ICASA, Film and Publication Board & Brand SA 2017/18 Annual Reports; with Deputy Minister

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Communications

10 October 2018
Chairperson: Mr H Maxegwana (ANC)
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Meeting Summary

Annual Reports 2017/18

The Committee was briefed by ICASA on its Annual Report. The Committee was informed by the Deputy Minister  that ICASA was an area of concern because of findings of fruitless and wasteful and irregular expenditure by the AG as well as areas where no progress had been made in attaining its targets Members heard that the key factors and trends affecting the organisations  performance were: the review of the broadcasting audio-visual and digital content policies; increased demand for spectrum by industry; rapid technological advancement; market consolidations; a decline in standard mail volumes across the postal sector; increased adoption of over-the-top services; and a moratorium on the licensing of community broadcasting service. In total 54 of its 61 targets were achieved. Amongst the areas of non-achievement was that ICASA still did not have offices in all nine provinces; there were 21 vacancies, with a reduction from 10.3% to 5.9%. The Audit Report result was Unqualified with findings. Irregular expenditure was R39.4m and fruitless and wasteful expenditure was R7.3m

Members asked if any irregularities were found where non-compliance related to quotations of prospective suppliers not being submitted. Members were concerned at the low level at which the disabled were employed, and the entity needed to address this. Members said the 16 resignations from the entity was too high and wanted an indication why this figure was so high. What did a vacancy rate of -30% mean and could the eight terminations be clarified?  Members asked how ICASA ensured that its graduate program was spread to the other provinces. Members asked what the status of the matter concerning the ex CEO Mr Rubben Mohlaloga was; why was he not present and what was he being paid for. They further asked about the cost of data; what the entity was doing to ensure that the audit with material findings did not recur and why there was a slow response by management to the auditor’s findings. Members wanted an update on the SCM misconduct investigation of December 2017 and more clarity on the recovery of any irregular expenditure for the years 2015-17. Members asked how much of the more than R66m was recovered; why was R5m in fruitless and wasteful expenditure condoned and why payment increases were given to five employees in contradiction of employment performance management policy and remuneration policy.

Members said there was no indication in the annual report why there was a delay in the publication of the document on the use of digital sound broadcasting and wanted clarity on the matter. Members wanted to know what type of cases ICASA had with the CCMA in terms of labour relations and attrition. Members also wanted to know about disciplinary and grievance cases. Members wanted an update on whether the iQhayiya FM radio station matter was resolved, where a wrong spectrum license was granted.

On the moratorium on the issuing of community radio licences, Members were concerned that communities had not been properly informed and consulted before the deadline was imposed. Was there any timeframe for communities to still apply? Members asked how far the dispute over spectrum involving ICASA and the Minister was.

The Committee was briefed by the Film and Publications Board on its Annual Report. The Committee was informed that there were concerns around vacancies and the executive, but the Department was moving towards stabilising the entity. There was now a CFO and the Department expected the regressions to improve. Fruitless and wasteful expenditure had worsened from R30 000 to R2.9m and irregular expenditure was R1.2m. The Department would report back from time to time on these issues.

The Committee was briefed by the Film and Publications Board on its Annual Report. The Committee was informed that there were concerns around vacancies and the executive, but the Department was moving towards stabilising the entity. There was now a CFO and the Department expected the regressions to improve. Fruitless and wasteful expenditure had worsened from R30 000 to R2.9m and irregular expenditure was R1.2m. The Department would report back from time to time on these issues.

The Committee was informed by the FPB that some of its targets were not achieved because the indicators in the APP were not correctly chosen. The FPB felt that the ‘Inxeba’ appeal proved the role of the FPB’s classification in developing social cohesion. Members heard that the FPB’s concern was escalating violence and language content; and with regard to performance 78% of targets were achieved and only four appeals were received in 2017/18. Members heard that at least 95% of classification decisions, registrations and renewal licenses could be issued within eight working days; that cyber safety and child protection initiatives would be rolled out in six different provinces. The FPB said that its audit report was unqualified with findings and there was one fruitless and wasteful expenditure item. The AG had identified that the quality of performance information was a risk area.

