Department of Telecommunications and Postal Services on its Annual Performance Plan

Meeting report

Opening remarks

Ms Stella Ndabeni-Abrahams, Deputy Minister, said that the 21 targets of the entity were revised to 17 targets, the APP of the entity was aligned with the National Development Plan (NDP) and the Medium Term Strategic Framework (MTSF) amongst others; and seven strategic goals were targeted. She added that it was important that SMMEs benefited from radical economic transformation and the National Integrated ICT White Paper was developed to avoid duplication.

Presentation by the Department of Telecommunications and Postal Services on its Annual Performance Plan

Mr Robert Nkuna, Director-General, DTPS presented the 2017/18 APP of the Department to the Select Committee on Communications and Public Enterprises. DTPS 2017/18 APP priorities identified included drafting of ICT legislation, broadband connectivity, finalisation and approval of the national e-strategy, finalisation and approval of the e-government strategy, facilitating the corporatisation and licensing of the Postbank. It also included implementation of the state owned company (SOC) rationalisation report, facilitating operations of the virtual cyber security hub, finalisation and approval of the ICT SMME strategy, and securing of two partnerships for digital economy towards ICT enterprise development, SMME growth, e-skills and innovation.

The first strategic goal of the entity was to offer broadband connectivity that provided secure and affordable access to education, health and other government services for all citizens and to stimulate socio-economic development. To align with the goal, DTPS will prioritise project managing the roll out of the broadband connectivity implementation plan (phase 1 towards connecting 2700 sites).

Strategic goal 2 was to ensure the country has a modern, sustainable and competitive postal and telecommunications sector. To actualise the goal, DTPS will prioritise drafting of ICT legislation in line with the National Integrated ICT Policy White Paper, conducting preliminary technical and regulatory studies to inform South Africa’s draft position for WRC-19, and finalisation and approval of the ICT SMME Strategy.

The third strategic goal of the entity was to build an inclusive information and knowledge driven society and through a comprehensive e-strategy and access to government services. The focus of the goal will be on finalisation and approval of the national e-strategy and finalisation and approval of the e-government strategy. To actualise strategic goal 4, the Department will focus on implementation of the SOC rationalisation report, facilitating the corporatisation and licensing of the PostBank, monitoring and evaluating the service delivery performance and compliance of SOCs against plans and relevant prescripts.

Mr Rebolang Soldaat, Acting Chief Financial Officer (CFO), DTPS reported that the budget of the Department was R1.6 billion with 64% of the budget to be spent on infrastructure support.  As entities of the Department, the National Electronic Media Institute of South Africa (NEMISA) account for 11%, Universal Service and Access Agency of South Africa (USAASA), 9%, Universal Service and Access Fund (USAF), 17%, Sentech (31%) and the South African Post Office accounted for 30% of the transfers.

Discussion

Mr A Myambi (ANC, Mpumalanga) welcomed the presentation. On the bills to be presented to
Parliament by the Department, he asked if the bills will be submitted for approval in the current financial year because public participation in its entirety is time consuming. On the organisational structure of the Department, he asked why the cover page of the report still reflected the picture of the previous Deputy Minister. He asked if the five programmes are sufficient for the Department to fulfil its mandates. He inquired about the financial position of the Post Office and about the fate of South African Post Office (SAPO) employees who failed to meet the requirements and qualifications after an evaluation of the current employees in its organisational structure. Future reports should reflect provincial statistics to equip Members with the necessary information regarding their respective provinces.

Mr E Mlambo (ANC, Gauteng) inquired about the location of the 2 700 ICT sites highlighted in the report and he wanted to know if the 2700 sites are spread nationally. He asked about the location and the number of cyber security hubs and advised that the security cluster must be involved in the cyber security hubs as stakeholders because cybercrime was an increasing concern for many advanced countries.

Mr J Julius (DA, Gauteng) also welcomed the presentation. He asked if SAPO has created any new jobs and if any employees have been developed since the great reduction in staff complement since 2014. On SAPO’s projection of an annual net loss of R1 billion, he inquired about the status quo and he wanted to know if SAPO was prepared to pay out social grants in terms of its number of outlets, the support available from the government, the progress made till date and the impact of the South African Social Security Agency (SASSA) grants on Postbank. He asked about the progress made on obtaining a banking license for Postbank and the strides made till date towards achieving operational efficiency and a competitive postal service. He commented that with the current state of the postal service, citizens might as well “send turtle doves to deliver messages instead of SAPO”. Mr Julius asked if there was any guarantee that the trend of losses at SAPO will end as the entity kept accumulating losses and was constantly receiving bailouts from the government. There had been a scenario in the past whereby Postbank offered a loan of R1 billion to SAPO which led to a bail out by the government. He then asked about measures in place to ensure that Postbank did not continue with the same trend if it became corporatised as a full-fledged bank as both entities are expected to be independent. Postbank has been granted the license by the Reserve Bank to offer low rate lending and although National Treasury advised the Postbank in 2010 to desist from granting loans due to its high risk nature, the trend changed afterwards. He sought clarity on the cost implications and funding requirements for Postbank and also the progress made on the computerisation process. He sought clarity on the holding company since the controlling company will be SAPO and asked if the Postbank systems and compliance implementation would be finalised by 3 July 2017.

