SABC & MDDA 2016/17 Annual Report, with Minister; MDDA inquiry proposal

Meeting report

The Chairperson noted apologies from Communications Deputy Minister who was attending a cabinet committee meeting.

The Chairperson said that a letter had been received from the Broadcasting, Electronic, Media & Allied Workers Union (BEMAWU) and the SABC 8 addressing SABC governance and raising concern about the state of affairs at the SABC and the President's delay in appointing a permanent SABC board. They are worried that Minister Dlodlo’s plans to extend the contracts of three top executives, Group CEO, CFO, and COO, who are currently in Acting positions. Both letters would be circulated to the Committee and the Committee would respond accordingly.

Mr M Kalako (ANC) said that he had also received the letter from BEMAWU and he accepted it. It was good that BEMAWU was bringing the matter to the Committee and the Committee was dealing with their concerns about the SABC, but there was no need to write an open letter to the Committee since every citizen had a right to call the Committee to request to be present and put forth their position. Mr Kalako said that he understood the SABC 8 outspokenness at the time when they formed, but if they carried on in their current manner in the SABC, they would be forming themselves as a clique, which would be a problem and make the Committee look at them as a parallel organisation within the SABC. There was nothing wrong with raising matters. It was wrong for the SABC 8 to persist as a rogue group of journalists, and the Committee needed to discourage them from acting like that.

The Chairperson said that since both open letters were addressed to the Committee, then the Committee needed to respond and deal with them. The letters were separate. The letter from the SABC 8 was in support of the letter from BEMAWU.

Ms P Van Damme (DA) said that the Committee needed to respond, and the Committee had a duty to listen to both the SABC management as well as the SABC 8. She suggested that the SABC 8 be invited to present before the Committee in Parliament, or the Committee travels to the SABC offices in Johannesburg and deals  with their concerns in detail and ask questions about the issues they were raising.

Mr M Gungubele (ANC) said that it was okay that the SABC 8 acted in a certain manner at a particular point in time, but those issues had been resolved and they did not need to continue acting in that manner any more.

The Chairperson said that it was clear that the Committee needed to invite the SABC 8 to Parliament.

The Chairperson said that political parties had a right to respond in their own capacity since they also received the letter, but the Committee would be responding through the Office of the Chairperson.

The SABC 8 consisted of; Thandeka Gqubule-Mbeki; Busisiwe Ntuli; Krivani Pillay; Foeta Krige; Lukhanyo Calata; Vuyo Mvoko; Jacques Steenkamp; Nonkululeko Zonke Smith. The Chairperson said that these individuals would be called to Parliament since the Committee did not have time to travel to them. A decision would be taken after the Committee had listened to their concerns. BEMAWU would also be invited to present to the Committee.

Ms Ayanda Dlodlo, Minister of Communications, said that if this invitation was going to be extended then it needed to be extended to everybody who wrote to the Committee because there were many people she knew who had written to the Committee and many more who would be writing to the Committee in future.

Mr Gungubele said that the attitude of the Committee was always to listen to everyone and not leave out anyone.

The Chairperson said that the Committee would process matters as they had always dealt with matters and respond to them or invite them to the Committee if it was necessary.

The Chairperson said that the Committee would work out the dates and invite BEMAWU and the SABC 8 to the Committee as soon as they had an opening in their parliamentary schedule.

Ms Van Damme pointed out that in terms of the law, the SABC Board accounted to the Committee on all SABC matters. She asked what the law said if the SABC was without a duly constituted Board.

The Chairperson said that the Minister led the Board to account to the Committee. She gave the political overview of the entity, and not necessarily the administrative report. The Board accounted to the Committee on matters relating to the board. The Chairperson asked the Committee whether to allow the Minister to account without a board.

Mr Kalako said that the position of the Committee that the SABC needed a Board as soon as “yesterday” was publicly known. It could not be emphasised more how important it was for a Board to be appointed over the SABC so that governance within the SABC was in place. He pleaded that the Committee allow the Minister and the Department to present whilst the Committee was dealing with the constitution of the Board.

Mr R Tseli (ANC) supported the view to proceed with the briefing from the Minister and SABC.

Ms Van Damme said that she would ordinarily request that the SABC be sent packing since there was no board, and a board is the body that accounted to the Committee, but there were serious issues in the SABC that required responses and questions that needed to be answered.

Mr Gungubele said that even the Board reported to Parliament through the Minister. The Minister was the executive authority and the 100% shareholder on behalf of the public. The Minister was not just an ordinary person. But if there were serious legal issues then the Committee needed to be advised.

The Chairperson requested they proceed with the understanding that it was an awkward position that there was no SABC Board because the Minister could not operate without a board. She needed the Board as much as the Committee needed the Board to be appointed since it would be dealing with day to day governance of the SABC.