Members wanted the reasons why seven people had resigned. Members said disciplinary action was taken against five people who were given warnings, but they wanted clarity on the status of the disciplinary hearings that took place on 12 June against three people in the HR department.  They asked further if any disciplinary action or letters were written to the shared services executive who later became a board member of ICASA. Members were informed that no action was taken, however they (Members) had received a copy of the letter that was written to the shared services executive on the 6 July 2017. The Committee noted that the issue was brought to the executive committee on 7-9 June 2017, and on 12 June it was reported to Council. They questioned how could they then have received a response that declared that there was ‘nothing’ on the salary dispute between staff and HR. Members said that the same thing happened in Ms Palesa Kadi’s term and she got off scot free from the same allegations. There was no reflection of the disciplinary hearing in the Annual Report which led the Committee to inquire whether the table in the Annual Report included the disciplinary hearing that had been postponed. On the matter of the CEO and the COO settlement, Members asked if the FPB made provision for legal cases and if so why was it regarded as wasteful expenditure.

Members were still waiting for the previous year’s questions on the CEO and COO to be answered. The program involving outreach to schools and parents was very important. Members asked if there was any partnership with the Department of Women and Children because they were doing a similar program; and what assistance was needed, so that these programs could be achieved.  Members said that what worried them was the exposure of children to violence and strong language, even on the SABC. The films portrayed a culture of shebeens, drugs, robbing, raping and smoking dagga, as well as witchcraft. The Committee asked at what level did the FPB interface with role players including the SABC to address this matter.

The Committee was briefed by Brand South Africa on their Annual Report.  The Committee was informed by the Minister that Brand SA was a stable entity. Brand SA had regressed from a clean audit, but according to the AG’s report, the internal control systems was very good. Members heard that South Africa ranked 3/102 nations in the Open Budget Index 2017 and 31/180 nations in the World Press Freedom Index 2017; and that these two rankings indicated strengths in transparency and public accountability in the context of a democratic constitutional order. Members heard further that the organisation also ranked 4th in sustainable economic opportunities, 4th in participation human rights, 7th in safety and rule of law and 8th in human development. Brand SA also had nine ‘activations’ on creating awareness of the Constitution. Financial statements were compiled on an accrual basis, but the budget was done on a cash basis. Revenue was 4% higher than budget because of income received from a partnership with the Department of Trade and Industry and from investments of surplus cash. Total expenditure increased by 30% from the previous year largely because of investor studies and research work and accruals from the previous financial year.  The deficit on the financial statements was an accounting deficit not a cash deficit. There was a cash surplus of R5.6m.  Brand SA was cash flow positive. It had received an unqualified audit with other matters and Brand SA then spoke to the nine finding’s contained in the detailed management report.

Members commended Brand SA for their work and were impressed with their work on the AG’s findings.

Meeting report

Briefing by Independent Communications Authority of South Africa (ICASA)
Dr Keabatswe Modimoeng, Board Chairperson, ICASA, said that two board members’ terms had come to an end and they had been replaced.

Mr Willington Ngwepe, CEO, ICASA, said the five strategic goals were: investment in and access to broadband infrastructure; promoting competition; developing a common national identity and social cohesion; having an independent and credible regulator; and having an improved stakeholder and consumer experience. Key factors and trends affecting its performance were: the review of the broadcasting audio-visual and digital content policies; increased demand for spectrum by industry; rapid technological advancement; market consolidations; a decline in standard mail volumes across the postal sector; increased adoption of over-the-top services; and a ‘sustained’ moratorium on licensing of community broadcasting service pending review of the Regulatory Framework distribution of community radio stations. Two additional community licences were issued in 2017/18 in the Free State and KwaZulu-Natal (KZN). He then spoke to the cost to communicate for voice and data price trends.

As for the internal environment, he said that a settlement was reached of the long-standing industrial relations dispute and the Advanced Spectrum Management System was deployed. In total 54 of 61 targets were achieved.

In the area of non-achievement, he said ICASA still did not have offices in all nine provinces, only in seven. The percentage of suppliers paid within 30 days still stood at 94% and not the targeted 95%. He said there were 21 vacancies and the vacancy rate percentage had been reduced from 10.3% to 5.9%. He spoke to staff training costs, staff attrition and labour relations and the mitigation factors employed in labour relations and to employment equity and the number of people with disabilities that were employed.

