IKAMVA Bill: deliberations, with Minister

Telecommunications and Postal Services

04 September 2018
Chairperson: Mr J Mahlangu (ANC)
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Meeting Summary

The previous board of the Universal Service and Access Agency of South Africa (USAASA) got chopped because it was a law unto itself.

The Minister of Telecommunications and Postal Services, Mr Siyabonga Cwele, brought this to light when he briefed the Committee about the status of the USAASA  with regard to board changes. He stated the first signs of problems with the previous board started last year around July 2017. The first matter was received from Mr Lumko Mtimde (CEO) who alerted the Ministry of the irregular appointment of the Company Secretary in terms of salary adjustments.

He said the Ministry engaged with the board to inform it the appointment was not done according to the advertised salary level. The board was told to follow regulations and it was asked how it was going to rectify the problem.  The board then asked for condonation from the Minister. While the Ministry was still mulling over the matter, the board implemented disciplinary hearings and withdrew the request for condonation. The board stated it received a legal advice which informed it the Company Secretary was appointed in terms of the Company Act.

The CEO then took the matter to the labour court which set it aside. The CEO then went to the Public Protector. The Department received a letter from the Public Protector requesting the Department to suspend the case. The Department had a meeting with the board beginning of June 2018 to discuss fourth quarter performance decline, company secretary matter, and stance towards the Public Protector.

The Minister stated some board members were not aware of the resolutions taken by the board. The chairperson of the board, with the exception of Mr Nqandela Nqabekhaya, wrote a letter to the Department stating the board was right to appoint the company secretary because it followed the Company Act and that the Department and Public Protector were interfering in the work of the board. The Department pointed out in the reply letter of the things it felt were wrong and asked for the legal costs incurred. By doing that, the Department was making USAASA board aware not to make use of external legal services because that was against USAASA’s operating policies.

The board insisted it was right and indicated the Department was wrong. The Department wrote to the board to remind it it breached the regulations regarding the appointment of the company secretary and to let it know its performance was declining. The board then indicated the only reason the Minister wanted to disband it was to protect the CEO.

The Minister explained that at the time he was not acting on behalf of the CEO and CFO and was always in contact with the board. The Deputy Minister, who also was a go-between between the Department and board, told the Minister no progress has been registered in dealing with the USAASA board. It was on the basis of this correspondence and counter-correspondence the Minister lost confidence in the board. So, he decided to release the whole board.

He went on to say he has now received an email from the Public Protector and he was still studying the report and has noted the remedial actions. Furthermore, he enlightened the Committee he has received a letter from attorneys who claim to represent the board in which the board members were asking the Minister to review the report from the Public Protector. The Minister has asked the state attorneys to inform the attorneys representing the board members that he would respond to their concerns on 31 September 2018. So, he said, he dissolved the board because of a number of factors which included the Public Protector’s report, not following the prescripts of the Public Finance Management Act (PFMA), and not sticking to National Treasury regulations on the adjusted salary of the company secretary. The entity now has got an interim board which comprises five members. Permanent board members would be appointed after three months.

Meeting report

The Minister of Telecommunications and Postal Services, Mr Siyabonga Cwele, briefed the Committee about the status of the USAASA  with regard to board changes. He said the previous board of the Universal Service and Access Agency of South Africa (USAASA) got chopped because it was a law unto itself. He he  He stated the first signs of problems with the previous board started last year around July 2017. The first matter was received from Mr Lumko Mtimde (CEO) who alerted the Ministry of the irregular appointment of the Company Secretary in terms of salary adjustments.

He said the Ministry engaged with the board to inform it the appointment was not done according to the advertised salary level. The board was told to follow regulations and it was asked how it was going to rectify the problem.  The board then asked for condonation from the Minister. While the Ministry was still mulling over the matter, the board implemented disciplinary hearings and withdrew the request for condonation. The board stated it received a legal advice which informed it the Company Secretary was appointed in terms of the Company Act.

The CEO then took the matter to the labour court which set it aside. The CEO then went to the Public Protector. The Department received a letter from the Public Protector requesting the Department to suspend the case. The Department had a meeting with the board beginning of June 2018 to discuss fourth quarter performance decline, company secretary matter, and stance towards the Public Protector.

The Minister stated some board members were not aware of the resolutions taken by the board. The chairperson of the board, with the exception of Mr Nqandela Nqabekhaya, wrote a letter to the Department stating the board was right to appoint the company secretary because it followed the Company Act and that the Department and Public Protector were interfering in the work of the board. The Department pointed out in the reply letter of the things it felt were wrong and asked for the legal costs incurred. By doing that, the Department was making USAASA board aware not to make use of external legal services because that was against USAASA’s operating policies.

The board insisted it was right and indicated the Department was wrong. The Department wrote to the board to remind it it breached the regulations regarding the appointment of the company secretary and to let it know its performance was declining. The board then indicated the only reason the Minister wanted to disband it was to protect the CEO.