South African Broadcasting Corporation (SABC) 2016/17 Annual Reports presentation
Ms Ayanda Dlodlo, Minister of Communications, spoke about the SABC targets not achieved from the key performance indicators (KPIs) in 2016/17 which included:

• The ‘net profit before tax’ target was R3.4 million, but the amount achieved was a loss of R1 billion. Reasons for non-achievement were that all revenue streams underperformed against the budget and showed a year on year decline in constrained economic conditions and declining advertising income across the industry and consumers’ low disposable income. All this was the backdrop of the Ad Hoc Committee on the SABC Board Inquiry. Planned interventions would be claw back strategies to increase advertising and television licence revenues, but also use innovative trading models for radio, television and digital media sales to ensure optimization of the SABC commercial inventory.
• For the KPI to maintain a minimum cash equivalence of R600 million, the target was not achieved owing to low cash collections in the SABC. They had to use cash reserves to fund infrastructure catered projects, acquiring sport rights, and broadcasting events of national interest.
• The targets for the number of properties and inserts of provincial content in broadcasts were 360 inserts and two properties. 333 inserts were achieved, as one property. The under-delivery was as a result of delays in finalization of production contracts and challenges of the financial crisis.
• Two channels were to be carried onto the DTT transmitter network. These were SABC News and SABC Encore. SABC News was available on DTT platforms, while Encore still needed to be transferred onto SABC DTT services. It was not done in 2016/17 owing to DSTV contractual issues, and a lack of resources from the SABC side to package the channel. SABC intended to include Encore on its DTT channel and requested ICASA to extend its licence for Encore. They were awaiting feedback from ICASA on the extension.
• On developed and approved technology projects planned for digital libraries, SABC business requirements were reviewed and approved in March 2017 subject to budget availability.
• On replace radio stations’ production play-out system, the target was to implement user interface between Landmark and production system. Proof of concept was signed with service provider to deliver radio stations production play-out system. It was installed at RSG studios and Radio Park server room.  The remainder of project plan will be rolled out in 2017/18.
• On the upgrade of the TV Final Control Centre (FCC) play out automation, the Request for Proposal (RFP) was supposed to have been awarded. The project plan was approved and the FCC upgrade business case was presented to the Bid Adjudication Committee (BAC) but it was not approved. The business case would be resubmitted in 2017/18.
• On implementing the Workforce Plan, this was not implemented, however, it was used to contain headcount through vacancy management. The Workforce Plan was not submitted to EXCO due to a change in leadership resulting in it not being implemented. The SABC will develop a career progression framework and policy.
• Implementing the performance management implementation plan was not achieved, however training on the new Performance Management system was provided. Performance management was placed on hold to finalise job descriptions. Performance management will be implemented in 2017/18. Performance agreements needed to be in place so that senior managers and executives receiving bonuses when there was no performance could be stopped in the SABC as this had become the norm.
• Develop a Workplace Skills Plan (WSP) and Operational Training Plan that is aligned to the Skills Audit report and digital migration requirements had a 26% and not a planned 80% achievement due to operational challenges for purchasing training resources. The WSP training target could not be achieved. Financial constraints in the SABC were a problem since it could not pay for some of the training service providers. SABC intended to ensure that the WSP was aligned to the training of scarce and critical skills and manage training very closely to achieve targets.
• In assessing and revising internal controls, these gaps were completed: Supply Chain Management (SCM), fixed assets, accounts receivable, and financial statements close process. However, Project Qinisa was put on hold during the fourth quarter and an investigation was conducted on the service provider for payments against actual deliverables. The SABC was placing renewed focus on improving internal controls. The remaining project deliverables will be re-evaluated during 2017/18.

Ms Nomsa Philiso, Acting Group CEO, SABC, said that the broadcaster operated services that were fundamental to the democratic and cultural life of citizens. Public broadcasting continued to play a critical role in South Africa and the rest of the world. The SABC had specific targets in delivering on Outcome 14 of the National Development Plan (NDP). Ms Philiso said the strategic pillars and goals of the SABC were financial sustainability, content and platforms, human resources (HR), and governance. The SABC was the only broadcaster serving information, educational and entertainment needs of millions of citizens and the ability to provide content in all official languages, in multiple genres.

Looking at radio stations, Ukhozi FM was the champion with the highest audience with 7.6 million listeners, while stations such as Metro FM had 4 million, RSG 1.2 million, 5FM 757 000, and SAfm had 145 000. SABC television channels were championed by SABC1 with 28.8 million viewers, SABC2 with 26.9 million, SABC3 with 21 million, SABC News with 2.2 million, and SABC Encore with 1.4 million viewers.

SABC Radio achieved 71% audience share – with Public Broadcasting Services (PBS) contributing 65% and Public Commercial Services (PCS) contributing 6%. SABC TV stations over delivered on local content quotas with SABC1 having 80%, SABC 67%, and SABC3 53%.

Against the backdrop of tough economic conditions and a year filled with many challenges for the SABC, the public broadcaster was able to deliver on a number of its set strategies and objectives. One of the main achievements was delivering on its mandate for local content, music and language as well as news and sporting events. However, at the end of 2016/17 the SABC was facing a financial crisis which saw it being unable to meet its contractual commitments. Reasons included external factors such as macro media economics, declining advertising and TV revenues, internal factors included rash decisions that precipitated the exodus of audiences and advertisers on crucial platforms.

Personnel costs remained the highest expenditure in the SABC. Net loss after tax amounted to R976 million compared to R41 million in 2015/16. Revenue and other incomes were R7.6 billion compared to R8.1 billion in 2015/16. This was a 6% decrease due to dropping advertising revenue, sponsorships and TV licence revenue. Operational expenses remained the same at R8.4 billion. There was a positive cash balance of R81 million at the end of March 2017 compared to R800 million in 2015/16. Operational cash was utilised to fund capital expenditure projects. The cost of delivering on broadcaster’s public service mandate was very high, and sports rights costs were constantly rising and contributing to the pressure on SABC cash reserves.

Ms Thabile Dlamini, SABC Acting CFO, said that SABC received an adverse audit opinion with six key findings for 2016/17, which was regression from the qualified opinion received in previous financial years. The Auditor-General South Africa (AGSA) raised findings about SABC as a going concern with it being unable to pay debts on a monthly basis and it required R600 million in order to pay its debts. Other findings were irregular fruitless and wasteful expenditure; property, plant and equipment; trade and other payables; deferred government grants; and accumulation of material uncorrected misstatements.

