Department Telecommunications and Postal Services: Mar-Dec 2018 performance

Share this page:

Meeting Summary

The Department and a number of CEOs and industry leaders presented to the Portfolio Committee on Telecommunications and Postal Services  an overview of their industry’s performance for Quarters 1, 2 & 3 of the 2018/19 Financial Year.

As part of implementing the Climate and Culture Survey Action Plan, the Department developed a Leadership Development Programme in conjunction with Wits Business School targeted at developing the leadership cadre consisting of Director-Generals (DGs) and Deputy Director-Generals (DDGs). The Leadership Development Programme has commenced with earnest and will be concluded in quarter 4. In an effort to digitise DTPS, the Department has rolled-out the e-submissions process as it moves towards a paperless DTPS. The Department successfully hosted the BRICS ICT Ministerial 2018 meeting in Durban during September 2018. The Department also successfully hosted the ITU Telecom World 2018 in line with its hosting agreement.

In terms of implementation of the National e-Strategy, the Department developed and undertook extensive stakeholder consultation on the Digital Skills Gap Analysis report, which will inform the development of the National Digital Skills Strategy. On rationalisation of SOCs, the Department developed and undertook stakeholder consultations on the draft business cases for both the State ICCT infrastructure Company and the State IT Company, which will inform the drafting of relevant legislation going forward. In terms of SA Connect, the sustenance of 63 identified sites was projected managed. Furthermore, broadband infrastructure has been installed in 313 sites while internet services have been activated in 93 sites. In an effort to fast-track the deployment of ICT infrastructure, the Rapid Deployment National Coordination Centre was established in November 2018 and has commenced with its operations. With regards to continuing with preparations for WRC-19, the SA contributions report was further updated based on outcomes from meeting of the Working Parties which also contribute to the development of the draft SA Preliminary Positions for WRC-19.

On ICT infrastructure support, there was a target of a funding application for Phase 2 Broadband Connectivity to be finalised. A memorandum of understanding (MOU) between DTPS and the Development Finance Institution (DFI) was finalised and the tender was issued by the Development Bank of South Africa (DBSA) for the scoping of the project pre-feasibility study and a draft baseline analysis was developed. However, the pre-feasibility is yet to be finalised - the delays are due to required compliance processes.

DTPS detailed the Department’s finances. This included reductions to the 2017 medium term expenditure framework (MTEF) baseline by 46.5% from R1.7 billion to R923 million. R203.9 million was reallocated from SA Connect (R143.9 million) and Sentech migration of digital signals. The South African Post Office (SAPO) is expected to issue shares to government in return for the R2.9 billion. Overall spending at 31st December was 18% of the allocated budget. Administration expenditure of 60% is due to the accommodation bill or invoice not yet received from the Department of Public Works (DPW). ICT infrastructure support expenditure of 63% is as a result of the 100% transfer made to Sentech for the dual illumination. Invoices relating to the SA Connect project were received in January 2019. Compensation of employees increased by 1.4% to R224 million and taking salary adjustments into considerations, the idling of posts in the Department will be negatively impacted.

SAPO noted that the South African Social Security Agency (SASSA) project was now in full swing. There has been a significant increase in performance against competitors. In terms of the backlog, where mail has been failed to be delivered, there was a disastrous picture that has been well analysed in the media. Challenges remain on the international side. There are quite serious challenges facing post offices worldwide with a flood of e-commerce packages that require technology upgrades to accommodate. There has been a significant move to decentralise management.

Sentech, highlighted an area of the APP being challenged, namely revenue target. Because of digital migration delay some customers have switched off their analog signals without migrating to digital.

Broadband Infraco (BBI) commented that the revenue figures are below the budget, but there is a significant increase forecasted for quarter 3. Revenue will be above R400 million, indicating that the strategy of focusing on sales is successful.

Members had a number of questions. On the funding of the ITU conference, Members asked why the Department hosted this conference if it cost the taxpayer so much money when they were promised that it would cost us nothing.

Members also asked how the Department assesses the impact of its awareness campaigns. Are they effective? On annual funding statements, there was a comment about something that went wrong and the decision was to take that individual for training. Members felt that training without consequences will not help address the underlying issues effectively. In terms of the merging of the two departments, Members ask how this is impacting the performance and morale in the Department.

It was also maintained that many people have lost faith in the post office. New vehicles and other luxuries have been purchased but where is the efficiency? Members receive calls all the time asking for undelivered items. Equally unacceptable is the fact that there are still post-offices that are closed because of a failure to pay rent. Mail is stuck behind locked doors. Members also noted that the three targets the Department missed are three quite important targets.