Ms Z Ncitha (ANC, Eastern Cape) also commended the presentation. She asked if the Department was involved in the Inter-Ministerial Committee (IMC) led by the Deputy President which was pursuing rationalisation of all SOEs and the measures in place to ensure that cutting the costs of communication was implemented. On the bills that would be forwarded to Parliament, she said the judgement of Land Access Movement of South Africa (LAMOSA) gave the NCOP a different approach in terms of dealing with public participation. It has been observed that departments fail to prepare for public participation when preparing budgets as there were instances in which no transport was provided for participants who attended public participations from rural areas across provinces, and there was no means of media archiving which makes it difficult to target the compliance of officials. She asked how the potential of SMMEs will be unlocked, where the SMMEs are located, and the location of the eight pilot districts for the 2 700 sites.

Mr O Sefako (ANC, North West) commended the engagements of the Department with the South African Development Community (SADC) in ensuring that the roaming rates are kept low. He asked about the impediments to obtaining a banking license by Postbank and asked if Postbank would enjoy the benefits of being a commercial bank.

Mr A Singh (ANC, KwaZulu-Natal) complemented the plan of the Department to coordinate broadband connectivity to 200%. He then asked how coordination can be effected without the duplication of broadband services as there might be both provincial and national broadband services. He asked if the Department would be able to offer SASSA grant payments in the next couple of months.

The Chairperson said that the Committee will monitor the Department on radical economic transformation. She inquired about the timeline for Postbank to obtain a banking license and the programmes in place to assist and monitor SMMEs to venture into the market.

The Deputy Minister responded that the bills are urgent, they required urgent attention, and must be processed within the current financial year. Ongoing extensive engagements and consultations were identified as the delay. She tendered her apology for the picture of the previous Deputy Minister reflected on the cover page of the report explaining that the change had not been effected, because the Department already made the submission to Parliament. The Department was dependent on the National Health Insurance (NHI) map for the footprints of the sites which would be 1 district per province. The Department has a commitment to building smart communities and villages, empower citizens through skilling and support to beneficiaries of programmes, contribute towards radical economic transformation, and roll-out of e-strategy to enable citizens come up with innovations in the ICT space. A strategy has been developed to ensure the creation of competitive SMMEs and the Department was currently engaging with the Department of Trade and Industry (DTI) to ensure that the frustrations and bottlenecks of SMMEs to benefit from the economic value chain are addressed. The nature of the challenges in South Africa must be appreciated and policies must be changed to address the unique challenges of the country. Although targets of the Department were registered as a result of assessment of its capacity, DTPS did not have a structure that will focus on building the capacity of employees ever since the President made the pronouncement of splitting the Department of Communications and DTPS. The responsibility of the Department was to drive ICT and e-strategy fully and effectively monitor oversight of entities. Coupled with afore mentioned, DTPS aimed to re-skill its current personnel to counter its challenges and cannot dismiss or retrench any employee that applied for a relevant post in the past. The national cyber security hub was located in Gauteng and no provincial hubs will be built to ensure effecting coordination, and avoid any threats to the mandates of DTPS. All security cluster departments are involved in the hub. Postbank licensing was in its finalisation stage and substantial support was required from the Committee. As much as the Department identified concerns such as corruption and “state capture” in the country, Postbank will be captured by South Africans who are beneficiaries of services offered. On the participation of Postbank in the distribution of social grants, it was the Department’s mandate to ensure that SAPO was fully functional and responded to the challenges of the digital world. Postbank can offer financial assistance to actualise SAPO’s mandates within the stipulated regulations. DTPS was currently participating in the IMC that was chaired by the Deputy President and the Department was focusing on its entities to avoid the duplication of mandates. Public participation regarding budgets must involve the majority of concerned persons and the Committee will be informed about the relevant dates for public participation of the Department to assist members in mobilising their respective constituencies for participation. The Department was working towards engaging with provinces at the proper levels and coordination in terms of broadband roll-outs. Whilst the Department has good intentions regarding broadband roll-out, there was a conscious effort to mitigate the unintended consequences of such programmes such as cybercrime.

