The Auditor-General spoke to the 2017/18 audit outcomes of the Department of Telecommunication and Postal Service and its seven entities. The Auditor-General said that compliance with key legislation and financial statement preparation remained a concern, with the quality of financial statements unchanged from the previous financial year at 25%, while the quality of performance reports improved from 50% to 63%.
Overall, only Sentech had achieved a clean audit. There was significant doubt whether the South African Post Office and Broadband Infraco SOC Limited could continue to operate in future because of recurring losses and poor liquidity ratios at the Post Office, and because of recurring losses and liabilities exceeding assets at Broadband Infraco SOC Limited. Irregular expenditure had decreased by 60% from R1.7 billion to R706 million. The top root causes of poor results were the slow response by management to implement action plans and vacancies or instability in key positions at the Post Office, the National Electronic Media Institute of South Africa, and the State Information Technology Agency (SITA) and a lack of consequences for poor performance and transgressions at the Department of Telecommunications and Postal Service and the Post Office. There was a lack of capacity and ineffective contract management at the Post Office and the Information Technology Agency. The Auditor-General recommended that the Committee get feedback from management on implementation plans and the status of key controls; that vacancies be filled; that irregular and fruitless and wasteful expenditure be followed up; and that feedback be requested on plans and interventions for Broadband Infraco SOC Limited and the Post Office.
Members felt that there was a lack of leadership in the Department. Members said the Auditor-General’s audit findings attributed the root causes of issues to a lack of skills in the Department. Had the leadership of the Department reviewed the Human Resources processes? Members were concerned about consequence management and why the Public Finance Management Act was not being properly implemented. Was there any evidence of public financial accountability within the Department?
Minister Siyabonga Cwele that said the Department’s state of affairs, as shown by the AG’s presentation, was correct. The Department had had challenges in the Universal Service and Access Agency of South Africa (USAASA ) and in the Universal Service Access Fund and that had led to the removal of the Board because of a rapid deterioration in USAASA’s affairs. He said that senior posts in the Department had not been filled because of budget cuts and because the revised structure of the organisation had not been finalised. There were still five critical posts vacant, including the Post Office’s Chief Financial Officer post and the post of Chief Executive Officer at the National Electronic Media Institute. He said the Chief Executive Officer of USAASA had returned and the interim USAASA Board would be finalised soon. He said one of the biggest challenges was how the Department structured its Annual Performance Plan. He said the Annual Performance Plan was still not good, but it was improving. He informed the Committee that the State Information Technology Agency had lost its Chief Financial Officer as a result of intimidation.
The Department of Telecommunications and Postal Services spoke to the audit findings and the Department’s integrated action plans in addressing the findings. There were policies and instruments to deal with IT governance. An e-portal had been developed for SMMEs which would be launched in the current month. Work was still being done on the rationalisation of State-Owned Companies.
The Department had achieved 82% of its planned targets. The three targets not achieved were the approval and implementation of the organisational structure, securing two partnerships for the digital economy, and the project management of broadband rollout to 2 700 sites.
Members queried a transaction relating to FCB and asked what the FCB was. Members asked why the Department had paid close to R800 000 in overtime. Why was that figure so high? Members asked how the Department had dealt with irregular expenditure from an accounting perspective and wanted more details on the procurement and contract management issues of the audit report. What happened to any person who did not meet the timeframes for submission of their performance agreements? What was the status of the migration to digital? What happened to those involved in irregular expenditure who were no longer in the employ of the Department?
The Universal Service Access Agency informed the Committee that ten of its 24 targets (42%) had been met. Areas of underachievement included the supply chain management processes that were not effective, leading to non-achievement of compliance with the PFMA and Treasury Regulations. The AG audit action plan had not been implemented by management, and management had not monitored the implementation of the action plan, resulting in a number of repeat findings. The Annual Training Plan had seen a 25% implementation. Local skills accounted for only 29% during the deployment of ICT services. There were 7% vacancies in senior management. The risks for the organisation were an inability to effectively recover should a disaster occur; inadequate change management process, and an inability to produce financial statements timeously. USAASA was not a going concern.
