Sentech, USAASA, USAF & NEMISA on their 2015/16 Annual Reports

Telecommunications and Postal Services

18 October 2016
Chairperson: Ms M Kubayi (ANC) Acting Chairperson (first 30 minutes of afternoon session): Ms D Tsotetsi
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Meeting Summary

Annual Reports 2015/16 

Sentech had received a clean audit, was sustainable, generating cash and growing its asset base even though market conditions for the year under review had been difficult to navigate. In the medium to long term, it was running two networks and needed to refresh the analogue network that it had been hoping to retire. Sentech was looking for new revenue streams by diversifying into the international market to mitigate against exposure to foreign exchange currency fluctuations resulting from dollar denominated satellite costs. 

The market for the delivery of content had changed and Sentech did not see itself as a signal distributor but as a digital content distributor, hence the organisation’s structure was reviewed so that it was aligned to its new business model. 82% of its targets had been achieved and there was an increase in digital terrestrial services and an expansion in the FM services network.

Challenges were that the Vsat business had affected its profitability; the unavailability of set top boxes in the market would delay the analogue signal distribution switch-off, which was costly for Sentech; and the shortage of technical skills, which it was attempting to mitigate by offering bursaries in broadcasting engineering.

Members said the risk of delays in rolling out digital terrestrial television was noted in the presentation. What was the shortfall that Sentech had to carry, beyond the grant income that had been received and what would the shortfall be in the current and following years? Were there any plans to address community radio stations complaints that the cost of a Sentech licence was too high? What steps was Sentech taking to mitigate foreign exchange rates that were regarded as a risk? Members asked whether any calculation had been done on what the cost would be when current infrastructure would have to be replaced and what was required to maintain infrastructure. Why was 50% of the staff leaving? Members asked what the projected revenue streams were and what had been spent on digital transmission equipment for the past five years. What had been negotiated to fund the dual illumination and who was funding it? What was the cost of the call centre and was it for the installers or users of set top boxes? What were the plans to make the short-wave services profitable? What was the success rate of Sentech’s programme with higher learning institutions, to develop a skilled workforce and how many of the graduates had Sentech retained? Members asked what the names of the SMMEs were that Sentech had assisted, to avoid them double dipping.

Regarding the 13th cheque issue and the cost of industrial action, Members asked how this was not anticipated. Regarding cyber-attacks, Members asked if Sentech had its own cyber security plans. Members asked if Sentech had resolved challenges on employing people with disabilities. Regarding the case against ICASA, Members asked what progress there had been to settle the case. Members asked how long it had taken to design the organisational architecture and what that cost had been. Members asked if Mr Mtimde was still a member of the board. The Chairperson said the legislation governing Sentech was quite old and there might be a need to review and refresh it in light of the technological changes taking place in the sector, like the migration to digital broadcasting.

The Chairperson said she had written to the Minister to ask why there was a joint report from USAASA and USAF and not separate ones. The Minister had said the issue was around costs, but that the documents would be separate. She said this was important from an accountability perspective and so that money from one entity was not used by the other.

Universal Service and Access Agency of SA said the year under review was a tough and challenging one. The Agency was looking at stakeholder management and the Department of Communications in particular. The Agency was looking closely at the implications of the ICT white paper for Universal Service and Access Agency of SA in terms of strategy, structure and focus and had implemented a strategy review recently. USAASA now had three focus areas, to enhance human capital through organisational development; to realign their business process systems; and to enhancing good corporate governance. USAF had three focus areas also, namely, broadband rollout to two municipalities; the school connectivity programme; and the Broadcasting Digital Migration project. USAASA achieved 12 out of its 24 targets and USAF achieved two out of its three targets. The challenge of vacant senior posts had been reduced through the appointment of a CEO, CFO and company secretary and the issue of digital migration remained a challenge. 

The delayed launch of the Broadcasting Digital Migration project resulted in low expenditure for the BDM project. Total spending was R105.8m, which was 42% of the total budget. USAASA and USAF had received unqualified audit reports. Areas needing attention arising from the AG’s report was supply chain management and there were areas of irregular spending which had been challenges. Other areas noted were planning which had not been SMART and performance management. A big challenge was user demand for services and USAASA wanted to stimulate this.

Members were extremely concerned at the internal controls for USAASA and USAF as there had been a regression in controls. Were staff in supply chain management not be charged with fraud. Was there any disciplinary action taking place? If not, why was it not done? Members said the lack of progress in organisational development was holding back the implementation of the enterprise resource planning system. How long would it take to complete the organisational development and consequently the enterprise resource planning? Who was the brand communications specialist that had been appointed and at what cost? Were policies being reviewed to ensure they were aligned to legislation and national policies? Members asked whether ICT in schools would be abandoned and whether Operation Phakisa had overtaken the programme. Members asked whether the $6 figure per set top box included the cost of packaging. Members wanted more details of the meeting USAASA would be having the following day.