Mr Nkuna responded that page 41 of the APP stipulated the requirements and processes for the bills.. As indicated, there are currently five programmes of the Department based on the structure and the programmes are subject to change if the structure of the Department changed. Targets were reduced to ensure the proper implementation of targets based on the current capacity of the Department. Postbank now has board members who underwent a rigorous vetting process by the Reserve Bank. The facilitation of the registration of Postbank has been completed and the entity currently existed as a company on its own although as a subsidiary of SAPO. The current Postbank Act stipulated that SAPO cannot access the funds of Postbank for its own use which meant that whilst SAPO was saddled with its numerous challenges within the last two to three years, it could not access the R7 billion in Postbank’s account. The license being sought is not a requirement for Postbank to issue social grants. The Minister and the Director-General participated in a technical committee dealing with comprehensive social security and the reason for the invitation to participate was due to the vested interest of the Department in terms of the future role of SAPO and the Postbank. When social grants are provided by SAPO, certain services would be procured as witnessed with the use of Fidelity Security Services by Cash Paymaster Services (CPS). SASSA and SAPO still required continuous engagement to clearly identify the role of each entity in terms of the grants. There are engagements with National Treasury and the Reserve Bank regarding the licensing which would allow Postbank to be a fully-fledged bank and the Committee will be updated about the progress made as there are legal issues that required the attention of the Department and National Treasury. As per the provincial outline of projects in the eight districts according to the NHI map, the districts are OR Tambo in the Eastern Cape, Pixley ka Seme in Northern Cape, Dr Kenneth Kaunda in North West, Vhembe in Limpopo, Thabo Mofutsanyana in Free State, uMzinyathi and uMgungundlovu in KwaZulu-Natal, and Gert Sibande in Mpumalanga. No districts were selected for the pilot in both Gauteng and Western Cape provinces. The Department was constantly working to ensure that SAPO was fully functional and up to R2 billion has been received from government in support of SAPO which assisted the Department in averting the liquidation of SAPO. Suppliers of SAPO are being paid out of the entity’s total debt of over R100 million. The Department was also spearheading the e-commerce of SAPO to ensure the entity utilised its logistics capabilities to become the largest e-commerce hub in Southern Africa through engagements with the universal and postal union. The issue of SAPO being the bank controlling company was being discussed with National Treasury, because in the Department’s interpretation of the Companies Act, an SOC was a public company and the Department’s view was that an SOC should be allowed to apply for bank licensing as under the Companies Act. SOCs complied with the same requirements as public companies. DTI has been engaged accordingly as DTI was responsible for the Companies Act and the Committee will be briefed before 3 July 2017 if there are any misunderstandings regarding the provisions of the Companies Act. The Department was participating in the overall initiative coordinated by the Deputy President’s office which examines how SOEs can function optimally. The Department was currently engaging the top 6 companies to implement transformation and identified three areas of transformation that will assist SMMEs. These areas are distribution (no black participation in distribution till date), infrastructure (all big companies have outsourced infrastructure to Huawei, ZTE, Ericsson, amongst others) and manufacture (to stimulate the manufacturing of devices locally). Cross-border roaming represented a matter of interest to the Department as the President recently visited uMkhanyakude and uMhlabuyalingana districts which share borders with Mozambique and Swaziland where most South Africans use Mozambique roaming networks. The challenge was being addressed by the Independent Communications Authority of South Africa (ICASA) to ensure that South Africans are serviced by their own networks and a Memorandum of Understanding (MoU) has been signed between ICASA and the Mozambican regulator. Areas affected are being identified and ICASA was being notified to intervene. Postbank afforded citizens much longer turnaround to ensure that citizens have sustainable accounts. It was mentioned that it was preferable if government departments banked with Postbank. Provinces have been allowed to continue with broadband launching although many provinces did not have broadband capabilities and they relied on build operator transfer. The interference of the Department in broadband roll outs in provinces was simply to ensure that there was a common approach and public funds are accounted for.

Mr Omega Shelembe, Deputy Director-General: SOC oversight, DTPS, responded and said that no jobs have been created yet by SAPO, but the Department prevented a collapse of the entity and avoid job losses when employees were on a protracted strike and SAPO could not pay salaries. SAPO’s projected net loss of R1.4 billion for the year was reduced to R1 billion as a result of the Department’s interventions. On the licensing application for Postbank, all documents were submitted in January 2016 and the Reserve bank responded after six months of consideration on 4 July 2016 issuing the authorisation to establish a bank. The authorisation entailed that a company can be registered to perform the functions of a bank which has been done and board of directors appointed and fully vetted by the Reserve Bank. The authorisation also came with conditions to be fulfilled within 12 months of the granting of the authorisation which was the process that is currently underway. An implementation partner has been appointed to assist SAPO in preparing its final license application which was due on 3 July 2017 and feedback will be awaited. Conditions to be fulfilled included banking systems, disaster management, human resource issues and risk management. On funding requirements, PostBank currently has a net value of R2.7 billion after settling all depositors which was sufficient to form a bank. Postbank will not be a commercial bank, it will specialise in the developmental aspects of banking - not mainly profit driven but the licenses are similar for all banks.