The opening balance for irregular expenditure in 2016/17 was R5.1 billion. Irregular expenditure awaiting condonation at the end of the financial year was R4.4 billion for the past four financial years. R1.4 billion was not correctly disclosed, which brought the final amount to R3.7 billion of which R686.9 million was the actual irregular expenditure incurred in 2016/17. This was a result of not obtaining the minimum number of quotations, bids advertised for less than minimum number of days, incorrect evaluation criteria applied to bids, irregular awards due to a lack of planning, Delegation of Authority Framework (DAF) contravention, and awards made without obtaining valid tax clearance certificates.

The opening balance for fruitless and wasteful expenditure at the start of 2016/17 was R92.4 million. Fruitless and wasteful expenditure awaiting condonation was R145.9 million. Of which R21.1 million was incorrectly disclosed. The actual fruitless and wasteful expenditure incurred for 2016/17 alone was R70 million. Reasons for this were due to impairment losses; travel cancellation fees and penalties; interest, penalties and fines on late payments; settlements to former employees; and legal fees incurred on settlements. Settlements paid out were R65.2 million during 2016/17.

Subsequent to the approval of the financial statements, a submission was made to National treasury to condone irregular expenditure valued at R2.1 billion. It related to issues of original tax clearance certificates. The R4.4 billion reported at the end of 2017 would be reduced to R2.1 billion, making the new balance for irregular expenditure R2.3 billion.

Advertising and licence fees were the biggest contributors to SABC income. A decline in revenue however was a result of declining commercial revenue owing to tough economic trading conditions and industry wide client cut backs; changes in TV licence collection strategies by third party service providers, consumers low disposable income, and negative SABC media publicity resulted in 17.4% year on year decline; changes in local content policies resulting in revenue losses of R29 million on radio, and R183 million on TV; and losses owing to system implementation challenges.

Due to a challenging year that saw a decrease in audiences due to a tarnished brand, SABC programming continued to resonate with both its audiences and peers. Numerous audience and peer awards were received during 2016/17 both locally and internationally.

Discussion
The Chairperson asked which page in the presentation dealt with editorial policy.

Ms Philiso replied that there was no page on editorial policy since it began in 2017/18 and the presentation requested was dealing with the Annual Report for 2016/17.

Ms P Van Damme (DA) said that the presentation confirmed what the Committee already knew, and she was interested in the way forward and what was being done to ensure that the same mistakes did not occur again. She wanted an SABC that had no irregular expenditure and no fruitless and wasteful expenditure.

Ms Van Damme said that there were media reports stating that the Minister had requested that the SABC interim board chairperson give her the name of the shortlisted candidates for the top three positions so that they could be approved by the ANC deployment committee. This was concerning because the reason the SABC had found itself in the position it was, was because of political interference, political deployment into positions due to their close proximity to the ruling party. She asked if it was true that Minister Dlodlo had requested the names for approval by the ANC deployment committee.

Ms Van Damme asked why the Minister was not happy with the individuals shortlisted for the top three executive positions in the SABC as was recommended by the interim board. And asked what would be happening and if the positions would be readvertised.

Ms Van Damme said she was concerned about the decisions taken in the last few weeks without an SABC board, and asked what financial decisions were taken in the absence of a board.

Ms Van Damme asked if the monies paid out to Mr Hlaudi Motsoeneng had been paid back, and if disciplinary action was taken against Mr James Aguma.

Mr M Gungubele (ANC) said that the audit matters of emphasis on performance information cut across the portfolio and not just the SABC. SABC was in a disaster zone. A committee meeting was needed for the Department and its entities to present their action plan to deal with the audit findings raised by AGSA.

Mr Gungubele said that one could not pick up what was envisaged and what was going to be done to address the financial sustainability of the SABC. The performance information articulated in the Annual Report made it difficult for the Committee to do oversight. When he was preparing and going through the presentation document, he could not anticipate what the view of SABC was and he hoped that it would be articulated in the presentation, but it was not articulated how the SABC intended to resolve the challenges.

Mr Gungubele asked what the state of readiness for the oversight of Communications entities was.

The Chairperson said that in the report there was nothing on what had been done to address the SABC challenges. The audit findings were very clear on what needed to be done but SABC did not indicate which issues had been resolved.

Mr R Tseli (ANC) said that every time the Department and its entities presented to Parliament, the Committee requested a briefing on issues that were raised during their last engagement. He asked for a briefing on work done by consultants during 2016/17, a plan to deal with the loss of audiences and how
SABC would address the declining sponsorship.

Mr Tseli said that the SABC interim board was asked about its remuneration for the work they had been doing. A statement had been made that the SABC interim board had decided to suspend its own payments. The Committee received contradictory information in their last engagement with the interim board and he wanted to know how much was claimed by the interim board. He appreciated the honesty of the presentation and the improvement in the collection of TV licence fees.

Responses
Minister Dlodlo replied that section 101 of the Constitution read that a written decision by the President needed to be signed by another Cabinet Minister. If she was requested to assist in a process and there was nothing to her that was unlawful, then she would assist.

Minister Dlodlo replied that she also thought it was frivolous for people with higher education certificates to be expected to submit matric certificates, but the issue raised was that if the matric certificates were fraudulent, then this nullified all other qualifications.