Dr Modimoeng said there was concern over the high levels of non-compliance of community broadcasters and ICASA was working with the Department and the broadcasters.

Mr Tebogo Matabane, CFO, ICASA, spoke to the expenditure summary by program sheet. He said revenue was R451.5m, expenditure was R464.7m, with a deficit of R13.1m. Revenue had not attained budget forecasts because income from investments declined during the third quarter of the financial year due to a total amount of R124.7m being returned to the National Revenue Fund as requested by National Treasury and because of a decrease from funds invested. R2.3m was realised from deferred grants and insurance claim settlements received by the Authority.

Expenditure had increased because of increased staff expenditure due to an increase in provision for bonuses and for settlements between the Union and ICASA and because new motor vehicles were procured. In addition, there was an increase in repairs and maintenance due to additional repairs incurred on old motor vehicles.

The Audit Report result was Unqualified with findings. The findings related to goods and services with a transaction value below R500 000 which were procured without obtaining the required price quotations; some of the quotations were accepted from prospective suppliers who did not submit a declaration on whether they were employed by the state or connected to any person employed by the state; some of the goods and services of a transaction value above R500 000 were procured without inviting competitive bids;
some of the commodities designated for local content and production, were procured from suppliers who did not submit a declaration on local production and content; sufficient appropriate audit evidence could not be obtained that commodities designated for local content and production, were procured from suppliers who met the prescribed minimum threshold for local production and content; and some of the contracts were extended or modified without the approval of a properly delegated official. Irregular expenditure was R39.4m and fruitless and wasteful expenditure was R7.3m

Discussion
On the matter where quotations of prospective suppliers were not submitted, Mr R Tseli (ANC) asked if any irregularities were found because of this non-compliance. He said that 2% of the entity’s staff were people with disabilities. His concern was the low level at which the disabled were employed. The entity needed to address this going forward. He said the issue of employer equity could not be addressed when councillors of the entity were included in the count as this was not right. They should not be included. He said the 16 resignations from the entity was too high and he wanted an indication why this figure was so high. What did a vacancy rate of -30% mean and could the eight terminations be clarified?

The Chairperson asked how ICASA ensured that its graduate program was spread to the other provinces.

On the resignations, Dr Modimoeng said that exit interviews were conducted but that ICASA historically had been a training ground for the sector. Employers offered double ICASA’s salary as the employees were sought after. ICASA’s HR policy tried to counter the poaching, but it could not compete.

Mr Ngwepe said the point about the level at which disabled people were working was noted and would be made a focus point moving forward.

On employment equity and the inclusion of councillors in the statistics, he said they were included because the board was an executive board and were treated the same, however the board’s numbers could be extracted, and the figures reworked.

He said he could provide the details of the eight terminations.

He said the recruitment to the graduate program was treated like any other recruitment process. It was widely advertised and the intake for the current year came from the length and breadth of the country and was not just from Gauteng. He said there was a deliberate bias towards the historically disadvantaged universities. 80% of the graduates graduated in the core aspects of the ICASA business, namely the regulatory environment.

Deputy Minister Kekana said that a breakdown of the graduate students to show the spread of students would be added to the report that would be sent to the Committee.

Ms Palesa Kadi, ICASA Councillor, said it was an opportune time for ICASA to plan for development of a presence in all nine provinces.

Mr Matabane confirmed that no one was misled or favoured regarding the quotations on training interventions. Verification was done before the training interventions occurred.

Ms V Van Dyk (DA) asked what the status of the matter concerning the ex CEO Mr Rubben Mohlaloga was. She assumed he was still employed by ICASA. Why was he not present and what was he being paid for? She asked if Mr Ngwepe was suggesting that the cost of data currently was justified. What was ICSA doing to ensure that the audit with material findings did not recur? Why was there a slow response by management to the auditor’s findings? She wanted an update on the SCM misconduct investigation of December 2017. She wanted more clarity on the recovery of any irregular expenditure for the years 2015-17. How much of the more than R66m was recovered? Why was R5 million in fruitless and wasteful expenditure condoned. She wanted to know why payment increases were given to five employees in contradiction of employment performance management policy and remuneration policy. Who were the five people? She said there was no indication in the annual report why there was a delay in the publication of the document on the use of digital sound broadcasting. She wanted clarity on the matter.

