Department of Communications 2016/17 Annual Report

NCOP Public Enterprises and Communication

08 November 2017
Chairperson: Ms E Prins (ANC, Western Cape)
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Meeting Summary

Annual Reports 2016/17 

The Select Committee was briefed on the 2016/17 annual report of the Department of Communications (DoC), and commended it on achieving a clean audit report for two consecutive years.

Key DoC achievements included the switch off of the analogue signal in core areas surrounding the Square Kilometre Array (SKA) in the Northern Cape, and the rolling out of 69 digital awareness campaigns against a targeted 10, which had resulted in thousands of set-top box (STB) installations countrywide. The Moses Kotane Institute had trained over 441 young people as installers for Digital Terrestrial Television (DTT) and Direct to Home (DTH) devices as a result of the DoC’s partnerships with provincial departments.

The Department reported that BrandSA had achieved 85% of its targets. The main reason for not delivering on other objectives was the delays in registrations and reprioritisation of earmarked countries to implement communications programmes. The entity had received a clean audit.

The Independent Communications Authority of South Africa (ICASA) had achieved 74.5% of its targets, with the main reasons for not delivering on 16 key targets being the backlogs emanating from the July 2016 industrial action, procurement delays, unexpected project delays, and lengthy processes to finalise regulations. It had received an unqualified audit opinion in 2016/17.

The Film and Publication Board (FPB) had achieved 86% of its targets. The main reasons for not achieving on 10 key target areas were the multi-year agreement on pay progression that was not accepted by the parties concerned, delays in procurement processes, and the system not being reviewed. An unqualified audit opinion was issued for 2016/17.

The Media Development and Diversity Agency (MDDA) had achieved 69% of its targets. The main challenges involved projects being deferred pending the outcome of impact study projects, vacant critical positions, limited applications from community TV stations, beneficiary projects, and late reporting. The entity had received an unqualified audit opinion.

The SABC had achieved 45% of its targets. Key targets not achieved were its financial sustainability, the launch of the "ENCORE" channel on DTT platforms, the digitisation of infrastructure and the performance contracts of employees. It had incurred a net loss of R976.8 million and received an adverse opinion, which was a regression from 2015/16, when it had received an unqualified opinion.

The Committee was concerned about the SABC’s net loss of R976.8 million, the alleged victimisation of MDDA staff members, the DoC’s funding challenges, and capacity issues, including the need to fill critical senior vacant positions.

Meeting report

Minister’s Overview

Ms Mmamoloko Kubayi, Minister of Communications, said that the DoC was functioning effectively especially under the conditions that the Department was in. There were constraints in the budget and funded posts. They were doing more with less under the circumstances of funding and capacity in the Department. Regarding the acting positions, the DoC was working around the clock so that top-level executive positions could be filled. It currently did not have a Deputy Director-General, and only an Acting Director-General.

There were areas that the DoC had achieved well in. For example, there was the outreach engagement and looking at their stakeholders and the awareness of digital terrestrial television (DTT). What was significant was that engagement had happened in the majority of the remote rural areas, and the DoC had not gone to most urban areas to do the engagements. The Department was looking at having a review on what specifically had led to it not being able to move faster in terms of the digital migration.

One of the stumbling blocks had been the court challenges that the DoC experienced. These were related to either inscription or non-inscription, and that process had been concluded by the constitutional court. Part of the DoC’s priorities was the project of digital migration and making sure that they delivered on it. The DoC would have to look at partnerships, especially in the digital migration project. It was going to make sure that it took advantage of engaging with the telecommunications sector to see how they would be able to come on board.

The other issue was around the audio-visual and digital content policy, which had not been concluded because it had been sent to Cabinet, and been sent back for consultation. The DoC had to make sure that it looked into the process of the White Paper, specifically on the broadcasting side, because one of its targets was around the Independent Communications Authority of South Africa (ICASA) Act, and what Cabinet passed in the White Paper regarding implementing the economic regulator, had an implication for ICASA. The DoC was currently engaging with ICASA to make sure there were no further challenges.

In the area of state-owned company oversight, work had been done with no capacity. However, the team was doing its best to conduct the oversight. There were a few challenges there, and the DoC would have to look at how they could strongly capacitate the team to effectively carry out oversight and make sure that there was stability within the entities. There were some vacancies in the entities that the DoC was working on, and had interacted with the board chairpersons to ensure that the vacancies were filled.

Department of Communications: Annual Performance

Ms Basani Baloyi, Acting Director-General, DoC, said that the Department had 29 targets planned for the 2016/17 financial year. 22 targets had been achieved, and seven were not. Overall the Department had achieved 76% of its planned deliverables, managed to over-achieve on three of its planned targets, and had received a clean audit.

In Programme One (Administration), the Government Communication and Information System (GCIS) continued to support the DoC with information technology(IT), internal audit, and supply chain management (SCM). There were 90 funded posts, of which 76 were filled, with 14 currently vacant.

Financial statements had been compiled and submitted to the Director General (DG), the Ministry, National Treasury (NT) and the Auditor-General of South Africa (AGSA), in line with the Public Finance Management Act (PFMA). 99% of invoices were paid within 30 days and 96% of requisitions were converted to orders within 48 hours. The 2017/18 annual performance plan (APP) had been tabled in Parliament and submitted to the Department of Planning, Monitoring and Evaluation (DPME). The Department had also developed the Service Delivery Charter, which had been approved by the executive authority.

Most of the targets in Programme Two( Communications Policy, Research and Development), had not been achieved, and this was linked to processes happening at Cabinet level. The draft White Paper on audio-visual and digital content policy for South Africa had not been approved, but had been presented to the Cabinet committee on Economic Sectors, Employment and Infrastructure Development(ESEID), and the inputs from the committee had been incorporated into the final draft White Paper, for approval by Cabinet. The ICASA Amendment Bill had not been signed into an Act because the proposed establishment of an economic regulator by the integrated Information Communication Technology (ICT) White Paper approved by Cabinet had an impact on the role of ICASA in the long term. The processing of the ICASA Amendment Bill had to be held in abeyance, pending the finalisation of the integrated ICT White Paper.

Consultation on the community broadcasting support strategy had been conducted late in the financial year (February 2017). The final strategy had been produced, but due to financial constraints the strategy could not be submitted to Cabinet for approval. The Department would be finalising the strategy in the 2017/18 financial year. The Green Paper on the Media Development and Diversity Agency (MDDA) had not been published. Finalisation depended on the Broadcasting Act, which was now referred to as the draft White Paper on audiovisual and digital content policy for South Africa.

As part of implementing the community broadcasting support strategy, the research report on community media support mechanisms had been compiled and five community radio stations had been provided with broadcasting infrastructure -- Mohodi FM and Vhembe FM in Limpopo Province, Mogale FM in Gauteng, Ermelo FM in Mpumalanga and Elgin FM in the Western Cape. The community radio stations that were supported had resulted in the creation of 47 permanent jobs and 99 temporary job opportunities.

Programme Three (Industry and Capacity Development) had some key milestones. These included conducting door to door visits, registration campaigns and activations; 69 digital broadcasting migration awareness campaigns conducted against the targeted 10 in the Northern Cape, KwaZulu-Natal, North West, Mpumalanga, Eastern Cape and the Free State; the analogue switch off transmission had commenced in the core towns of the Square Kilometer Array (SKA) in the Northern Cape; the Moses Kotane Institute had trained over 441 young people as installers for the Digital Terrestrial Television (DTT) and Direct to Home (DTH) devices as a result of the DoC’s partnerships with provincial departments;11 international stakeholder engagements were coordinated, which focused on some of the structures of BRICS, the Southern African Development Community (SADC), the Zambian Joint Commission for Cooperation(JCC), the G20, and others. The DoC had coordinated one multilateral partnership with the World Intellectual Property Organisation (WIPO), and two bilateral partnerships with China and Russia.

In Programme Four (Entity Oversight), the DOC had held 10 forums with chief financial officers (CFOs), company secretaries, policy and regulatory forums, DG/CEO forums, and bilateral engagements between the Minister and board members, with the aim of implementing the public entities' governance protocols.

BrandSA had achieved 85% of its targets. The main reason for not delivering on nine key objectives was the delays in registrations and reprioritisation of earmarked countries to implement communications programmes, while some deliverables on outcome 14 been amended to incorporate a broader objective of outcome 14. BrandSA had received a clean audit.

ICASA had achieved 74.5% of its targets. The main reasons for not delivering on 16 key targets were the backlogs emanating from the July 2016 industrial action, procurement delays, unexpected project delays, and lengthy processes to finalise regulations. ICASA had generated R455.7 million. It had received an unqualified audit opinion in 2016/17.

The Film and Publication Board (FPB) had achieved 86% of its targets. The main reasons for not achieving on 10 key target areas were the multi-year agreement on pay progression that was not accepted by the parties concerned, delays in procurement processes, and the system not being reviewed. The entity had collected revenue to the value of R94.3 million. However, an unqualified audit opinion was issued for 2016/17.

The MDDA had achieved 69% of its targets. The main reasons for not delivering on 20 key targets were related to projects being deferred pending the outcome of impact study projects, vacant critical positions, limited applications from community TV stations, beneficiary projects, and late reporting, as well as media awards being delayed as a result of the outcomes of the study on awards for community-based media. The entity had received an unqualified audit opinion for 2016/17

The SABC had achieved 45% of its targets. The key targets that were not achieved were financial sustainability, the launch of the "ENCORE" channel on DTT platforms, the digitisation of infrastructure and the performance contracts of employees. The reasons for not delivering on 11 key target areas were related to insufficient funds, constrained economic conditions and advertiser cutbacks, as well as project ‘Qinisa’ being placed on hold. The SABC had incurred a net loss of R976.8 million in the 2016/17 financial year. The broadcaster had received an adverse opinion, which was a regression from 2015/16, when it had received an unqualified opinion.

Ms Dikeledi Thindisa, Chief Financial Officer: DoC, said that the DoC had an overall budget of R1.34 billion, and had spent 99%, or R1.33 billion. Of the R41 million that it had received during the adjustment budget for DTT, R11 million had not been spent. The DoC had applied for a rollover from National Treasury, which had been approved for spending in the current financial year.

Programme One had spent 99% of its R57.7 million budget; Programme Two had spent 88% of its R7.16 million budget; Programme Three had spent 74% of its R47.75 million budget; and Programme Four had spent 100% of its R1.23 billion budget. On the compensation of employees, 96% of the R68 million budget had been spent; and goods and services had spent 75% of the budgeted R45.8 million.

 

Discussion

Mr O Sefako (ANC, North West) congratulated the DoC on its clean audit. Regarding the policy uncertainty, he asked if there had been no proper public engagement, or what had caused the uncertainty. He asked for an explanation as to why the SABC had incurred a net loss of R976.8 million in the 2016/17 financial year.

Mr J Julius (DA, Gauteng) said that the Minister had gone to the MDDA for oversight recently, and allegations had been made by the MDDA staff that they had been intimidated and victimised and could not speak out. These allegations indicated that the Minister had silenced them and said that they could not go public with it. It was worrying because in order for the Department to have a good annual report and work according to what government wanted, more needed to be done to keep the staff happy, especially those at the lower levels. He asked the Minister what had transpired there, and if she was prepared to do a further investigation. He wanted clarity on whether Ms Nkomo was the CEO of the MDDA, because it had previously been denied that she was the CEO. He said that the Minister had resented Mr Donald Liphoko’s appointment as acting CEO, and that there were a lot of reasons to believe that the MDDA was currently not functional. This was based on Mr Liphoko being fired because the Deputy Minister of the DoC had said that he cancelled irregular contracts. If this was the case, how could the Minister say that they were doing their best in this Department if these things were still happening at the MDDA?

He asked why the GCIS was still giving contracts to compromised media in the country. Looking at ANN7 and New Age, the government could not afford to spend money on compromised businesses, where the Guptas had sold the company and the Minister had said she was happy that a black industrialist was coming in, empowering a black person. He said that there was a ‘snake in the grass there’. He asked how the Department could forge ahead with this compromised deal, giving the government a bad name.

Mr Julius said that BrandSA was an entity that started with an objective of putting South Africa on the international map, yet one of the Guptas had been a board member of BrandSA for over 10 years. Having a foreigner as a board member of Brand South Africa was wrong. He wanted to know in future whether the Minister would vet this, because there was no use in looking at the presentation of the annual report for 2016/17, and there was no planning ahead as to what should be done in terms of these challenges. The country was falling apart because of people and foreigners thinking that this was a corrupt government, and this had a huge impact on the economic development and the future growth of the country. He wanted to know if the board members were vetted and how the Minister would ensure that a foreigner did not become a part of it.

Ms Z Ncitha (ANC, Eastern Cape) said that because the DoC had challenges in funding capacity, with people in acting positions and a vacant Deputy Director General position, what was the DoC planning to solve these challenges? What was the plan of the Department to ensure that there was a budget for digital migration?

The Chairperson asked what the pricing for the set-top boxes (STBs) were so that if the deadline was December next year, then each Member representing provinces could inform their communities. She asked for a detailed plan on how it would meet the deadline for the STBs so that the Committee could monitor it and hold the Minister accountable.

