Rolling Out Broadband Connectivity: DTPS, Communications & National Treasury feedback on plan of action

Standing Committee on Appropriations

18 August 2017
Chairperson: Ms Y Phosa (ANC)
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Meeting Summary

The Department of Telecommunications and Postal Services (DTPS) and the Department of Communications (DOC) were invited to brief the Committee on progress with South Africa’s broadband connectivity programme. However, prior to presentation, the Chairperson asked whether there would a joint or separate presentation, and the DOC said its inputs were included in the DTPS presentation. The Chairperson was unhappy with this approach, and the absence of the DOC’s Director General without apology, and ruled that the Department had not made a presentation.

The DTPS presentation focused on South Africa Connect programme. It highlighted the challenges of broadband connectivity, the funding allocations and spending, the spectrum allocation and the cost to communicate programme. It reported that there had been a significant improvement in the Network Readiness Index (NRI), from 76 to 65. However, the country needed to make significant improvements on the government’s usage and social impact sub-indexes.

While information communication technology (ICT) was seen as a powerful tool for economic development and for effective and efficient service delivery by government, South Africa was challenged with issues of accessibility, usability and affordability. Inability to access ICT was closely associated with poverty which was most prevalent in predominantly rural areas. However, broadband rollout was very capital intensive and required billions of rands. Broadband was viewed as an ecosystem of digital networks, services, applications, content and devices that would be firmly integrated into the economic and social fabric of the country. It was a key objective of SA Connect that it should reach a critical mass of South Africans. The first phase of digital development focussed on the prioritised provision of broadband connection services to 6 135 facilities in eight districts, while 35 211 facilities in 44 districts would be served under the second phase.

With regard to funding, it was reported that an application to National Treasury for a roll-over of R336 million from 2016 had not been granted. A budget of R441 million had been allocated for a roll-over in the 2017/18 financial year, with R727 million and R806 million applied for in 2018/19 and 2019/20 respectively. A request had been made for the transfer of funds to Broadband Infraco (BBI) and the State Information Technology Agency (SITA). R317.5 million had been transferred to BBI for the provision of broadband infrastructure services to 1 931 government facilities.

National Treasury provided additional information, and commented that when the Chairperson had touched on the collaborative strategy, it had become clear that both the DPTS and the DOC were failing. They were broadly responsible for broadband infrastructure and digital migration. If they did not do their work properly, the work would be delayed. It was essential that the DOC present its side of story. Was it satisfied with the progress? To state that its inputs had been incorporated in the presentation of the DTPS did not provide a complete story.

Treasury said that the current allocations had been based on a business case model, but since there had been a shift in the way the project was being implemented, it required additional information from the DTPS. To begin with, one should ask whether the SITA and BBI were capable of running the project. A legal opinion on this question had been submitted to the Treasury. The second question was whether the budget had been appropriated under a particular implementation plan. The implementation plan had been changed and it was crucial to know which institutions had come on board. Treasury was waiting for information from SITA. The third question was about the transfer of money to SITA and BBI. The Procurement Office at Treasury had to conduct oversight on the budget. Once all the information had been submitted, Treasury would process the request as soon as possible.

Members commented that there were two departments, and each had its own mandate. Both departments had to state whether they were satisfied with the progress. They asked how much budget had been allocated to the first and second phases. They wanted to know which implementation approach was being applied, whether the broadband policy targets were being achieved or were not yet achieved, how internet data was priced, and how small, medium and micro enterprises (SMME) were involved in the programme. 

Meeting report

Opening remarks

The Chairperson said that both Departments – Telecommunications and Postal Services (DTPS) and Communications (DOC) -- and National Treasury would be briefing the Committee. The Committee would be concerned with whether the departments able to achieve their goals and the objectives that they had committed to achieve, and how they spent their money. It would also be concerned with the value for money in the performance of the departments and whether money was used for the realisation of what it had been allocated for. She acknowledged apologies from Ms M Manana (ANC), who was sick, Mr B Topham (DA) and Mr A Shaik Eman (NFP) who were attending to other commitments, Ms Ayanda Dlodlo, the Minister of Communications, who was not feeling well, and Mr Siyabonga Cwele, Minister of Telecommunication and Postal Services, who was attending to other governmental business.

Mr N Gcwabaza (ANC) said that he accepted all the apologies, except for the apology from Ms Dlodlo, who was unwell. The invitation of the Minister to attend the meeting had been made in time and it was crucial that Ministers – as accounting officers – be present. Irrespective of the Ministers’ absence, the meeting should go ahead.

Ms D Senokoanyane (ANC) seconded the proposal for the meeting to proceed.

The Chairperson sought clarity on the governmental business Minister Cwele was attending to.

Mr Robert Nkuna, Director General: DTPS responded that he had been in Cape Town since Monday. However, he had been interacting with the Minister and he had learned that the Minister was attending annual general meetings (AGMs). One of these AGMs was the State Information Technology Agency (SITA), which played an important role in the rolling out of broadband connectivity.

The Chairperson said that even though the apology from the Minister should be accepted, it should be emphasised that the Ministers – as executives – were accountable to Parliament, whereas Directors General (DGs) were accountable to Ministers.

DTPS and DOC: Joint briefing

Mr Nkuna said that there were two AGMs of the main entities of the DTPS taking place, and apologised again on behalf of the Minister. Their discussion evolved around broadband connectivity. In fact, the broadband connectivity did not belong to the DTPS, but rather to all departments and to the whole of society. Only the DTPS was entrusted with the responsibility of making sure that broadband connectivity became a reality in the interests of the national economy. Should the broadband connectivity project not work, the country would not make progress in terms of an “industrial revolution.” The project played a key role in the restructuring the South African economy. For the realisation of the new economy dispensation, the project had to be implemented comprehensively, otherwise the country would not compete economically at the international level. The broadband connectivity project was one of 14 key points of reviving economy that had been mentioned by the Minister of Finance.

The Chairperson asked Mr Nkuna to confirm whether the presentation was a joint presentation.

An official from the Ministry of Communications confirmed that the presentation included inputs from the Department of Communications.  

Mr Nkuna said that matters relating to connectivity were falling with the mandate of his Department, whereas the National Treasury oversaw and allocated the resources. The Department of Communications was responsible for broadcasting services, and their role in the broadband connectivity project was to make sure that digital migration took place. In other words, the DOC supplemented the DTPS in rolling out broadband connectivity.  That was how the DOC was featuring in the presentation.

The Chairperson said that her understanding was that the DOC would also brief the Committee on its own work as it pertains to the broadband connectivity. She remarked that some works were being delayed because some organs wanted to work in isolation. The collaboration strategy needed to be elaborated on for clarity.

Mr Nkuna agreed, and commented that there were three entities involved in the project. These were the State Information Technology Agency (SITA), SENTEC and Postal Services. In addition to these three entities, two departments were involved, the DTPS and the DOC.

The Chairperson said her understanding was that the rolling-out of broadband connectivity was based on a collaborative strategy, and there was a need to illustrate how that strategy would work. There ought to be a guiding document.

Mr Nkuna said that guiding documents were included the Memorandum of Understanding (MoU).

The Chairperson commented that the MoU was about structures of the departments, and she was talking about collaboration among the key players. Was there a steering committee consisted of all key players? Were there pillars focusing on particular areas? 

Mr Nkuna responded that Ms Dlodlo had established a collaborative mechanism that coordinated the roll out of broadband connectivity. All three entities mentioned earlier were members of such a mechanism.

The Chairperson commented that she wanted to be sure whether the brief was a joint or collaborative presentation. 

DTPS: Progress on the Broadband Programme and its spending plans

Mr Tinyiko Ngobeni, Deputy Director General (DDG): ICT Infrastructure, took the Committee through presentation. The presentation focused on the South Africa Connect programme, the challenges of broadband connectivity, funding allocations and spending, spectrum allocation and the cost to communicate programme. He said that there had been a significant improvement in the Network Readiness Index (NRI), from 76 to 65. However, the country needed to make a significant improvement in government usage and social impact sub-indexes.

While ICT was seen as a powerful tool for economic development and for effective and efficient service delivery by government, South Africa was challenged with issues of accessibility, usability and affordability. Inability to access ICT was closely associated with poverty, which was most prevalent in the predominantly rural areas. However, broadband rollout was very capital expensive and required billions of rands. Broadband was viewed as an ecosystem of digital networks, services, applications, content and devices that would be firmly integrated into the economic and social fabric of the country. It was a key objective of SA Connect that it should reach a critical mass of South Africans. With regard to the SA Connect programme, the first phase of digital development was focused on the prioritised provision of broadband connection services to 6 135 facilities in eight districts, while 35 211 facilities in 44 districts would be served in the second phase.

With regard to funding, an application of R336 million to National Treasury for a roll-over from 2016 had not been granted. The budget of R441 million had been allocated for a roll over from the 2017/18 financial year. R727 million and R806 million for 2018/19 and 2019/20 respectively had been applied. A request had been made for the transfer of funds to BroadBand Infraco (BBI) and SITA. R317.5 million had been transferred to BBI for the provision of broadband infrastructure services to 1 931 government facilities.

Absence of DOC’s Director General

The Chairperson sought clarity on whether there was any input from the Department of Communications.

An official from the Ministry of Communications said that there were no further inputs, given that there their inputs had been incorporated in the DTPS presentation. He agreed with everything that had been said in the presentation with respect to the work that had been done and the progress that had been achieved.

The Chairperson asked whether there was no presentation.

The official from the Ministry of Communications responded that there were no further inputs that could be added on to what had been said.

Mr Rezah Atcha, Director: Financial, Policy and Budget analysis on the Energy and Communications sectors, National Treasury, said that earlier on, when the Chairperson had touched on the collaborative strategy, it became clear that both departments were failing. They were responsible broadly and largely for broadband infrastructure and digital migration. If they did not do their work properly, the work would be delayed. It was essential that the Department of Communications present its side of story. Was it satisfied with the progress? To state that their inputs were incorporated in the presentation did not provide a complete story.

The Chairperson questioned the Ministry official about his status in the DOC, and said that a junior official should not have been expected to represent the Department at the meeting. The Director General should have been in attendance, and there had been no apology for her absence.

Mr Gcwabaza said there were two departments and each had their own mandate. He asked the Department of Communications to state whether it was satisfied with the progress. To state that their inputs were incorporated in the presentation did not mean that Members had heard the brief from the DOC.

The Chairperson said that it should be noted that the DOC had not presented. There had been no written communication regarding an apology from the DG. Why had the DG not attended? 

Mr Gcwabaza commented that the Chairperson had been putting questions to the wrong person, and that no apology from the DG had been received.

The Chairperson welcomed Ms M Shinn (DA), and said that she was welcome to participate in the meeting.

Ms Shinn said she was interested in assisting her colleagues, because she had been involved in the postal service’s projects for many years. Actually, the work of the Department of Communication in the project was minimal. Its only work was to amend the digital migration policy. The policy had put the work of the SA Connect on hold for three years. The purpose of the meeting was to look at the funding of SA Connect and this did not require the DG of the DOC to be present.

The Chairperson commented that the DOC should have communicated in a formal way that they were not going to be there. It had been invited to brief the Committee. Since 10 July 2017, there had been no communication, except an apology from the Minister. The Treasury should provide additional information regarding the question of financing the project.

National Treasury input

Mr Atcha said that he would like to speak about the implementation model and the impact of current allocations, since the Committee was concerned with appropriations. The current allocations had been appropriated, based on a business case model. Since there had been a shift in the way the project was being implemented, it required additional information from the DTPS. What was this information?

To begin with, one should ask the question whether the SITA and BBI were capable of running the project. A legal opinion on this question had been submitted to the Treasury. The second question was whether the budget had been appropriated under a particular implementation plan. The implementation plan had been changed, and it was crucial to know which institutions had come on board. The Treasury was waiting for information from SITA. The third question was about the transfer of money to SITA and BBI. The Procurement Officer at the Treasury had to conduct on oversight on the budget. Once all information had been submitted, the Treasury would process the request as soon as possible.

Discussion

The Chairperson said that the Committee was expecting a brief on the migration from analogue to digital and this information had not been covered in the presentation. This information was supposed to have come from the Department of Communications.

An official from the Ministry of Communications reiterated that the DOC had submitted its inputs to the DTPS, and that he was ready to take questions related to the migration from analogue.

Mr Nkuna said that the question of migration from analogue to digital transition had been pending since 2015. It should be noted that South Africa had signed an international agreement that it would migrate to digital by June 2015. This had not happened and the deadline had been shifted. If South Africa failed to move from analogue to digital, it meant that the spectrum needed for telecommunication services would be lacking in various respects.

The absence of the utilisation of new technology had led to a legal dispute. There had been a case between e-TV and the DOC which related to the use of new technology in the broadcasting sector. The case had taken a number of months, and in that period very little had been done. There was a challenge of manufacturing of the boxes that were designed to receive digital signals. The case had been settled two months ago. On the side of the DTPS, it had to ensure that boxes were installed all over the country to enable the digital signals to be received, and this work was being done by SENTEC. Despite the installation of the boxes, digital signals could be received, given that the TV screens in our homes were still analogue. There were still the issue of tenders, because 27 companies had applied for the manufacturing these boxes. There had been a dispute over whether the granting of the tender had been done in the right way. In sum, South Africa was lagging behind in terms of migrating from analogue to digital transmission.

Ms Shinn said that in the budget review that year, the Treasury had indicated that R1 billion was provisionally being allocated to the second phase of SA Connect, and in the second report, it had been indicated that R2 billion had been allocated. Was it R1 billion or R2 billion? Who was leading the SA Connect project? Was it SITA or BBI? She asked about the implementation approach in terms of increasing the government’s shareholding in the National Broadband Network (NBN) with regard to the allocations of R411 million and R806 million in the 2017/18 and 2019/20 financial years respectively. Was that allocation a bit high? She sought clarity on whether phase two of SA Connect would cost R5.7 billion.

Mr A McLaughlin (DA) asked whether the broadband policy targets had been achieved, or whether they were not yet achieved. Referring to the figures appearing on slide 19, he said that he could not understand the message that the DTPS wanted to relay. How much had been spent on the implementation of the SA Connect project?

Ms D Senokoanye (ANC) asked whether there had been an effort to roll out broadband connectivity in the rural areas, as there was nothing to indicate that the Department was doing so. She wanted an explanation on how internet data were rated, and how they were expired. They were expiring within a short period of time.

Mr Ngcwabaza expressed his concerns over the delay in migration to digital in terms of the increased costs. How was the Department planning to fund the increased costs of the project? What type of measures had been put in place with regard to supply and demand? How had the budget of R336 million for the 2016/17 financial year been arrived at? What did the acronyms “BBI” and “SOC” stand for? He expressed his concern about having many entities involved in the implementation of the SA Connect project, as these entities might be requesting money to carry out the same tasks. Many entities might be the cause of the delays, especially when some were not performing or meeting their targets. Many entities could also make monitoring and evaluating the project difficult. How many players were involved in this project? How many small, medium and micro enterprises (SMMEs) were involved? Was there a budget allocated for SMMEs? How many jobs had been created through the SMMEs?

The Chairperson asked the DG to share progress on the announcement of the deadline pertaining to the governmental economic growth action plan, and on the high level study on wholesale open access network spectrum needs. The Department had committed the Competition Commission to investigate the data prices, and a progress report on the investigation was needed. A progress on phase one of the SA Connect project was also needed, as it had been scheduled to be achieved by August 2017. For the successful implementation of a programme, human resources were key. However, it appeared that there was a high vacancy rate in the DOC. Would the DG of the DTPS be able to answer on behalf of the DOC? If the DG was not in the position to answer, questions should be directed to the DG of the DOC. What were the challenges of meeting the targets of the DTPS?

DTPS response

Mr Nkuna said that the questions from the Members were clear and spoke to accountability. Questions were welcomed. As Members should be aware, the Department’s performance stood at 80% and above as per annual report, meaning that most of targets had been achieved. One of the targets that had not been met included the one under discussion. Another unachieved target dealt with the structure and reconfiguration of the DTPS to become a new department. He assured Members that a lot of work had been done in term of the targets that had not been achieved. The Department would have a new structure in a due course.

The DTPS had already briefed the Committee on the progress of broadband connectivity. Issues relating to the Competition Commission had been attended to, and Minister Patel had directed the Commission to end the fray and work with the Independent Communications Authority of SA (ICASA) in dealing with costs of communication. The Department could account for the work ICASA was doing.

On the question of SMMEs, more details could be furnished by the DDG. What he could say was that most of the work was done by the SMME companies which had assisted in building the network in the areas mentioned in the presentation. 

“BBI” stood for Broadband Infraco. This was a company in which the DTPS owned a 74% stake, and the Industrial Development Corporation (IDC) owned the other 26%. It was one of the key agencies in the implementation of the SA Connect project. The “SOC” was a state-owned company, and this referred to SENTEC, which was responsible for the provision of radio and television transmission services. It had the capacity to go beyond radio and TV, and could be used to roll out broadband connectivity. It had speciality in wireless connection and satellite communications. SENTEC was 100% owned by the Department.

There was something interesting happening in the country that the DG would like to bring to the attention of the Committee. There were a number of the state-owned companies that fell neither under the DTPS nor the DOC that were involved in one way or another in the broadband project. They included Eskom, the Passenger Rail Agency of SA (PRASA), and TRANSNET, to mention but few. The Department was engaging with these entities. They should be brought on board because they were involved in the delays in one way or another. On question of data pricing, the ICASA had been doing a good job, and this had been communicated to the public.

Treasury response

Mr Atcha said that the budget had been increased in the 2019/20 financial year because there would be certain aspects in phase one that would have an impact on phase two of the broadband programme. Phase one was just a pilot, and phase two would be implemented across in the country. The Treasury had adopted a model whereby the rural areas would be funded first. When the budget for implementation of the phase one had been requested, there had been no evidence to support the funding of the project. The allocation had been increased, taking into consideration the work that had been done. 

Further discussion

Mr N Gcwabaza (ANC) asked for clarity on the budget allocations. On what basis had a certain percentage been allocated?

Ms Chinn said that her questions had not been responded to.

The Chairperson asked how far the Department had gone in achieving its targets. Most departments were being challenged with connectivity. Had any work been done to assist the Department of Health, in particular, with connectivity in the rural areas? She commented that there ought to be an implementation plan, because such a plan would prevent the Department from losing money. Lack of such plan could constitute negligence that would have a negative impact on the work of the Department. Was there any consequence management? How did the Department go about implementing the Medium Term Strategic Framework (MTSF)? Had the strategic goals of the MTSF been achieved? Most of the entities were challenged with the connectivity problem. Had this problem been addressed? All these questions pointed in the direction of why the Department should account.

Mr Nkuna said that they were aware that they had to account to Parliament, and that was the reason they were there. On the question of SMMEs, they were divided into three categories of empowerment which were structured as follows:

  • The first level was those SMME that had rolled out their own infrastructure, which was used by the Department without duplicating them.
  • The second level dealt with outsourcing, as 30% of the work had been set aside for the purpose of outsourcing. Here, the Department initiated its own infrastructure.
  • The third level was community. Entities had been advised to create small scale services that should be provided by members of the community. They would be able to provide internet services.

Regarding the funding of BBI, it had been given initial funding. However, BBI had to go out and find its own funding.

On the issue of negligence, no one had been punished because the delay was not due to a particular individual’s negligence in that sense. There was a performance management system in the Department which evaluated how employees were performing.

The Chairperson expressed her concern that the Department would not be able to implement the SA Connect project. The DTPS should speak to other departments and have a programme of action. From this perspective, the DTPS would be able to define the budget and identify the challenges and pillars with which they would collaborate.

Mr Nkuna said that there were various key players, and a collaborative system had been established.

The Chairperson said that the Department should provide a quarterly report on the broadband connectivity situation. People were waiting for the Department to deliver.

 

The meeting was adjourned.

 

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