DTPS, SAPO, SITA, NEMISA, Sentech, BBI & .zadna on Quarter 2 performance; with Deputy Minister

Meeting report

Opening remarks
The Chairperson identified the key areas of the report of interest to the Committee as the technical quality of the reports, the efficiencies measured by the Key Performance Indicators (KPIs), as well as the service delivery of various entities.

The Deputy Minister said substantial progress has been made in facilitating ICT infrastructure and connectivity, there have been rapid deployment of services, and e-strategy programme is on course. Interventions of the Department are biased towards rural communities and e-schools as they form part of the President’s mandate highlighted in State of the Nation Address (SONA) 2014 for vulnerable groups. Whilst there have been partnerships with stakeholders, State Owned Entities (SOEs) are closely monitored as they mainly focus on connectivity, sustainability, skills development, and Small Medium and Micro Enterprises (SMMEs). Whilst informing the Committee about the Minister’s apology, the Deputy Minister said the Minister recently announced the establishment of the Postbank.   

Department of Telecommunications and Postal Services (DTPS) second quarter performance 2016/17 financial year
Mr Robert Nkuna, Director General, DTPS, presented the Department’s report.
Following the approval of the National Integrated ICT Policy White Paper, the road map identifying and prioritising legislative amendments emanating from the Policy was developed. First drafts of the Postal Services Amendment Bill and the SAPO SOC Ltd Amendment Bill were developed whilst the draft e-Services programme was developed and circulated to e-Government subcommittee members for inputs. Extensive stakeholder consultations on the National e-Strategy discussion document were undertaken through multiple platforms and the Department developed the draft ICT SMME strategy in line with ICT Broad Based Black Economic Empowerment (BBBEE) sector code. 

On State Owned Company (SOC) rationalisation, the SITA SOC assessment report on rationalisation was developed and in terms of promoting the RSA ICT agenda, South Africa participated at the PAPU Plenipotentiary conference where the regional positions were adopted. As regards preparations for WTSA-16, the RSA position paper for international standardisation programme was developed. All targets for the administration programme of the Department were partially achieved. Identified reasons include the non-approval of the Service Delivery Model due to its lack of alignment with the mandate of the Department, late signing of the climate and culture survey contract, and financial constraints. As per the international affairs programme of the Department, all targets were achieved except the target relating to drafting RSA POA for implementation of Brazil Russia India China and South Africa (BRICS) ICT Agenda and consultation with relevant stakeholders. The reason for the non-achievement of the target relates to the conflicting meeting schedules which culminated in inability to meet with Brazil and Russia. All targets relating to policy, research and capacity development were achieved and all targets relating to ICT enterprise development and State Owned Enterprise (SOE) oversight were also achieved. As per the ICT infrastructure support which is the flagship programme of the Department, targets were not achieved due to the failure by SITA to appoint a service provider and delays with regards to response from relevant stakeholders in the security cluster. As per budget per economic classification, 44% was allocated to transfers and subsidies, 27% for payment for financial assets, 20% for goods and services, and 9% for compensation of employees. On expenditure per programme, 8% was budgeted for administration, 2% for ICT international affairs, 4% for policy research and capacity development, 37% for ICT enterprise development and SOE oversight, and 49% for infrastructure support. It was reported that 57% of the budget had been spent at the end of the second quarter. Expenditure per economic classification depicted that 47% of the allocation for employee compensation had been spent, 17% of goods and services budget had been spent, and 51% of allocation for transfers and subsidies had been spent. The entire budget for payment for financial assets was utilised and there was an overspending of R1.7 million for a Microsoft licence due to payments for capital assets. As per transfers to entities and international organisations, there was an overspending of R2.7 million on transfers to foreign governments and international organisations due to exchange rate variance. 

South African Post Office (SAPO) Second Quarter performance
Mr Mark Barnes, Group Chief Executive Officer: SAPO, reported on the second quarter performance of the entity. Key achievements at the end of the second quarter include;

• Achievement of revenues of R2.321 billion despite the tough trading conditions for the first six months.
• Approval of the Postbank section 12 application to establish a bank by South African Reserve Bank.
• Conclusion of syndicate term loans from various financial institutions amounting to R3.7 billion, consolidating the previous R1 billion term loan.
• Total payments to creditors of R1.791 billion (R883m paid during quarter 2).
• Reduction in the R899m creditors backlog from March 2016 to R260m.
• Settlement of historical salary obligations with all employees.
• Conversion of 6,724 casuals from temporary to permanent employment.
• The activation of the voluntary severance package and the exits of 680 employees during September 2016.
• Customer breakfast meetings to regain customer confidence.
• SAPO staff head count declined to 19,876 as at 30 September 2016, which excludes the employees who have opted to take the voluntary severance package.
• Investment in SAPO employees resulted in 384 employees graduatingon 27August 2016 with a Bachelor in Business Administration degree, amongst others.