Minister Dlodlo replied that she did not want to appear as if she was maligning candidates. According to the Memorandum of Incorporation (MOI), she had the responsibility to approve the candidates before the interview process ensued. When she saw the list of candidates and considering what had previously happened in the SABC she had to be circumspect. If the process had been shared with her in as far as the type of individual that was required, the process could have been very easy. Some of the candidates had experience as presenters and journalists but without any executive experience and she therefore could not appoint such a person into a position such as COO or CEO since a candidate needed to have executive experience as well as experience in radio and television broadcasting.

Mr Gungubele raised a point of order that perhaps the nature of the question forced Minister Dlodlo to delve into the matter of candidates who would or would not be appointed into positions and he was not sure if this was a matter for the Committee.

Ms Van Damme said that Parliament needed this information since it was part of the way forward.

Ms N Tolashe (ANC) said that she agreed with Mr Gungubele that the Committee could be bordering on matters that did not involve the Committee and could therefore lead them to assessing candidates. She said that the Minister could have perhaps said that she had not been taken into confidence by the interim SABC board before selecting candidates.

Mr M Kalako (ANC) said that there was nothing wrong about the response the Minister gave to Ms Van Damme’s question. The issue was already in the public domain and it was important that she cleared her name as it was reported that she was involved in not accepting candidates. She was correct to respond to the question but not delve into what could appear as if the Committee was assessing the candidates.

Minister Dlodlo replied that she was clear from the outset that she did not want to appear to be maligning any candidates because they were indeed good candidates. What was expected to have been done by the interim board was not followed in as far as the Minister had the authority to appoint the CEO, COO and CFO.

Minister Dlodlo replied that it was common knowledge that parties had an interest in appointment processes and it probably happened in the DA that they would have a particular interest on certain matters. If ANC members were called to comply then they had to. And she did not interfere in those processes.

Minister Dlodlo replied that she outlined all the interventions of the SABC at the beginning of the presentation, and whether the interventions were inadequate. This was something the Committee could assist on. All senior positions in the department and its entities would be finalised before the end of January 2018 to ensure stability.

Minister Dlodlo replied that because the SABC did not have money, the Department of Communications (DoC) had asked other government entities, the Public Service Commission, Treasury and AGSA to assist the SABC to implement the plans and strategies to address the challenges.

Ms Philiso added that when the SABC came back to present on 26 October 2017, they would present on interventions as well. Some of the interventions included seeking different partnerships in core production, and cost containment initiatives. They were looking at different sources instead of just saying that government did not have money. Sponsorships would require stability - people wanted stability.

She acknowledged that the 10 October 2017 was Day 14 without an SABC board. Within that period there had not been any financial decisions needing to be tabled.

Almost all the cases were been handled by the Special Investigating Unit (SIU) which had set up offices in the SABC and they were going through the cases of Mr Motsoeneng and Mr Aguma with regard to their settlements.

Ms Dlamini said that a figure of R99 million was paid to consultants. Most of the contracts with consultants were handed over to the SIU unit for investigation to determine if there was any value for money.

Ms Dlamini replied that at the end of August 2017, the SABC owed the interim board R2.9 million. They were paid for their first month in March but then they had opted not be paid until there was stability in the organisation. The SABC was paying outstanding monies to the interim board.

Follow up questions
Ms Van Damme said that in terms of the SABC Charter, “the non-executive directors of the SABC being the board, shall conduct interviews and compile a shortlist of preferred candidates, refer them to the Minister for his/her approval or rejection on the appointment of candidates to fill the executive directors of the corporation”. In terms of the process followed by the interim board, they were correct and did not need to involve the Minister from the beginning. The SABC Charter was agreed to by all stakeholders, whereas the MOI was not.

Ms Van Damme asked what would now happen with regard to the appointments and if the positions would be re-advertised, or would the term of the acting office bearers be extended and when would the process happen if positions were to be re-advertised.

Ms Van Damme said that the DA did not have a deployment committee. The only positions the DA approved were those of political appointments, ranging from Mayco Members, Cabinet Members, and Chief Whips because those were political deployments. The DA did not approve the positions of state owned entity executives and civil servants because those people were not in political positions but were appointed to serve not only the DA but also citizens.

Ms Van Damme said that it was not right for political parties to be involved in the process of appointing CEOs and other senior management officials in State Owned Entities (SOEs).

The Chairperson said that it would be problematic to bring political party working into the Committee. The Chairperson was not saying that Ms Van Damme was right and the Minister was wrong, but rather that discussing how parties dealt with such matters would be wrong for the Committee to engage on. In his view it was incorrect to get into that discussion. If the ANC as a governing party dealt with a particular matter differently as a national governing party, and the DA in the Western Cape dealt with it in another manner then it was not to be dealt with in the Committee because that would confuse what they were supposed to be doing in the Committee. The Chairperson pleaded that the Committee not involve party work in the Committee because that would raise unnecessary discussion follow-ups.

Ms Van Damme said that she respectfully disagreed with the Chairperson’s reason because part of the reason the SABC found itself where it was, was because of political interference. Political interference in itself was very much an issue related to the SABC. She did not agree with the ANC approving appointments of executives.
 
The Chairperson said that the ANC did not have a process of appointing individuals in SOEs. The ANC only appointed political deployees.

Ms Van Dame said that the answer contradicted what the Minister said and she did not know what the truth was anymore.

Ms Van Damme requested that the document dealing with the way forward on the SABC funding model and also the R3 billion grant requested from Treasury be provided to the Committee. That information was provided to the Standing Committee on Finance and not the Portfolio Committee on Communications. The Committee needed to be comfortable as the oversight body on how to improve the SABC funding model as well as how the SABC would be dealing with problems.