Members asked if USAASA could explain the impending policy uncertainty resulting from the implementation of the ICT policy review panel recommendations and what would this mean to service delivery, especially to the unserviced and rural areas. Did USAASA had enough skilled resources to ensure the full capacity to implement its APP?

The Chairperson asked what right USAASA had to make inter-entity loans and could it explain the status of other loans. Could it explain the circumstances leading to a bank overdraft? What was it for, did the Department know about this and was the overdraft cleared?

The second round of questions in the USAASA presentation was centred on strategising and insuring financial accountabilities which members of the board had committed themselves to following through with that matter.

Thereafter, NEMISA was invited to make their annual performance report. Some of the issues raised in that report, which was classified as an unqualified report, where centred around filling vacant posts, accrediting qualifications, developing contingency plans for any future disruptions such as the Fees Must Fall and ensuring that the new management reach full financial proficiency and attain their pre-existing goals.

Irregular expenditure of R2 450 788 was mainly due to travel and accommodation requests. The Institution had a lot of rural area projects and it was difficult to find quotations from three different suppliers because most were not registered to enable the board to do business with them. 

Fruitless and wasteful expenditure amounted to R88 000, due to late payment penalty to SARS. However, these costs were recovered after they explained their reason of non- payment to SARS.

Members asked why NEMISA did not provide the Auditor General with adequate and reliable reports for reported achievements to this programme? The AG said there was insufficient evidence between targets and actual achievements, why was that the case? Could NEMISA provide an action plan on how it would address the adverse findings of the AG? Members asked for a breakdown of the R11.3 million for the collaborations. On the issue of SMS, how did this ensure that all people received an SMS in a language they were familiar with and could understand? On the scholarship exchange, what could be a challenge for not having action programmes? Members also asked about the Ghana University partnership; about the vacant post and whether that related to the surplus, and how many posts needed to be filled.  

Meeting report

Sentech
Mr Magatho Mello, Board Chairperson, said Sentech had received a clean audit, was sustainable, generating cash and growing its asset base. It had increased revenue by 7%. In the medium to long term, it was running two networks and needed to refresh the analogue network that it had been hoping to retire. Sentech was looking for new revenue streams by diversifying into the international market to mitigate against exposure to foreign exchange currency fluctuations as a result of dollar denominated satellite costs. 

Mr Mlamli Booi, CEO, said market conditions for the year under review had been difficult to navigate. The organisation’s structure had been reviewed so that it would be aligned to its new business model. Sentech had achieved 82% of its targets. There had been an increase in digital terrestrial services and an expansion in the FM services network.

On financial performance, revenue had increased by 7% and costs decreased by 23%. Gross Profit had decreased by 3% because of foreign exchange currency fluctuations and the fact that its satellite leases were dollar denominated. Total assets had increased by 18% and the organisation had good solvency and liquidity ratios. Revenue from TV and radio had increased. The market for the delivery of content had changed and Sentech did not see itself as a signal distributor but as a digital content distributor.

Challenges were that the Vsat business had affected its profitability; the unavailability of STBs in the market would delay analogue signal distribution switch-off, which was costly for Sentech; and the shortage of technical skills which it was attempting to mitigate by offering bursaries in broadcasting engineering.

Discussion
Mr C Mackenzie (DA) said the risk of delays in rolling out digital terrestrial television (DTT) had been mentioned in the presentation. What was the shortfall that Sentech had to carry, beyond the grant income that had been received? What would the shortfall be in the current and following years? Community radio stations had complained about the cost of Sentech licences being too high. Were there any plans to address this? Foreign exchange rates were regarded as a risk. What steps was Sentech taking to mitigate that risk?

Ms J Kilian (ANC) asked whether any calculation had been done on what the cost would be when current infrastructure would have to be replaced and what was required to maintain infrastructure. Could the difference in the average pay between senior and top management be explained? Why was 50% of the staff leaving?

Ms M Shinn (DA) asked what the projected revenue streams were and what had been spent on digital transmission equipment for the past five years. The dual illumination budget was entirely omitted from the budget. What had been negotiated to fund the dual illumination and who was funding it, because it had to come from the Department of Communications? What was the cost of the call centre and was it for the installers or users of set top boxes?

Ms N Ndongeni (ANC) asked if the challenges around the non-achievement of targets had been resolved. What were the plans to make the short-wave services profitable? What was the success rate of Sentech’s programme with higher learning institutions to develop a skilled workforce and how many of the graduates has Sentech retained?

Ms Tsotetsi asked what the names of the SMMEs were that Sentech had assisted, to avoid them double dipping. What plans were in place to allow for the fact that bursary students might be affected by the current unrest at universities?

The Chairperson asked if there had been a loss in revenue because of instability in power supply or because emergency generators did not kick in and what were the mitigating factors. What were the engagements between Sentech and its clients?  Regarding the aging medium wave infrastructure, what were the difficulties and how would Sentech mitigate these going forward? Regarding the 13th cheque issue and the cost of the industrial action, she asked how this was not anticipated. Regarding cyber-attacks, she asked if Sentech had its own cyber security plans.

