Independent Communications Authority & Films & Publications Board on their 2015/16 Annual Report, with Minister present

Meeting report

Briefing by the FPB on its 2015/16 Annual Report and Financial Statements

Ms Palesa Kadi, Shared Services Executive, FPB, asked the Chairperson for permission to show a five minute video clip on the successes of the FPB. After the video presentation, she said new technology was taking over and hoped this would be the future of presentations. Ms Kadi went on to present the entity’s mandate, vision, mission and values. She highlighted the organisational achievements which included the entity receiving an unqualified audit report for 2015/16 in respect of both financial and performance audits. The AGSA had commented on the overall improvement in organizational performance at the FPB. Out of a total of 72 annual targets, 86% of targets were met. Where targets were not met this was due to financial considerations and subsequent reprioritization of plans. Successful completion of the On-Line Policy consultation process was culminating in the policy being ready for gazetting.

She explained the FPB had a high visibility and high impact strategy. It included the following:

(1) Ministers Imbizos
(2) Representation in the Government Communication and Information System (GCIS) Forums
(3) Safer Internet Day Commemoration (Back-to-school Program) in the Eastern Cape and Gauteng and other outreach initiatives such as the Rand Show
(4) Adverts placed on seven SABC Radio Stations in seven languages for Safer Internet Day
(5) Collaboration with the Justice Cluster on Child Protection matters and
(6) Presence at key industry events, for example Durban International Film Festival, Loeries Awards, Feathers, rAge Expo, Sexpo, etc.

Part of the impact also included effective expansion of the FPB footprint, with emphasis on the Southern African Development Community (SADC) regional programme and interaction with other African Countries such as Ghana and Kenya. Successful hosting of the inaugural African Media Classification and Online Child Protection Conference in October 2015 took place. The workforce profile indicated a total of 38% males and 62% females. The FPB had a total staff component of 89 individuals.

Ms Kadi gave an outline of the FPB trends for the 2015/16 financial year. On the physical material classification, it classified an average of 140 per month. The FPB also classified an average of 52 game titles per quarter. She highlighted that online content inspection were done at an average number of 1 212 per quarter including FPB ProChild and on Social Networking sites. Another trend was that prominent age categories found were All Ages, 13 years old and 16 years old content. New registrations for 2015/6 were 538 and renewals were 2105 and FPB had four appeals.

With regards to child abuse content analysed, seven cases were lodged with 7 917 items comprised of images and videos reviewed. For 2016/17 thus far 15 cases had been lodged child with a total of 233 188 items reviewed. She highlighted that this increase was a huge concern and the cases of child abuse related to matters involving sexual exploitation and pornography. Many children were not well taken care of and according to Census 2011 the number of fatherless children was huge thus having less order in the home context. Children were being exposed to Pay TV which meant that the content they were watching was not well regulated and this posed a risk to their intellectual well-being.

Ms Kadi spoke about the FPB’s use of consultants. For the period under review it had spent around R2 million on consultants with the biggest portion of this amount going to labour related matters. This was mainly due to a lack of skills within the entity but it was in the process of gathering those needed skills. In response to this spend, FPB had embarked on a number of cost saving measures especially through working with GCIS. As a result it managed to save R3.24 million resulting in an overall operational expenditure increase of only 1.5% which was well below expected inflationary increases.

Mr Regardt Gouws, Acting CEO, FPB, presented the financial information to the Committee. He explained R5.3 million was generated from regulation fees in 2015/16 as compared to R6.5 million in 2014/15. The decrease of 18% was due to the reduction in the number of registrations and physical submissions for classification of material. Other income was at R853 000 and consisted of investment income and tender fees. Overall income received for the year as at 31 March 2016 was R88.5 million as compared to R87.1 million received in 2014/15 resulting in an overall increase of 1.6%. The reduction of the accounting surplus from R5 million to R3.4 million was due to more appropriate planning and forecasting. The 2015/16 year surplus was retained and utilized to pay outstanding balances for the Online Content Regulation Project. 100% of the grant was indeed spent during the 2015/16 financial year.

With regards to expenditure 2015/16, Mr Gouws said staff costs of R45.1 million were incurred. This total included classifiers fees of R4.3 million paid during the financial year. He explained operational expenditure of R39.7 million increased by only 1.6% compared to the previous years due to cost saving measures which included the reduction of consultancy fess by 43%, a 70% reduction in advertising expenditure and new vehicle leases entered into. According to the AGSA’s report, FPB received an unqualified audit opinion with emphasis of matter on the restatement of corresponding figures. Material non-compliance was found by the AG because effective steps to prevent irregular, fruitless and wasteful expenditure were not taken by FPB.