 

The CEO said the loss of the RT5 Government courier tender demonstrates SAPO’s on-going battle to secure Government business and SAPO cost exceeds its revenue by a monthly average of R100 million. As per the financial performance of the entity, there was a net loss of R607 million, revenue was 26% below the budget with a year on year change of 4%, whilst expenses amount to R2.907 billion. As per SAPO Group statement of financial position, total assets were the same with total equities and liabilities (R12.731 billion). Postbank statement of financial position is strong with cash and short investments exceeding depositors’ funds by R2.4 billion. R650 million recapitalisation funds were received in April 2016, R2.7 billion loans were acquired in July 2016, the R50 million subsidy received for address roll out projects is yet to be utilised and the R120 million received for DTT project in August 2016 is also yet to be utilised, and balance of loans acquired as at 5 October 2016 amounts to R1.9 billion. SAPO creditors reduced from R899 million in March 2016 to R434 at the end of the second quarter whilst CFG creditors amount to R251 million. SAPO KPI achievement is low at 25% for quarter 2 due to delay in funding to enable operations and revenue recoveries whilst high performance KPIs were not achieved due to the delay in finalising the managers’ performance contracting process. Notable unachieved KPIs include strategic themes to increase and diversify revenue, and achieving a high performance organisation. It was reported that revenue and expenditure performances are on a year on year decline of 4%. Suggested critical steps to achieve the mandates of SAPO include:

• Improvement of the operational performance of the organisation.
• Regaining customer confidence in order to improve revenues.
• Accelerating actions to obtain Government business.
• Fast tracking implementation of the strategies to operate successfully in the parcel business.
• Funding critical projects to aid the recovery of the business.                                               
• Fast-tracking the critical appointments of CFO, COO and company secretary (which will be insourced) during quarter 3 to strengthen the governance within SAPO.

 

An effective intervention would be to re-launch from scratch an effective courier service.

 

Broadband Infraco (BBI) quarter 2 report

Ms Puleng Kwele, Chief Executive Officer: Broadband Infraco (BBI), reported on the second quarter performance of BBI. On performance against predetermined strategic objectives, all targets to maintain a reliable network were achieved. All targets relating to financial stability were achieved with the exception of the target to decrease the amount of operating loss annually. The target to ensure sound human resources practices was also achieved. As per the strategic objective of economic transformation, two targets, namely percentage spend on black youth owned entities annually and percentage spend on people with disabilities owned entities annually, were not achieved. Non-achievement of the targets was incited by limited procurement budget. Whilst reporting on network infrastructure which relates to fibre rolled out nationwide, 1113.79 of the 1180.83 kilometres of fibre have been rolled out whilst 67.1 kilometres is in the process of being rolled out.

Mr Ian van Niekerk, Chief Financial Officer: BBI, presented the entity’s financial position. Actual total assets were the same, with total equity and liabilities (R1.452 billion) and assets increased by R36 million. Assets were below budget due to reduced spend and increased depreciation, BBI remained cash positive throughout the quarter, and debtors were below budget due to good collections. As per the financial performance, a new sales strategy has been implemented to address the revenue which was below budget (R203.781 million realised as opposed the budgeted R269.178 million), operating expenses were below budget as a result of good management of cost containment, amongst others. Overall net cash and cash equivalents amounted to R83.054 million as opposed the budgeted R58.035 million. Prospective funding initiatives identified include DTPS, National Treasury, USAASA, commercial banks, amongst others. It was affirmed that no irregular expenditure was incurred in the current year.

The CEO briefed that BBI concluded the appointments of 2 key accounts managers, 3 senior network engineers, senior manager O and M, and most of the appointments were internal as part of the organisation’s retention strategy. Other key human resource interventions include the appointment of 15 interns nationally, internal recruitment of 7 employees who previously resigned, amongst others. The employee footprint is comprised of 37% female and 63% male. Whilst interventions were impacted by limited procurement budget, BBBEE spend has increased slightly in the last quarter from R13.4 million to R14.2 million and Broad-Based Black Economic Empowerment (BBBEE) distribution also decreased slightly to 112%. Strategic top 10 risks identified include limitations in resolving fulfilment value chain, margin pressure, difficulty to raise funds, damage to the reputation of BBI, amongst others.        