Mr Mello said the process to appoint a CFO was at the stage where the board had made recommendations to the Minister and hoped an announcement would be made within one to two weeks.

The Department had helped with regard to the costs of dual illumination.
 
Regarding mitigating foreign exchange risk, he said the board’s view was to look at containing the growth of satellite use because it’s costing was in foreign exchange and to move services to terrestrial or fibre networks. Secondly, it was looking at business opportunities outside of South Africa because it would be paid in foreign currency and this would mitigate the risk.

Regarding the dual illumination costs, Mr Booi said Sentech had received a subsidy of R107m in the last financial year, but were R32m short in terms of its projections. Total costs would be around R140m excluding inflation costs. The impact of the shortfall would be that reserves would be depleted over the years and Sentech would need to develop a different financial strategy.

Regarding the FM revenue and community broadcasters and the challenge they faced to pay licence fees, signal distribution was not cheap but there was a differentiated tariff between community and commercial broadcasters. Previously there had been a fund to subsidise community broadcasters but this had dried up, which was a risk for FM revenue. Community broadcasters’ funding was an issue that needed to be managed from a policy perspective.

Mr Obrey Nekhavhambe, CFO, said there was R81m underfunding for the dual illumination costs.

The figure given for the average personnel remuneration per employee, was a typo.

Regarding the costs of DTT infrastructure, Mr Seth Radebe, Audit and Risk Committee Chairperson, said Sentech spent R1b, but some equipment had a useful life of seven years and would need replacing.

On the bursary programmes, Mr Kganki Matabane, COO, said Sentech had internship opportunities and was enlisting unemployed engineers and on average 60% of them found employment with Sentech. Some were poached while they were at Sentech.

On the issue of the replacement of analogue equipment, that equipment that was retired was used for spares.

Regarding short-wave transmission, had reached the end of its life and was expensive to maintain. The main reason for using short wave was the African continent. Sentech was doing tests on using digital radio for short wave.

On the issue of Medium Wave, trials had also been done regarding digital medium wave and its equipment was obsolete.

On the issue of the impact of load shedding, Sentech had an service level agreement (SLA) with its customers and held monthly engagements with them.

On the issue of technical skills, Mr Booi said Sentech had a programme with the universities of Pretoria, Wits and Cape Town.

The impact of ‘fees must fall’ was the same as it was for any other parent and Sentech was monitoring it closely.

On the issue of the resignation of employees and its impact on the business, he accepted that people would be poached from Sentech and it was viewed as being Sentech’s contribution to the development of people in the sector.

On the issue of revenue projections and the exclusion of analogue, Sentech would provide details, as more broadcasters were needed on the digital platform to generate revenue.

The contact centre was critical for the launch of digital terrestrial television (DTT) because the need to have someone to call if there was a problem with the set top boxes. Funds were needed for this call centre and the ministry had committed to finding ways to get funds for the contact centre.

On the issue of the success rate of bursary students, Sentech had not had the bursary programme for long. There was close monitoring and support for students by the HR department. He was hoping the initial graduates would pass out this year.

On the issue of the risk of the 13th cheque being unresolved, at the time a contract was signed in August /September 2015, Sentech had thought the matter had been resolved. However, there had been a misunderstanding about the contract, which dragged the issue out for a further six months from the end of October. He had told the unions that he would guarantee they would get 60% of their monthly salary but they had to agree to a performance assessment. The reward had been better than the guarantee and had been better than a 13th cheque. The agreement was not a multi-year agreement because the agreement had not been for a 13th cheque.

On the issue of cyberattacks, Sentech had a policy and plan in place. It had done an assessment and had identified areas that needed strengthening.

Ms V Ketabahle (EFF) asked if Sentech had resolved challenges on employing people with disabilities.

Ms Tsotetsi asked if Sentech had a list of SMMEs Sentech had assisted. She asked if one of the bursary conditions could not be to serve at Sentech for one to two years.

Ms Shinn asked if Sentech had developed interactive content for the platforms it was focusing on. Regarding the case against ICASA, she asked what progress there had been to settle the case. She asked whether certain figures in the annual report were correct. Figures were quoted that appeared to have three zeros missing.

Ms Kilian asked whether the issue of employer accountability had been resolved.

Mr Mackenzie asked how long it had taken to design the organisational architecture and what that cost had been. He asked if Mr Mtimde was still a member of the board.

Mr Mello replied that Mr Mtimde as still a member of the board.

On the issue of employment equity, Mr Booi said it was still a challenge to recruit disabled people. Sentech had consulted with an agency that placed such people. However, it was in the nature of Sentech’s work that technicians climbed up masts and transmitters and so it was limited to recruit in only certain areas.

On the issue of the list of SMMEs, Sentech would provide the list of all. In the last financial year, it had assisted three SMMEs at a cost of R1m.

On the issue of the threat that ‘fees must fall’ would affect bursary students and hence Sentech, he said Sentech offered internships.