Mr Gouws explained that the FPB had no material adjustments to the financial statements of Performance Information. It identified, disclosed and implemented consequence management for all irregular, fruitless and wasteful expenditure. Although the AGSA had not identified any additional irregular transactions for disclosure, and that the amounts identified by management were quantitatively immaterial, the AGSA still insisted that the transgressions were quantitatively material due to previously raised irregular expenditure which had occurred. This assessment by the AGSA resulted in the modified audit report.

Mr Gouws then outlined the finding categories for 2014/15 and 2015/16. Audit progress made for 2015/16 were in the following categories:

(1) Expenditure and payables (0 findings)
(2) Property, plant and equipment (0 findings)
(3) Disclosures (reduced from 4 to 2 findings)
(4) Supply Chain Management (SCM) (reduced from 8 to 1 finding)
(5) Performance Information (reduced from 3 to 1 finding) and
(6) Compliance and controls (0 findings)

Regression was found in Information and Communications Technology (ICT) with an increase from 3 to 5 findings. Overall, FPB had a reduction of findings from 33 to 14. A total of 88% of previous unresolved findings were successfully cleared during the 2015/16 financial year. The AGSA reported an improvement in internal controls as per the Management Report. Proper accounting of revenue transactions and ICT general controls were flagged as areas of concern. Management was satisfied with the controls implemented over Supply Chain Management processes and procedures. As a result of this control, management reduced this from R9.1 million in 2014/15 to R487 000 in the current year.

Ms Kadi spoke about Industrial Relations (IR) issues. There was a case where two employees made their way into a restricted area and one of the DVD’s containing restricted images disappeared. With regards to employee one, the case went to the Labour Court for a hearing on 12 May 2016 and the court directed the matter to arbitration. The first hearing was held on 18 July 2016 and the second on 14 September 2016. An appeal by the employee was lodged with the Minister, Public Protector and Council chairperson. With regards to employee two, the FPB referred the matter to the Labour Court and that process was still underway. An appeal was lodged by the employee with the Minister, Public Protector and the Council Chairperson.

She went on to explain another case FPB was involved which related to the Tzaneen Nedbank Fraud case by which the employee was eventually reinstated. The charge was for misuse of company property, bringing FPB into disrepute and alleged involvement in fraud. The employee was dismissed on 23 December 2014 and received an arbitration award of reinstatement. The reinstatement was effective 07 January 2016 as the criminal case was withdrawn by Nedbank.

Other cases involved a trainee operations manager who was found to be non-suitable for the post. The employees’ contract expired on 15 July 2015 and the employee declined the offer to the previous post. The matter was referred to the CCMA and conciliation was held on 29 October 2015 but no settlement was reached. The employee elected to refer the matter to the Labour Court and the matter was then referred to the Council Chairperson by the employees’ attorneys.

Another case was when the Legal Manager lodged a CCMA constructive dismissal claim and a conciliation hearing was held on 9 September 2015 with no settlement result. Arbitration was held on 18 January 2016 but FPB was not informed and as a result the employee received a default arbitration award issued on 25 January 2016. A rescission application was successfully lodged and another arbitration hearing was held on 6 May 2016. The next hearing date was scheduled for 28 September 2016. The final case Ms Kadi highlighted was an anonymous case where an employee did not disclose misconduct with another government department and FPB did not screen properly. The matter was escalated from Risk/HR to Council Chair/Exco. A disciplinary hearing was held on 21 July 2016 and the employee was found not guilty of gross dishonesty and misrepresentation. The next steps were to respond to Whistle Blowing and inform the Minister.

Ms Kadi then went through FPB’s Strategic Objectives (SO) indicating those achieved, partially achieved and not achieved. With regards to Performance Information, the entity achieved 85% of its organisational targets with 11% partially achieved and 4% not achieved. Some of the annual targets in SO1 not achieved included the implementation of automated processes. She explained that there were still technical challenges that were experienced by classifiers though not much. On the test reports there was no electronic signage. Another target not met in SO1 was the development and approval of the labelling system. This target was partially achieved as the tender for a suitable service provider was re-advertised. Still under SO1, FPB targeted to conduct 3 000 convergence surveys. It signed a MoU with UNISA but was unable to roll-out the programme due to insufficient funds.