Responses
Minister Dlodlo replied that she never said there was a deployment committee in every party, but rather that every party would have an interest in the appointment process. Minister Dlodlo replied that she never used the term “deployment committee”. That was a term Ms Van Damme used herself. The SABC funding model would be presented to the Committee in the next meeting with the SABC. Process needed to be respected, and she was waiting for the Minister of Finance to look at the documents and determine a way forward. The documents would not be a final product, but for the input and assistance of the Committee, Minister Dlodlo would be bringing the document before the Committee.
 
Ms Van Damme asked what the status was of the merger between the Henley Television studio facilities with Television News resources.

Ms Bessie Tugwana, Acting COO, said that the merger had been reversed and SABC was in the process of realigning the system.

The Chairperson asked Ms Tugwana to explain.

Ms Tugwana replied that there was a merger between the News Department and the Technology Department, there was a complaint by the affected colleagues in the News Department. SABC engaged the complaint to understand how they were affected. The objective was to consolidate resources in areas where there was no utilisation and leading to unnecessary wastage. Management met with the colleagues and affirmed it would reverse the merger.

Ms Van Damme asked how much money was lost in the merger process and if the money was recovered.

Ms Tugwana replied that no money lost. All they did was put costs incurred back into the different areas. There was a complaint that the merger itself was as a result of monies lost.

Ms Philiso replied that there was no movement of monies or a loss. If anything, all that would be done would be to reallocate funds.

Minister Dlodlo pointed out that the only MOI in operation was the one signed by former Minister of Communications Yunus Carrim. And it was not under dispute.

Ms Van Damme said that the point was that in terms of the SABC Charter, the process followed by the Minister was incorrect. The board was indeed correct.

Minister Dlodlo replied that in terms of the MOI that was incorrect.

MDDA presentation
Minister Dlodlo said that MDDA had a target of 61 targets, of which 42 were achieved, and 19 were not.

Ms V Van Dyk (DA) asked who was going to be the Acting MDDA CEO of MDDA since Mr Donald Liphoko had been moved to GCIS and who would be presenting on behalf of MDDA.

The Chairperson said that the Minister was empowered to tell the Committee. Since she was present, the question could wait and if the CEO matter was not dealt with, then Members could ask the question.

Ms Van Damme said the reason Ms Van Dyk was asking was because they wanted to know who was in attendance from the MDDA and if apologies were received from those who were not present.

Minister Dlodlo replied that the Acting CEO, Ms Khululwa Seyisi, was unable to attend the meeting because she was attending to a sick child. The entire Board could not be brought down due to costs involved.

Minister Dlodlo reported on the first unachieved target which was the MDDA was supposed to fill 90%of approved positions but recruitment in 2016/17 was initially focused on positions covered by funding that had been committed, and recruitment of some positions reporting to the CEO had been put on hold to enable the permanent CEO to participate in the recruitment process. Recruitment to fill up outstanding positions would be intensified in 2018/19. Some positions would be filled by the end of January 2018.

Another performance was to review the Human Resource Management system. An HR plan was approved in 2016/17 to review the performance management system and would be carried out in 2017/18. The target for signed performance contracts was 100%, and the reason for failure was that five staff members did not sign performance contracts as they reported to the CEO and CFO and both positions were vacant and occupied by individuals in acting capacities.

Legal and regulatory affairs had a turnaround of eight weeks for contract vetting and legal approving. Vacancies in critical positions placed capacity challenges in the unit, and the legal and contract officer position would be filled in 2017/18.

Percentage of litigation cases handled had a target of 100%. Two cases in 2016/17 were both being handled and were to be settled out of court. Performance of quality policy development and legislative review contributions were set at 100%. There were legislative and policy reviews but legislation reviewed may have impacted on communities.

On financial and auxiliary services, there was a zero target for irregular and fruitless and wasteful expenditure. However irregular expenditure was incurred as a result of the extension of vacancies at the MDDA. There was no fruitless and wasteful expenditure. Under risk management and performance audit, the performance indicator was an updated and approved assurance plan. There were vacancies in key crucial positions resulting in non-achievement.

On community broadcast media, the number of community television stations supported for strengthening was four. There were limited applications for community radio stations. The MDDA adopted a proactive approach to engage with community television and radio stations to identify where support for community TV was required. The target was 80% of community broadcast funds to be dispensed. There was a failure due to beneficiary reporting, which meant the MDDA was unable to dispense funds to beneficiaries.

[See document for performance information on digital media, media awards, partnership agreements, and media literacy workshops].

The MDDA was able to raise a record high revenue of R74 million from various sources in comparison to R60 million raised in 2015/16. Significant achievement was achieved in grant disbursements in 2016/17 of R58 million compared to R30 million in 2015/16. Increased grant disbursements resulted in MDDA incurring a deficit of R13 million. The CEO recruitment was finalised and awaiting concurrence from the Minister. The CFO recruitment was at the shortlisting phase.

Programme 2 (Grant and Seed funding ) performance information was deemed unreliable by Auditor-General South Africa (AGSA) as the evidence provided by MDDA did not adequately support the actual achievements of 301. Interventions were put in place to enhance how the data for target achievement was collated and include work time sheets and employee contracts.

Ms Phelisa Nkomo, MDDA Chairperson, noted the MDDA delegation consisted of Mr Musa Sishange, Board Member, Ms Sheryl Langbridge, Communications Manager, Mr Trevor Khodza, Acting CFO, and Ms Sibongile Ngwenya, HR and Corporate Affairs Manager. The Acting CEO had sent apologies.

The Chairperson asked where the new board members appointed by the President were.

Ms Nkomo replied that with the appointment of the two new board members by the President, the MDDA had a quorate board, which addressed the lack of quorum at MDDA board meetings. The Board met a week after the two new members were appointed to discuss project backlogs as well as ensure stability in the MDDA. There was an induction and orientation for the new board members.