On the issue of the ICASA’s case, Sentech had returned a licence for use of broadband spectrum, which had a condition to connect 1500 schools attached to it. Sentech wanted an exemption from this condition because it had not implemented the spectrum licence. This issue was under negotiation with the regulator.

On the issue of organisational development, it had been done in phases and would be finished in eight months. Sentech would provide a cost.

On the issue of the investigation, Mr Radebe said it was not yet finalised and it related to changes that had been made to the bank accounts by one or two employees, which had resulted in a R105 000 loss.

On the issue of the figures reported in the Annual Report, Mr Nekhavhambe said the figure was incorrect and should have three zeros added.

On the issue of what content platforms had been developed, Mr Matabane said the customers decided what set top boxes (STB’s) they wanted to use.
 
The Chairperson said the legislation governing Sentech was quite old and there might be a need to review and refresh it in light of the technological changes taking place in the sector, like the migration to digital broadcasting.

USAASA /USAF
The Chairperson said she had written to the Minister to ask why there was a joint report from USAASA and USAF and not separate ones. The Minister had said the issue was around costs, but that the documents would be separate. This was important from an accountability perspective and so that money from one entity was not used by the other.

Mr Mawethu Cawe, Board Chairperson, said the year under review was a tough and challenging one. The issue of digital migration was a challenge. USAASA was looking at stakeholder management and the Department of Communications in particular, and with whom they would be having a meeting with the following day. The executive team was looking closely at the implications of the ICT white paper for USAASA in terms of strategy, structure and focus.  USAASA had implemented a strategy review recently and the Department of Telecommunications and Postal Services (DTPS) had been part of that, as well as other stakeholders that had been invited to contribute. It would be collaborating more with partners to get the most out of the resources at their disposal. He introduced the new CFO, who had started the day before.
 
Mr Lumko Mtimde, CEO, said USAASA had three focus areas, to enhance human capital through organisational development, to realign their business process systems and to enhancing good corporate governance. USAF had three focus areas also, namely broadband rollout to two municipalities, the school connectivity programme and the Broadcasting Digital Migration (BDM) project. USAASA achieved 12 out of its 24 targets and USAF achieved two out of its three targets. The challenge of vacant senior posts had been reduced through the appointment of a CEO, CFO and company secretary. USAASA and USAF had received unqualified audit reports. He also spoke to organisational development and to the BDM project.
 
Mr Mokgobo Sephiri, Acting CFO, said USAASA had generated revenue of R8.8m, received R66m from the DTPS and R146m from BDM distribution and logistics and R50m from ERP. The total revenue was R262m. The delayed launch of the BDM project resulted in the low expenditure for the BDM project. Total spending was R105.8m, which was 42% of the total budget.

Mr Mtimde said areas needing attention arising from the AG’s report was SCM and there were areas of irregular spending which had been challenges. Other areas noted were planning which had not been SMART and performance management. A big challenge was user demand for services and USAASA wanted to stimulate this.

Discussion
Ms Kilian was extremely concerned at the internal controls for USAASA and USAF as there had been a regression in controls. She asked whether some members in the SCM should not be charged with fraud. Was there any disciplinary action-taking occurring? If not, why was it not done and how was the matter going to be corrected?

Mr Mackenzie said the lack of progress in organisational development was holding back the implementation of the ERP system. How long would it take to complete the organisational development and consequently the ERP? Who was the brand communications specialist that had been appointed and at what cost? Were policies being reviewed to ensure they were aligned to legislation and national policies?

Ms Shinn said the amount for the Broadcast Digital Migration (BDM) figure for set top boxes was R5m not R5.2m. She asked whether ICT in schools would be abandoned and whether Operation Phakisa had overtaken the programme. There had been no budget for tender facilitation by USAASA, which meant R676m was unbudgeted expenditure. Regarding the potential risk of wasteful expenditure of R1.3b on set top boxes that might not comply with policy judgement, she asked whether the $6 figure per STB included the cost of packaging. She noted that the R20.7m of unspent funds were mainly attributable to unspent BDM funds and R231m was the total spending affected by the delayed BDM project implementation. How were these remarks justified? She wanted more details of the meeting USAASA would be having the following day. She asked what the purpose of the meeting was and who were involved?

Ms Tsotetsi said USAASA took a long time to fill key positions. She asked how long it took to set up a hearing and how often did monitoring and evaluation take place to minimise risk.

Ms Ndongeni asked if USAASA could explain the impending policy uncertainty as a result of implementation of the ICT policy review panel recommendations and what this would mean to service delivery, especially to the unserviced and rural areas. Did USAASA have enough skilled resources to ensure the full capacity to implement its APP?

The Chairperson asked what right USAASA had to make inter-entity loans and could it explain the status of other loans. Could it explain the circumstances leading to a bank overdraft? What was it for, did the Department know about this and was the overdraft cleared? She wanted clarity on depreciation and amortisation entries in the annual report and wanted clarity on staffing costs. Could the CEO’s comment indicating a need for additional funds for the upgrade of software in STBs be explained and where would the money be coming from?