 

Meeting report

The Chairperson welcomed those in attendance, including a number of CEOs and other representatives from the telecommunication and postal service industries. He noted, however, that there was not enough time to discuss sufficiently the issues at hand for the day’s session. He insisted, nonetheless, that there would be time for the fruitful discussion of some issues.

Briefing on quarters 1, 2 & 3 performances

Mr Robert Nkuna, Director-General, DTPS, thanked Members and guests in attendance and outlined the scope of the presentation.

Mr Farhad Osman, Head: Planning and Monitoring, DTPS, said the Department committed to achieving 24 Annual Performance Plan (APP) targets in 2018/19 financial year. In line with the quarterly targets set for quarters 1, 2 & 3, 21 of these targets were achieved whilst three were not achieved.

With regards to capacitating senior management service (SMS) members in Programme and Project Management, a total of 50 SMS members were trained, thus completing the training programme for 83% of SMS members - albeit the target was to train only 80% of identified SMS members.

As part of implementing the Climate and Culture Survey Action Plan, the Department developed a Leadership Development Programme in conjunction with Wits Business School targeted at developing the leadership cadre consisting of Director-Generals (DGs) and Deputy Director-Generals (DDGs). The Leadership Development Programme has commenced with earnest and will be concluded in quarter 4. In an effort to digitise DTPS, the Department has rolled-out the e-submissions process as it moves towards a paperless DTPS. The Department successfully hosted the BRICS ICT Ministerial 2018 meeting in Durban during September 2018. The Department also successfully hosted the ITU Telecom World 2018 in line with its hosting agreement.

The RSA position paper on South African Development Community (SADC) roaming was finalised and approved after which it was advanced at the SADC SCOM and the SADC ministerial meeting. With regards to the ITU Plenipotentiary Conference 2018, Cabinet endorsed the South African negotiating position which was advanced at the ITU PP-18. South Africa was able to advance nine proposals which were tabled at PP-18.

With regards to the development of ICT Legislation, the following bills were presented to the cluster and Cabinet: Electronic Communication Amendment Bill, Postal Service Amendment Bill and Ikamva National e-Skill Bill. As part of implementing the ICT SMME Development Strategy, the training of internet service prodders (ISPs) in the NHI Sites commenced in identified municipalities. The incubation of ISPs was undertaken with strategic partners such as the National Electronic Medis Institute of South Africa (NEMISA), Vaal University, .zaDNA and Google.

In terms of implementation of the National e-Strategy, the Department developed and undertook extensive stakeholder consultation on the Digital Skills Gap Analysis report, which will inform the development of the National Digital Skills Strategy. On rationalisation of SOCs, the Department developed and undertook stakeholder consultations on the draft business cases for both the State ICCT infrastructure Company and the State IT Company, which will inform the drafting of relevant legislation going forward. In terms of SA Connect, the sustenance of 63 identified sites was projected managed. Furthermore, broadband infrastructure has been installed in 313 sites while internet services have been activated in 93 sites. In an effort to fast-track the deployment of ICT infrastructure, the Rapid Deployment National Coordination Centre was established in November 2018 and has commenced with its operations. With regards to continuing with preparations for WRC-19, the SA contributions report was further updated based on outcomes from meeting of the Working Parties which also contribute to the development of the draft SA Preliminary Positions for WRC-19.

The Department was unable to consider the identified 2019/20 strategic risks during the strategic planning workshop due to a late change in the workshop process/programme. The Department was unable to provide secretariat and technical support to the Presidential Commission on the Fourth Industrial Revolution due to initial delays in the establishment of the commission. The Department did not finalise the project pre-feasibility study in relation to the funding application for Phase 2 Broadband Connectivity, due to required compliance processes.

On Administration, the target of having the Strategic Risk Reports (SRR) conducted and Risk Register updated was not achieved. Q1 would have seen the 2018/19 strategic risk reports compiled and presented to relevant governance structures for approval and Q3 would have seen the 2019/20 identification conducted and draft strategic risks considered during the strategic planning workshop. In actuality, 2018/19 SRR were complied, presented to relevant governance structures and signed-off by the Director-General and Strategic risks were identified during the strategic planning process. However, due to a late change in the strategic planning workshop programme, the strategic risks that were identified were not presented for consideration.

On ICT infrastructure support, there was a target of a funding application for Phase 2 Broadband Connectivity to be finalised. A memorandum of understanding (MOU) between DTPS and the Development Finance Institution (DFI) was finalised and the tender was issued by the Development Bank of South Africa (DBSA) for the scoping of the project pre-feasibility study and a draft baseline analysis was developed. However, the pre-feasibility is yet to be finalised - the delays are due to required compliance processes.