The Minister explained that at the time he was not acting on behalf of the CEO and CFO and was always in contact with the board. The Deputy Minister, who also was a go-between between the Department and board, told the Minister no progress has been registered in dealing with the USAASA board. It was on the basis of this correspondence and counter-correspondence the Minister lost confidence in the board. So, he decided to release the whole board.

He went on to say he has now received an email from the Public Protector and he was still studying the report and has noted the remedial actions. Furthermore, he enlightened the Committee he has received a letter from attorneys who claim to represent the board in which the board members were asking the Minister to review the report from the Public Protector. The Minister has asked the state attorneys to inform the attorneys representing the board members that he would respond to their concerns on 31 September 2018. So, he said, he dissolved the board because of a number of factors which included the Public Protector’s report, not following the prescripts of the Public Finance Management Act (PFMA), and not sticking to National Treasury regulations on the adjusted salary of the company secretary. The entity now has got an interim board which comprises five members. Permanent board members would be appointed after three months.

The Committee also received a presentation from the parliamentary legal adviser on the IKAMVA BIll. members raised some concerns and those concerns will be considered by the legal adviser and incorporated in her next presentation. 

Discussion

Ms R Shinn (DA) wanted to know if the CEO was aware of the salary adjustments when he signed the letter of appointment for the company secretary. She said this was bothering her because the matter went to the Public Protector whereas there were internal processes that should have been followed by the CEO who thought things would fall in his favour. She asked if the CEO was capable of doing his work because he appeared to be panicking.

The Minister explained that while he was dealing with all these matters, the board of USAASA indicated to him it had completed the disciplinary hearings and the CEO should be fired. The Minister then asked the board to give him information which, unfortunately, came in dribs and drabs.  The Minister stated when the Department was dealing with the board, he was shown the minutes of the board where advice was given by the CEO. The board then felt the CEO was undermining it. The then acting corporate and legal services executive of the entity went into details about the Act regarding irregular salary adjustment of the company secretary and this was tabled before the board. The CEO also reported the matter to the Minister. Many advices were given to the board on its incorrect decision, but the board thought the CEO was defying it.

The Minister further informed the Committee he has not made an assessment on the capacity of the CEO, but as a Minister he was aware of the tensions and interventions between the CEO and the board. Engagements happened between the Department and the board. The board sabotaged the efforts of the Department, and he asked the board why he should condone something the board was pre-warned and post-warned of and what law he should follow in doing the condonement.

Ms J Killian (ANC) stated it was so bad for the entity to again have this internal conflict. Tensions were clear between the CEO and the board. The board was advised not to interfere in the work of the entity, but to provide only strategic direction. She pointed out the board met more than four times a month instead of its planned sittings of once in a quarter. After the CEO was instructed to sign the employment letter of the company secretary, the CEO alerted National Treasury and labour court which set the case aside because it was seen not as an urgent matter. The board then saw the CEO as undermining it, and the board appointed an external legal person.  She then wanted to know what the incurred legal costs were for fighting the irregular adjustment of the company secretary’s salary and indicated it was time to hold accountable those appointed to the board by paying for the losses incurred by the entity. She further suggested the Minister should consider remedial actions proposed by the Public Protector. She indicated the board had gone rogue just like the SABC which used both the Company Act and SABC Act when it suited it.

The Minister enlightened the Committee the legal costs were coming in dribs and drabs and were amounting to R4 million. He indicated that when he had a meeting with the board in May 2018, the board asked the Minister why he was concerned about an insignificant additional R180 000 to the company secretary’s salary. The Minister stated it was public money.

Mr C Mackenzie (DA) asked if there was an SIU investigation undertaken on USAASA. He also remarked that the Committee found the USAASA infrastructure appalling during its oversight visit to Mpumalanga.

The Minister stated there was an SIU investigation which the previous board opposed before the chairperson of the previous board resigned. The Minister asked the board to take necessary action and told the company secretary that he was the custodian of the most important documents of the entity. The Deputy Minister was the one dealing with the board most of the time and she relayed her frustrations to the Minister. He said there was dishonesty with the board because it would say one thing and later change its mind. The board was not taking care of the resources it had to manage. The board was fully aware of the advices of the Minister, National Treasury, and senior management of the entity.

Ms D Tsotetsi (ANC) said the Committee engaged with USAASA regarding the salary adjustments of the company secretary. The former chairperson of the board promised to respond in writing to the Committee, but nothing has yet been received. She asked at what stage does one has to approach the Public Protector because internal procedures on this matter were followed, but nothing came to fruition.

The Minister indicated he does not know when to approach the Public Protector. He stated Mr Mtimde detailed the allegations against the board. The Minister said the Public Protector did not only focus on its core business, but concentrated on the Protected Disclosure Act.

