Telecommunications and Postal Services Budget: Committee Report, with Deputy Minister

Telecommunications and Postal Services

08 May 2018
Chairperson: Mr J Mahlangu (ANC)
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Meeting Summary

The Committee decided not to adopt its budget vote report after discussion during the meeting revealed that there were discrepancies and confusion in respect of some of the figures, and these needed to be corrected. It also told the Universal Service and Access Agency of South Africa Universal Service and Access Agency of South Africa (USAASA(USAASA) that it was not approving its annual performance plan (APP) as there were still a number of unanswered questions.

The Committee highlighted the governance and leadership challenges experienced by entities such as the National Electronic Media Institute of SA (Nemisa), the South African Post Office (SAPO) and USAASA. It stressed that it was important for the Department, as the enabler of policy, to ensure the effective delivery on key mandates and the provision of proper guidance and assistance to all entities, and for the responsible Deputy Director Generals (DDGs) to take on a more responsible role to ensure all entities operated lawfully and effectively.

A major issue was the need for the Post Office to obtain a banking licence. Members were told that SAPO, as a transactional bank, could loan out 80% of its capital of R8 billion to its customers at a higher interest rate than they would get from their interest-bearing investments, but because it did not have a banking licence, it was unable to do this. The application for the banking licence was due to lapse at the end of June 2018, and if the necessary changes to the legislation were not made before the end of June, then the whole process had to start afresh.

USAASA was taken to task for not submitting its APP on time, and for not responding timeously to questions raised at the previous meeting. The Department apologised for any inconvenience caused by these procedural failures. 30 questions in total had been asked at the last meeting, and USAASA had answered them in an addendum provided to the Committee. For the past two years, it had engaged intensively with the Auditor General of South Africa (AGSA) to improve its planning processes.

There were various reasons why USAASA had not achieved its targets as planned. The frequent changes in Ministers of Telecommunications and Postal Services, including the Communications portfolio, had had a domino effect on USAASA’s ability to deliver on its mandate. Another contributing factor was the instability of USAASA’s executive management, as none of the chief executive officers (CEOs) employed previously by USAASA had ever finished their employment terms. This had brought uncertainty at the operational level, and had also triggered low morale among the staff members.

Meeting report

Committee report on Department’s budget

The Committee Chairperson advised the Committee that he had invited the Universal Service and Access Agency of South Africa (USAASA) to appear before it. The entity was scheduled to present after the Committee had finished its planned presentation and adoption of the Committee Budget Vote Report. It was also because the Minister, Siyabonga Cwele, would not be in attendance and the Deputy Minister, Thembisa Ndabeni-Abrahams, who would lead the delegation, would arrive slightly later in the meeting.

The Chairperson said that Mr C Mackenzie (DA) had made technical changes to the report. Ms MR Shinn (DA) and Ms J Kilian (ANC) had also made some corrections to the report. The Committee would go through them as the corrections were somewhat substantive.  He asked Ms Hajiera Salie, Committee Secretary, to take members through the documents.

Members began to go through report. Ms Salie said the changes would be seen, starting from page 11 of the report. The Budget Analysis of the Department for 2018/19 on page 11 had been changed, although in the new copy of the report it was at the bottom of page 10. Ms Shinn had had a concern that the numbers were not correct. It had been agreed that the numbers were not correct, and the quarterly report had been used to rectify them.

Ms Kilian said she wanted to commend Ms Shinn on the wording in the report, as Members wanted to change words just to make it easier to read. The error had been a very serious oversight. The Committee took it that the figures presented in the current report were correctly recorded from the document received, as this was a serious matter that should be taken into account.

The Chairperson also thanked Ms Shinn for her “eagle eyes,” and Mr Mackenzie for first raising the matter. The Committee agreed on the amendments made on page 11 of the report. The Committee moved on to pages 13 and 14 of the Report.

Ms Salie said on pages 13 and 14, between subheadings ‘Programme analysis’ and ‘ICT structure support,’ some figures again were not correct and had to be amended, and thus it was the same scenario as page 11.

Ms Shinn said there was still confusion on how to do figures in the metric system, as sometimes a comma was used, sometimes a point was used and sometimes a space was used. She said according to the metric system used in South Africa, a space should be used for thousands and a comma for decimals. Some changes were then made to how some of the figures were written on page four.

Mr Mackenzie made comments on subheading 10.2, ‘ICT International Affairs and Trade.’ He said the figure should be much more than R4.9 million.

The Chairperson said it should probably be R49 million. He also asked if they could reflect on that.