State Information Technology Agency (SITA) corporate performance report for quarter 2
Dr Setumo Mohapi, CEO, SITA, informed that the entity achieved 50% performance against planned targets for quarter two. The highest performing programme was financial sustainability with a 75% performance, whilst the least performing programme is organisation with 0% performance due to delays in the finalisation of improvement plans and succession management plans. As per the service delivery programme of the organisation, unachieved targets include the enhancement of the efficiency of government business processes, and transformation of SITA into a customer-centric organisation. Reasons for variances include reprioritisation of e-services and delays in the finalisation of the customer satisfaction implementation plan. Two targets (consolidation and modernisation of data centres) of the infrastructure programme were not achieved due to delays in contract finalisation and delays in finalisations of the cloud computing strategy. Strategic objectives of the entity’s procurement programme were partially achieved and all except one KPI relating to the strategic objectives of the financial stability programme were achieved. Whilst the organisation programme of SITA failed to achieve its strategic objective, the governance and administration programme partially achieved its strategic objectives. 

Ms R. Rasikhinya, Chief Financial Officer: SITA, reported on the financial performance of the entity. Revenue for the quarter amounted to R1.4 billion, which is R321 million (18.2%) below the budget of R1.7 billion. As in the previous year, the actual service revenue performance for the quarter is below the budget by R 154 million. Whilst budgeting, SITA considered a 6% increase in the tariffs which was endorsed by GTOC which is awaiting the Minister’s approval. The impact of the reduced turnover has been mitigated by the reduction in agency (R230 million) and service delivery expenses (R70 million) via better negotiated contracts and a lower depreciation charge than originally budgeted due to re-prioritisation of capital expenditure. Direct labour still remains a concern as it represents sunk cost for service revenue which is being generated. The expected gross margin on services based on the budget was 29.5% of revenue whilst the actual gross margin was 24% of revenue. The expected gross margin on agency related sales is 7% and the achieved margin of 29% was a product of foreign exchange gains. The actual gross surplus is R366.6 million, which is R37.5 million below the budgeted gross surplus of R404.1 million. On the total operating expenditure line, there is a savings of R60 million across all line items whilst the operating surplus of R117 million against budget for the quarter is R12 million ahead. Provinces make up R561.2 million of the total outstanding book which is disproportionate of their contribution to revenue and there are some concerns about the ability of some of the clients to pay. It was also reported that service revenue is the major contributor to the non-achievement, only R195 million of the R325 million service revenue half year variance will be recovered during the remainder of the financial year, and there was also a shortfall of R129 million, of which R98 million is the lost revenue due to the tariff adjustments not approved.

Key audit findings include unfilled critical posts, lease agreements and business continuity plans that are not in place, lack of monitoring of contracts for performance, amongst others. Interventions to address audit findings include internal audit liaison with all executives and senior management to discuss the resolution of the MLPs, a workshop was held on 29 September 2016 where root causes for the findings as well as action plans and implementation dates were identified with the view of addressing and preventing a repeat of the findings, monitoring and verification of the resolution of the MLPs and SIAFs is carried out by internal audit, the monitoring of MLPs status is automated and all lines of business have access to the system, lines of business have identified process owners for each finding within a division to ensure that action plans identified are implemented the resolution of the Office of the Auditor-General (AG) MLPs form part of SITA’s Corporate Balanced Scorecard for 2015/2016 (under the governance and administration perspective). 

USAASA (Universal Service and Access Agency of South Africa) and USAF quarter 2 performance reports
Mr Lumko Mtimde, CEO: USAASA, reported on USAASA and USAF’s performance in the second quarter. Performance outcomes of the entity indicated an overall achievement of 40% in quarter 2 targets, whilst 70% of quarter 3 targets were achieved. As regards the human resources performance of the entity, only the target relating to work skills plan implementation was achieved. Unachieved targets include target to review learning and development policy, and target to monitor HR SLA implementation. As per its IT performance, only the target to monitor and report on percentage availability of systems was achieved whilst 2 other targets were unachieved. On the entity’s legal services performance, only the target to promote legal compliance was achieved. As per its research performance, no target was achieved: the only target relates to conducting impact assessments in three identified USAF subsidised local municipal areas. Whilst the targets for corporate governance were achieved, none of the targets for stakeholder engagement were achieved and an Integrated Communications Policy, which will foster stakeholder engagements, was submitted for approval by the Board Audit And Risk Committee (BARC) and board on 26 October 2016. Action plans to mitigate deviations include a new Go-live date which was set for March 2017 to allow for finalisation of outstanding project activities as per ERP system maintenance and support of the implemented modules. Other actions include capacitation of IT human resources, conducting fieldwork and data collection in all six local municipalities by the end of November 2016, amongst others. At the end of quarter 3, USAASA had 56 permanent employees and 4 interns. There were no new appointments whilst there were two resignations (one at executive management level and one at senior management level) and one retirement at skilled level. As per actions taken for consequence management, three written warnings were issued at executive management level for non-performance, there was one suspension at senior management level due to insubordination, and there were two suspensions (one a par for executive management level and professional level). Regarding plans to address AG’s findings pertaining to USAASA, 5 action plans have been implemented and independently reviewed by internal audit as per PMU, 7 out of 9 action plans have been implemented on finance matters, 1 action plan has been implemented out of 5 raised issues pertaining to Supply Chain Management (SCM), and there are interventions underway to address the raised issues of corporate services and corporate governance. For USAF, interventions are also underway to address issues of operations, SCM, and finance as highlighted by the AG.