Mr M Kalako (ANC) wanted to know what type of cases ICASA had with the CCMA in terms of labour relations and attrition. He also wanted to know about disciplinary and grievance cases. He wanted an update on whether the iQhayiya FM radio station matter was resolved, where a wrong spectrum license was granted.

On the moratorium on the issuing of community radio licences, Ms M Matshoba (ANC) was concerned that communities had not been properly informed and consulted before the deadline was imposed. Was there any timeframe for communities to still apply?

The Chairperson said the matter concerning the ex CEO Mr Rubben Mohlaloga was now in the hands of Parliament and ICASA could not answer that question.

Dr Modimoeng said substantive inputs on the CCMA matter could be included in the report that ICASA would submit to the Committee.

On data costs, Mr Ngwepe said that headline prices were stable, but these did not include specials and promotions and the phone companies would therefore claim that prices decreased. The tariffs charged by the companies were the maximum that could be charged. ICASA believed that there was more that could be done to decrease the headline prices and there would be interventions by ICASA on this matter.

On labour relations and staff attrition, he said the labour cases varied from misconduct to loss of company assets.

On iQhayiya FM radio station, he said ICASA was still battling to find an interference free frequency for them. There was no available frequency which would not cause interference to other stations. ICASA would keep trying to resolve the issue, but he acknowledged that ICASA needed to give more feedback to the community.

On the community radio application deadline, he said there was no opening for applications currently. The only applications being considered were those that had been lodged before 2015.

Mr Kalako asked how far the dispute over spectrum involving ICASA and the Minister was.

Dr Modimoeng said the dispute had been settled out of court a fortnight ago and ICASA was looking forward to the licencing of spectrum.

On the R5.4 million condoned by council for the payment of salaries outside of policy, Mr Matabane said that on 4 July 2016, employees went on strike and a number of issues were raised including anomalies in salary payments. Based on this, management submitted a proposal to pay those anomalies that had been identified, and this had been approved by the board. These issues were also addressed in the 2017/18 policies to avoid a repeat occurrence.

On irregular and fruitless and wasteful expenditure, he said there were instances where some of the funds were recovered. An internal audit report on the matter would be finalised soon.

On the investigation that was started in December 2017, he said that today was the last day of that hearing. The delay in finalising this process was because an internal investigation had to be finalised first. He said council was monitoring the matter on a monthly basis.

Ms Kadi, as she was also a member of the internal audit committee, gave the assurance that all the audit issues mentioned would be taken care of, including the issue of training. All financial irregularities would be zoomed into and people would be held accountable for irregularities.

Deputy Minister Kekana said ICASA would, through the quarterly report, indicate how it was improving through implementing the action plan.

On the issue of community radio stations, she said the Department had looked at the geographic spread of community radio stations and had noted that the Northern Cape was one of the provinces that was under-resourced. Once the moratorium was lifted, the Department would ensure that such provinces got attention.

Briefing by the Films and Broadcasting Board (FPB)
Deputy Minister Kekana said there were concerns around vacancies and the executive, but the Department was moving towards stabilising the entity. There was now a CFO and the Department expected the regressions to improve. Fruitless and wasteful expenditure had worsened from R30 000 to R2.9m and irregular expenditure was R1.2m. The Department would report back from time to time on these issues.

On the AG’s findings, she said that the entity needed to improve its information systems and the Department would be giving them support.

Ms Thoko Mpulwana, Board Chairperson, FPB, said the FPB Bill was at the NCOP and if passed then regulations would be amended.

Dr Maria Motebang, Acting CEO, said some of the FPB’s targets were not achieved because the indicators in the APP were not correctly chosen. She said the ‘Inxeba’ appeal proved the role of the FPB’s classification in developing social cohesion. She said the Classification Guidelines Review started in 2017/18 and stakeholder inputs would inform the review. She said a new pool of 38 classifiers were appointed. She said that the Classification trends pointed to an escalation of violent content, strong language, depiction of gender-based violence and violence against children and that the correlation between content trends and the impact on society needed examination. The FPB’S concern was escalating violence and language content.