On the issue of delays in the ERP system, Mr Cawe said the board had dealt with this and were as concerned about the pace, but it had to go through processes with the unions.

In reply to Ms Shinn’s question, he said the BDM project was a challenging situation.

He said the meeting had been requested by the Minister of Communications who wanted to meet with USAASA on the issue of BDM.

On the issue of the software upgrade estimate of $6, Mr Mtimde said the boxes were in warehouses and they needed to be installed and only then the upgrade would be done over the air.

Regarding where the money would come from, USAASA had had engagements with National Treasury, the Department of Communications and DTPS on the funds needed. National Treasury had said that all stakeholders should meet to find a solution. USAASA’s submission for funds was subject to a resolution taken at that meeting. He said the $6 was a conservative figure.

He said DTPS was prioritising the question on governance and the stability of the board.

In reply to Ms Ndongeni, USAASA was analysing the published policy directive’s impact and the time frames because there would be legislative change implications.

He said USAASA had developed an action plan based on the AG’s report.

On the issue of school connectivity, Ms Makhotso Moiloa, Operations Manager, said the figure of R5m was correct.

On the question around Operation Phakisa, she said there were issues around funding. Connectivity had been determined as being under the ambit of DTPS. DTPS would be doing the school connectivity because that was its core business. There had been a decline in the number of schools in the programme because of the long debate on whose responsibility the school connectivity was.
 
Mr Mtimde said USAASA was paying SAPO for the services it provided for storing the STBs. There were challenges relating to the cost of the storage.

On the issue of interventions, he said the culture of the organisation had to change.

On the issue of the ERP, there were financial implications. He could only answer how long it would take after a meeting of the board.

On the issue of depreciation and amortisation figures, Mr Mohammed Chohan, the new CFO, pointed out in the financial statements where the figures arose.

On the issue of why there was no budget for BDM tender facilitation, Mr Sephiri said there was no budget allocation. The R676m had been taken from the previous year’s reserves.

On the issue of USAF surplus funds, he said it was attributable to BDM funds. Unspent BDM subsidies for project costs, related to expenditure to facilitate the project rollout, like for example on travel and transport costs.

On the issue of why less was spent, it was because the rollout was only active in the fourth quarter.
Broadband accounted for R4m of unspent funds and rapid deployment for R3.6m.

On the issue of inter-entity loans, they were accounting entries made because of errors in payments. There were two accounts, that of USAASA and USAF. Iif the descriptions in the banking entries were not written correctly on documents it was possible for a payment to be paid to or from the wrong account. When the error was discovered, it was recorded as a loan and the following month it was corrected.

The Chairperson asked why the entries were not made under errors rather than loans, as the PFMA did not allow for loans to be made by entities. She said this was a flaw in the USAASA/ USAF accounting systems.

Mr Sephiri said that the term loan might be misleading and it would in future avoid using the word loan.

Mr Linda Nene, Audit and Risk Committee, said that at the time one person had staffed the finance department and it was possible to make such errors, as there had been a serious control breakdown because the CFO and a senior manager had left.

Mr Chohan said that the financial statements had been prepared according to GRAP rules. If there were an erroneous entry, that transaction would be seen as an amount that was owed. The system needed to be changed such that errors like this were discovered and corrected before month end so that it did not reflect in the books.

On the issue of the overdraft, Mr Sephiri said there had been challenges in the finance section on how payments were done because two of the three signatories had left the organisation and had resulted in challenges in transferring funds from the organisation’s call account to its cheque account. This had led to one of the cheques being overdrawn because there had not been enough funds in the cheque account. The overdraft had been cleared and USAASA had resolved the challenge of bank signatories.

The Chairperson asked if no notice had been given by those that had departed.

Mr Cawe said the CEO had been ill for six weeks before the end of his contract and this had created a void. The organisation did not want to change signatories as they thought he would come back to work. The process of changing the signatories had taken a month.

On the issue of the brand specialist, Mr Mtimde said the brand specialist had deliverables, which would be submitted to the board regarding policies, strategies, brand improvement and stakeholder management.

The meeting adjourned for lunch.
As the Chairperson was required to attend another meeting, Ms D Tsotetsi, chaired this part of the meeting.


Second Round of Questions on the USAASA Annual Presentation Report
Mr Mackenzie referred to page 58 and asked, in terms of the equity target, if there were any targets that they could attach to the figures presented on that page so that they may have a snap shot of how they were doing in that area. Secondly, he referred to page 97 where the expenditure reflected an increase in catering and asked why there was more than double in the increase of catering, refreshments and domestic services. Thirdly, he asked for an explanation of what the item titled “obedient capacity building” totalling R15 million in the expenditure. And lastly, he asked that they explain the SARS penalties and interests that totalled an estimate of R84 thousand and any investigations that have been conducted or concluded in this regard.