Mr Mahomed Chowan, Chief Financial Officer: USAASA, reported that the income for the second quarter for USAASA exceeded projections (R20.346 million realised as opposed R17.261 million budgeted) whilst the revenue also exceeded year to date projections. As per the expenditure of the organisation, there was an overspending of 6% in the second quarter whilst there was an under-spending of 5% as per year to date budget versus actual expenditure. Bulk of the entity’s expenditure was on BDM distribution and logistics, as well as compensation of employees. As per the financial performance of USAF, quarter 2 and year to date incomes exceeded budgets. There was an overspending of R95.67 million in the quarter, and bulk of the expenditure was on STB subsidies for BDM whilst the least expenditure was on bank charges and audit fees.

The CEO also reported on the performance of USAF. No targets were achieved as base stations upgrades for Mhlontlo and King Sabata Dalindyebo local municipalities were not completed. Whilst progress was made on maintaining broadband network connectivity in various entities, 160 sites lack a remote monitoring access facility. Only 9 501 of the 14 615 targeted set up boxes and antennas were installed for qualifying needy TV-owning households. Backhaul upgrades for Mhlontlo and King Sabata Danlindyebo local municipalities in the OR Tambo District were not completed due to delays in obtaining confirmation letters and environmental rights applications. Action plans to mitigate unmet targets include a completion of backhaul upgrades in quarter 3, project fast-tracking to meet the end of financial year completion, conclusion of procurement process and completion of upgrades in quarter 3, and continued engagements with service providers and the Department of Communications (DOC).

National Electronic Media Institute of South Africa (NEMISA) quarter 2 performance.
Mr Peter Ramatswana, previous acting CEO: NEMISA, presented the second quarter performance of the entity. NEMISA achieved all targets of its administration programme by appointing new board members, appointment of CEO and CFO, and repositioning of the institute to deliver on SA Connect (broadband), National Integrated ICT Policy and other national policies. All targets related to multi-stakeholder collaboration were achieved with the exception of targets related to the number of new partnerships formalised. As per e-astuteness development, all targets were achieved except the target to implement 4 online courses in the second quarter. The knowledge and innovation programme as well as the aggregation and framework programme failed to achieve targets due to delays in the transfer of funding to the institute.

Ms Rofunwa Ligege, previous acting CFO: NEMISA, informed that total assets of the entity amounted to R43.36 million as at September 2016 whilst surplus was R14.97 million in the same period. Planned actions for the third quarter include induction of new board members in October 2016, commencement of CEO and CFO on 1 November 2016 and high level analysis by the end of December 2016.  
 

SENTECH quarter 2 business performance report
The second quarter report of the entity was presented by the CEO in person of Mr Mlamli Booi.
Six of the eight applicable KPIs were achieved, indicating an achievement of 75%. All strategic objectives aimed at ensuring high levels of customer and stakeholder satisfaction were achieved, whilst only one of the two KPIs geared towards the drive of organisational performance through effective talent management was achieved. The unachieved KPI relates to achievement of performance ratings. All strategic objectives aimed to ensure financial sustainability of the organisation were achieved except revenue diversification into international markets.

Mr Siphamandla Mthethwa, CFO: SENTECH, reported that costs were adequately managed as legal and consulting costs were substantially reduced, whilst assets of the entity totalled R1.9 billion at the end of the second quarter. TV revenue was below budget due to DTT revenue not materialising and SW revenue which was below budget due to Radio Lead Africa Suspension, contract termination of TWR and no new revenue realised per projected 8hours per day additional sales. Despite the afore mentioned, total revenue surpassed budget by 7%. He informed that product and network performance was at 99.89% and internal audit is on track with the execution of its annual internal audit plan.