Ms Sheryl Langbridge, MDDA Communications Manager, said that the agency had received an unqualified audit for its financial statements with findings for lack of compliance with laws and regulations. AGSA audited two programmes: Programme 2 – Grant and Seed Funding; and Programme 4 – Capacity Building. Programme 2 had been unqualified in 2015/16 but was qualified in 2016/17. Programme 4 remained unqualified from 2015/16 to 2016/17. A corrective audit action plan was in place to improve performance.

The MDDA Board approved R69 million worth of community media projects for beneficiaries. This was more projects than had ever been awarded in any of the previous years since the first awarded projects in 2004. The target was to support 40 community broadcast projects, 10 small commercial projects and eight community print projects. 28 community broadcast projects were supported in 15 rural district municipalities, of which nine were led by youth. 11 small commercial projects in eight rural district municipalities were supported, with seven of them led by youth. 198 jobs were created from the community broadcast projects.

Through strengthened stakeholder partnerships, MDDA raised R72 million in additional funding. The major funders were MultiChoice, SABC, and DoC. Multi-Choice strengthened its commitment in assisting community broadcast media with a R25 million contribution. SABC contributed R11.8 million to support community broadcast capital and operational requirements. An MOU was signed with DoC for R20.9 million rand to support community radio stations with broadcast studio equipment, over and above the annual allocation of R23.8 million.

The achievements in capacity building were outlined (see document).

In the community broadcast media programme, the biggest non-achievement was the number of community TV stations supported for strengthening where the target was four but MDDA delivered on one. The target was not achieved due to limited applications from community TV stations. MDDA was proactively engaging with the sector to identify where support was required. It also failed to deliver on percentage of community broadcast funds disbursed with only 18% instead of 80% delivered. The non-performance or late reporting of funded projects negatively impacted on disbursement of funds. MDDA carried out an analysis why various projects failed to report adequately indicating the need for increased training and monitoring of projects.

In the print and digital media performance programme, disbursement of funds to approved projects was 56% instead of the 70% target. The non-performance or late reporting of funded projects impacted negatively on disbursement of funds.

None of the capacity building performance indicators was achieved due to lack of capacity in critical vacant positions in MDDA. Capacity building projects were deferred until quarter four pending the outcome of the MDDA impact study expected in 2017/18. The results would be used to establish appropriate MOUs.

Ms Sibongile Ngwenya, MDDA HR and Corporate Affairs Manager, said there were 39 funded posts. In 2016/17 25 of these were filled. Funded vacant posts were 14. The CFO post was filled in an acting capacity. There were two vacant posts in the Office of the CEO, three in the office of the company secretary, one post in internal audit, two posts in HR and Corporate Affairs, one post in Communications, two posts in Strategy, Monitoring and Evaluation, and two posts in projects.

Due to the high vacancy rate in MDDA, staff were required to take on additional responsibilities and extra hours to ensure continued delivery of the MDAA mandate.

Mr Trevor Khodza, MDDA Acting CFO, said that the overall quality of submitted financial statements improved, with minor amendments made to the final report. The agency still needed to improve on compliance and regulations. Specific focus would be on contract management and SCM. An action plan had been drawn up, and unit managers given key focus areas to address in 2017/18.

The lack of stability in key managerial and supervisory positions led to 30 audit findings for 2016/17. The highest findings were in performance information, financial management, and HR. Key audit improvement areas were needed from the assurance providers; Acting CEO, Acting CFO, Company Secretary, HR and Corporate Affairs Manager, and the Communications Manager.

A total of R6.7 million of irregular expenditure was incurred in 2016/17. This was due to the application of changes in National Treasury procurement processes through the introduction of the Central Supplier Database (CSD). Risk management measures were implemented to ensure a parallel process of supplier verification to strengthen compliance. MDDA incurred no fruitless and wasteful expenditure in 2016/17.

There were two litigated cases: a labour court dispute with a former employee for unfair dismissal; and a legal dispute over a contract between the MDDA and a broadcast equipment supplier.

Interventions to curb irregular expenditure included the termination of all contracts deemed as irregular, a new process of Request for Quotation (RFQ) and advertisement of tenders initiated to correct the procurement process; manual process of supplier BBBEE points claim verification through use of certified certificates and manual SBD4 form submission; continuous training update of SCM staff with new Treasury regulations and compliance procedures; review of contracts register to ensure compliance with legislation on contract deviations; and independent review of the Delegations of Authority policy to ensure policy was aligned to operational requirements and clearly assigned bank signatories.

Consultants were primarily brought on board to mitigate the MDDA vacancies. The total spent on consultants in 2016/17 was R5.2 million.

Ms Nkomo noted that the Minister had responded that the entire MDDA Board could not be present due to travel costs. Ms Tasneem Carrim who was appointed by the President was also currently employed at GCIS and had a prior commitment.

Discussion
Mr Tseli asked what impact the vacancy rate in MDDA had on the organisation since they were sourcing the services of consultants for R5.2 million. He asked for clarity on the two litigation cases. He asked why there was a variance of 62% in the disbursement of funds. Information on MDDA employment demographics was missing.

Mr Gungubele said that the audit report had highlighted concern about the status of MDDA assurance providers and MDDA needed to present their audit action plan to the Committee. He said that the good financial statements of MDDA were undermined by their poor performance. Clean audits were essential so the Committee could track progress. The poor audit results meant that it would be difficult for the Committee to get the information they wanted. He urged MDDA to develop an action plan as soon as possible.