Department’s response

Minister Kubayi said that public engagement on the policy had been completed. The policy had gone to Cabinet, and during discussions specific departments had been requested to have bilateral talks with the DoC. These were the engagements that the DoC was currently working on now.

The person who had met the staff at the MDDA had been former the Minister, Ayanda Dlodlo. She had engaged with the team leadership of MDDA to get a report, and the issues of concern had been addressed. The DoC wanted to look at the capacity of the MDDA leadership, as there was no full time CEO. Ms Nkomo was the chairperson of the MDDA board. There had been a time when there was no chairperson, and Ms Nkomo had become interim chairperson. The explanation which Ms Kubayi had received was that the board had written to the Minister to request her to second somebody at MDDA as CEO, and during the delay of the response from the Minister, the board chairperson had become the caretaker of the MDDA.

Ms Kubayi said that the Department did not want to have an environment where staff members were intimidated. She had asked the oversight team to schedule some time with the entire MDDA board so that they could look at the problems and ensure that the environment was conducive. The MDDA did not have a lot of staff members, and they were young people with bright minds. The Department would deal with the problems properly through engaging with the board. Due to Ms Nkomo’s intense Master’s degree programme, she had requested leave and the DoC had asked the President to designate a chairperson so that some of the issues could be dealt with and ensure that the entity was functioning.

She had received a report on the issues that had been raised, and was looking in detail into whether irregular contracts had been signed, who was responsible and if they had been stopped.

She said that the spending and engagement in the media space revolved around the placing of adverts and the communication of certain messages. Regarding the transformation of the communications sector, it was critical to see diversification of ownership. She said that some journalists had gone to verify if Mr Mzwanele Manyi was the owner of the former Gupta company and nothing tangible had come up to prove that the transaction of his buying the company was not legitimate. There was no legal basis to give instructions to the team not to do business with this entity.

There was no foreigner who was a trustee of BrandSA. Members of the trust were registered, and the process was very rigorous.

She said that the plan was to request more funding from Treasury so that they could execute their mandate. They were looking at filling funded vacant positions by the end of this year. At the senior level there were only two funded posts -- for the DDG and DG positions.

On the planning for the project of digital migration, the Minister said that there were various entities that had a role. One entity ensured that transmission was available, and the challenge with this entity was the dual illumination period, because they had put in infrastructure for digital transmission, but still had to run the analogue transmission. Running both of these transmissions costs a lot of money.

The first part -- setting up a call centre for digital migration – had been done. The second part was mobilisation of the community to register, where the first phase was in the SKA area and had been completed. The DoC needed to go back to the community and work with the private sector to provide affordable set top boxes in the area, and had to set a deadline as to when the SKA should be switched off. The second phase was to move in the borderlines of the neighbouring countries so that when these countries migrated, than there would be no interferences and no spillovers. Part of the issues was that for someone to have a set top box, they had to have a television licence, and the DoC could not implement this in areas where people did not have television licences.

The post office had been given the responsibility to register people, and the DoC was looking at better ways of spreading the word to community members to go and register at the post office. Because of the slow pace, there were fights with the installers over the contract that was given to manufacture the boxes. There was a case that was still pending, and the DoC was meeting with them to look at how best they could resolve everything.

Ms Baloyi said that the SABC funding model had been structured in such a way that 85% of their funding they received from advertisers and sponsors, while they received 3% from the DoC for educational programmes. The loss had come mainly from the fact that the advertising revenue had dropped as soon as most of the issues surrounding the SABC had come into the public eye. The SABC had paid R31 million to their employees without a performance management system, and R11 million had been paid to the former chief operating officer (COO). It was such areas that had contributed to the loss. The SABC had commenced with a performance management system to ensure that it was within the law and approved by the board, rather than giving everyone performance bonuses.

Ms Baloyi said that the chief audit executive at the GCIS had challenges because of the workload, and this had prompted the DoC to appoint a Deputy Director.

The DoC estimated that the maximum cost for set up boxes should be around R400. The investigation that had been carried out by the National Treasury and PriceWaterhouseCoopers (PWC) indicated that there were irregularities around the procurement process, and the DoC hoped that in the next round of the procurement of the boxes, the prices would go down.

For the DoC to conclude the digital migration project, it needed around R7.9 billion for all the entities that were responsible for the rollout of this project. Part of the challenges on the digital migration projects was that some houses might qualify for a set top box, but they did not have a television set. The DoC was looking at various partnerships that would ensure that this particular project was managed.

 

The meeting was adjourned.

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