Ms Kadi went on to explain SO2, which was focused on consumers, general members of the public and industry informed about the mandate of FPB. A target was to produce online and broadcast material to increase brand visibility, promote engagement and awareness campaigns. It was able to achieve this deliverable even though no budget was allocated to it. Under SO3 PFB managed to achieve most of its targets. One of its highlights was the desktop study on Anti-Child Pornography initiative in the SADC region. She explained that child abuse was one of the core focus areas for FPB as there was an increase in cases where children were being exposed. This led to higher rates of suicide due to bullying amongst young people and them being exposed on social media sites. It was important for the FPB to be part of the prevention of these issues.

Discussion

The Chairperson wanted to know where the CEO was.

Ms Natalie Skeepers, Council Member, FPB replied that the CEO was on special leave pending suspension.

Mr M Kalako (ANC) commended the entity for receiving an unqualified audit for the last three years. He wanted to know what type of training to staff FPB were offering. The targets not reached were due to financial considerations therefore reprioritization had to take place.

Ms Kadi said the training was for the ICT workforce. The average age was 37 year olds and they were unable to keep up with new technology. The entity was reprioritizing two projects one of which was the Online Content Regulation System as there was no space and capacity to complete it.

Mr M Gungubele (ANC) felt that another session was needed to discuss the common understanding on Performance Information. If this was not done, the Committee and Department with its entities ran the risk of misunderstanding each other as they would not know what was expected from each other. He noted that in the presentation FPB’s vision was to be a “leading and credible content regulator”. When FPB intervened it was not about what it did but rather what the situation was and why it had to intervene. When Parliament gave a mandate the entity had to make sure it was carried out. What defined “credibility”? Children were being exposed to content they should not be seeing and the FPB was in control. He also wanted to know whether FPB had a Performance Information report and if so the Committee should have it by the end of the day. People should know what changes the FPB has brought.

Councillor Skeepers said the vision of the organisation had been successful for its 20 year existence. It had been consistent in its approach to content regulation. Therefore, FPB was reliable, fair and transparent. The research it conducted in communities brought changes about. It provided training to MNet and other Pay TV institutions for them to understand classifications. As media, change was constant and FPB helped people understand these changes. The Committee would have the report on Performance Information by the end of the day.

Mr Gouws added that the total for irregular expenditure had come down from R6.3 million in 2014/15 to R254 000 in 2015/16 which indicated that systems were put in place. He felt very “aggrieved” because FPB had done a lot of work for the year. There was human nature in in these transactions where someone would forget to sign a document and the AG would consider the transaction “irregular”. He had worked with the AG for seven years and did not agree with some of the processes. He suggested that perhaps a discussion could be held between the Committee and AGSA.

Ms V Van Dyk (DA) wanted to know the reasons for 67% resignations and whether FPB would consider having learnerships in the future. She also would have liked a breakdown of financial targets per programme where she could see the planned versus actual achieved. What was the timeframe for classification?

Ms Kadi replied that when staff resigned, FPB would conduct exit interviews. According to the majority of interviews, staff resigned because of better offers at MNet, Multichoice and ICASA. There was no course for content regulation and once staff gained experience in the field their skills became sought after. Therefore the FPB was going into an agreement with UNISA to create a new course especially for this reason. Once this had been done, it would implement learnerships.

Mr Gouws replied the timeframe for classification was three days.

Ms M Matshoba (ANC) referred to page 37 of the presentation where FPB indicated “fraud awareness email sent to staff”. What was the message about? Also, on page 41 of the presentation it indicated training educators on cyber safety. Who chose these educators?

Ms Kadi said educators were chosen at problematic schools were cases of cyber-bullying was taking place.

Ms N Tolashe (ANC) was happy to hear that the relationship between FPB and GCIS was good. FPB should learn from GCIS. On page 5 of the presentation she wanted to know more about organisational achievements as it was a bit vague. She was also happy with the balance of male and female employees. The figure for the use of consultants was huge as indicated on page 9 of the presentation. On page 25 of the presentation it indicated that FPB partially achieved its development and approval of the labelling system. Why was the Council the reason for the variance as it was part of the organisation?

Ms Kadi explained that the labelling system was successful on DVD’s and games since the FPB triangle was printed on these. But when it came to online content the question was how to provide this as it was not physically possible. Therefore this process could not be completed because of the huge costs involved.