The CEO briefed that priority activities for the board during the quarter include annual general meeting, recruitment of the CFO, board evaluation, compliance with statutory requirements, and consideration of the 2015/16 financial statement and annual report. SENTECH achieved a clean audit for the fourth successive year and progress has been made against the 26 findings issued by external auditors on 31 July 2016. He said 42% of findings have been addressed, 31% are on-going, and 27% are in progress. As regards risk management, the CEO affirmed that developments and emerging risks associated with the entity’s big customers are being monitored and mitigation strategies are in place to manage the risks. He added that revenue assurance risks are being managed to ensure that all revenue due to SENTECH is collected and management will continue to double efforts in implementation of all activities related to KPIs to minimize risk levels. Regarding enterprise development, SENTECH supported 13 SMMEs, which culminated in the creation of 68 jobs and 5 internship programmes for young people. Four SMMEs received grants to the value of R2.7 million whilst other SMMEs were in the incubation programme amounting to R3.5 million. As per human capital development, the CEO noted that attracting African talent remained a key driver of the entity’s recruitment process. Aat top management levels, 100% are black, 87%at senior management level are black, 72% of the specialists and employee at the middle management levels are black, and 82% black for skilled and technical levels. Themajority of the human capital activities are on track whilst performance management and succession planning are being addressed. He said the entity keeps improving human capital development through its interventions in building high performance teams, changing the environment, and appointment of the new CFO.

.zadna quarter 2 report.    
Mr Vika Mpisane, CEO: .zadna, presented the entity’s report.
60% of the overall targets set were achieved. As per strategic goal 1 which is to administer and manage .za, all targets were achieved with the exception of the target relating to the release of the draft school.za. All targets to facilitate international best practice compliance and registry-registrar licensing were achieved and all targets to publish registration guidelines were achieved with the exception of the target to finalise global domain name registration. All public awareness targets were also achieved, whilst none of the targets to conduct research and surveys were achieved. Annual .za domain name registration report was published and all targets to facilitate domain name policy recommendations were achieved except the target relating to the completion of Internet Governance (IG) policy gap analysis. Targets relating to the evaluation of ECT Act effectiveness in relation to .za management were achieved and targets to oversee ZA ADR process were also achieved. Partially achieved targets include targets to achieve financial sustainability of the entity, targets to enhance internal controls and corporate governance, and targets to build human resource capacity. As regards the financial performance of the .zadna, there was a deficit of R740, 000

 

Discussion
Ms Shinn inquired about the anticipated plan of the Department to secure tenders such as the lost RT5 tender. On DDG appointments, she asked when acting DDG positions will be finalised. She asked about disciplinary actions taken on the media corner issue that keeps dragging. As perinternational targets and achievements, she asked if the international engagements are necessary for the Department to achieve its mandate. On the ICT Policy White Papers, she asked if the 8 billsare new bills or amendments asthe Committee already identified 26 policies and 19 regulations affected by the White Paper.She also inquired if the implementation plans of the department will be revised after an engagement with stakeholders and relevant sectors.

Mr K Siwela (ANC) inquired why entities set unattainable targets and the impacts of non-achievement of targets on service delivery. Whilst referring his inquiries to .zadna, he asked why an unbudgeted amount of R740, 000 was spent in the 2nd quarter. He commented that whilst it appears that SAPO is on track, there is a lot of job shedding. He asked how SAPO’s job sheddingcontributes tothe President’s commitments on job creation.

Ms N Ndongeni (ANC) asked if the inputs of the Committee are held in high esteem by the Department and its entities. She inquired about the staff complement of .zadna and the number of members that constitute the board as in previous engagements, the entity was found to have 9 board members and only 4 staff members.

MrMackenzie quoted the Department’s statement “rationalisation of SOEs will ultimately result in a state owned infrastructure company and as State owned ICT Company”and asked if entities such as BBI will form part of the infrastructure company and if the ICT Company will include entities such as SITA in order to facilitate service delivery. He inquired when the economic benefits of the rationalisation will be realised as promised by the President and the Minister of Finance. He reiterated that the President and the Minister of Finance identified rationalisation as a means of addressing bloated company ownership structure and the lack of economic growth in the country and the pressure on the budget. He asked how many employees in the department account for the R213.71 million spent on compensation of employees. On payments to foreign governments in which there was an overspending of R2.7 million due to exchange rate variance, he inquired about plans to ensure the accuracy of future budgets.Whilst referring to SAPO as a “broken organisation”, he inquired when postage stamps will be delivered as the unavailable postagel stamp is a dent on the image of the organisation. In previous engagements with SAPO, it was reported that stamps are being printed overseas and the supplier is yet to be paid. Regardingthe CEO’s statement that mail is a third of SAPO’s business and it keeps declining, he inquired about the importanceof the fight for the reserved mail space in the market. He inquired if it is rather advisable to handover the mail section of SAPO’s business to the private sector. He asked if the Postbank will remain in the SAPO group of companies, if there are intentions to completely exclude it, or if SAPO will be the nominee shareholder of Postbank. As regards SAPO’s dismissal of68 employees in quarter 2, he asked how many of the dismissals were criminal actions and how many of the dismissed employees have been criminally charged in terms of consequence management. Mr Mackenzie asked why SAPO was not awarded the RT5 government tender and interventions to prevent a future reoccurrence of such. He asked if there are other unavailable services at SAPO branches besides the postage stamps. As per USAASA’s presentation, he inquired about the cause of delays in rolling out setup boxes that were ordered and paid for.

