Board Chairperson of iNeSI.
The delegation from iNeSI responded that she had asked the delegation to convey her apologies; she had informed the team but this was an oversight that they had not submitted this in advance.
The Chairperson replied that it was frustrating that it seemed to be a trend with Dr Maloka to simply not appear before the Committee, as it was not the first time that she had been absent. In fact, she commented that there actually seemed to be a trend as well that leaders of entities that were struggling never appeared in Parliament, and that also spoke to an attitudinal problem towards Parliament. The Committee, as a result, was appealing to the Department of Telecommunications and Postal Services (DTPS) that when it appointed individuals for Board memberships it must ensure that those individuals were ready to serve South Africa (SA).
Mr Gaitsewe Lenepa Board member, Audit Committee Chairperson, took the Committee through the Chairperson’s report in the Annual Report (see attached presentation for full details). In this financial year the report covered the activities of NEMISA which was planned to migrate to iNeSI, so the report refers to activities of NEMISA
Dr Ndivhoniswani Tshidzumba, Chief Executive Officer, NEMISA ,read through the attached presentation with the Committee. He said that 70% of targets were achieved in the administration programme. The 30% non-achievement had been mainly from vacancies that had been budgeted for but had not been filled, including that of the CEO, COO and two executive positions respectively. By June or July of the 2015/16 FY the CEO position had been filled and by November of the same year the rest of the positions would be filled.
There were also other teaching positions that had contributed to the non-achieved 30%; but he explained that because of the transition to iNeSI, NEMISA had decided not to employee permanent teaching staff. Staff were employed on a project basis in terms of the learnerships that NEMISA received from Media, Information & Communication Technologies Sector Education & Training Authority (MICT SETA).
Moving to Programme 2: Multi-Stakeholder Collaboration, he said that in June 2015, NEMISA had been asked when it would establish Colabs in North West, Mpumalanga and Free State, the three provinces without Colabs. NEMISA had finalised a Memorandum of Understanding (MoU) with the Vice Chancellor of North West University in October 2015. Before the end of the same month NEMISA would be engaging the Central University of Technology (CUT) in the Free State to negotiate for the MoU of the Colab there. In early November NEMISA was about to finish negotiations with the Tshwane University of Technology (TUT) for its Nelspruit campus in Mpumalanga to have a Colab, so that by the end of the 2015/16 FY all those Colabs could be operational.
The NPC had activated its newsletter both in print and digital media. In some of the events that NEMESI attended it took some of its SMS there. It had also aligned the Colab directors’ deliverables with its Annual Performance Plan (APP).
Programme 3: e-Astuteness Development, showed a 66% achievement. Dr Tshidzumba said that programme 3 was based on the fact that it recorded the number of participants in a classroom, seminar and a workshop for direct contact. The variance in reporting there was due to the time lag between the financial year report and the academic year report; as some numbers would have started in the beginning of the 2014/15 FY, and the Universities' end of the academic year would subsequently be different from the financial year report of NEMISA. As a result NEMISA, through its Colabs, had embarked on a country wide teaching project on how universities could report in line with government's financial year reporting. The 2015/16 FY report would have similar numbers.
Ms Shinn said she was concerned about the outstanding debtors and the non-commitments made for deliverables due to uncertainty surrounding the budget. She asked what exactly were the issues there She also did not understand the performance awards listed from 2010 to the end of the 2012/13 FY and those awarded for 2014/15 FY. She was also confused as to how much funding NEMISA actually received from Department of Telecommunications and Postal Services (DTPS) as there were contradicting figures in the Annual Report (AR). She asked for a breakdown of what NEMISA had received, and how these funds were used.
Mr Mackenzie asked for details on the irregular expenditure which involved a contract on e-literacy software amounting to R400 000 and a contract on e-skills conference which had cost R100 000.