The Chairperson said that grant and seed funding was one of the MDDA core mandates. If there were audit findings in that critical area, then MDDA would have to explain why it was going wrong in this main task.

Ms van Dyk said that she was really concerned about the MDDA and asked if she was the only one who saw the elephant in the room. As a Committee there was reason to be concerned since there was the Minister and the Deputy Minister and one was saying that she did not receive the investigation report about mismanagement at MDDA and the other one was denying ‘the report’. She asked who was lying between Minister Dlodlo and her Deputy, Thandi Mahambehlala.

Ms Van Dyk said that Minister Dlodlo had said that she would not take disciplinary action against the MDDA Board chairperson based on rumours. But the MDDA Annual Report much like the now released investigation report reflected the same problems. How did the cash balance grow from R7 million to R30 million in one year? How was it possible that payments to non-executive board members doubled in one year?

Ms Van Dyk stated that Ms Nkomo did act as the MDDA CEO, in spite of Ms Nkomo’s statement that she had never acted as CEO at MDDA in the past five financial years. She waved a bank statement as proof that she said belonged to Ms Nkomo and who had paid herself almost R80 000 in March 2017. Ms Nkomo had indeed acted as CEO and it was not a rumour. She questioned on what basis this was done.

Ms Van Dyk asked Minister Dlodlo if she knew that the Minister’s new spokesperson, Mava Scott, was dealing with the MDDA and earned almost R1 million in eight months. He was the owner/director of Hummingbird Media in South Africa.

Ms Van Dyk asked what supply chain process was followed for amounts over R500 000 since she could not see this in the financial statements. There was a payment of R800 000 made to Hummingbird Media, and she asked the contracts to the value of R485 000 and another for R385 000. Another payment of R85 000 was also issued to Hummingbird. Ms Van Dyk wanted to know what processes were followed.

Ms van Dyk said that the newly appointed Acting CEO, Ms Seyisi, joined the MDDA through Holystics Approach which is also one of the irregular contracts pointed out by the Auditor General. Apparently, she was not recommended for the position of Company Secretary, according to the selection assessment report but was still appointed in January 2017 in that position. The question now is - how when you are not found suitable for the Company Secretary position, can you be appointed as Acting CEO?

Ms Van Dyk said that the investigation report stated that the Board Chairperson did not sign off the board minutes which violated the MDDA Act. She urged that the Committee place Ms Nkomo on immediate suspension so that the Committee could conduct a parliamentary inquiry and receive all the relevant facts. No one was speaking about the investigation, the report received and the way forward, and she wanted clarity on those issues by the Chairperson.

Responses
Ms Nkomo replied that the Board had focused on recruiting a CEO, and the CEO would then recruit his own team. The CEO was appointed in January 2017 but left to become CEO for the Public Protector in May 2017 so the Board resolved to appoint the other positions of CFO and COO, and who ever would be appointed as CEO would inherit the new team. This was the rationale behind the delays in appointments.

Ms Nkomo replied that committed funds would be approved at board level for projects, but the funds were not disbursed until a project had reached a particular stage and fulfilled stability, a governance structure, a proper licence, etc. If those areas were not filled, the project would be halted. Funds would not be disbursed; they would be kept allocated for the project until it had reached a state of readiness.
 
The Chairperson asked if Ms Nkomo was explaining the cause of the AGSA findings.

Ms Nkomo agreed.

The Chairperson asked what caused the inability to disburse.

Ms Nkomo replied that if MDDA had a historical relationship with a project in relation to committed funding and there were certain abnormalities in the process, then they would want to delay the disbursement of funding until the abnormalities were corrected. The state of the project also mattered. The project had to be in the right state before funding was given.

Minister Dlodlo replied that she had dealt with the matter of whether Ms Nkomo had ever acted as CEO. She dealt with it in her first appearance before the Committee as the Minister of Communications. Ms Nkomo had previously been acting as CEO as well as Board Chairperson. That was subsequently stopped and the matter resolved.

Mr Musa Sishange, MDDA Board Member, said that when funds were allocated to projects, the projects had to meet a certain criteria before funds were disbursed. The funds were already committed to the project, but if the project did not have a quorate board, then MDDA could not send the funds to the project until it had dealt with its governance. He noted that there were new people at AGSA that had handled the audit report and in their next engagement with the Auditor General they would inform those individuals how the MDDA functioned so as to avoid any qualifications on performance information.

Mr Sishange said that the first litigation matter was from 2014 and the matter went to the CCMA and then to the labour court. The labour court then referred it back to the CCMA. Whoever lost in the CCMA case also lost the opportunity to take the matter back to the labour court. The individual involved had then tried to settle the matter after they had already been employed elsewhere in government. The issue needed to be resolved or else it would keep recurring in audit reports. The other case was a supplier who was used to getting business from the MDDA in broadcast equipment, and they thought they would be awarded the work for a number of broadcasting stations. The supplier did not receive any business for installation of broadcast equipment because funds were withheld and the supplier therefore took the matter to court.

Ms Tolashe asked if she heard Mr Sishange correctly that MDDA needed to meet with AGSA to inform them how MDDA worked since the audit team that audited MDDA was new.

Mr Sishange replied that MDDA had issues with how AGSA was conducting its work with the Acting CEO, and it emerged when he sat on the internal audit committee that certain things were not explained adequately to the new AGSA team.

Ms Langbridge said that the audit opinion was due to one finding that AGSA said was not measurable. It had not been raised as a finding in previous AG reports. The indirect jobs referred to volunteers working at stations and people employed by service providers to build studios. The evidence provided to AGSA was the contract with the service provider stipulating the number of people that would be used to build the studios.