Ms Ketabahle inquired from SAPO about the numberof government businesses being secured. She asked if mail delivery officers form part of SAPO’s staff complement and the wage they earn.

MrManyoni asked about the timeframe for the implementation of broadband connectivity. He also inquired if there would be partnerships between the Postbank and major banks within andoutside the country.

The Chairperson said entities were cautioned in 2016 to avoid setting unattainable targets. What informs the determination of set targets? Whilst referring her inquiries to SENTECH, she asked how the internscan be located during oversight visits. Gender remains an historical IT challenge as the IT environment is male dominated; she then inquired from SENTECH, BBI, and NEMISA about the strategies in place to recruit females. She said both USAASA and .zadna need to intensify efforts to improve performance on research and development, and enquired when the research challenges will be resolved as proper research is imperative for ICT to ensure that the entities are not overtaken by events. On ICT connectivity, she inquired about details of areas not currently connected.

The DG responded that SA Connect remains a flagship of the Department and it refers to the connection of about 40, 000 sites throughout the country amounting to R60 billion. The tender was not successful because the bidding process was equally unsuccessful and the Minister indicated during the SONA debate that state assets would be used to implement SA Connect. Responding to Mr Manyoni’s inquiries, there are engagements with entities and submissions will be made to political principals in the next two weeks on the way forward. He said the DDGs have been acting for so long due to the structure of the Department and to mitigate the challenge, the SDM has been finalised and the top level structure of the department has been submitted for approval in order to align the entire structure of the organisation. The IT sector is internationally regulated and when regulations are developed in international forums such as the International Telecommunications Union (ITU), the Department is expected to make inputs hence the participation of the departmentin such engagements. He identified the 8 Bills as Postal Services Amendment Bill, SAPO Amendment Bill, Electronic Communications Amendment Bill, Electronic Communications and Transactions Amendment Bill, Digital Development Fund Bill, ICT Economic Regulator and Tribunal Bill, INESI Bill, and SITA Bill. He explained that the aforementioned form the core of the Bills and there are possibilities of the Bills impacting other Acts.

Onengagement with industries, the implementation plans designed by the Department which slightly focuses on the legislative programme of the Department will not be altered in any manner as engagements with industries focus more on substantive issues. The Department values inputs from the Committee and there is a meeting with the Minister slotted for Friday 24 February 2017 to discuss Annual Performance Plans (APP). He reiterated that one of the key issues in the APP is to determine if the previous inputs from the Committee have been accommodated.

Responding to issues relating to .zadna as per its employees and board members, the ICT policy states that .zadna will be incorporated into the regulator. As regards infrastructure and service companies, the open access Wi-Finetwork will not be owned by governmentbut will rather be an industry-led network. There will be collaborations between government and the industry whilst SITA will form the core of the future State IT Company.

The media corner issue relates to the Department of Communications even though DTPS is involved in the unfolding court processes. The main issue refers to jurisdiction to ascertain if the jurisdiction lies with DTPS or with Minister Muthambi (Department of Communications). He conceded that the setting of targets remains a fundamental challenge for the Department and its entities and bolstered that the challenges emanate from the broad nature of the KPIs.

Ms Joy Masemola, CFO, DTPS, responded that 298 of the 305 funded posts have been filled. As per the R2.7 million overspending on international membership fees, National Treasury is being engaged for assistance as the department is saddled with an annual challenge of exchange rate variance.

Mr Barnes responded that as per SAPO job shedding versus job creation initiative of the President; it is doubtless that an effective economic organisation creates jobs whereas an ailing organisation retains jobs. The only policy impacting SAPO job shedding is the national attrition rate of 8%. If an economically sustainable organisation is created with less employees, the organisation through its interaction in the economy will create more jobs than the previously cut jobs.