The Chairperson commented that when the Committee dealt with the Annual Performance Plans (APPs) of USAASA, some members of the opposition felt the Chairperson was too hard on the board members with regard to PFMA expectations, laws that regulate the entity, shabbiness of the work presented to the Committee, and arrogance displayed by the board chairperson. The Chairperson advised the legal advisers to close the gaps in the Bill that were allowing board members to follow laws as they suited them but run to the Company Act when it is convenient for board members. The Chairperson then asked the Minister if he was not creating instability by taking certain rushed actions. He reminded the Committee that South Africa is a constitutional democratic country and it does not matter where you report your concerns to, whether to a Public Protector, SAPS, media, president, etc.  It was time the country was showed what is wrong is wrong. People appointed to public bodies have to fall on their swords, and he advised the Minister to go for the jugular.

The Minister explained he took decisions based on his interaction with the board. He tried by all means to assist the board to resolve the matter since May 2018 until August 2018. Due processes on the issue were followed because he was aware that his actions would also be taken on the review.

Ms Killian suggested the board members of USAASA should be declared delinquent and that in future board members that have been declared to be delinquent should not be appointed to public bodies again.

Mr Mackenzie remarked the Minister has to fire appointed board members to public entities who were not performing because it was the Minister who made the appointments. The Minister has to ensure there were no repeats.

The Minister informed the Committee the interim board has got five members: Adv William Huma who is the interim chairperson, Ms Ntombizodwa Kutta-Ndlovu, Ms Mapuleng Moropa, Mr Joel Sihle Ngubane, and Mr Siyabonga Dube. He further stated the Department was struggling with the digital migration process even though the court has ruled in the Department’s favour. There was no budget for the roll-out. He said if the budget was available, the project would be rolled-out speedily.

Deliberations on the IKamva Digital Skills Institute Bill

Ms Fatima Ebrahim, Parliamentary Legal Adviser, took the Committee through the Bill, clause by clause. She asked the Committee to adopt the draft, but not as an A list.

Mr Omega Shembe, DTPS Director-General, commented the parliamentary legal adviser’s presentation reflected on the engagement between the legal units of parliament and Department. The presentation touched on the conundrum of the Company Act. The Department was of the view it would continue to borrow from the Company Act. NEMISA was registered in terms of the Company Act as a non-profit organisation and would be deregistered. On the role of National Treasury in determining board remuneration, currently, National Treasury was setting the categorisation for the remuneration of the board. When determining the categorisation for remuneration, the Department was sitting jointly with Public Service Commission and National Treasury. He suggested the Minister should be included in the process. Regarding the term of office for the board, he indicated the board needed to be refreshed all the time to maintain objectivity because the renewal of seats might lead one to defend one’s old ideas. Concerning the CEO functions, he stated there was a document available at National Treasury that spelt out the details and would be considered when it comes to that section of the Bill.

Mr Alf Wiltz, DTPS Chief Director for Telecommunications Policy, suggested clause 6 (8) be amended or rephrased because it puts the Minister on an equal footing with the nomination committee. He proposed that the Minister, if he/she receives no nomination or insufficient numbers of nominations, should appoint the required number of board members after consulting with the board.

Mr Mackenzie stated the Committee was not out of line at least by stating the terms of office should be between three and five years. He suggested the Bill should indicate a minimum of three but not exceeding five years. He pointed out Section 8 should be carefully crafted on who should be excluded from board membership.

Ms Shinn expressed concern about the loss of institutional memory if terms of office would not be renewed for board members. She also said the definition of what digital skills meant should be changed to “efficiency to use digital skills”.

The Chairperson suggested the parliament legal adviser should apply her mind about the concerns raised and inform the Committee when she was ready to present to it again. The Committee would love to have a tight and defendable Bill. Pertaining to the terms of office of the board members, the Chairperson indicated the Bill dealt with the most important transition. The Committee did not get a lot of input when it advertised the Bill. He reasoned that having board members for a short period might put the Committee backward. He went on to say if you were in a space for a long time, you develop your own independent mind, you are not easily coerced, and you’ve got corporate memory. The Committee has got a better document to work on, and the parliamentary legal adviser should not allow the Department to bully her.

Prof Walter Claassen, NEMISA Chairperson, commented that questions raised two weeks ago by the Committee have helped his team to move forward with the Bill, and the other points raised would still get the same attention.

The Chairperson then asked the Committee to decide on the entities that should be interrogated seeing that soon it was going to be the BRRR period. He noted it was impossible to deal with all the entities because it was a waste of money to invite people to parliament for only 30 minutes. He warned Members the Committee has got only two days for engaging with the entities. It would be better to have four to five entities. Members agreed the Committee should start with the crucial entities like SAPO, USAASA, and BBI. The rest could be done on the second day.

The meeting was adjourned.

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