Ms Kilian asked if the notation on page 101 indicating if the SARS penalty was waived was correct. She commented that as long as the Committee felt that the new management tried to clean up the nasty things from previous administration then they were happy.

She commended USAASA on their efforts and said they should ensure that officials who abused their powers should be brought to book. Lastly, she encouraged the board members of USAASA to continue working hard to ensure that there is good governance and accountability for any wrong doings. Ultimately the new board would have to come back to the Committee to show that they have followed up with commitments they had made.

Ms Tsotetsi apologised that she was not aware that there was a new CFO and CEO. She was concerned at the slow pace in filling the key post and acknowledged the strategy given in the report to deal with that. She asked the board whether the strategy would be effective to address the aforementioned issue within the set time frame.

Mr Nqaba Nqandela, Director and Board Member, USAASA, expressed appreciation for the words uttered by Ms Killian. He reiterated the answer already given by the CEO earlier. It was important to clarify as the board that the CEO had their full and unwavering support for the resolutions he had outlined to curb the wrongdoings in USAASA.

He said the Chairperson spoke about the process given to deal with the wrongdoings and investigations they would be engaging with the Minister of Communications. The issue of consequences management was of great concern to the board members and they had mandated the CEO to prioritise this matter because they would not want to come back to the Committee and report on the same issues.

On the issue whether there was a process involved to keep officials accountable for any wrongdoing, Mr Nqandela said this was a difficult thing to do because he had, in his previous position elsewhere, charged someone whom resigned from the organisation and tested it legally and unfortunately once one had resigned there was very little you could do other than laying criminal charges against that individual. Unfortunately, he noted that this alternative measure was costly and lengthy. Parliament's Standing Committee on Public Accounts (SCOPA) would ask entities to give them names of such individuals who had left under a cloud or other suspicions so that they as government could check if they reappeared in their systems. However, there was not much that entities could really do. He emphasised that the CEO had their full support but that he too would be held accountable if these matters were not being addressed.

Mr Mohamed Chowan and Mr Mokgobo Shadrack Sephiri, CFO and Accountant at USAASA, were asked by the above speaker to answer financial related questions.
Mr Chowan started with the question related to employee wellness expenditure and catering, refreshments and domestic services which increased in the current financial year. For the former, he said that they did not have a service provider responsible for assisting USAASA with employee wellness programme. As a result, the expenditure of R53 000 as reflected in the report was only for activities related to employee wellbeing. For the current financial year they had to remunerate the service provider monthly to facilitate employee wellness programmes, hence the increased figure.

Catering referred to refreshments that employees indulged in at the office, and cleaning materials. For the current year they had a large group of consultants, almost the same number as permanent employees, that assisted with the ERP system at head office. As a result, the refreshments and cleaning materials increased. As soon as they were aware of the high rates in refreshments, they engaged the service providers to bring their own refreshments.  

On the BDM capacity building, there was R14,8 million which was BDM logistics and distribution costs paid to South African Post Office (SAPO).

He lastly explained the SARS penalty and interests to which he said that they had challenges at year end on change of signatures at the bank. As a result, the SARS penalties were a reflection of late payments for PAYE which was only paid a day after the due date.

Mr Mtimde answered the last few questions relating to equity targets. He said the Agency had finalised a strategy for the coming year. The number of females were lagging behind, as for the current year there was a set strategy. The pace of filling vacant positions had been speedy as it was evident that in the last three months they were able to fill positions.

In terms of the audit plan, USAASA had discussed who would be responsible for different tasks and that they would discuss the details of the plan with the audit committee, in which they would agree on deadlines.

USAASA could not be happy with the unqualified report due to its number of internal control deficiencies. There was high motivation to improve and in the next meeting the Agency would have a clean audit as that was their target.

Mr Linda Nene, Chairperson of the board audit and risk committee at USAASA, noted that a quick dash board survey was done from the helper and security to the executives to get the staff to air their issues (views?). Thereafter, they had to bring the issues addressed in the above facilities to the board and determine the way forward with these issues in mind. Conceptualisation of the new strategy was done out of this interaction. The CEO also wants to make the staff feel that they came to work to make changes in society.

The Acting Chairperson thanked every board member from USAASA and acknowledged that it was unfortunate that the new board members would have to take both the good and the bad to move the parastatal to better levels. She wished them well and adjourned the meeting. (??)

National Electronic Media Institute of South Africa (NEMISA) 2015/16 Annual Performance Presentation

Opening remarks

The Acting chairperson, Ms Tsotetsi, welcomed NEMISA and asked the Chairperson to make opening remarks before they commenced their presentation.

Prof Walter Claassen, Chairperson of the board at NEMISA, introduced himself as the new chairperson appointed by Cabinet from October 2016. Previously, he was an academic at Stellenbosch University in Management and issues of Information skills. He felt honoured to be working at NEMISA as the Chairperson. The board was aware of the privilege it was to serve in this space where digital was the new word on everyone’s lips. They would like to reaffirm their commitment and dedication not to disappoint in executing the critical mandate at NEMISA. 

NEMISA received an unqualified audit finding from the Auditor General.

NEMISA carried out training in Johannesburg, where its head offices were located, and many other provinces. CoLabs had been set up at the University of Limpopo, University of the Western Cape, Walter Sisulu University, Durban University of Technology, and at the Vaal University of Technology.

A total of R11.3 million was used towards the CoLabs and these were highly effective to fulfil the quest of bringing these services to the communities. In addition, these CoLabs were more about educating people, businesses and government officials about digital skills

The CoLabs were expanded to the Free State, Mpumalanga and the North-West Province. These CoLabs were in the initial stages and continues to get support from NEMISA to ensure its developments.

NEMISA continued to enjoy growth in the network of institutions of learning and training at various levels.

Mr Peter Ramatswana, Acting CEO of NEMISA, presented the overview of the performance of NEMISA for 2015/16. Key achievements were to pilot bold face-to-face and online training in various communities.

The new model used was called blended learning, where students spend one week at training and three weeks in the work place, has worked and continued to work efficiently. The model was significant to reach out to rural areas with the motive of ensuring that young people were well trained to get employment or even start their own companies.

He indicated their success in term of collaboration networks in various provinces, such as the Eastern Cape and KwaZulu-Natal, where NEMISA partnered with other state entities. This enabled them to reach a good number of young people together with women. Their programmes benefit the SMME’s. NEMISA had developed online courses, e-skills Learning Management System Portal which had made their training efforts more effective.

He also highlighted success in the “SHE WILL CONNECT” programme targeting women with a specific focus on development of women in ICT in the Limpopo Province. The initial target of women was 400 and they had achieved 75% of that target.

NEMISA had been able to show presence in the Free State, partnering with Central University College, and in Mpumalanga, partnering TUT, and in North West, partnering with North West University.

The Institute focused on five programmes: Administration, Multi-Stakeholder Collaboration, e-Astuteness Development, Knowledge for Innovation and Aggregation. Most of the achievements had been 78,7% and non-achievement of 21%. The Fees Must Fall impacted on their progress because most programmes were carried out within Universities. This had raised awareness in terms of the institutional mitigation strategies in trying to find new institutions to roll out their teaching apart from higher learning institutions. They would be working with Colleges.

Members of Parliament interjected, stating that there were discrepancies in terms of the slides given and the documents used to indicate performance overview where for achieved the diagram showed 75.5% instead of 78,7% and accordingly misrepresented non-achievement as 24.5% instead of the correct figure of 21.3%. Members asked for an updated copy to ensure proper reflection of the aforesaid issues.

Mr Ramatswana apologised and said an updated report with correct figures would be provided.

On programme 1, Administration, NEMISA had achieved all they had sought to with many targets. In terms of programme 2, Stakeholder Collaboration, they had exceeded targets in other areas of their achievements. On programme 3, the e-Astuteness Development, which spoke to the core mandate of NEMISA, they had reached and exceeded targets in other areas. In areas of non-achievement, Fees must fall was quoted as a hindering factor. In terms of programme 4, knowledge for innovation, there were achievements in many areas. Some of the factors that led to non-achievement were the under-budget issue. Instead of budgeting R3 million as later it was determined to be the correct mount, R500 000 was issued for this programme.  

The Fees Must Fall campaign had impacted on the programmes and resulted in non-achievements. NEMISA withdrew students from the University for their safety and that was the reason for non-achievement.

The Acting Chairperson, stepped down and the Chairperson, Ms M Kubayi, whom was in another NEC meeting, resumed her position as Chairperson of the Committee.

Ms Rofunwa Ligege, Acting CFO: NEMISA, noted the net surplus, and stated that partnering with state entities allowed NEMISA to generate more revenue in addition to the amount they received from National Treasury. Total income for the current year under review amounted to R55 million, most funding was from National Treasury via the Department of Telecommunications, and interest earned from investments.
Total expenditure for the year was R53 million.

She explained the numbers as reflected in the Statement of Financial Positions. The Institution had outsourced debt collectors to assist with collecting debt as previously called for by the Committee.
Old Assets needed upgrading.

The Auditor general had audited their report and given an unqualified opinion.

Irregular expenditure of R2 450 788 was mainly due to travel and accommodation requests. The Institution had a lot of rural area projects and it was difficult to find quotations from three different suppliers because most were not registered to enable the board to do business with them. 

Fruitless and wasteful expenditure amounted to R88 000, due to late payment penalty to SARS. However, these costs were recovered after they explained their reason of non- payment to SARS.

Questions
Ms Kilian was concerned about the Institution not reflecting irregular expenditure as a whole, and asked that that be explained. Secondly, she asked about the issues of Fees Must Fall (FMF) and said it was good to see a good turn around despite their demonstrations. She further stated that the role of the Committee was to assist in making sure that NEMISA achieved on their financial position and predetermined objectives. The FMF could not be the only factor of non-achievement. She asked members of the board to indicate other shortcomings instead of only relying on FMF. She also noted that there was a steep increase for staff, and wanted to know whether this was based on performance or other factors. She asked for clarity in this regard.