Ms Kilian expressed her confusing on the figures presented and said she no longer trusted any figures in the report.

The Chairperson said the Committee could reflect and try to find discrepancies in the document.

Ms Kilian said the issue was that the rest of the document was extensive, and if discrepancies could be found at the beginning of the document it was obvious that other discrepancies would be found throughout the document. The responsibility of the staff was to make sure that errors were not made. The Committee’s responsibility was to interpret the engagement and reflect on the narrative and make sure that it agreed with the Committee’s views. She felt very uncomfortable, as the work that was being done at that moment was not the job of the Committee, and the office must be questioned as to why the Committee was not receiving the necessary support.

Ms Shinn commented on subheading 10.3, ‘Policy, Research and Capacity Development,’ where a figure had been adjusted but it had not been stated that the figure was adjusted.

The Chairperson asked if they could reflect on problematic figures and make sure the narrative was correct and appropriate, as that was the work of the Committee. He said figures were meant to be given, and he did not understand why the Committee had been given the problem of dealing with figures.

Ms Kilian suggested that the Committee work on the substantive amendments that had been made and get the argument on that and then adopt them. However, the Committee had to agree that the report could not be adopted on that day (8 May). The Committee must have absolute certainty that the figures were correctly reflected, and when comparative analysis was done, it must be clear what the Committee was referring to.

The Chairperson re-emphasised that for the time being the Committee had to look at the problematic figures and focus on the narrative, then later in another short meeting it should look at the figures and make sure they were worked on.

Focusing on the narrative, the Committee then moved on and some amendments were made on issues such as spelling and certain wording.

On page 15, under sub-heading ‘11.1.1 Observations,’ the first point said: The Committee highlighted the governance and leadership challenges experienced by entities such as the National Electronic Media Institute of SA (Nemisa), the SA Post Office (SAPO) and the Universal Service and Access Agency of South Africa Universal Service and Access Agency of South Africa (USAASA(USAASA), and noted that it was important for the Department, as the enabler of policy, to ensure the effective delivery on key mandates and provide proper guidance and assistance to all entities and for the responsible Deputy Director General (DDG) to take on a more responsible role to ensure all entities operated lawfully and effectively. The aforementioned was what Ms Shinn had written.

Ms Kilian agreed to some extent. She asked if it was not the Director General (DG) that must be held accountable for the branch operating effectively. 

Ms Shinn said she wanted to motivate what she had written. There was a Deputy Director General whose sole job was to play oversight on the management and effectiveness of the entity. It would seem that many of the entities, particularly USAASA, was in such trouble that the DDG had said, when he was questioned, “we have a hands-off approach”. Therefore the office was doing nothing instead of going out into the field, such as the one in Mpumalanga, where it had been found that there were irregularities. She asked why the DDG did not go on inspection visits to make sure that ICASA was doing everything they said they were doing when they reported to him.

The Chairperson said what Ms Kilian was raising was an important matter. What he thought was that actually the Minister was the one who had the political responsibility and authority, but indeed the DG was the one to be held accountable. The Committee could not go to a less senior person -- the Minister was the person the Committee should refer to. If these were recommendations to the Minister, they should be to him and the DG.

Ms Shinn said her main issue was that he was spending too much time in the office and not in the field to make sure that the entities were reporting correctly.

Ms Kilian said it would be better if the Committee put this issue in the recommendations, rather than under ‘observations.’ She said the Committee should not worry about observation, but focus on real recommendations from then on.

The Chairperson and the Committee agreed, and moved on to its recommendations. He referred to page 18, subheadings 11.12.

Discussion on recommendations

Ms Kilian recommended that Members should start the recommendations with “the Committee recommends that the Minister ensure delivery on key mandates and provide proper guidance and assistance to all entities” and she suggested particular entities such as NEMISA, SAPO and USAASA should be specified.

The Chairperson said the Committee must not recommend, but direct the Minister to ensure effective delivery on key mandates and provide proper guidance and assistance to all entities, in particular NEMISA, SAPO and USAASA.

Ms Kilian referred on page 19 to the bullet point saying: “Ensure that there were ongoing discussions with Treasury to secure additional funding for SAPO”. She felt that the issue of immediate interventions on the issues in SAPO should not be forgotten, because they were critical for the entity, and the Committee should focus specifically on them.

The Chairperson referred to Page 21 of the report, bullet point three, which had been added by Ms Kilian. She added the words, “access capital in Post Bank is in an amount of R1.3 billion and should the licence not be finalised, it should be regarded as capital and the cut-off date of this finalisation of the first step of acquiring the banking licence is June 2018 and has been complied with.”