Mr McKenzie asked, in respect of the interest paid to suppliers and trade debtors, why the age trade to receivables for 61-90 days was R3.5 million, when NEMISA had R18 million surpluses, presumably in the bank? He asked if NEMISA had had to pay interest of R510 000 because of trade receivables stretching beyond 30 days? If so, he wanted to know how that would be remedied in the 2015/16 FY?
Mr McKenzie said NEMISA had also signed an operating lease in 2010, which was escalating at 9% per annum. He asked for clarification on whether it was still escalating at that percentage, in the event of extension of the lease. He wanted to know the reason for such a dramatic increase in the student stationery and printing costs, which had gone from R36 574 to R251 000. He referred to the property rates and taxes of R1 068 047 paid on a property donated to NEMISA, but said that he had not seen any accounting for that property in any assets of the Institute since the last time he had queried those rates. He called for further explanation.
Mr McKenzie pointed out that during the Committee's recent oversight to two CRSs in Limpopo it had found out that NEMISA was not known there, neither had it provided any training to those institutions. He asked what NEMISA /iNeSI had been doing to assist CRSs to fulfil their functions.
Ms Tsotetsi asked if there was any training that was provided to rural communities and whether NEMISA / iNeSI provided placement of its trainees after graduation.
Ms Maseko asked if NEMISA had an Integrated Performance Management System (IPMS) in its structure. If so then she wanted to know how was it administered. She wondered if it signed performance agreements, as she noted the three year trend of non-compliance in the Auditor General South Africa (AGSA) audit outcomes report for NEMISA. She wondered if that was linked to performance agreements with those individual(s), and if there were now any corrective measures in place to guard against a repeat finding.
Ms Maseko said that it was of great concern that NEMISA was intending to renovate a leased property. She asked if it had been unable to purchase its own property, and also asked why the donated property was not in use instead of paying the increasing rental.
Ms Maseko asked if NEMISA had ever done any impact assessment of the training it provided, and whether there were returns on investment.
The Chairperson was concerned about the Academic Committee only having sat for two meetings in the 2014/15 FY. She said that she was not satisfied by the term “partial achievements” and therefore the accurate description would be that there were achievements and non-achievements only.
The Chairperson said that as far as she could see, no plans had been listed to address the debt collection challenges and she also wanted to know why the performance review had been moved on to the new FY.
The Chairperson also saw that there had been unspent DTPS conditional grants and receipts transferred for CRSs. She asked for NEMISA to explain why that had happened, in light of the discussion of CRSs in need of resources and training. She wanted more detail on the scrapped assets. She questioned if NEMISA faced any threats of liquidity. She was confused by the reporting that NEMISA was running a R37.8 million administration to deliver projects that were worth R6.1 million and asked for clarity on the figures and the rationale. She wanted to know what it was doing around the irregular expenditure.
The Chairperson again reiterated her concern at the absence of the Chairperson of the Board of NEMISA. The Committee had wanted to question her as to why the Auditor-General was now reporting for the third consecutive year on findings of non-compliance with the law. She wanted, finally, clarity on why some Board Committees’ evaluations had not been concluded.
Dr Tshidzumba said that outstanding debtors related to the tuition fees that NEMISA had been charging between 2009 and 2012. The NPC had commissioned debt collectors to assist in that regard. It had collected at least 60% of those debts. From 2014 NEMISA had stopped charging tuition fees as NEMISA in light of the change-over to becoming iNeSI.
The R6.1 million was a transfer from the DTPS for the e-skills component deliverables. The R37.8 million was for the entire mandate of NEMISA. The e-skills component was part of the five operational Colabs.
The contracts for the conference had been a challenge for the board as the majority had come from the DTPS’s e-skills institute and had been signed by the Deputy Director General (DDG). The professors who were presenting at the conference, and the organising company, had signed contracts with the DG. The challenge there was that the DDG was, at the time when he signed, the Acting CEO at NEMISA , and NEMISA had needed to seek a legal opinion as to which entity was actually liable for payments. The receipts had been sent to NEMISA. The budget for the contracts had been beyond the R6.1 million for e-skills and NEMISA had engaged with the Minister and DG on the matter. The outcome was that NEMISA paid for the conference contracts.