The Universal Service Access Fund had achieved only three of its ten targets. Areas of underachievement included the number of smart communities established; the number of underserviced areas with access to electronic communication infrastructure; the number of free public Wi-Fi hotspots; the percentage of set-top-boxes and antennae distributed to registered users; the number of existing sites with connectivity maintained, and inflated costs in relation to broadband projects. The external auditor had noted that the inventory balance was materially understated and expenditure materially overstated.
Members said that the Annual Report reflected poor planning, poor management, poor implementation, poor performance, and poor consequence management. Members placed the trend of operational failures at the door of the Chief Executive Officer. What had been done to vet service providers more adequately? What criminal court cases were in motion for fraud issues concerning set top boxes? Why had no warning bells rung over staff resistance to change around the procurement, installation and maintenance of the SAPS system? Members asked if the instances of serious procurement irregularities had been thoroughly investigated. Why had there been a jump in the professional fees paid out? A Member noted that the SA Connect infrastructure at OR Tambo Municipality was not working.
The Electronic Communications Act Amendment Bill 2018 had arisen from the ICT policy White Paper and been drafted by the Department of Telecommunication and Postal Service. Cabinet had approved the Bill for public consultation in November 2017. The Bill sought to deploy critical broadband infrastructure rapidly, clarify the roles and responsibilities of the Minister and ICASA and provide for open access networks to transform the sector and to lower the cost to communicate. The Bill would provide a definition of regular markets and a mechanism to review the markets to ensure they remained competitive. It would enhance cooperation between ICASA and the Consumer Commission and the Competition Commission. The Bill dealt with a number of issues, the most prominent of which was the licencing of spectrum, although the Department believed aspects of the licensing could be done within the current legislative environment.
In response to public submissions, a new chapter had been inserted to provide for international roaming regulation. The licensing of wireless open access networks would provide open access network services but the wireless open access networks would not be a public entity. It would be ICASA ‘s role to determine the terms and conditions and incentives of wireless open access networks. ICASA would have to set out a schedule to conduct market reviews of defined markets and ensure that a review took place every three years.
The Chairperson said that if the Committee did not get a Content Advisor and Researcher, the Committee could not continue to work on the Bill because it was very technical.
Members said the time allocated for public hearings was insufficient, as the Committee would need at least two weeks for the hearings and then three months to discuss the Bill. Members asked if ICASA’s independence as a Chapter 9 institution was in any way threatened. Would the awarded spectrum be future- proofed for those that had won spectrum? Would there be competitive wireless open access networks and could there be more than one wireless open access network? Members asked if the spectrum would be allocated or assigned. Members asked whether the Minister, or ICASA, would be supreme in matters involving ICASA.
The Chairperson welcomed the Minister and the delegation. Time was not on the side of the Committee that day. He had informed the South African Post Office (SAPO) that it could attend the meeting with the Presidency in Tuynhys. The meeting would be interrupted when the Committee joined the Minister and the President for the launch of the stamp on the steps of Tuynhys.
The Chairperson thanked the Department for their excellent treatment of the international visitors to the International Telecommunication Union Conference, Telecom World 2018, in Durban in September 2018. He was very impressed. He wished that students from universities could have joined in because they could have learnt so much from the international guests. He was fascinated by the young people from across the country who were coming up with solutions to the future. He would like to see that set-up rolled out across the country.
Briefing by the AGSA
Mr Humphrey Mashaite, Senior Audit Manager: AGSA, spoke to the 2017/18 audit outcomes. He said that in terms of compliance with key legislation, financial statement preparation remained a concern, with the quality of financial statements unchanged from the previous financial year at 25%, while the quality of performance reports improved from 50% to 63%. Overall, only one entity, Sentech, achieved a clean audit.
The audit outcomes of SAPO, National Electronic Media Institute of South Africa (NEMISA) and Broadband Infraco SOC Limited (BBI) had showed an improvement, while the Universal Service Access Fund (USAF) had regressed due to poor controls over bulk set-top box (STB) distribution. Department of Telecommunication and Postal Service (DTPS), the Universal Service and Access Agency of South Africa (USAASA), and the State Information Technology Agency (SITA) audit outcomes remained stagnant.
The majority of the entities were still receiving material findings on the audit of performance information and compliance with applicable legislation. NEMISA, SAPO, SITA, DTPS, USAASA, and BBI audit outcomes were unqualified with findings, while USAF’s audit outcome was qualified with findings. On the management and delivery of key programs, concern was expressed at SITA’s Program 1: Service Delivery, Program 2: Infrastructure and Program 3: Procurement.