Ms Abongile Mashele, COO, FPB, spoke to the performance highlights. She said 78% of targets were achieved and 22% were not achieved. She said tariffs had been finalised and were submitted to the Minister. She said only four appeals were received in 2017/18 and the appeals tribunal upheld only one of the classification decisions. She spoke to research focus groups which involved learners, teachers and parents from 15 schools in four provinces whose aim was to give insight into the attitude and online behaviour of the youth.

She then spoke to the targets that were not achieved, namely the classification guidelines review plan; the development and approval of a tariff structure; the progress made in the enactment of FP Amendment Bill; That at least 95% of classification decisions, registrations and renewal licenses be issued within eight working days; the roll out cyber safety and child protection initiatives in six different provinces; the issuing of eight internal newsletters; all four phases of the approved short-term office expansion strategy be implemented; the nine coaching sessions for successor candidates to be conducted;

On the audit report’s unqualified with findings outcome, Ms Unathi Ngobeni, CFO, said there was one fruitless and wasteful expenditure item. The AG had identified that the quality of performance information was a risk area. The previous years findings had been addressed and seven percent revenue was unspent, and the rollover of these funds were approved. She said staff costs increased by 6% because of salary increases and she spoke to Administrative expenses, Consultants’ fees and Fruitless and wasteful expenditure.

Discussion
Ms Van Dyk wanted the reasons why seven people had resigned. She said disciplinary action was taken against five people who were given warnings, but what was the status of disciplinary hearings that took place on 12 June against three people in the HR department.  Was any disciplinary action or letters written to the shared services executive who later became a board member of ICASA?  ICASA had replied that there was none, however she had received a copy of the letter that was written to the shared services executive on the 6 July 2017 and she noted that the issue was brought to the executive committee on 7-9 June 2017 and on 12 June it was reported to Council so how could she receive a response that there was nothing on the salary dispute between staff and HR. She said this same thing happened in Ms Palesa Kadi’s term and she got off scot free from the same allegations.  She said there was no reflection of the disciplinary hearing in the AR. Did the table in the Annual report include the disciplinary hearing that had been postponed? On the matter of the CEO and the COO settlement, she asked if the FPB made provision for legal cases. If there was provision, then why was it regarded as wasteful expenditure?

Ms Matshoba said she was not convinced by the report in terms of the targets that were not achieved. She said the program involving outreach to schools and parents was very important. Was there any partnership with the Department of Women and Children because they were doing a similar program? What assistance did it need, so these programs could be achieved? 

Mr Kalako said that what worried him was the exposure of children to violence and strong language, even on the SABC. The films portrayed a culture of shebeens, drugs, robbing, raping and smoking dagga, as well as witchcraft. At what level did FPB interface with role players including SABC to address this. This also rests with the political office bearers.

Ms Mpulwana said that as far as the board was concerned there was no disciplinary meeting involving Ms Kadi. She was not sure whether the letter that was mentioned, was a disciplinary letter but she did know that Ms Kadi’s contract had ended.

On the outreach project she said that while it was flagged as red it should have been green because it was an overachievement of the target, however the AG was not satisfied in terms of the AG’s reporting requirements it was not up to standard.

On the question of working with the Department of Women and Children, she said the FPB tried to have an MoU with them and there were some projects that they did together. The FPB also worked with the Department of Basic Education where it could.

Ms Mashele said that the previous year a formal process was started to work with the Department of Women and Children to develop a MoU and there was a working relationship with that Department so that when outreach was done, it was done in conjunction with that Department to target specific sectors. She said the target was achieved but the AG required that an evaluation report be completed before it would recognise that the target was achieved. This report was not finalised in time for the audit.

On the content of broadcasters, she said this was one aspect the FPB, in terms of legislation, could not regulate but the FPB had been advocating for a single content classification system across all platforms in SA. The FPB’s classification tool rated content in terms of society’s values and norms.  This raised another aspect, which was the role creatives had to play in terms of social cohesion, which was an important debate to be had by broadcasters and society and the FPB was always willing to participate in this debate.

Ms Laurie Less, Shared Services Executive, said the three HR staff members were being disciplined in terms of consequence management and this would be reported the following year.