The leased property was in Parktown, Johannesburg and that had been NEMISA headquarters for 15 years. However, the Board had impressed on SMS its dissatisfaction with the arrangement there. The new arrangement was that the landlord would pay for the renovations and the rental would be unchanged.
The stationery and printing increase was because the multimedia and graphic designing component as from China and the United States (US). However, because of the new model of e-skills that amount had been reduced, due to the learnership programme that there now was with universities.
The donated property was in Franschoek, where NEMISA did its e-skills training in the Western Cape (WC). The rates and taxes reflected in the AR were for the leased property in Gauteng and the Franschoek property.
NEMISA was also concerned about training CRSs as that was its mandate but Dr Tshidzumba had been in Vhembe district with NEMISAs head of training in September 2015 dealing with that issue. NEMISA would be partnering with Limpopo Economic Development (LED) and the Premier's office on speeding up training, for indeed NEMISA’s visibility was minimal in that province. Therefore the NPC had decided that all new learnerships from October to February in the 2015/16 FY would go to Limpopo.
In relation to promotion of e-skills, NEMISA, with the Deputy Minister of Telecommunications and Postal Services, had held training session on cyber security awareness and the basics of graphic design in Vhembe and Thohoyandou. Moreover, NEMISA was putting up a model with LED on how it could run the “Train the trainer” programme to Information and Communications Technology (ICT) Small, Medium and Micro-sized Enterprises (SMMEs) for the entire province. So far the LED was promising to fund the roll-out of that model. The Colab with the University of Limpopo was proceeding very well, on basic computer literacy training for clinic staff, and it would also be developing a patient management system (PMS) as well.
Dr Tshidzumba said that NEMISA’s mandate was very rural-focused as it was about promoting e-skills in the most remote areas of the country. That was also quite expensive, which was the reason behind the multistakeholder Colabs with higher learning institutions in provinces. Its current campaign was to get the Colab directors to go out and target SMMEs, especially the youth running small internet cafes, which was what was planned for Limpopo.
NEMISA was also looking into the Interactive Community Access Network (ICAN) Centre model currently running in the WC.
He said that placement of graduates was quite a challenge, even for the two year broadcasting graduates. Currently with MCIT SETA learnerships; the policy was that all those posted in community broadcasting television stations and CRSs needed to be trained. However, it did provide the list of its graduates to its partners for placement and also generally used the same graduates for exhibitions and marketing for DTPS.
NEMISA had individual performance management systems, and performance agreements, but because of the SMS vacancies reported for the 2014/15 FY those key performance indicators (KPIs) would not have been reported. That had been rectified retrospectively for the 2015/16 including assessments of the board.
NEMISA had commissioned an impact assessment of its work from 1998 and this would be published in a journal format, including assessment of e-skills.
The unspent money on CRSs was originally a R15 Million project from the DoC to NEMISA in 2011/12. It had been disrupted in 2012/13 when the DoC transferred R10 million of that amount to the South African Broadcasting Corporation (SABC) and the accounting for that project had not been satisfactory for those years and the Department of Communications had not been happy with it. That was why there still remained R 3 million of amount that had been given to NEMISA. In September the new DoC had agreed with NEMISA to finalise the project.
Ms Moira Malakalaka, Chief Financial Officer, iNeSI, said that the scrapped assets were mostly computer hardware and software that had been worn out even before the three years of their envisaged lifetime was reached. The canteen had also been closed. Television and radio equipment listed consisted of small devices and their components which were either dropped or lost completely. That scrapping had decreased in the 2015/16 FY.
In terms of non-commitments made for deliverables due to uncertainty surrounding the budget; Ms Malakalaka said that only in 2015/16 FY, for the first time, had NEMISA had been informed about the e-skills budget on time. The delays previously had negatively affected targeting and KPIs for the e-skills programme. That was why some targets had rolled over into the following FY.
In terms of the internal controls that the Chairperson had alluded to, Dr Tshidzumba said that NEMISA had compiled a list of those and targets were then set. For example, the software used by different units of NEMISA had needed updates as the contracts linked with them had expired in April/May 2015. That had been rectified and controls like performance management risk was already in process. The budget transfer for e-skills was also an internal control issue and NEMISA did not envisage complaints from Colabs about delayed reports as they had their budgets already. That also spoke to the non-compliance trend where the Audit Committee had agreed on performance targeting and the period of reporting those targets. The learner management system which had been outdated had been given to a particular Colab to rectify.
The performance awards had not been paid for the past three FYs although provision had been made for such awards. In the 2013/14 year, NEMISA had started addressing that backlog so that 2014/15 became the year that backlog was concluded.
Mr Lenepa said the academic Committee had been chaired by Professor Roy Marcus and because NEMISA had such a small board, there would be a quorum deficiency for more than one subcommittee, when one board member resigned. The quorum policy was reviewed at the beginning of the 2015/16 FY so that even video phone conferencing had been allowed.
The evaluations challenge arose because NEMISA had changed its internal auditors and by the end of the FY, replacement auditors’ appointments had been delayed so that board evaluations were never concluded on time.
The Chairperson said that DTPS had informed the Committee that transfer claims for entities were based on schedules prepared by entities themselves.
Dr Tshidzumba said that there were two transfers from DTPS to NEMISA. The scheduled claims were for the NEMISA grant and the e-skills money. However, the e-skills money had a schedule of tranches previously. Now, , the recent MoU with the DG of DTPS had arranged that the full amount would go to NEMISA immediately after signing with the DG.
NEMISA had also commissioned an employee’s satisfaction survey because of the transition to iNeSI, so that it would be concluded with a plan to work on any grievances that were highlighted.
Dr Tshidzumba said that rates and taxes were not included in the Parktown property and possibly NEMISA could have listed the separate payments for water, rates and electricity, and to whom those were paid. That was also why the rental for the property amounted to about R7 million as it included those separate items.
Ms Malakalaka said that NEMISA had not applied the valuation policy method in its accounting where one would be appreciating the asset. The cost model NEMISA had chosen was the depreciation method and NEMISA had tried to fair value the property. However, the challenge then had been that it was a sectional title property and the NPC shared rates with the other occupier of the property.
State Information Technology Agency (SITA)Annual Report 2014/15 briefing
Mr Jerry Vilakazi, Board Chairperson, SITA ,said the Agency had come through a major challenge before the 2014/15 FY, since a number of government Departments had actually threatened seeking a legislative decision that would have allowed them to procure services directly instead of procuring through SITA. The Board had engaged with those Departments and SITA was able to work through those matters of concern. It had also had to deal with concerns with the Western Cape provincial government but the Board had also ironed out those matters. Four board members had also resigned in the 2014/15 FY, but the Board had continued functioning despite all those challenges.
Dr Setumo Mohapi, Chief Executive Officer, SITA, continued with the presentation. He said that in this FY, the intention had been to create a structured programme to improve service delivery in line with the agency’s mandate.
He said that statistically about 66% of government sites were served with 56kbps lines and so one of the programmes was aimed at improving the core network and increasing the quality of the network services to government.
The diagnostic survey had shown that about 50% of tenders were cancelled and 33% were cancelled because of bad specifications. The reasons behind those were possibly because the technical specifications had not been clear or people were not able to say whether or not they had complied, and by the time of evaluation it was impossible to do the evaluation.
Mr Mackenzie said he noted that across SOEs in general, performance bonuses had increased. He asked why this had happened at SITA? He also commented on the increase of SITA’s group revenue and the drastic decline in its comprehensive income for the 2014/15 FY, and asked what had caused this, given that its revenue had increased? Further, he wanted to know how would the agency ensure that that income rose again.
Ms Ndongeni asked SITA to name the schools it had connected in each of the six provinces it had connected schools in. She asked how many females were in strategic positions in the agency?
Ms Shinn asked how much of an investment the Agency would be putting into upskilling of personnel in cyber security, and if there would be a separate budget put aside for that plan. She asked for details why the project to upgrade a customer’s network programme had never materialised, and the reason behind the failure to collect revenue. She noted that in the report on actual expenditure versus the Capital Expenditure (CAPEX) budget, there were instances of cancellation of major tenders for infrastructure and late delivery of Next-Generation Network Services (NGNS) equipment, and asked how this had happened.
Ms Shinn noted that SITA had a few new executives, and there was a variance in operating expenditure. She asked what was the difference between the SMS component budgeted for and being spent. Under irregular and fruitless expenditure the Agency had written-off about R66 million. She asked if there were to be consequences for the people responsible for such waste.
Ms Tsotetsi asked whether there had been action taken against employees that had not declared their interests. She noted that the Committee still required a racial breakdown of women in training at SITA. She asked for the geographic spread of offices where SITA programmes had been rolled-out. She also wanted to know if SITA had a skills retention strategy or a plan mitigating against loss of skills when personnel resigned.
Ms Tsotetsi said that although the Agency had not achieved on its pre-determined objectives there were performance rewards for long service, and she wondered if those spoke to length of service, regardless of performance or performance, and how these were assessed.
Mr Mackenzie said that SITA had instituted an ethics line. There was also a report that no proven cases of corruption had been concluded. Did that mean no cases had been reported, or was it that no reported cases had been proven. He asked how that line was performing at the moment.
The Chairperson said that SITA had presented an organogram revision in the 2012/13 FY, noting that the Agency would have preferred a project team in the CEO’s office instead of a COO. She asked what then had informed the reconstitution of that COO level with there now being two deputy CEOs, and what was the process followed in the reinstatement of that level of management. She also wanted to know what had happened to the envisaged project team in the office of the CEO.
She noted that SITA had envisaged that contracts were to be finalised in 30 days, but there was non-achievement because it had gone to 40 days. The reason given was that the development process had not yet been streamlined, and that this resulted from lack of a collaborative approach from various stakeholders in the process. She wanted a detailed explanation of what that actually meant.
She said that non-achievement of ICT acquisitions spent through SMME was said to have failed because of lack of a dedicated SMME strategic plan with clear objectives on how various development opportunities would be leveraged. She had written to SITA after receiving a complaint from SMMEs that SITA did not consider that sector in its process. She therefore asked for an explanation because the response to her letter said that SMMEs were in the SITA process, yet now the accounting officer seemed to be saying the opposite.
She asked for the reasons behind the discontinuation of the national network upgrade by the South African Police Service (SAPS). During an oversight visit to SITA, the staff had raised the matter of contractual agreement challenges between the agency and SAPS.
Was the non-achievement of profitability linked to the continuous cancellations of tenders which had been advertised? What informed the cancellation of tenders?
The Chairperson asked what had been done in terms of personnel satisfaction management and the resolution of outstanding issues? She enumerated issues that had made staff at SITA unhappy, as conveyed at the time of the Committee’s oversight visit, and urged the incoming CEO to take time to read the Committee’s oversight report on those issues. She asked if the excess staff had been placed into permanent positions.
The Chairperson pointed out that the fact that SITA had had 34 deviations in one financial year reflected immense challenges in the running of operations.
The Chairperson had issues with contract extensions as they highlighted improper procurement processes and lack of project management skills at the agency.
She then read from AGSA’S report on findings of non-compliance with the law and asked what actions the Board had taken after the audit report was received and whether it had been aware of the Supply Chain Management (SCM) problems before the audit. It was worrying that an Agency charged with procuring for government had no systems or controls in place to guard against flouting of SCM regulations. Finally she asked how far was SITA in reviewing in its establishment legislation.
Mr Vilakazi said that the issues raised by staff during the Committee’s oversight were reflective of the mood and sentiment within the Agency at that time. The Board had concluded a strategic session with the staff on satisfaction levels, where the Agency was and where it was going. The Agency had conducted a global survey which compared companies in terms of rankings on staff engagement, their performance and staff motivation. The report outcomes reflected the observation made by the Committee during its oversight, which was that morale was at its lowest. The board had then directed the CEO to deal with all those issues affecting morale. A second report commissioned late in the 2014/15 FY showed a shift in morale and those conducting the survey commended the work done by SMS, though the performance report did not yet correlate with that shift. The over 1 000 redundant employees outside the organogram at the Agency had been placed.
He then spoke to the organogram that had been adopted at the end of the 2013/14 FY. At that time the abolition of the COO position was decided upon because SITA did not have a Chief Technology Officer (CTO), which the board felt was more critical. One of the decisions taken to deal with the dissatisfaction from other state departments, which Mr Vilakazi had alluded to in his opening remarks, was that a second Deputy CEO would need to be capacitated with the necessary skills to deal with very senior level officials of the various departments that were procuring through SITA, and that had been approved by the shareholders. That was why there were two deputy CEOs.
At the last presentation which Mr Vilakazi had attended, SITA had reported that it had directed the new CEO to conduct a diagnostic study of the organisation and to then return to the Board with strategies on how to move SITA forward. He had been given a total of six months to conduct such a diagnosis and SITA was expecting that presentation from the CEO at the next Board meeting. He said that DTPS had put together a steering Committee made up of officials from all entities of DTPS, to review and rationalise activities and functions of some entities and that process was still ongoing.
Dr Mohapi said that in terms of the distribution of CSI scores across provinces he thought it better that SITA had not been specific on that however, if he was allowed to submit those scores they would be submitted in future.
The AR did report on 8 females out of 23 males in the SMS and if EXCO were also to be included he conceded that there was a challenge. SITA was busy addressing this. It was now dealing with its capacity shortfalls, considering what skills were required, how many individuals were needed and what culture would be needed. A bottom-up exercise was being developed so that cyber security could be addressed in the planning cycle. For example, the consideration would be how many Cisco Certified Internetwork Experts (CCIEs) would be needed for the size of the network that was being operated. That would create a capability system so that with the skills audit in context the training programme then would cater for certifying the correct numbers of people in the right areas. That way of working also would apply to application systems certifications, whether it was ORACLE, IBM or EMC storage. Furthermore, that also applied to security, where benchmarking was even possible where the system could be quantified. SITA was already doing this.
From a public service point of view, the strategic initiative to upgrade a customer’s network programme should have started with upgrading customer links to get them to at least 1Meg so that SITA could also be able to respond quickly when clients wanted to get to fibre which carried beyond 5Meg. However, that had not happened and 92% of the access lines that SITA used were provided by Telkom, which were mostly copper. SITA had agreed in 2014 with Telkom to migrate clients to bigger lines. However, because of the Ready For Service (RFO) charge that had not been covered in that agreement, there were delays in the upgrade. That had been rectified in the 2015/16 FY so that the backlog could be cleared.
He noted that the R10 million fruitless and wasteful expenditure for 2014/15 had a R1,8 million carry-over from that 2013/14 FY coupled with a new R8.5 million in the 2014/15 FY. The R8.5 million was a back payment to Telkom on interest charged on unpaid bills, and this was still under investigation by the internal audit unit. The report would be given to the Audit and Risk Committee, and action would be taken afterwards.
No action had been taken against employees that had undeclared interests by the end of the 2014/15 FY but in 2015/16 employees who had still not declared would have received a letter informing them of the steps that would be followed.
He noted that the locations of where CSI and training had occurred would also be provided in a supplementary written report to the Committee.
Regarding skills retention, the AR showed that resignations were going beyond the norm and possibly that was reflecting the history of the journey SITA had come through, as Mr Vilakazi had reported in the opening remarks and the sentiment that staff had reported during the Committee’s oversight visit to the Agency. The talent management system that enabled the skills retention policy had simply directed the company to career development capacitation, and a positive work environment management for employees, so that personnel were fulfilled. However, the upgrade of that system probably had not yet been institutionalised in the year under review. The focus change currently was on a top-down training and learning approach so that the required competencies for the Agency, and certification of skills that could be validated globally, would be found in SITA personnel.
He reported that the CEO had recently completed a 95% staff engagement round with all SITA employees in provinces in the last month and a half, which was a new culture development, where staff members could reflect on how they could address their province's specific client needs and develop business cases for the provincial governments they serviced. It was hoped to create a sense of ownership and belonging to SITA together with creating opportunities for career growth.
In relation to long service rewards the current SITA SMS had suggested that those correlate to performance, as they currently did not. Categorisation would be something that SITA would have to consider.
The SITA zone that Mr Mackenzie had questioned was an idea that had not been rolled out yet, but where SITA wanted to automate the process of procuring. This would remove most of the human intervention in the process and giving client’s faster responses to Requests For Quotations (RFQs).
He then dealt with the AG's findings. At the outset, he stressed that SITA was responsible for managing the IT systems of government and the procurement procedures system where it was necessary to have similar capabilities in relation to all that work on both paths. Therefore no matter if there were the proper processes in place to remedy a problem, if there were not the best capacitated people in SCM, with the right level of integrity, the problem would not be fixed. The new organogram had been approved so that SMS SCM personnel could be recruited anew, which was ongoing. Moreover personnel awareness had to be raised so that personnel understood that SMS and EXCO cared and would be monitoring correct SCM process, diligence and integrity. Even in the short time he had been in place, the CEO had seen quite a few errors that seemed deliberate or negligent.
Dr Mohapi then spoke to the project management team in the CEO's office which had not materialised in 2014/15, but had been brought back in the 2015/16 FY. The Board had approved the original organogram that had proposed the addition to the structure, which was why the PMO strategy institutionalisation was in SITA’s transformational journey.
He said there was a separate process for going out on tender, as it was only when someone had been awarded the tender that formal contracting started. That process typically took very long as diligence expectations were that SITA could put contract templates upfront together with tender documents which had worked very well in the past.
In terms of SMME ICT acquisition spending, he conceded that initially this had been slow. During the year, SITA did get a BEE certificate but here the enterprise development score was so low because within its procurement structure there had been no function dealing with enterprise development as a standard method. A new system was now being put in place, and there would be a person dedicated to that enterprise development system.
Cancellations had a huge effect on profitability and CAPEX, customer satisfaction, service delivery and financial performance. Spending CAPEX at the level of 16.5% certainly indicated that measures were not taken in a situation that needed intervention. That generally resulted in higher down times, which affected core structures, which in turn affected service delivery adversely. There was a tighter management system now on CAPEX and the numbers were currently above 70% in the 2015/16 FY.
Dr Mohapi said he had heard about the alleged “untouchables” in the Agency when he arrived and recognised that there were two separate paths of engagement. He had became unpopular by removing one path. He had said that although he had an open door policy, every line function person who wanted his attention would have to come with the line manager to see him. During his first round of staff engagement, he had taken a staff of four, including his personal assistant, change management and communications personnel , but no other executives.
Dr Mohapi said that there were only two types of deviations. One resulted from simply bad management of contracts where the expiry of a contract and tendering for a new contractor would not be handled on time and personnel would ask for extension for the new tender process to be finalised. That was still happening quite a lot but at least SITA was discovering those deviations as they were happening, instead of after the event. Most of the non-technical deviations in the 34 now reported on were based on bad planning. Others were license renewals where the systems currently used by SAPS and Department of Defence and Military Veterans would have to be renewed periodically.
In terms of the cancellations, Dr Mohapi said that those related a lot to the technical specifications that had not been clear or people were not able to say whether or not they had complied and by the time of evaluation it had been impossible to do the evaluation, or where there were very tight specifications. He said all those deviations which were SCM related were being investigated by the internal audit unit and in the 2015/16 FY the RFQs were being monitored and being discovered as they were happening.
Mr Andre Pretorius, Acting Chief Financial Officer, SITA, further elaborated on some points. The long service were categorised by scale, where people with five years experience on the Board would receive R 2000 and those with 10 years would get R5 000. SITA had paid that for the 2014/15 FY, without taking account of performance.
He added information on the discontinuation of the national network upgrade by the SAPS. In essence, this project was one where SITA would get tasks from SAPS and in turn would task SAPS suppliers. The Agency had mutually agreed with SAPS to discontinue the project because of the delays around signing the agreements.
Mr Stadi Mngomezulu, Board Member and Chairperson of the Procurement Subcommittee, SITA, said that nothing in the AG's audit report that spoke to non-compliance with the law and SCM challenges came as a surprise to the Board. The issues had been interrogated extensively at the Board subcommittee for procurement. The Board had instructed the EXCO to develop remedial measures. When receiving presentations from Exco, the Board had made choices and trade-offs. Because of the history of lack of controls in the Agency, even during the year under review, the Board had made those trades-off to keep SITA running, and servicing of some clients even though the submission for RFQs had deviations.
Irregular expenditures were never written-off, but instead rather motivation for condoning was considered, so that irregular expenditure was still accounted for.
Ms Tsotetsi said that SITA had not adequately dealt enough with EE for people with disabilities, but as she had heard the undertaking to transform the Agency, she would hope this matter would also be addressed. She asked if the Committee could be given any idea of how long it might take to conclude the two cases relating to procurement irregularities, and the seven cases relating to potential irregularities in respect of SCM and ICT service delivery.
The Chairperson commented that in line with Public Service Commission (PSC) percentage regulations the number of vacant posts which were approved were 3 255m, but 667 were still unfilled at SITA. It was reported that the EXCO had prioritised a filling of a further 410 out of 1 023 posts which had been approved as well. The Chairperson asked for clarity on the years in which this would happen.
The Chairperson was worried by the reply from Mr Mngomezulu that some SCM challenges would carry over to the 2015/16 FY even though SITA had had a structural revision which seemed to have brought some stability in terms of the SMS appointments.
Dr Mohapi said that the SITA Act was being reviewed at DTPS. Within SITA, SMS EXCO were yet to make a proposal to the Board, and EXCO was reviewing both strategic and legislative matters. He was of the view that DTPS would release a draft document in the second quarter of the 2015/16 FY in regard to the revised legislation. In the written report that he would send to the Committee, he would include details of the ongoing cases referred to by Ms Tsotetsi and an estimate of how long they would take to be finalised.
He explained the figures for the vacancies. The 1 023 related to the second period of the 2015/16 FY, but even the number of 410 remained a big number as staff costs were quite high at SITA. When he arrived at SITA the approved budget was for 1 023 vacancies, but that had since been reduced to 410 and that number was being managed very critically. There needed to be some bureaucratic processes before hiring. The biggest driver of costs at the Agency had been found to be staff costs, since in the past personnel were hired on a project basis but if the project was cancelled those staff still remained, and when another new project was commissioned, SITA would go out recruiting again. The cost grew but staff efficiency did not. Before hiring again there had to be an HR, staff utilisation, efficiency and training plan conducted.
Mr Willie Vukela, Acting Deputy Director General, DTPS, said that there was a process in the Department where the rationalisation of all the SOCs it had received was underpinned by the principle of e-governance from the Department of Public Service and Administration (DPSA). A bigger process of interpreting the mandate of all government SOCs was progressing as well, which took into account the developmental agenda of government.
The meeting was then adjourned.
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