On the financial health and financial management of the entities, Mr Mashaite said there was significant doubt whether SAPO and BBI could continue to operate in future. SAPO had recurring losses and poor liquidity ratios, and BBI had recurring losses and liabilities exceeding its assets. He added that irregular expenditure across the Department and entities had decreased by 60% from R1.7 billion to R706 million.
Mr Mashaite said that the root causes identified were the slow response by management to implement action plans and vacancies or deal with instability in key positions at SAPO, NEMISA, SITA. In addition, there was a lack of consequence for poor performance and transgressions at DTPS and SAPO, and a lack of capacity and ineffective contract management at SAPO and SITA. He recommended that the Committee get feedback from management on implementation plans and the status of key controls. He added that vacancies should be filled; irregular and fruitless and wasteful expenditure be followed up; and that feedback was requested on the plans of BBI and SAPO for interventions.
Ms M Shinn (DA) felt that there was a lack of leadership in the Department. She said the AG’s audit findings attributed the root causes of issues to a lack of skills in the Department. Had the leadership of the Department reviewed the HR processes?
Ms J Kilian (ANC) was concerned about consequence management and why the PFMA was not being properly implemented. Was there any evidence of public financial accountability within the Department?
The Chairperson said he had not heard mention of what the AG’s position was to be in terms of the new law.
Minister Siyabonga Cwele said the AG’s presentation of the Department’s state of affairs, was correct. The Department had had challenges with USAASA and USAF and the rapid deterioration in USAASA’s affairs had led to the removal of the board. He said that senior posts in the Department had not been filled because of budget cuts and because the revised structure of the organisation had not been finalised. There were still five vacancies in critical posts, including the SAPO’s CFO post, after the CFO had resigned in June and NEMISA’s CEO post, after the incumbent had been fired. The Minister stated that the CEO of USAASA was back and the interim USAASA Board would be finalised soon. He said one of the biggest challenges was how the Department structured its Annual Performance Plan (APP). He said the APP planning was still not good, but it was improving. He informed the Committee that State Information Technology Agency (SITA) had lost its CFO as a result of intimidation.
The Chairperson said that the Committee needed to reflect on the latter matter. The Committee supported SITA’s interventions and would need to speak to government to provide support in such instances.
Mr Mashaite said the AG’s issue of leadership was more about internal controls and not about the Department as a whole. He said common themes were not implementing financial procedures and not adequately monitoring the implementation of action plans. That was especially the case with SAPO’s financial and performance management. In terms of consequence management, he said investigations did happen, but no individuals were held accountable. For example, fruitless and wasteful expenditure cases from 2014/15 were still outstanding.
He said changes in the Public Audit Act would be on material irregularities where the AG would follow up whether the accounting officer had implemented corrective action pans. Regulations on that matter would be published.
Department of Telecommunications and Postal Services (DTPS)
The Chairperson congratulated the Department on the hosting of the successful ITU conference but said he had noted the lack of participation of the youth in the KZN region at the conference and that small businesses were not getting sufficient support. Perhaps they needed to be housed under one roof so that progress could be monitored. That would allow the youth to have an impact on the fourth industrial revolution.
Mr Robert Nkuna, Director-General, said that he wanted to extend his congratulations to industry who had co-hosted the conference. He said he had interacted with other African countries at the conference. He stated that South Africa was ready for 5G which would occur in 2020.
Mr Nkuna then moved on to his presentation on the Annual Report. He spoke to the audit findings and the Department’s integrated action plans for addressing those findings, which included the appointment of a travel company after the tender had been advertised for 14 days instead of 21 days, and the irregular expenditure related to cases previously reported on, amounting to R100m. There were many cases and in some cases, the people were no longer with the organisation. When investigating the cases, he said it was sometimes difficult to get information. That was an issue that the Department was grappling with in its discussions with the AG. He said there were policies and instruments to deal with IT governance. An internal control committee had been established and was chaired by the CFO. Audit findings were on the agenda of all meetings. All legislative bills were drafted internally by the Department. An e-portal had been developed for SMMEs which would be launched in the current month and work was still being done on the rationalisation of State-Owned Companies (SOC).