On fruitless and wasteful expenditure, Ms Ndobeni said the amount for the settlement did not include legal costs, it only included PAYE salaries.

Ms Van Dyk was not satisfied with the answer why was the disciplinary meeting held a year after the event. It was reported in May 2017 to the CEO. A legal opinion was received on 26 May 2017 and there were meetings held on the matter on 29 June 2017. Why were steps only being taken now?  A letter was written to Ms Kadi on 12 June. Why was disciplinary action not taken, as she was part of management? She was still waiting for the previous year’s questions on the CEO and COO to be answered. She believed she was lied to.

Ms Mpulwana said it was a procedural question. Her information was that there was no disciplinary action investigation. She said she would investigate the matter and write a report on it.

Ms Van Dyk replied that it was ‘crazy’ that the FPB did not have any documentation on the matter. She said a letter was written but was then withdrawn. Why was the letter withdrawn? On the matter of the CEO she said the Committee was supposed to meet with the whole board.

The Chairperson said the FPB could go back and compile a report and then give the information to the Committee.

On the disciplinary hearing of May 2017, Deputy Minister Kekana said that if an activity happened it had to be reflected in that financial year.

Ms Van Dyk wanted to know where in the Annual Report the disciplinary action was reflected.

Ms Mpulwana said the disciplinary hearing of the three HR people was only starting now.

Ms Van Dyk said that decisions taken at FPB bothered her.

Deputy Minister Kekana said she had circulated the classification guidelines and wanted the Committee’s input.

Briefing by Brand South Africa (Brand SA)
Deputy Minister Kekana said Brand SA was a stable entity. The current CEO was undergoing a disciplinary hearing. When it was finalised, the board would update the Department. Brand SA had regressed from a clean audit, but according to the AG’s report, the internal control systems was very good.

Ms Thembi Kunene-Msimang, Board Member and Acting CEO, Brand SA, said Brand SA did Research & Tracking of Nation Brand Performance Indicators and used the Anholt Gfk-Roper Nation Brand Index.
South Africa ranked 3/102 nations in the Open Budget Index 2017 and 31/180 nations in the World Press Freedom Index 2017. These two rankings indicated strengths in transparency and public accountability in the context of a democratic constitutional order. It also ranked 4th in sustainable economic opportunities, 4th in participation human rights, 7th in safety and rule of law and 8th in human development. She then spoke to the city brand index. During the 2017/18 period the Brand SA hosted three South African Competitiveness Forum (SACF) interventions. She spoke to international investor perceptions of South Africa. Brand SA also had nine ‘activations’ on creating awareness of the Constitution, hosting student and community dialogues and films. She spoke to marketing initiatives in the USA, UK, and China markets. She then spoke to media, public relations and stakeholder engagements.
 
Ms Nadine Thomas, CFO, Brand SA, said the financial statements were compiled on an accrual basis but the budget was done on a cash basis. Revenue was 4% higher than budget because of income received from a partnership with the Department of Trade and Industry, where R4.7m income was realised and there was income from investments of surplus cash. Total expenditure increased by 30% from the previous year largely because of investor studies and research work and accruals from the previous financial year.  The deficit on the financial statements was an accounting deficit not a cash deficit. There was a cash surplus of R5.6m.  Brand SA was currently implementing an ERP system so there was a 45% increase in non-current assets. Brand SA was cash flow positive. Savings on expenditure arose from unfilled vacancies.

Brand SA had received an unqualified audit with other matters. It was not because of material misstatements but it was because of non-compliance with regulations. The audit committee ordered an audit of a tender and irregularities were found and reported. The tender occurred in a prior year but affected the current year. 

Program 2 and 3 dealing with branding and marketing was unqualified.
She then spoke to the nine findings contained in the detailed management report. Brand SA was in the process of rectifying all of these. She said the approval for deviations related to advertising in media houses had been done by the accounting officer and should have been done by Treasury.

Discussion
Ms Van Dyk said the entity was doing a great job and she was impressed with their work on the AG’s findings.

Mr Kalako commended Brand SA for their work.

The Chairperson said that when travelling abroad he always checked for their material and he was impressed with finding the material at embassies

The meeting was adjourned.
 

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