Mr Mackenzie said FMF took place in September and things stabilised. There was only one month of disruption. He asked if other targets could not be reached earlier or in other months. Given that FMF had moved their activities online, as a contingency plan; could members also not have these alternatives to continue with their projects? He further asked what happened to scrapped assets. On irregular expenditure, he asked what the report meant by stating that some investigations were happening to determine this.

Ms Ndongeni asked why NEMISA did not provide the Auditor General with adequate and reliable reports for reported achievements to this programme. The AG said there was insufficient evidence between targets and actual achievements, why was that the case? Could NEMISA provide an action plan on how it would address the adverse findings of the AG?

Ms Tsotetsi asked for the breakdown of the R11.3 million for the collaborations. She noted the appreciation of SHE CONNECT and the target on women. On the issue of SMS, how did this ensure that all people received an SMS in a language they were familiar with and could understand? On the scholarship exchange, what could be a challenge for not having action programmes?

Ms Shinn asked about the Ghana University partnership.

The Chairperson referred to page 73 in terms of fees, and asked the difference between consulting and professional fees. She referred to page 68 and asked about “the going concern” and how come NEMISA was referred to as the aforesaid. She noted that where they had achieved targets they over achieved and when they failed they really did not achieve anything. Did this mean that where they over achieved the bar was set too low? And also, why was underachievement due to under budgeting in other circumstances?

Mr Ramatswana addressed the FMF question. Most of their workshops happened within the Universities. There had been a serious challenge to secure alternative venues. This was because the nature of their project needed labs that had Wi-Fi and so on. He agreed with having contingency plans but said it was difficult due to the specific nature of these peculiarities. Going forward he said they would buy laptops and make their programme more mobile. They would need of routers. Those plans would assist in instances where Universities could not be accessed. On accreditation of their certificates and their true value, they had made a commitment that when a learner registered, to keep a record. There was a certificate of attendance and one of participation, attend 75% and participate in the course. If absent you would merely get a certificate of attendance. They differed with the AG on this point.

They had taken an action plan. NEMISA was engaging with their CoLabs so that issues were properly addressed.

Having an SMS in all languages would not be a problem. The Institution wanted to deliver training in other languages too.

On the scholar exchange programme, there had been problems in concluding these in the past. However, there had been bilateral agreements with other countries. There was value in this programme.

The Ghana Central University partnership happened but stopped on the second year as a result of unrevealing Xenophobia attacks in South Africa. Sometimes they overachieved because there were various state entities, Business such as M-net to train their staff. This would add to the increased number of targets.

Ms Ligege said the irregular expenditure was R3 million when added with the one carried over in 2015. Staff incentives where due to performance.

Scrapped assets may be disposed of through auctions, donations or other means as per the company policy. The CFO would make recommendations to the board regarding the disposal method and they would have the ultimate say.

On the investigation done by the internal auditor on irregular expenditure for 2014, no one had been held accountable. For the current year, the Irregular expenditure investigations were ongoing and no one had been held responsible as of yet.

CoLabs breakdown would be sent via email. There was no real difference between consultation and professional fees.

Outstanding debtors for 12 months would be scrapped.

Ms Ligege explained the concept of a going concern, to mean that whether the entity would still be in operation for the next 12 months because funding was dependent on National Treasury and therefore they would show that they were indeed operating as a going concern.

On the question of under budgeting, they had done a local scan and ended up going nationally.

Second round of Questions
Ms Kilian, asked the target audience of NEMISA, because people would want a certificate, especially in rural areas, because it would offer them a job. How likely was this? This was also enhanced by partnering with universities because it created an impression in people’s heads that they would get jobs befitting accreditations after training.

Ms Tsotetsi asked if the workshops could be bridging courses for people to get into those that could be accredited.

Ms Ndongeni asked about the vacant post and whether that related to the surplus, and how many posts needed to be filled.

The Acting CEO responded that the audience ranged from youth and men and women, those that need re-skilling. Others may be re-skilling government employees, particularly in dealing with developments in digital literacy. We also want to create awareness as to the nature of the smart phone. Even if there were no formal testing, as the workshop progressed they could tell if one was exposed to the extent that he could apply. Secondly, they were careful not to give false hope. They make a clear distinction in non-accredited and accredited courses. 8 qualifications had been given accreditation.

He agreed with Ms Tsotetsi and said we would deal with making other courses a bridge to getting to accredited spaces such as colleges and Universities.

The Acting CFO said most debtors were students and they had recurring debt. NEMISA did not have policies that denied re-registration if one owed fees. This was because it was designed to train students from previously disadvantaged communities.

She further clarified that the surplus was due to vacant posts, they did not pay any salaries here, and partnered with the Universities.   

The issues of FMF also influenced registering students of NEMISA who sometimes insisted that training be for free as influenced by this movement.

The meeting was adjourned.


 

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