The Chairperson wanted to know whether FPB employed persons with disabilities. He noted it was good to talk about the fraud case. He also did not see the breakdown of planned versus achieved targets in the expenditure.

Ms Kadi said that FPB had indeed employed persons with disabilities. It now had the services of a recruiter which dealt specifically with persons with disabilities as there were many things that needed to be considered when employing them such as the accessibility to premises and whether resources were available for them to work.

The Chairperson asked what could be done since the CFO felt “aggrieved”.

Mr Gouws said the issue of irregular expenditure had been taken up to the business executive level of the AGSA and found it was a methodology implementation issue. Higher level discussion was needed.

Mr Gungubele indicated that a reduction to R250 000 was not something to be proud of. The CFO should focus on correcting what the AG was worried about.

Ms Tolashe recommended that PFB have a relationship with the Department of Social Development and the Department of Basic Education to address what was happening in schools.

The Minister noted that the Department was part of the cluster ministry focusing on Outcome 14 which was social cohesion and nation building. FPB contributed to this. The Constitutions’ Chapters 16 and 28 was important for FPB.

Mr Gungubele commented that the Minister’s responses were very helpful. A lot of issues were articulated directly by Ms Kadi but the question remained whether FPB was making a difference. The vision could not indicate what it did but should be what it envisioned to do.

Briefing by ICASA on its 2015/6 Annual Report and Financial Statements

Mr Rubben Mohlaloga, Acting Chairperson, ICASA gave the Committee a brief overview of its strategic plan for 2015/16. Issues that were topical in the performance environment during the financial year were Over-The-Top (OTT) services, DTT, Internet, Postal Services and Broadband. Other issues in the performance environment were:

(1) Market Consolidation issues
(2) Need to accelerate digital migration
(3) Review of the ICT sector policy
(4) Net neutrality
(5) Technological evolution and
(6) Internet Agenda (matters relating to spectrum allocation)

He explained that ICASA had a total of 103 targets spanning over 10 programmes for the 2015/16 financial year. Key regulatory highlights included licensing, research spectrum management and consumer protection highlights. With regards to providing regulatory services to industry, ICASA targeted to have 100% of Type Approval Applications processed within 15 working days. Mr Mohlaloga explained that a total of 2 573 Type Approvals were processed in the 2015/16 financial year and of these only 14.56% (376 applications) were processed within 15 working days. With regards to numbering applications, a total of 340 numbering applications were processed in 2015/16 and 98.23% of these were done within the target of 20 working days. ICASA targeted to have 80% of radio communications spectrum allocations processed within 60 working days. These included new, transfer, and renewal applications. It processed a total number of 6 680 radio spectrum applications and of these 99.45% was processed within 60 working days. All amendments were completed within 60 working days.

With regards to complaints and compliance cases, performance by sector indicated a total of 50 cases within the postal, broadcasting and telecommunications sectors. A number of 40 of these cases were within the telecommunications sector. He elaborated on human resource priorities set for the year and its performance. Employment equity indicated a grand total of 353 employees with 77% Africans, 8% Coloured, 15% Indian and 11% White. The vacancy rate had gone down from 24% in 2014/15 to 10% in 2015/16. HR Development expenditure was at R3.2 million with an average of R13 354 per employee. For 2015/16 ICASA had a total of 33 resignations, one dismissal and one retirement. 

Mr Mohlaloga presented the audit outcomes. ICASA received an unqualified audit for the fourth consecutive financial year. Performance Information was found to be reliable and useful and overall organisational performance improved from 29% in 2014/15 to 76.7% in 2015/16. Irregular expenditure decreased by 91% in 2015/16 and a total amount of R14 537 521 was condoned by Council. Fruitless and wasteful expenditure increased by 13% in the current financial year. The strategic issues ICASA was planning to tackle was the release of more spectrum for telecom operators, radio and TV broadcasters, real and perceived market concentration in the ICT sector and to make broadband delivery more transparent and affordable.
Discussion

Ms Van Dyk wanted to know the reasons for the 33 resignations at the entity. With regards to its consumer affairs, what was the timeframe for FPB to respond to complaints as she was sitting with a complaint that had not been resolved since March 2016? She recommended that for programmes one to three the entity had to provide a plan of action to address the AGSA’s issues.