Ms Thulisile Manzini, DDG: Governance and Administration, DTPS, detailed the Department’s finances. This included reductions to the 2017 medium term expenditure framework (MTEF) baseline by 46.5% from R1.7 billion to R923 million. R203.9 million was reallocated from SA Connect (R143.9 million) and Sentech migration of digital signals. The South African Post Office (SAPO) is expected to issue shares to government in return for the R2.9 billion. On ITU sponsorships, the sponsorships received were as follows; MTN (R25 million); Microsoft (R1million); and the Industrial Development Corporation (IDC) gave R250 000.

Overall spending at 31st December was 18% of the allocated budget. Administration expenditure of 60% is due to the accommodation bill or invoice not yet received from the Department of Public Works (DPW). All invoices were received in January 2019. International Affairs and Trade expenditure of 95% is as a result of the international membership fees amounting to R27 million that were paid in full in the 1st quarter resulting in a saving of R1.3 million. ICT infrastructure support expenditure of 63% is as a result of the 100% transfer made to Sentech for the dual illumination. Invoices relating to the SA Connect project were received in January 2019. Compensation of employees increased by 1.4% to R224 million and taking salary adjustments into considerations, the idling of posts in the Department will be negatively impacted.

Overall, transfers amounts to 85% of the allocated budget. International membership fees amounting to R27 million were paid in full in the 1st quarter resulting in a saving of R1.3 million. Transfers are made to entities according to the agreed schedule with National Treasury at the beginning of the financial year. On findings, under expenditure management, a finding on the ongoing capturing process was incorrect.

The Chairperson asked the CEOs that were present whether there were further issues they thought important to bring to Members’ attention.

An official referred to USAF and said with Cabinet’s decision regarding the DGE project, it meant the APP would need to be amended. For almost six months it did not conclude on controlling for the rulers of the broadband project and this was picked up in the 3rd quarter. In terms of broadband connectivity, 100% functionality targets would not be achieved.

Mr Mark Barnes, CEO, SAPO, noted that the South African Social Security Agency (SASSA) project was now in full swing. If one were go through the numbers though, it would be quite complicated to understand. In addition, the results will be skewered now by start-up costs that the project will no longer occur. Some funding has been given to SAPO, which has been used to repay loans. Some cash is now available for real capital development. There has been a significant increase in performance against competitors. In terms of the backlog, where mail has been failed to be delivered, there was a disastrous picture that has been well analysed in the media. Challenges remain on the international side. There are quite serious challenges facing post offices worldwide with a flood of e-commerce packages that require technology upgrades to accommodate. There has been a significant move to decentralise management. One of the key performance indicators (KPIs) is quite far behind because of this change in management. The staff optimisation expenses were increased in cooperation with unions.

Mr Mlamli Booi, CEO, Sentech, highlighted an area of the APP being challenged, namely revenue target. Because of digital migration delay some customers have switched off their analog signals without migrating to digital.

Mr Andrew Matseke, CEO, Broadband Infraco, commented that the revenue figures are below the budget, but there is a significant increase forecasted for quarter 3. Revenue will be above R400 million, indicating that the strategy of focusing on sales is successful. The other issue is the issue of irregular expenditure. As part of core business infrastructure, agreements had expired and took a long time to remove. If the service was used after a contract has expired it was irregular expenditure. He enjoined members not to be alarmed by this since it could be accounted for.

Mr Walter Claassen, CEO, NEMISA, said NEMISA will have seven collaborations operating during the coming financial year and wanted to expand to a further two. Agreements have been signed. Secondly, Nemisa was working on 1-year MOAs, but we are moving to 3-year MOAs and looking at what new programmes can be undertaken.

Discussion

Ms M Shinn (DA) asked why the National Employment Coordination Centre existed. On slide 6, on funding for phase 2 of the SMS, can you please explain the difficulty being had in coming up with figures for this? On SA Connect, she would have thought that Treasury has some challenges in funding. It was amazing how much is not working, and she would assume those installers will not be paid until those sites are actually up and running. On slide 17, she wanted to know how these members have been selected and what were the government department / private sector. On the funding of the ITU conference, she asked when this conference was first mooted. The Minister said he would not be financing anything other than the travel and accommodation bills of the ITU delegation. Since then R11.5 million has now been taken from the Department. Why did the Department hold this conference if it cost the taxpayer so much money when we were promised that it would cost us nothing? No funding was supposed to be available.