Ms Kilian said what she had raised with Ms Salie was the issue that Mr Barnes, CEO of SAPO, had said Post Bank had an amount of R8 billion rand in capital that could be more effectively used if it were a commercial bank.

Mr Mackenzie helped Ms Kilian explain her point, and said he thought that Mr Barnes’ intention to turn Post Bank into a transactional bank was to loan out 80% of the R8 billion to its customers at a higher interest rate than what they would get from their interest bearing investments, and because Post Bank did not have a banking licence it was stuck in a position where it could not do that.

Ms Kilian what she understood was that they would have to re-apply for the licence if the time lapsed and they were still not operational. If the necessary changes to the legislation were not done before the end of June, then the whole process had to start afresh, so she had recommended that the Committee say that the application for the banking licence was due to lapse at the end of June 2018.

Mr Mackenzie said it was actually a deadline for the completion of the process to apply for a banking licence. He understood that the only obstacle to getting approval for a banking licence was that the Banks Act stated that a state-owned company could not hold a banking licence, and that was the legislation that needed to be amended.

The Chairperson said that was the legislation that was currently under way in Parliament.

Ms Kilian asked if the Committee knew that for certain, and whether it had been ATC’d (Announcements, Tablings and Committee reports).

The Chairperson said he had spoken personally to Mr Yunus Carrim, Chairperson of the Standing Committee on Finance, and could confirm that Mr Carrim was busy with the Bill.

Mr Mackenzie asked if it was not the EFF’s amendment to the Banking Bill, as that had been ATC’d?

The Chairperson replied saying he was not interested where it was coming from, as long as it had been approved. If the Committee wanted more details on that, once the Report was approved and when the Committee had the short meeting that was planned, he would brief the Committee.

Ms Kilian said she agreed, as long as the Committee captured the issue as a very urgent matter, as Members now wanted to see action. The Committee report must stress the urgency of the legislation being concluded by June. She was worried that Parliament would take a recess in the first week of June, so the Committee should rather say the process must be done by the end of May, before the end of the Parliamentary term.

The Chairperson agreed the report must put emphasis on the finalisation of the process before the deadline of June. Finally, the agreed upon legislation was as follows: “Ensure that legislation dealing with the banking licensing of Postbank is fast tracked and finalised with co-operation of all government departments and relevant portfolio committees before the deadline in June 2018”.

Ms Kilian suggested a change of wording in the recommendations from only stating “the Department” to “the Minister and the Department should actively support SAPO by facilitating the following,” and what followed were the recommendations made by the Committee. She said SAPO could not fight its own battles and Parliament must put a stamp on the Committee’s recommendations.

The Chairperson raised an issue that the Committee could not recommend to Parliament.

Mr Mackenzie suggested a word change as follows: “Ensure that the remaining legislative hurdles dealing with the banking licence of Postbank are fast tracked and finalised.”

The Chairperson suggested that the Committee should insert a date so that whoever would be dealing with it may be reminded.

The Committee made more amendments to the report when they came to the discussion on the submission date of the USAASA report on 27 April.

Ms Kilian said a very important section had disappeared, and she did not think it should be dropped.

The Chairperson concluded that the Committee would not adopt the report, and the Members agreed. He said some figures had to be looked at, and then a meeting would be called during lunch or breakfast once Ms Salie had dealt with it. The report would be circulated to all Members. Finally, he announced that the debate in Parliament would take place on Thursday, 17 May. 


USAASA issues: Discussion

The Chairperson invited Mr Mawethu Cawe, Chairperson of USAASA, to respond to issues raised at the previous meeting of the Committee. He had seen some kind of correspondence, but the document to be submitted on 27 April had not been received by the Committee until 2 May without an apology in advance from USAASA for not submitting. He wanted the Minister also to be present during the meeting. He was generally not satisfied with how the entity had conducted itself, and emphasised that departments were expected to perform.

The Chairperson said that when a budget was passed, it was a law making process. USAASA had committed a serious offence by not submitting its annual performance plan (APP). At the previous meeting, some questions had been asked by Members of the Committee, and Mr Cawe had said he would attach an addendum to the APP, with the responses to the questions.  Until the meeting on 8 May, that addendum had not been attached. Things were not happening appropriately between Parliament and the Department.