The CEO said the postagestamps have been ordered and are awaiting customs clearance. He however clarified that a stamp is not needed to send a letter as a franking machine can be used and stamps are not an absolutely necessary part of the postal system. The entity has engaged and signed orders for all suppliers for post office branches and SAPO branches order conservatively due to cost constraints and many eventually run out of stock in a limited time. The retail section of SAPO is growing at an annual rate of 15%, mail is a declining business, and the value of a functional infrastructure for the growth part of SAPO cannot be underestimated. Whilst SAPO is aware of imminent substitution of its mail offerings in the modern digital world, the physical footprint and the necessity for the mail system to function properly cannot be underestimated as demonstrated by the most advanced and digitally advanced entities in the world such as Alibaba and Amazonwhich finally recognise the necessity of an operational footprint.

The CEO informed that the Postbank will be held in a separately owned subsidiary which will in turn have a bank controlling company above it as a requirement of the Reserve Bank. There are no intentions of excluding the Postbank fromSAPO structure due to the natural infrastructure link that will be brought to its offering. The Post Bank currently has 5.7 million individual depositors and once the SASSA grant process is completed, there will be an estimated 17 million account holders in the Postbank.

Mr Barnes said that Postbank’scapital is protected not only by corporatisation but also by evidenceof R1.4 billion capital under the most stringent capital requirements. He reiterated that the Postbank also possesses various integrating functions with the other growth plans of SAPO and he offered to respond in writing to the inquiry about the 68 dismissed employees. Regarding the award of the RT5 tender, the challenge refers to the different basis of calculating the most economically efficient pricing mechanism as SAPO’s pricing mechanism was based on a weighted average whilst National Treasury adopted and averaging method. He affirmed that NT has been challenged on the award of the tender as SAPO is the cheapest service provider based on a weighted average. He also informed that SAPO is currently involved in 11 live bids with the government and about 3 are waiting to be awarded and a comprehensive RFI has been submitted on 10 February 2017 forparticipation in the SASSA grant. As regards partnerships with the Postbank, he said there is no plan for partnerships at the current stage. Delivery drivers are SAPO employees, 2000 new bicycles were recently bought and bicycles remain an integral part of natural service delivery as bicycles are still widely used in advanced countries like Germany. He offered to respond in writing to the inquiry about the wages of delivery drivers.

Mr Lumko Mtimde responded that there are two major delays in the roll out of setup boxes. The delays were identified as the Supreme Court judgement and the resolution by USAASA to suspend production even after some boxes have been produced and stored at SAPO. The delays are beyond USAASAand a go-digital campaignand public awareness needs to be launched to facilitate the distribution of the boxes even though there have been improvements in recent months. On connectivity,post the broadband rollout of services in OR Tambo district, a handful of schools, clinics, and government departments have been connected whilst some other entities are awaiting connectivity. Someconnectivity which has been previously completed faced challenges as the intention of the entity is to connect and subsidise the programme for 2 years and afterwards handover to municipalities or relevant entities to assume the responsibility for the connectivity. The entity has intensified its approach to increase digital literacyand there are engagements with stakeholders to ensure they are well equipped to assume the mandate to promote digital literacy.

Mr Booi responded on the footprint of interns. There are 3 national regions (Western, Northern, and Eastern regions) and interns are placed in the respective regions they hail from. The entity currently has 24 interns out of whom 60% are engineering and technical students whilst the remaining 40% are support staff. There are partnerships with universities in support of research, development, and training of engineers. He affirmed that there are currently 14 students (50% females) nationally partnering with 3 universities namely University of Pretoria, University of Cape Town (UCT), and WITS University. He added thatthere are currently 4 students in UCT (3 females and 1 male student) out of which a female student recently graduated after receiving financial support in her final year.There is an appeal to stakeholders to assist the entity with females with interest in engineering in order to assist in building a pipeline of black academics which the country currently lacks. He informed that the strategy of the organisation is to provide bursaries and fund research in the universities to provide a pool of professors. It is impossible to produce a university student without a school programme and there is a decision by the entity to establish support centres for grade 10-12 learners in Mathematics and Scienceto assist learners via after school learning and holiday studies. A detailed footprint of interns can be forwarded to the committee on request.

Mr Mpisane informed that the R740 000 unbudgeted amount was spent on the African Internet Governance Forum. He reiterated that certain opportunities that present themselves require that the entity utilise its resources to take advantage of them. The Internet Governance Forum is a reputable United Nations mandate that disseminates itself into regionsand the country and has its own Internet Governance Forum. The Africa IGF is a mandate of the African Union Commission and when there was a decision to host the event in South Africa, the entity utilisedthe opportunity to support the Department in hosting the event which resulted in the setting aside of a budget from the surplus of the entity. He clarified that even though the expenditure was not budgeted for, the entity derived substantial benefits from the event. He said .zadna currently has 8 directors and the building exercise of the organisation is on-going. As per the limited research and development interventions whilst ICT is ever changing, he said .zadna is currently engaged in a research with ICT Africa on the Africa ICT index which will assist in accessing internet penetration in South Africa and the linkage of domain names to it. The entity also has its own user oriented type of research via questionnaires to domain name users to ascertain how .zadna can be improved.