Ms Sibongile Ngwenya, MDDA HR and Corporate Affairs Manager, replied on employee demographics that the presentation did not report on this but it was a fact that women were predominant in the MDDA, particularly African women. Currently, no persons with disability were employed in the MDDA.

Mr Khodza, Acting CFO, replied that improved integrated performance information on the agency would be presented at the next engagement with Parliament and it would also ensure that all the assurance providers were delivering on their mandates. MDDA had approved 54 community based radio stations for 2016/17. MDDA took a deliberate approach to fund projects situated in rural areas.

Mr Kalako said that the issues raised by Ms Van Dyk were serious governance matters.

Ms Tolashe said she was curious about the last section of the report dealing with disbursement. She asked if the Board was ever in the areas where funded projects were situated.

The Chairperson said that all the reports would be dealt with after questions on the Annual Report had been discussed.

Ms M Matshoba (ANC) noted that in one year there had been three Acting CEOs, and asked when a permanent CEO would be appointed. She was worried about the bank statement Ms Van Dyk had in her possession belonging to Ms Nkomo. If an investigation was going to be conducted, then the Committee could start with finding out from where the bank statement came.
 
Ms Nkomo replied that there would be a board meeting on 12 October and they would be discussing the necessary interventions needed for funded projects. The Board had taken a decision two years ago to conduct oversight visits of all funded projects.

Ms Van Dyk said that she had not heard a response to her question about why annual board fees had doubled from the previous financial year.

Mr Kalako spoke about the report and in the last meeting the Minister said that she was not aware of the report but would make a follow up and inform Parliament. He proposed that once the Committee investigation was pending, the Committee would request the President that Ms Nkomo be temporarily removed.

Mr Sishange asked which reports were being referred to.

The Chairperson said that they were talking about the report of 2015 that Deputy Minister Mahambehlala had spoken of. The second report was the report which the Minister had said at the previous meeting would be ready by 19 October 2017.

In response to Ms Matshoba, Ms Van Damme said that the information Ms Van Dyk presented to the Committee on the bank statement was given by a whistleblower and she therefore had a right to protect the whistleblower.

Ms Van Damme said that Ms Nkomo was asked during an oversight meeting in Stellenbosch if she had ever acted as the CEO and she had denied this vehemently. However, now it had emerged there was evidence that indeed she had acted as a CEO at a point in time. She therefore misled Parliament and violated the MDDA Act.

Ms Van Damme said that while the investigation would be ensuing, Ms Nkomo needed to be suspended so that she could not interfere in that process.

Mr Gungubele said that the Committee needed to establish the facts on all leads in a due manner, and once facts were established the Committee could proceed in a legal manner.

The Chairperson said that he was reluctant to decide on the investigation requested by Committee members in the current meeting. The Committee needed to arm themselves legally on how to proceed with the investigation.

Ms Van Dyk said that the proposal from Minister Dlodlo was for a forensic investigation to be instituted to look at all irregular expenditure and all contracts that may not have followed proper process. Minister Dlodlo had suggested that the investigation be done by an internal audit unit with the assistance of DoC. Ms Van Dyk proposed that they do not follow that route because they had failed to prevent the allegations and could not investigate themselves.

The Chairperson said that members were not to respond to Ms Van Dyk since he had ruled that the Committee would seek legal advice before proceeding with an investigation.

Ms Tolashe suggested that the Chairperson along with Mr Kalako and Minister Dlodlo form a subcommittee and look into the matter and then bring it back to the Committee so that the process is not too tedious.

The Chairperson said that the concrete proposal was that Mr Kalako, Ms Van Damme and the Chairperson would form part of the process and check to ensure that they follow the correct parliamentary legal process. The Minister and the DoC needed to be spared from the process since it was a Committee decision. The Chairperson and the subcommittee would come back to the Committee and present the way forward.

Ms Van Damme said that legislation stated that the process for removal of a board was to be discussed according to section 15(A) of the Broadcasting Act. She was however happy to meet with the Chairperson and Mr Kalako and suggested that they meet after the meeting adjourned.

The Chairperson said that MDDA would continue as they were until the Committee had taken a decision as to what they would be doing.

Minister Dlodlo replied that she had gone ahead with the investigation and it came with recommendations that might be inadequate but she had called for an investigation nonetheless. She had already instituted a departmental investigation into the MDDA and it was not as if she was not doing anything about the MDDA.

Mr Gungubele raised a point of order that there was Committee process and the Committee had proposed a way forward and they were not asking anyone to clarify issues. The Committee had no right to prescribe what power had to happen in the Department and requested Minister Dlodlo to leave the issue as the Committee had decided to act.

Minister Dlodlo replied that she was not prescribing to the Committee what to do or the approach to take. She was responding to issues that maligned her.

The Chairperson summarised the sequence of events that would follow. Between the 11 and 12 October, the three members would inform the Committee what shape the investigation would take and the route would start then. The Committee Secretary would have to collect all documents that would assist the investigation. While the process was ensuing, the MDDA would carry on doing its work until the Committee came up with the results of the investigation. He was not sure if the Committee had the power to suspend the MDDA Board Chairperson.

Ms Van Dyk said her concern was that that would give Ms Nkomo the chance to tamper with information.

Mr Tseli said Ms Van Dyk needed to rest assured that her concerns would be dealt with.

Mr Gungubele said that there needed to be a timeframe when the Department would present the Committee with an audit action plan for all its entities.

The Committee Secretary read out the decision of the Committee on the process the Committee would follow on the MDDA.

Meeting adjourned.