Deputy Minister Thembisa Ndabeni-Abrahams walked in at this point of the meeting. The Chairperson said Mr Cawe had threatened him earlier that morning and he wanted to put it on record. He repeated everything he had said to USAASA a few moments before she came into the meeting. He said the actions taken by the Department were complete defiance on the part of the Department.

Mr Mackenzie said USAASA was a very poorly performing entity and that during the last meeting the Committee had made little effort to accommodate USAASA, and it had been too hard on the entity.

The Chairperson disagreed and said any entity that did not abide by the law should be held accountable. He emphasised the lack of communication from USAASA.

Ms Ndabeni-Abrahams apologised on the Department’s behalf, and withdrew any wrong statements that had been made before. She also apologised for her lateness and any inconvenience caused by USAASA.

Mr Cawe apologised for his comment earlier in the morning to the Chairperson. He said the Department was not aware that the Committee had not received all the documents, but the entity had brought them to the meeting and if the Committee needed them, they were accessible. When they took over from USAASA it had not been in good shape, and they had worked hard to get it to where it was.

The Chairperson said it was a procedural matter that the Committee should receive all the documents needed in the meeting from the entity. 

Mr Mackenzie commented on the missing signatures again from the Department’s Ministers, which had been an issue raised at the last meeting with USAASA.

Ms Ndabeni-Abrahams replied that the National Treasury required a letter from the Minister, and that it was not required by law for the Minister to sign the document. Perhaps the solution would be not to add the Minister into the list of signatories, as he had written the required letter.

The Chairperson agreed, but said if the entity put the Minister in as one signatory he must sign. However, it was indeed not a requirement for all other departments.

Mr Sipho Mngqibisa, Chief Executive Officer (CEO): USAASA, said 30 questions in total had been asked by the Committee at the last meeting, and USAASA had answered them in an addendum provided to the Committee.

Mr Mahomed Chowan, Chief Financial Officer (CFO): USAASA, answered item 11, and said   USAASA’s final plan for 2018/19 on page 25 had shown a budget estimate of R80.074 million, while on page 31 was R79.465 million. The difference of R609 thousand was non-tax revenue from Program two on page 35. Why was there none shown from 2017/18 to 2020/21? The interest revenue was not budgeted for. Over the previous two financial years, aggregate spending on information communication technology (ICT) had been R52 million. From 2017/18, it had been reduced to R4.6 million and to just above R5 million going forward.  In the previous two financial years, the majority of the spending was related to implementation of SAP software. From 2017/18 onwards, spending would be moderate to incorporate support and maintenance.

Mr Mackenzie asked why funding of Blackberry Messenger (BBM) had been scaled back.

Mr Chowen replied that USAASA had not been given reasons by National Treasury.

Mr Mngqibisa referred to item 12, which spoke to the programme structure, and said it was in line with the requirements of the National Treasury framework for strategic plans and APPs. The programme listed targets for the budget year and over the MTEF period for each strategic objective

The Chairperson said he did not entirely agree, as he knew there were some issues with the APP as submitted, but because of time constraints he would not delve into them.

Mr Mngqibisa said USAASA had reviewed the previous document, and that there were changes in the latest document.

The Chairperson said he had seen the latest document and it was perfect. He asked the CEO to proceed. 

Mr Mngqibisa addressed item 15. He said over the past two years, USAASA had engaged intensively with the Auditor General of South Africa (AGSA) so that they were able to report. The management of USAASA had a full comprehension of the regulatory instruments as per the requirements of the Public Finance Management Act (PFMA). The planning process by the Agency was integrated with entities such as SENTECH, Broadband Infraco (BBI) and ZADNA, the domain name authority, including the Department of Telecommunications and Postal Service and the Department of Communications. These entities and departments get invited to the strategic sessions intended for information gathering for annual performance planning. The Agency also submitted its plans to the Department of Planning, Monitoring and Evaluation for review and comments. AGSA was also involved in the review process of the final plans in order to check compliance with the “SMART” criteria.

The Agency had a planning policy in place which was informed by the following National Treasury planning instruments:

  • The framework for strategic plans and APPs;
  • The framework for managing programme performance information;
  • The guidelines on the preparation of quarterly reports for public and constitutional entities;
  • The National Treasury performance information handbook

The service delivery model was informed by available resources. The achievement of the APP would be driven mainly by the approved budget allocation, available resources with skills (all critical positions were filled by competent staff), and the Board had the capacity to perform its oversight role effectively.

The Chairperson said AGSA did not run USAASA. The AGSA office was a chapter nine institution and USAASA was misrepresenting them, as it could not involve them right through to the end. AGSA did not sit in the Department -- they gave guidelines to the entity, and did not even audit everything, only one or two things.