He said the Department had achieved 82% of its planned targets. The three it did not achieve were: approval and implementation of the organisational structure, securing two partnerships for the digital economy, and the project management of broadband rollout to 2 700 sites. Significant achievements had been the drafting of the ICT White Paper, the national e-strategy and the e-government strategy, the ICT SMME strategy, SOC rationalisation, the national radio frequency plan, and advancing SA’s ICT agenda. The Department had not achieved its organisational structure target because of delays in the finalisation of the Service Delivery Model and the need for extensive consultation.
Ms Joy Masemola, CFO, spoke to progress that the Department had made on the audit action plan relating to the previous year’s findings. Of the 26 findings, only the procurement process issues still needed to be implemented. She said that the total revenue was R6.3b, total expenditure was R4.9b and R1.4b had been transferred to Treasury.
Ms Shinn queried a transaction relating to FCB and asked what the FCB was. She wanted more detail on the IBM/Intelsat arrangement and on USAASA’s rollover of funds. She said the fact that there were 12 items noted in the audit engagement of the AG was an indictment of the Department. She asked why the Department had paid close to R800 000 in overtime. Why was that figure so high? She also queried the number of people dismissed compared to the number of cases, noting that only one person had left and asked if the others had been fired. She said there had been a significant number of performance beneficiaries. She asked if that was in addition to a bonus cheque. She asked what qualified one to earn a performance bonus and how was it measured. She said it was unacceptable that R4m was spent on sick leave. Was the sick leave because of high stress levels or because of the flu? What was the R30m in contingent liabilities for and was it written off by the Department?
Mr C Mackenzie (DA) asked how the Department dealt with irregular expenditure from an accounting perspective. He wanted more information on how the Department monitored and developed products and services of the Post Office. He asked how delegates to sponsored seminars in China were selected and how many went on those trips. He wanted further clarity on the branding of 116 cars of Sentech. How many incidents relating to the Department had been reported to the Crime Hotline that year? To what did the payment of business advisory services relate? He said it appeared that a lot of money had been spent on catering. What was the e-skills training given by Nemisa on behalf of the Department? He queried the issue of shares for the R3.7b injected by the government into SAPO, as SAPO was wholly owned by the State. On the R3m revenue received from Vodacom, he asked if that was from the original shares as the Department did not own any shares in Vodacom anymore. Who were the three political office bearers noted in key management personnel? What were the financial guarantees of R250m for? What were the details around the legal claims for R37m and R10m?
Ms N Ndongeni (ANC) asked for more details on the procurement and contract management issues of the audit report, on the tender advertisement of 14 days and on irregular expenditure. What happened if anyone did not meet the timeframes for submission of one’s performance agreement? What was the status of the migration to digital?
The Chairperson said the AG had asked that the Committee look at the implementation of the action plan to address the poor audit outcomes. What commitment did the Department have to that and what measures were in place? What had happened with those involved in irregular expenditure who were no longer in the employ of the Department? He asked for clarification on the question of whether the Department had underspent or whether it had managed to save money.
On sponsorships, Mr Nkuna said that the Department had until recently not included monetary sponsorships in its accounts as sponsorships were normally in kind. It was now signing agreements beforehand, where it asked the sponsor for the value of the sponsorship for accounting purposes.
On SITA and the Department of Home Affairs, he said the Department was aware that there were challenges and that SITA would be presenting to the Department on the matter.
Mr Nkuna said that the problem with the quarterly review submissions was that the Department had probably spent too much time working on the main projects and not enough time on the compliance side. On whether the Department had underspent or saved, he said the Department had managed to save and had reallocated the monies elsewhere. The Department was starting to build its own internal capacity to draft bills.
On people leaving the Department under a cloud, he said that that was a problematic situation. The cases totalled R100m and were over a ten-year period and those people had been paid their pensions. There were three cases and the amounts varied but the Department could not arbitrarily write off the amounts. A case had to be established. He said one could have an investigation that lead to a result where no information was forthcoming.
Mr Nkuna explained that when SA Connect was rolled out, local enterprises had had to benefit so the Department was exploring the creation of entities to provide services. The Department did not have the resources to engage in the incubation of SMMEs. It was developing a network to assist with development, but it could not allocate much in the way of funds.
On the matter of the tender advertised for 14 days and not 21 days, he blamed Supply Chain Management inefficiency. The Department still did the procurement on 14 day advertisements. There was nothing wrong with the substance of the outcome. Two people had not complied by submitting performance agreements. One had left, and one was being disciplined.
The DG explained said that the company, FCB, had been appointed to do public relations services for Digital Terrestrial Television (DTT). Later another company (Media Corner) had been appointed. DTT then moved to the Department of Communications. His predecessor as DG had said he would deal with the matter which had been the wrong approach. When the matter had gone to court, the Department had lost the case and the claim against government was for R45m. The Department had approached the Department of Communications to take responsibility for that amount. On the question of whether the government could recover the money from the ex-DG, the state law advisors had said the matter was still being negotiated.
IBM/Intelsat were internet providers for all projects which had not yet been finalised and had been pending for two years. Intelsat worked with Sentech to provide satellite internet access.
He added that the Department approached many institutions to enquire whether students wanted to go to the seminars. To date the Department had not funded many as the students were mainly funded by the sponsors.
On the issuing of SAPO shares, he said the Department had had discussions with Treasury and had not wanted SAPO to issue shares, but the Department had erred on the side of caution to avoid compliance issues. The Department still had 0.03% shares in Vodacom and that accounted for the Vodacom revenue.
Mr Nkuna stated that the Department welcomed the views of the AG. He said the Department had to go back and to clear all its old irregular expenditure and hoped to write off those debts. The variance related to a broadband project which had not started the rollout of SA Connect. Some of the issues raised by the AG had already been covered and the Department had developed relevant policies and needed to implement them.
Ms Masemola said that one share was issued for the R3.7b injected by government, for compliance purposes. She said an internal auction had been conducted to dispose of assets and R730 000 had been raised. The rest of the assets were disposed of.
On progress made on poor audit outcomes, she said the Department had an integrated action plan and an internal audit which would monitor the progress of the plan. The underspend of R1.3m was for an unfilled DDG post.
On the process of addressing irregular expenditure, she said 87 cases needed to be dealt with. Those were old cases and DTT cases. 18 cases were awaiting court outcomes. The cases amounted to R118m. In 14 cases the Department was still tracing documents so that the cases could be investigated. Those cases amounted to R69m.
Ms Thulisile Manzini, DDG Administration, said the overtime was for normal overtime pay for SAPS employees and that accounted for the majority of the overtime. The service terminations had been normal terminations not dismissals. Performance rewards were only paid to non-SMS personnel who needed to get a specific score. On the matter of sick leave, she said that only four people had made use of incapacity leave. People used their 36 days of sick leave. The Department had a service provider, the ICASS wellness company, which assisted people who might find their work environment stressful.
Ms Thulisile Manzini said the Minister and two Deputy Ministers were the political office bearers referred to. Ex-Deputy Minister Mkhize was a deputy minister for one month in the financial year under review.
Mr Omega Shelembe, DDG SOC Oversight, said USAASA’s variance from its allocated budget of R75m to an expenditure of R159m was because of under-expenditure in the prior two years. The development of products and services was for facilitating the corporatisation of the Post Bank, including acquiring ATMs, digital banking solutions and the lending structure of the Bank. On the issuing of SAPO shares, he said it was for a payment for financial services, so the Department had to receive something from SAPO to reflect that.
He added the NEMISA training was for e-skills training in the Department, which was executed by NEMISA through a Memorandum of Understanding with the Institute.
The Chairperson and Ms Shinn pointed out typos in the Annual Report. Correct spelling was important because the report became a permanent document in Parliament.
Mr Mackenzie wanted to know what the bad condition of capital stock assets related to. How many incidents had been reported to the national anti-corruption hotline in the year under review? He wanted an explanation of the guarantee on behalf of Telkom and a bank. He said the connection between one of the strategic objectives, 100% broadband population coverage, and its performance indicator, which was an operational virtual cybersecurity hub, was tenuous.
Mr Nkuna replied that the contingent liabilities were R45m and the R25m was only an estimate. The Department had not received tip-offs from the Crime Hotline but had received tip-offs through the Public Service Commission. The broadband rollout had a number of areas of focus and cybersecurity networks needed to be secured.
Mr Farhad Osman, Chief Director: Strategic and Performance Management, added that the objective was to provide secure network availability.
Mr Shelembe said the Telkom guarantee had been issued a few years back and was being amortised, so it would appear as an item until it was written off.
Ms Masemola said 4% of the assets in the asset register were in a bad condition and had to be disposed of.
The Chairperson noted that the country was facing problems regarding cybersecurity with people stealing small amounts of money from bank accounts. How could that be stopped?
Ms Shinn said it had happened to her with money being taken by a WASP. She said that verbal agreements done over telephones should be backed up by paper.
Minister Cwele said that a letter had been sent to the NEMISA Board when the CEO was suspended. NEMISA had asked for the Department’s assistance and the Department had recommended that NEMISA appointment one of its most senior staff in an acting position. The digital migration was a challenge, but the relevant entity would brief the Committee.
On the issue raised by the Chairperson and Ms Shinn, he said that he had raised concerns about that and agreed that there was a need to change the Banks Act.
Mr Nkuna noted that digital security would require work with a number of stakeholders.
Ms Shinn stated that cybersecurity had been taken over by State Security.
Minister Cwele agreed that that was true but the Department was running the hub, and cybersecurity involved many departments.
At that point Minister Cwele left the meeting.
Universal Service Access Agency (USAASA) and USAF
Mr Lumko Mtimde, CEO of the Universal Service and Access Agency of SA, said ten of 24 targets (42%) had been met. Areas of underachievement were Supply Chain Management processes that were not effective leading to non-achievement of compliance with the PFMA and Treasury Regulations; the AG audit action plan had not been implemented by management; and management had not monitored the implementation of the action plan on a quarterly basis, resulting in a number of repeat findings. Only 24% of the Annual Training Plan had been implemented. Local skills utilised during the deployment of ICT services in targeted areas amounted to only 29%. There were 7% vacancies in senior management, 18% in professional and qualified staff and 12% in skilled workers. Irregular expenditure totalled R5.5m, which included R2.5m from prior years.
The identified risks for the organisation were:
- Inability to effectively recover should a disaster occur.
- Inadequate change management processes leading to a lack of SAP support.
- Inability to produce financial statements timeously.
- The entity was not a going concern
– Development of the Digital Development Fund Bill
- Failure to derive value from Organisational Development process deliverables
USAF achieved only three of its ten targets. Areas of underachievement were the number of smart communities established; the number of underserviced areas with access to electronic communication infrastructure; the number of free public Wi-Fi hotspots deployed; the percentage of set-top-boxes and antennae distributed for registered users; the number of existing sites with connectivity maintained; and inflated costs in relation to broadband projects. The external auditor noted that the inventory balance was materially understated and expenditure materially overstated. USAF had irregular spending of R19.2m, of which R19m had arisen in prior years.
Mr Mahomed Chowan, CFO, said USAF revenue was R239m and expenditure was R446.2m and there was a deficit of R206 780 000. The surplus was related to the BDM stock.
Ms Shinn said that the CEO had been appointed in May 2016 and suspended in February 2018 and USAASA had missed most of its targets during his time at the helm. She acknowledged that he had inherited a poisoned chalice but asked what the difficulties of the organisation were. She asked if it was that the work was too much for the entity. What had been done to vet service providers more adequately? What criminal court cases were in motion for fraud issues concerning set top boxes (STB)? Why had no warning bells rung over staff resistance to change around the procurement, installation and maintenance of the SAPS system? She said the court had accepted the cancellation of the tender on STBs. Did the court say that the other two service providers could produce and be paid for those STBs not yet produced? She asked if the instances of serious procurement irregularities had been thoroughly investigated.
Mr Mackenzie said that the Annual Report reflected poor planning, poor management, poor implementation, poor performance, and poor consequence management and placed the trend of operational failures at the door of the CEO. He said the saving grace of USAASA was that it would change to the DDF. He asked why there had been a jump in the professional fees that had been paid out. Had management development ended?
Ms N Ndongeni (ANC) asked how many vacancies there were and when those posts would be filled. She pointed out that the SA Connect infrastructure at OR Tambo municipality was not working.
The Chairperson said the presentation had not dealt with the AG’s findings in summary form as had been requested. He demanded that that information be submitted by the following day. He said he did not see sufficient measures to correct the AG’s concerns and wanted a list of the interventions, each with its due date, to be submitted to the Committee.
Mr Willy Huma, USAASA Board Chairperson, said the interim board had been appointed 1 September 2018. He noted the concerns of the Committee and the board had spent the last month getting to understand the challenges facing the organisation, which were deep, but not insurmountable. He said that it was already the third quarter, so the organisation would not be able to recoup the losses of the first two quarters. He said management had been beset with legacy and legal challenges. The clean-up process was complete and there would be a ‘smart’ Annual Performance Plan in the next financial year. One also had to consider that the entity would be changing its format because of the new Bill.
New board members Mr Huma, Mr Siyabonga Dube, Ms Mapuleng Moropa, Ms Ntombizodwa Kutta-Ndlovu and Mr Sihle Ngubane pledged their commitment to improving the performance of the organisation and meeting its targets.
Mr Mtimde said there was only one judgement for a claim of R234 that was outstanding. When that was over, then the legacy problems would be done, and he could focus on performance.
He said consequence management actions had been taken. The challenges in Quarters 3 and 4, however, had increased and performance had dropped. He said he was acting against those responsible for poor performance.
On the performance of service providers, he said he was looking at tightening contract management issues with BDM. The broadband service provider was in Mpumalanga and USAASA had undertaken interventions. Mr Mtimde would check on the capacity of the service provider to take the process forward in OR Tambo municipality. The matter of STBs in the North West was being investigated.
Regarding SAPS, he said there had been warning bells and USAASA was working with Treasury to ensure that SAPS would work. He said support and maintenance of SAPS was necessary because without it, staff would revert to the old ways of doing the work. Notwithstanding the court judgement in the procurement case, the other two service providers were not affected or prejudiced by the order and so needed to continue their contracts.
At this point the Deputy Minister left the meeting.
Ms Shinn asked if that meant that all 1.5 million STBs would be procured at the contracted prices.
Mr Mtimde said USAASA would be meeting with its legal team on the implications of the judgement and therefore asked to be given time before replying to the question.
The Chairperson requested a reply by the following Monday.
Mr Mtimde said there were still 486 000 STBs with the Post Office and the focus was on completing the Free State and North West provinces. When the stock of STBs was finished, USAASA would review and tighten its SLA with them.
He said there were seven vacancies in the entity. Work on at the OR Tambo Municipality was to have been completed by 1 March 2018, but work was happening as he spoke. He said that USAASA was undertaking a digital survey on the benefits of the deployment.
A USAASA official added that Nyandeni was complete and the service provider was now working on connectivity to test, and quality assure, the infrastructure before launching it.
Mr Mtimde said those roll-outs would be at selected sites.
In response to the Chairperson’s question, he said that half of the KPIs were found not to be ‘smart’ and he would attach a time-bound action plan with the BRRR report.
Mr Chowan said disciplinary action had been taken against a senior administration manager and an executive manager. There was a period when there was no SAPS support in place and therefore material adjustments had to be made because of errors in processing during that period. The R324 000 in bonuses were not for senior management, but for lower level of staff.
Electronic Communications Act Amendment Bill 2018
The Chairperson said the Committee would not delve into the details of the Bill at that meeting. He said that if the Committee did not get a content advisor and researcher the Committee could not continue with work on the Bill because the it was very technical.
Ms Shinn said the time allocated for public hearings was insufficient, as the Committee would need at least two weeks for the hearings and then three months to discuss the Bill.
Mr Nkuna gave some background to the Bill, saying that it arose from the ICT policy White Paper and the Cabinet approval in November 2017 for public consultation on the Bill. It sought to deploy critical broadband infrastructure rapidly, clarify the roles and responsibilities of the Minister and ICASA and provide for open access networks to transform the sector and to lower the cost to communicate, to provide a definition of regular markets and to review the markets to ensure they remained competitive. It was also intended to enhance cooperation between ICASA, the Consumer Commission and the Competition Commission
He said the Bill dealt with a number of issues, the most prominent of which was the licencing of spectrum. He said the difficulty was how to strike a balance between the current licence holders and those that did not have licences. The Department was seeking to achieve consensus. He had met with industry countless times and the Minister had also met with industry. A ‘winner takes all’ approach was not possible or even desirable. A consensus was where no one would be worse off. The licensing had been an issue for 12 years. He believed aspects of the licensing could be done within the current legislative environment.
Mr Alf Wiltz, Chief Director, Telecommunications and IT Policy at DTPS, spoke to the key amendments of the Bill which were to ensure rapid deployment of infrastructure, to provide a governance framework and to clarify ICASA’s role to make regulations and resolve disputes. In response to public submissions, certain obligations that might interfere with administration of the Act had been omitted. Where cooperation was required, it would be dealt with via an MoU rather than legislation. The Bill clarified the role of the Minister to do spectrum planning and allocation and ICASA’s role to administer and manage the assignment of spectrum. The requirement to renew radio frequency spectrum licences annually had been removed and high demand spectrum would, subject to approval, be tradeable. A new chapter had been inserted to provide for international roaming regulation. The licensing of wireless open access networks would provide wholesale open access network (WOAN) services and the WOAN would not be a public entity. It would be ICASA ‘s role to determine the terms and conditions and incentives of WOANs. The Bill had been amended to provide that open access did not apply in case of technical ability and excluded broadcast signal distributors from open access requirements. ICASA would have to set out a schedule to conduct market reviews of defined markets and that review had to take place every three years.
Adv Frank Jenkins, Senior Parliamentary Legal Advisor, said his interaction had been to write an opinion on the classification of the Bill and he was interested in what the public input or issues with the Bill would be at the public hearings. He had not yet received the information on the classification of the Bill.
The Chairperson asked what would qualify it as a Section 76 bill.
Mr Jenkins said borderline cases was an area of risk of it being classified as a Section 76 Bill. The Constitutional Court had in previous rulings said that it was not about what was in the Bill. Even if only one provision qualified it, then it should be a Section 76 Bill and the advice he had received was to err on the side of caution. Content wise the bill was technical. One issue was ICASA regulations which had to act within the current Electronic Communications Act.
On the certification of the Bill, Ms Yolande van Aswegen, Principal State Law Advisor, said that one issue was the regulations ICASA was authorised to do, which should be subject to the policy made by the Minister and ICASA should act within the framework of the current Electronic Communications Act. A second issue was the access that operators had to local authorities’ land. She said her office’s recommendation was to tag the Bill as Section 75, because the Bill was substantially a Section 75 Bill and did not affect the provinces.
Mr Mackenzie asked if ICASA’s independence as a Chapter 9 institution was in any way threatened.
Ms Shinn asked if the penalising law impeded the allocation of spectrum and the bidding process, because it put a damper on the spectrum to be assigned. Would awarded spectrum be future-proofed for those licensee’s that had won spectrum? Would there be competitive WOANS and could there be more than one WOAN?
The Chairperson asked if the spectrum would be allocated or assigned.
Ms N Ndongeni (ANC) asked whether the Minister or ICASA would be supreme, in matters involving ICASA.
In reply to Ms Shinn, Mr Nkuna said the Department was following the hybrid model, so it might not be feasible to have more than one WOAN. The WOAN would be co-formed by industry players and investors. It could be a consortium because it would need to have capacity and financial muscle.
On future proofing, he informed the Committee that the terms of licences issued in 1993 had not changed. The Department never changed terms. For the new licences, the Department needed to make it clear that certain aspects would be locked while other aspects could change. He said WOANS were not State-Owned Companies. The sector was populated by industry players, but they might not be able to do the WOAN on their own. The Department was engaging with ICASA on whether licences could be issued before the finalisation of the current Bill.
On the powers of ICASA, Mr Nkuna said the issue was about allocation versus licensing. ICASA had drafted the licences but had to seek the Minister’s approval. It was not clear who had the final call.
Mr Wiltz said having many Bills had been considered. It was theoretically possible, but there were so many linkages within the Bill that it could not be broken up.
The meeting was adjourned.
- Electronic Communications Amendment Bill: briefing; USAASA & DTPS 2017/18 Annual Reports, with Auditor General input; with Minister and Deputy Minister 3
- Electronic Communications Amendment Bill: briefing; USAASA & DTPS 2017/18 Annual Reports, with Auditor General input; with Minister and Deputy Minister 2
- Electronic Communications Amendment Bill: briefing; USAASA & DTPS 2017/18 Annual Reports, with Auditor General input; with Minister and Deputy Minister 4
- Electronic Communications Amendment Bill: briefing; USAASA & DTPS 2017/18 Annual Reports, with Auditor General input; with Minister and Deputy Minister 1
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