Mr Alf Wiltz, Chief Director: Telecom Policy, DTPS, said the Department has made interventions to ensure the bills are introduced to Parliament on time despite the onerous process involved. Postbank legislation ensured the creation of a separate legal entity and has all the required government provisions in place. On the licensing process, the Banks Act has been applied which will ensure that Postbank acted within strict requirement which would prevent Postbank supporting SAPO financially outside the stipulated requirements.

Ms Thulisile Manzini Deputy Director-General: Governance and Administration, DTPS, added that the process to structure the Department has commenced and a service delivery model which was a prerequisite for a structure to be considered by the Department of Public service and administration (DPSA) has been finalised and submitted. According to the Department’s APP, DTPS was expected to possess at least a draft or a final draft by the end of the first quarter but will only be ready at the end of the financial year due to the use of consultants as the Department has no internal resources to assist with the process.

Mr Tinyiko Ngobeni, Deputy Director-General: ICT Infrastructure, DTPS, said the Department was a member of the justice and crime prevention cluster and the Department has a specific role to coordinate between the citizens and the government in the form of collecting information from citizens on cyber security and threats and disseminating the information to various stakeholders and warn the defence stakeholders about imminent cyber security threats. The Department engages with the security cluster and also the private sector to ensure that the capability to address cyber security incidents was created. The Department created provincial road shows to engage with the provinces informing them about cyber security, and also encourage the establishment of provincial cyber security cells which can coordinate with the national cyber security cells.

Mr A. Mashishi Acting Deputy Director-General, DTPS, responded on media recordings of public participations and said a key target of the Department was to digitise the society to ensure everyone was able to enjoy the benefits of digitisation irrespective of their social economic status. Digitising government will provide the ability to make recordings in digital format.  SOCs will furnish the Committee with necessary details during their respective presentations as they play and implementation role for the Department. The critical elements driving the government on industrialisation are ensuring that service delivery and radical economic transformation was realised. The SMME strategy has been gazetted and Members were advised to peruse the gazette and make recommendations. Programs are being rolled out throughout the value chain such as broadband connectivity and cyber security hubs.  A digitised economy will create new business models as witnessed in the case of Uber where investors own a taxi industry without having taxis.

Ms Mameetse Masemola, Chief Director: Economic Analysis, DTPS, replied to inquiries related to the cost to communicate. She said in terms of the Electronic Communications Act, the Minister was empowered to issue policy directives to ICASA. The Minister has issued two policy directives in recent months. One related to the policy directive on price transparency which talked to consumers not being able to compare prices of devices. ICASA has since issued end user subscriber chapter regulations. The other policy related to competition in the broadband market and the reduction of data costs. The regulator had since written back to the Minister to indicate that implementation of the policy directives will commence in 2017. In the National Integrated ICT Policy White Paper approved by Cabinet, there are various interventions at policy level that the Department has identified to drive down the cost to communicate. A key example was the implementation of the Rapid Deployment Policy that addressed major concerns received from the industry about multiple authorisations required to install electronic communication infrastructure and also the duplication of infrastructure. The Open Access Policy contained in the National Integrated Policy White Paper will promote shared and equal access to broadband infrastructure. The Digital Development Fund Bill was identified as one of the bills that would be forwarded to Parliament in which USAASA and USAF will be amalgamated into the fund and the fund will ensure that there was support for both infrastructure and demand stimulation projects such as support for ICT SMMEs, roll out of Wi-Fi hotspots, assisting people with disabilities to have access to infrastructure and services, amongst others. The Bill to establish the ICT regulator will also be forwarded to Parliament to ensure that the regulator is well funded and is capable of discharging its mandates such as protection of consumers, reduction in cost to communicate, amongst others. SAPO will be engaging the Committee on 7 May 2017 and the Department will be available to support the entity and also respond to concerns of the Committee.

Mr Julius said he inquired about the infrastructural costs and not the net worth of Postbank. In 2010 the net worth of Postbank was R3.3. A clear message must be sent to SAPO that Postbank being its subsidiary was not a bailout mechanism or a lifeline. 

Mr Nyambi said whenever the Department was conducting oversight on provincial road shows and other interventions, invitations should be extended to Members of the Committee to empower Members with vital information which might reduce engagement times as only relevant questions will be asked. The Committee should not be bothered about the current footprints of interventions in the country as South Africa was primarily known in the past years to only make interventions in major cities such as Cape Town, Durban, and Johannesburg and the State of the Nation Address (SONA) also indicated that interventions should be rural-biased.

The Chairperson said rural areas are being referred to and not the metropolitan areas when making inquiries about Western Cape. She thanked the Department for the responses. She emphasised that it is unacceptable to implement projects in rural areas and not utilise the rural residents especially when the skill required is not a special skill.

The meeting was adjourned.