Mr Willington Ngwepe, Chief Operations Officer, ICASA, said that the timeframe for the response to complaints was 40 working days, but complaints differed so it was difficult to say based on the exact complaint. For example, some complaints were related to a lack cell phone network in a certain area especially in the rural areas and therefore further investigation was needed which would usually take more time to resolve.

Mr Mohlaloga added that ICASA tracked resignations on a quarterly basis and because this was a skills intensive sector, the private sector tended to pay employees more. People were going for better offers but ICASA had a programme in place to promote career progression and skills retention. It was implementing a graduate development programme targeting 15 graduates spanning over two years.

Ms Tolashe noted that according to the PFMA, entities had to respond to the Minister. ICASA had in the past refused to report to the relevant authorities. Why was this happening? She wanted to know more about the botched Vodacom and Neotel deal and what the legal expenses incurred were.

Mr Mohlaloga responded that ICASA did report when expected to. In was merely a perception held by certain people that ICASA refused to respond. It did submit reports and attend meetings.

Mr Ngwepe said the legal expenses were R6 million with regards to the Vodacom and Neotel deal.

Ms Katharina Pillay, Council member, ICASA explained the legal processes around the Vodacom and Neotel deal. A transfer of control was approved by the Council but the decision was taken on review in respect of 10 grounds. She explained seven of these were for ICASA and three against ICASA. The three grounds against ICASA was for the HDI requirement which ICASA needed 30% on arrival and did not have therefore the transaction was cancelled. Secondly, a competition assessment was not done and ICASA then went ahead to work with the Competition Commission. And lastly there was a perception of bias found against ICASA as there was a difference between the affidavits of ICASA, Neotel and Vodacom. Two meetings were held but the applicant said numerous meeting were held, even though these meetings were only taking place at ICASA premises and not directly with the Council. Due to this entire process, ICASA incurred legal costs of R9.2 million.

Mr Kalako highlighted that FPB had improved on irregular expenditure but there was a 13% increase in fruitless and wasteful expenditure. Why had this happened?

Ms Portia Mngomezulu, Corporate Services Executive, ICASA, explained that the increase was because of maintenance costs related to an ICT system ICASA was using. Even though it had ended the contract with the provider, unfortunately the system still needed to be maintained.

The Chairperson said it was important to employ persons with disabilities and to ensure the male and female balance was maintained. What were the planned targets versus those achieved?

Mr Mohlaloga answered that ICASA had employed six people with disabilities which was at 1.7%. Its target was to have 2% by the year 2021. Male staff was at 54% which was 189 employed. Female staff was at 46% which was 164.

Mr Pakamile Pongwana, Chief Executive Officer, ICASA, added that regulatory matters spanned over a number of years and when planning happened it was broken down into smaller chunks. The standard terms and conditions simplified the number of documents required which made it simpler. The targets planned were underachieved because there was a problem with phrasing objectives. There was a difference in interpretation from how the AGSA saw objectives and the evidence to support it. It had been a learning curve for the organisation.

Ms Matshoba noted she was not a “foreigner” to the presentation. The Department was accountable to members and there had been previous occasions when ICASA failed to account to DTPS. She had documents in her possession which proved this.

The Minister wanted an update on the case between the Hawks and a former supply chain manager. She also noted the South African Post Office (SAPO) mandate which required it to supply 1.5 million new addresses per year. ICASA was responsible to monitor the licensing of SAPO.

Mr Pongwana replied the Hawks issue was a long battle which started in the beginning of 2013. ICASA’s legal division had been following up on the case with the Hawks. The employee involved resigned before he could be prosecuted. The matter was still in court and being investigated. With regards to SAPO, it was unable to pay its fees to ICASA and applied for changes in its obligations because of financial constraints. The National Address System featured around existing addresses to make the Post Office more mobile. There were difficulties as in many rural areas there was no road access so the Post Office could not establish itself. Engagement had to take place, perhaps with the Independent Electoral Commission (IEC) to ask exactly what an address should be seen as.

Ms Matshoba wanted clarity on whether the legal costs was R6 million as per the CFO or whether it was R9 million according to Council member Ms Pillay.

Mr Tebogo Matabane, Chief Financial Officer, ICASA, said the R9 million noted was for the competition tribunal and another R6 million was towards court fees. Therefore the total cost for legal fees was R15 million.

The Chairperson thanked the Department and entities for their contributions. He closed the meeting in order for the Committee to discuss another urgent matter at hand.

The meeting was adjourned.