Ms Tsotetsi (ANC) referred to the quality of service and the cost of doing business and said there needed to be an understanding on how this can be optimised. She referred to slide 28 and asked how it impacted performance. How do you assess the impact of your awareness campaigns? Are they effective? On the Annual Financial Statements, she said there was a comment about something that went wrong and the decision was to take that individual for training. Training without consequences will not help address the underlying issues effectively.

Mr C Mackenzie (DA) referred to moving the two departments and asked how this was impacting the performance and morale in the Department. Is there a central coordinator within the department that could direct training more effectively, given the disparate bodies across it? He addressed Mr Barnes and said though it is competitive, a 67% delivery rate is not delivery and SAPO was not meeting the delivery standard stipulated as a part of its license. Many people have lost faith in the post office. New vehicles have been purchased but where is the efficiency? Equally unacceptable is the fact that there are still post offices that are closed because of a failure to pay rent and mail is stuck behind locked doors.

Ms J Killian (ANC) noted that the three targets the Department missed are three quite important targets. On senior management, when they do the training, especially on project management, do they get specialists from our side and do those senior managers write an exam, so that they are able to grasp where there are gaps in their knowledge? It would help determine if capacity has been developed. When will the risk plan be in place and be managed? On the implementation plan for roaming, she asked when there will be cheaper roaming available. The SASSA project has placed a lot of financial burdens on SAPO. What is the uptake from other departments which could be dealt with by SASSA? Can we now have comfort that SASSA is back to normal? If ICT practitioners cannot be trained because MOAs are not in place, the Department’s main purpose is to develop those skills. Can we understand why there is incorrect budget planning where you could not achieve your target?

Ms Ndongeni (ANC) commented on how dirty and uninviting post offices were and asked when these offices will be cleaned. [Some of her comments were inaudible].

Mr Mackenzie emphasised Ms Ndongeni’s point. The council had been on him about misconduct outside post offices and lack of security outside post offices. When are post offices actually going to be looked after and cleaned?

Ms Tsotetsi asserted that the purpose of training is to invest in your officials’ performances. There is a tendency for officials to leave the department after so much has been invested in them. How can we address this?

The Chairperson wanted clarity on capacity and asked how the non-achievements will be addressed. How does the Auditor-General interface with that non-achievement? Because of policy change, we get ourselves on the wrong side of audits by failure to take certain steps. He urged the Department to approach the Auditor-General and disclose certain developments in advance, don’t wait for the auditor. On SAPO, he asked the CEO where he saw the entity in a year or two.  Taking all these metrics into account, is this where you see us at? In my constituency, several people were the recipients of grants. Unfortunately and unaccountably, R60 000-R80 000 of said grants was mysteriously withdrawn somewhere in ATMs in Mpumalanga or Durban. It is a very sorry state.

Mr Nkuna thanked Members for their questions. He commented that it is not about anyone forcing anyone to do anything. When communications facilities are deployed it affects everyone. Disussions with the Department of Water and Sanitation focused on how infrastructure that crosses bridges can be deployed. It is about co-operation with local entities.

The sites that connect kept the money that is supposed to be for ICT services. The Department is trying to find a sustainable model that does not allow for double dealing. We have been meeting our obligations and our APP was structured in such a way where we hope things will happen. In the technical sense of providing the APP, it appeared that we would be the ones providing the know-how.

The fact is that the instituting commission was not there. On the ITU matter, those that participated regarded it as a good thing that it happened and that it was organised. Many African countries came to exhibit and showcase what they were doing. There was a value in the sense that for the first time Africa was in involved in the development of technology on African soil. With respect to money, these types of events cannot be funded by government alone. Previous events in South Korea were funded by Korean telecoms, as well as with donations from Saudi Arabia and the UAE. So there is a lot of international value in it. The funding came from the relevant branch that hosted the event.

On roaming, the Department believes that if the arrangement can be harmonised, it can help South Africans abroad to be able to use their local SIMs. The question is what the cost of making amendments is.

Ms Joy Masemola, CFO at the DTPS, commented on the issue of the memorandum and said when the Minister came in she placed it down the pipeline. It is case by case and cases are presented accordingly. On staff merging morale, the Minister has met with staff to explain the process and there are joint meetings with affected departments. The two departments are already working together as a team and a meeting with the Department of Public Services and Administration clarified the new mandate. On ICT training, she said there had been a call for personal training plans, which allows assessment of what type of training there is going to be. There will be a skills audit which will help assess the mandate.