Mr Mngqibisa says he could give the Committee documentation to show they had gone through processes. AGSA had formed part of the entity’s planning, as well as the DPSA. 

He answered the question on the reduction of performance indicators. He said this did not mean USAASA had less capacity, but was mainly to shift the Agency’s focus towards achievement of the strategic key priorities for the financial year. Most of the targets moved from the APP to the operational plan were found to be more operational in nature during the planning phase, hence their omission from the final APPs. These targets, together with the APP targets, would be cascaded down into individual performance agreements and tracked on a monthly basis for purposes of ensuring the Agency’s continued performance.

He said there were various reasons why USAASA had not achieved its targets as planned. The frequent changes of the Ministers on Telecommunications and Postal Services, including the Communications portfolio, had had a domino effect on USAASA’s ability to deliver on its mandate. Another contributing factor was the instability of USAASA’s executive management, as none of the CEOs employed previously by USAASA had ever finished their employment terms. This in turn had brought instability and uncertainty at operational level, and also triggered low morale among the staff members.

The baseline allocation for USAASA was not according to the funded legislative mandate, and the collected revenue for the Universal Service and Access Fund had not been prioritised for the requirements of the Fund to be fulfilled. The Agency had been established under a legislative framework that was administered by the Independent Communications Authority of South Africa (ICASA) and the regulatory complex did not put emphasis on universal service and access as they were other critical matters the Regulator had to address arising from the developmental agenda of the country.

Another major contributing factor was the skills set that the Agency had at its disposal, as there were few resources with the skill and knowledge of broadband planning and project management. The Agency’s current salary scales were aligned to Public Service Regulations, yet USAASA was operating in a technically regulated sector that was driven by rapid technological development, hence the Agency’s inability to attract good skills from the sector.

Mr Mngqibisa addressed item number 18 -- proximity of connected sites. The proximity of the sites connected and to be connected was determined by the geographical landscape of the particular identified local municipality. The numbers of sites to be connected were determined by the budget and normally USAASA engaged with local authorities such as the district executive mayors, municipal managers, and the various heads of departments (HODs) for provincial health and education.

Regarding the issue of set-top boxes, these came with warranties, but there was no call centre. Households had to visit a post office, and the post office would dispatch someone to check what was wrong.

The relationship with SENTECH was one of collaboration

The Chairperson asked about the full time board.

Mr Cawe said the Broadband Advisory Council (BAC) met every quarter and does not focus much on the risks. The Board had voted for a risk sub-committee.

The Chairperson, for the Board to have sub-committee meetings a minimum of 12 times a year was totally unaffordable. The entity should then change the Board into the executive.

Mr Mngqibisa then dealt with the last question on risk. USAASA had invested in a SAP Enterprise Resource Planning (ERP) system, and all the contracts were loaded into the system and monitored closely. The management of risks associated with contracts was also on the risk register that was closely monitored by the risk manager on monthly basis and reported to the Board’s audit and risk committee quarterly, as part of its oversight role.


Ms Kilian asked for more clarity on the risk register, and if the Committee may have copy of it. If committee met on monthly basis, the Committee needed to know potential risks. She did not know why it was important to meet monthly, but risks were important to consider. She asked if the entity had made provision for legal action in its contingency planning, and how the entity managed legal action taken against it.  Did they have funding in place to achieve its goals and targets, and could the Committee hold the entity accountable for those specific targets?

Ms N Ndongeni (ANC) asked USAASA for the names of the police stations and schools that had been connected, as that information was needed for oversight. She also corrected an error, saying she had not asked a question about the suspended CEO, but about the current CEO.

Mr Cawe answered that Mr Mngqibisa had been with the agency for seven years, and his last role had been executive performance. Before that, he was a manager at the manager’s office, and had also worked at ICASA at managerial level, as well as at the Department of Communications. He had a law degree.

He would check the information on the names of the schools and clinics.

They would look at the issue of risks, and would make a presentation in writing at the next meeting. They would also make available the risk register.

On the last issue, the funding of the APP, he said it was funded sufficiently. The only challenge the entity faced was the funding for digital migration, which was far less this year. He blamed this on the change of Ministers after they had agreed upon a certain strategy.

Ms Kilian said an entity should not depend on a Minister. The entity should execute its programmes regardless of who the Minister was.

The Chairperson said Ministers should not be blamed. The Committee was not done with the presentation, and the APP of USAASA was still not considered and had not been approved.

The meeting was adjourned.

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