The CEO said the entity has a target on emerging technology and the research will focus on the relevance of the technologies to ICT and .zadna domain name. The entity is considering a research in the next financial year on the domain name itself to access the feasibility of .zadna’s open source domain name registration system which will serve as a vital tool to determine the cost of registering a domain.

Mr Mpisane added that the entity also intends to observe the web registration system to make it easier for small businesses to obtain accreditation for domain name registration without investing in IT equipment. As per transformation projects, the entity has “registeresela project” whereby youths are engaged on a provincial level to reveal existing IT opportunities to them. He confirmed that the programme has made strides and revenue is directly proportional to the number of registrars. The schools online system programme of the entity sponsors schools to possesstheir own websites and equally provides enterprise development component via the use of local web designers which is also a major contribution to SMME development. The entity also intends to promote indigenous language domain names which will culminate in engagements with entities such as universities. The CEO affirmed that .zadna has rolled out internships and there are currently 5 interns spread across the organisation’s functions to foster a wide pool of technical resources. He lastly informed that the organisation will roll out “The School of Internet Governance” in 2018.

Mr Ramatswanaresponded that the percentage in terms of gender balance differs across programmes but females are on an average of 45-50%. A detailed breakdown of the percentages for the quarter would be provided. The entity makes targeted efforts to have programmes that are biased towards women and there is a programme in Limpopo titled “she would connect” in collaboration with INTEL, which mainly targets the digital literacy of women. One of the major areas of focus is from programme 5 of the entity which is focused on an aggregation frame work which will assist the entity in providing aggregated quarterly information and data. He added that whilst the aforementioned is imperative, NEMISA is still faced with capacity challenges.

Ms Shinn inquired why Price Waterhouse Cooper’s report which identified corruption and possible criminal activity in the tender process was not identified as an encumbrance delaying USAASA setup boxes. She reiterated that the Minister of Communications has been “ducked” questions on actions taken in the regard for over a year. She asked if the issue is “being swept under the carpet” or if the entire tender process must start all over.

Mr Mtimde noted that the Minister will respond to her inquiries. He however stated that some of the matters raised in PWC’s report were equally highlighted by the Auditor General’s report which is a final and authoritative report. The actions taken by the entity were largely guided by the Auditor General’s findings. Actions taken include opening a file with the Competitions Commission, internal disciplinary actions against some staff members that were involved in the SCM of the process, termination of some services, amongst others.

The Deputy Minister assured that the inputs made by the Committee are held in high regard as the inputs assist the Department in making strides. As per the tender process,the stoppages of tender process is a main issue for the government and the DG will assist with the issue as it is necessary for the public to witness the turning around of critical institutions that handle big tenders. It is difficult to resolve Special Investigating Unit (SIU) issues like media corner as it is an issue that arose several years ago and the Department is trying its possible best to resolve the issue. As per revision of international plans, she echoed that the ICT sector isa highly-regulated industry and work is done through both multilateral and bilateral structures. Budget restrictions must be addressed in terms of compliance to ensure engagements are due to compliance with obligations or due to pushing national interests. In future budgets, the Department will be expected to ascertain that all international activities are due to compliance and national interests. State owned rationalisation is a process and the recent approval of the ICT Policy places the Department in an authoritative position in ensuring that no SOE is independent. The CEO and the new DG have been engaging with the previous DG to assist accordingly. Careful planning to a great extent will minimise deviations from the budget, which is currently unacceptable. Many inquiries from the Committee relate to the Department’s transformation plan. She said all the entities and the department address common issues but in a highly-fragmented manner, such as gender equality, inclusive agenda, skills development, and rural development as prioritised by the President. She suggested thatin future, there should rather be a comprehensive report including the Department and all its entities, as inquiries of the Committee are the core of the mandates of the department.

The Chairperson read the written apology from the Minister and an apology from the Chairperson of SAPO board. She commended all entities that filled vacant posts that have remained a concern for the Committee. She emphasised that issues raised by the Committee should be taken seriously as the Committee expects raised issues in previous engagements to be addressed accordingly as the Committee depends on the Department and its entities to better the lives of citizens, especially poor communities who depend solely on the service delivery of government.  She thanked all Members and attendees for their engagements.

The meeting was adjourned.