The programme did not change to accommodate this initiative of talking to branches. Training for project management was done by external service providers, though there was no exam at the time of the training. The need to have our staff familiar with the basics was identified. Those lacking those skills went for this training. There is a policy on training which is already approved, which means that you have to pay back the money if you change department afterwards or move to the private sector. Two director positions at legal have been advertised – they are needed regardless of the state of the department.

Mr Farhad added that, on the risk issue, the consideration should happen in terms of mitigation – the Department planned on informed assumptions. By Q1 the establishment of the commission will have been facilitated.

Ms Manzini added that, on slide 34, there were disciplinary cases that had been examined. On the assessment, those findings impacted on compliance. On capturing transactions, those findings need more controls - the training officials need to take can only be provided by the National Treasury, however. On ITU, those cuts are Cabinet reductions.

Ms Tsotetsi asked if the Department had put in place the right controls.

Ms Manzini responded that the Department is sent progress on the findings and then the steering committee presents these findings at the auditing committee.

An official [Same unidentified person as before] added that the organisation subsidised the private sector to roll out infrastructure and then subsidised connectivity. There is a two level agreement: paying for servicing the rollout and then paying for connectivity based on connectivity reports. There was a new board and instability may arise but once this chapter concluded there will be stability and improvement. Policy changes do create discomfort with employees, but this is a part of a transitional period after which these will be addressed.

Ms Shinn replied that he has seven pages of under-achievements - lots of money has been spent on fixing wires but nothing is coming out of them at their ends.

He replied that audited findings will state non-achievement even if connectivity showed 9 instead of a full 10 in connectivity, because this was not total connectivity. Similarly, 294/295 is recorded as a target not achieved. A reasonable percentage of connectivity as a target will be set.

Mr Barnes added the world standard for postal delivery is 92%. If 100% is not delivered it just means that post is not being delivered on time. Even at 92% a great deal will not be delivered on time. The numbers are just overwhelming, it will never be achieved. On the broadband, SAPO delivers 30% faster than courier companies. Automation has to be part of the solution in getting closer to 100% delivery. A manual cannot cope with the volume of post. He added that he was embarrassed about the number of post offices which are closed - creditors were settled only two weeks ago. On the cleanliness of post offices, he admitted that some are dirty and said memos have been sent out to physically clean out post offices.

In terms of the SASSA license agreement, it remains a problem. PostNet needs to be shut down - it is illegal. SAPO saves the government and beneficiaries billions per annum. With tapping, when credit cards are tapped rather than inserted when making payments, there is a big opportunity for fraudulence. Sophisticated syndicates are operating. SAPO is profitable, overall to the tune of roughly R850 million. There is cash available for actual capital expenditure. The interest burden has gone away, but there are high overhead costs. Most expenditure is an investment in stock and the dynamics of investment are changing.

Ms Tsotetsi replaced the Chairperson as he stepped out for a few minutes.

Mr Classen stated that NEMISA has to look at its operating model because of extensive challenges. On the awareness campaigns, the organisation has not embarked on a national awareness campaign approach. People from the marketing division will come in to see how this might be improved upon. Impact is assessed in terms of uptake and people coming in for training afterwards. There was a delay in training recently because agreements were not signed. An agreement has to be signed every year. This process can be longwinded if it is not begun ahead of time. NEMISA will be moving out this problem fully with a three year agreement. Some universities only allow for agreements to be made once money has arrived.

Mr Matseke added that employees are given regular updates on the sub-rationalisation process. On the budgeted revenue, he said compiling the budget for the current financial finished around Dec 2017 instead of earlier as had been planned. However, it was only was issued early in March, which caused a delay of a quarter in regular actuals.

The Chairperson addressed Ms Shinn's question about the necessity of an ITU conference using tax payer money. He said he and other Members had attended the conference, and said it was one of the best organised events that he had ever been to. Whilst there, he asked young attendees whether they will embrace the fourth industrial revolution. The participation of students from universities and up and coming entrepreneurs was encouraging for him to see. They should have opened the event up to even more universities. We should host that kind of event again if we get the opportunity.

Ms Shinn responded that her concern was that tax payer’s money has been spent on it.

The Chairperson noted this concern but disagreed that it was an issue, since the meeting was a success to his mind.

Ms Shinn asked if the international affairs budget would be cut by R11.5 million seeing that that amount of money can be dispensed with so easily.

The Chairperson objected that this comment was out of order. He said Members ought to continue to fly the flag of the Committee.

The meeting was adjourned.

 

 

 

 

Share this page: