Audit Committee: AGSA briefing; Department of Communications & Digital Technologies & DTPS 2018/19 Annual Reports; with Deputy MInister

Meeting report

Opening remarks

The Chairperson welcomed everyone to the Portfolio Committee on Communications. He felt it important to highlight the name of the Committee as there were new departments and entities that joined the Committee. The amended programme was scheduled to end at 19:15. He explained that there would have been a communications challenge with regard to the implementation of the ATC that then proved the Media Development and Diversity Agency (MDDA), the Government Communication and Information System (GCIS) to report to the Committee which had necessitated the change in the programme. The presentation to be made by the Auditor – General South Africa (AGSA) had also been affected as they were supposed to present before another Committee. That meant that different teams from the entities would be presenting before the Portfolio Committee on Communications as they had also planned to present before other committees. He clarified that the MDDA was no longer in the Department of Communications and Digital Technologies but in the Presidency. He acknowledged that the Deputy Minister was present in the first meeting as the political figure.

Presentation by the Auditor-General South Africa on the Budgetary Review and Recommendations Report 2018-19

Mr O Duda, Acting Corporate Executive: Audit (AGSA), thanked the Chairperson for providing clarity on the entities GCIS and MDDA. The team would take the Committee through the presentations on those entities. There were two departments and they each had an engagement manager overseeing the departments and the respective managers would present about the department they had been responsible for. In addition to that, the Committee would be briefed about amendments to the Public Audit Act. The two departments had not been selected for the first phase in but the presentations would be high level.

Mr Andries Sekgetho, Business Executive: AGSA, provided an overview of what the audits entailed. He explained that the annual audits examined three areas: fair presentation and absence of significant misstatements in financial statements; reliable and credible performance information for predetermined objectives; and compliance with all laws and regulations governing financial matters. • In the past three financial years, the communications portfolio has shown a slight improvement in audit outcomes. The SABC improved their audit outcome from a disclaimed opinion to a qualified opinion. The SABC continued to face liquidity challenges in the current year but is expected to receive financial support dependent on the achievement of certain conditions. The Department regressed from clean audits over a three year period to an unqualified opinion with findings on the audit of the annual performance report. The Film and Publication Board (FPB) improved to a clean audit opinion. Sentech was commended for retaining its clean audit. Financial statement preparation remains a concern, as material adjustments had to be made to the financial statements submitted for auditing at the South African Post Office (SAPO), Universal Service and Access Agency of South Africa (USAASA), National Electronic Media Institute of South Africa (NEMISA), (State Information Technology Agency (SITA) and the Department Of Telecommunications & Postal Services (DTPS). USAF was qualified on inventory as a result of not having adequate systems in place to process records related to inventory. The SAPO was qualified on other deposits (grants) as well as other receivables as a result of not having adequate systems in place to process records related to the SASSA project, which resulted to a limitation in financial instruments and risk management. SAPO, SITA and NEMISA had material findings on performance information due to insufficient oversight, inadequate implementation of proper record keeping to enable reliable reporting and insufficient understanding of Framework for Managing Programme Performance. SAPO, USAASA, USAF, NEMISA, SITA and DTPS had material compliance findings, mainly due to non-compliance with procurement and contract management regulations and poor quality of financial statements.

AGSA recommendations

To the departments and its’ entities: Develop an effective action plan covering financial statements, compliance with legislation and performance reporting. Action plans should also form part of the performance contracts of key officials; prioritise and fill key vacancies with suitably qualified staff; implement consequence management as and when transgressions and/or poor performance is identified. To the Committee, AGSA recommended as follows: Request regular feedback on action plans and the implementation thereof; effective monitoring by the Committee should ensure that officials are held accountable; monitoring of appointments for key vacancies; unauthorised, fruitless and wasteful and irregular expenditure should be regularly followed up to confirm that all instances are adequately investigated and that adequate consequence management is implemented.

Discussion

Ms A Mthembu (ANC) welcomed the presentation.  She was concerned that there was instability in some of the entities caused by the number of vacant posts. Was there a specific reason as to why those posts were not filled?  As she understood it the vacant posts signalled that certain functions were not being performed well.  She felt that the number of rotating employees in perpetual acting positions did not foster an environment of stability within the entities. That was extremely concerning.

Mr C Mackenzie (DA) thanked the AGSA for the presentation. In hearing so much about State Capture he was relieved that the AGSA had remained untainted by scandal and he applauded them. He was concerned about the safety implications associated with the controversial nature of the task at hand and wondered if there had been any safety ramifications. Had employees of the AGSA been threatened and did they require protection form the State? With reference to slide 13, he addressed the interventions made that had improved the outcomes.   He wanted to know if the improved outcomes were as a result of AGSA advising the accounting authorities in the entities on how to improve. That spoke to the level of financial management in the entities and showed that the level of expertise was not what it ought to be. What was the level of financial expertise in the entities especially with regards to the SABC? If they were not up to par then what steps would the AGSA advice they implement to improve? On the debt owed to the South African Post Office (SAPO) and their apparent inability to collect it, what was the nature of that debt? Who was SAPO extending credit to other than the government? As he understood it when anyone transacts with SAPO monies were paid up front. He asked how things would look going forward if the Post Bank were to be taken out of the SAPO group. Would the AGSA be comfortable with the Post Bank running separately? On SABC acquiring content that was not broadcasted that the AGSA casted as fruitless and wasteful expenditure, he asked if that content had a shelf life. He felt that it could only be written off as fruitless expenditure after a longer period of time like four years but until such a time the content could be used in a year or eight month or on National Spring day for example. He wanted the AGSA to comment on that.

Ms N Kubheka (ANC) welcomed the presentation and acknowledged that the AGSA expected the Committee to assist the departments. She fully understood that the entities faced a lot of challenges but wondered how the other entities managed to get and sustain clean audits. What were some of the things they were doing to get clean audits so that other entities and departments could implement those examples? Her hope was that all the entities got clean or unqualified audits. She wondered whether the entities not getting clean audits were overwhelmed by challenges that were beyond them or if it was a reflection of a poor work ethic. Since consequence management had been raised she wanted to know if the entities had their own internal audits to fix problems before they got to the AGSA. On wasteful expenditure, she asked if the entities were keeping records or simply spending recklessly knowing that they did not have to account especially after wasteful expenditure had been flagged by the AGSA. She asked if the entities that received clean audits like Sentech also had good Service Delivery. Were they just doing whatever they needed to do to get a clean audit but were not carrying out service delivery correctly?

Mr L Molala (ANC) stated that the presentation was very informative and felt the AGSA gave a wonderful workshop that enabled Members to know what to look at. First, he was concerned that the AGSA mentioned oversight but did not present on it when it was mentioned a lot in the report. That was concerning because oversight was Committee’s responsibility and the report mentioned that it was not being carried out sufficiently so he wanted more information on that. Secondly, he had concerns around SAPO and the SABC’s past financial years’. He pointed out that with regards to those two entities the report mentioned intervention in many areas but lacked elaborate intervention plans – the repot only pointed out areas of weakness. He asked for the specific type of intervention that would be required from the Committee so that Members could work on them as he was of the view that the country needed sustainable public entities. Furthermore, he felt that the Committee ought to look at the entities present and interact with them so that when they presented there would be responses as to what the challenges were and how likely they were of improving. He felt Members could not only deal with quarterly reports but should also have a basis to make proper assessments.

Mr T Gumbi (ANC) commented on the recommendation given by the AGSA that the Committee should do proper oversight and asked for examples of oversight mechanisms. For example, if the Committee were to ask the entities for regular reports then what time frame should be set for the reports to be submitted to the Committee? Should it be monthly or quarterly? That would enable the Committee to properly execute their oversight role.

The Chairperson elaborated on Mr Mackenzie’s point on the Post Bank and SAPO. He asked the AGSA to reconcile the two slides. The first slide talked about cash management concerns making the continuity of SAPO uncertain. However the presentation stated that a financial analysis on the current state of SAPO had been carried out to assess whether it would be a going concern if the Post Bank were to be separated from SAPO and it was concluded that it would be a going concern. He needed clarity on that point as the information would be important when deciding whether or not to separate the Post Bank from SAPO. He felt that the answer as to whether to keep the two together or to separate them was not clear enough. He raised the point that currently the AGSA may not have had referrals or may not have issued certificates of debt but he wanted to know what level of reoccurrence where consequence management had and why the AGSA had not acted in that manner where they needed to escalate it (2.19.05) . That was reflected in different spaces be it Telecommunications or Communications. He asked the AGSA to speak to that.

The Chairperson also referred to one of the points raised by Mr Molala. He wanted clarity because on slide 18 there was reoccurrence but on slide 19 where it mentioned “assurances going forward”. Ms Pillay had mentioned two levels of assurance and the third one was not a current issue but in future it would be something to look at. However, towards the end of the presentation that matter arose on slide 46 and 47 where it was indicated that part of problem was ‘slow or no response to improving key controls and addressing risk areas’. He raised that point because the Committee was mentioned there and he wanted clarification because perhaps there were key issues the Committee needed to respond to which might not have emerged in the Legacy Report. He felt the clarity would help Members carry out oversight that was listed as a Recommendation. The Committee may not have been aware of some of the issues occurring but the question remained what needed to be done once knowledge of the issues had been obtained.  In essence the Chairperson wanted to know whether the observation of slow responses was a general statement or whether it was specific to the Committee.

The Chairperson, commenting on reoccurrence, referenced the action plans that the Committee may not have access to in order to carry out their oversight role. He asked if the AGSA had satisfied itself as to whether the mechanisms in the Action Plans of the entities adequately responded to what was flagged by the AGSA. Did the AGSA give feedback to the entities as to whether the Action Plans would address the issues they faced? He felt the audit should not be seen as punitive because it came at the end but rather, audits should help to capacitate the entities to improve their systems in place. The systems in place must work to keep the staff and entities in green. He pointed to the fact that the entities that achieved clean audits also had acting staff members. He therefore wanted to know what effect vacancies had on the result of the audits. What was the effect of skills on audit results especially when it came to reoccurrences? If skills were placed where they ought not to be then even skill training programmes would not prove successful and may result in investments yielding no returns.

Mr Duda thanked the Committee for feedback as it helped the institution knowing that the work they carried out added value to the system. He assured Members that the institution would keep strengthening processes to be able to provide the Committee with the information required for their oversight duties. He handed over to his colleges to answer the questions.

Ms Pillay, AGSA, stated that she would address matters raised relating to the Communications Portfolio. In response to Ms Mthembu’s question about the instability in the entities she explained that instability was raised as a root cause of the issues in the Communications portfolio. It was also the root cause for the troubles at the SABC. She noted the instability over a few years was caused by the high number of Acting Chief Executive Officer (CEO) and Chief Financial Officer (CFO) positions. She explained that the concerns were around supply chain management and the issues about the internal control environment and the amounts of irregular expenditure that had been recorded. The Head of Supply Chain position had been vacant for a substantial portion of the year that was under review. Additional instabilities were noted at the Board level which provided strategic direction to the entities through its responsibilities such as approving policies and risk management and as a result instabilities at that level greatly affected the entities. She reminded Members that in the previous financial year there was an interim board after which a permanent board was appointed and explained that the constant movement also contributed to the instability. She noted that as of April the board positions had been filled and the AGSA hoped that consistency at that level would also assist with strategic aspects that needed to be dealt with especially regarding audit outcomes such as irregular expenditure, the strategic direction of the entity as well as the turnaround strategy. 

On vacancies not being filled Ms Pillay explained that the SABC had a moratorium placed on filling vacancies but it had since been lifted and the post of the Head of Supply Chain had been filled. Other vacancies had been noted in the financial unit and it was understood that management was trying to fill those posts as well. In the communications portfolio the concerns were mainly around the SABC. She referenced the question about slide 13 about the improvements in the audit outcomes and stated that Mr Mackenzie correctly referred to the material corrections to the financial statements being an area of concern as it related the financial expertise. This was a concern as it implied that as financial statements were submitted there were material errors that management had failed to pick up. AGSA through the audit process would have informed management of the errors they had picked up and would advise if management would be able to correct the errors in the allocated time available to them in for AGSA to successfully conclude the audit. It was reported by AGSA to the Independent Communications Authority of South Africa (ICASA) that they had material corrections to be made to their financial statements and ICASA management were able to correct those errors and received an unqualified audit. The Department of Communications and FPB there were no material corrections in the financial statements and that indicated that they had submitted fairly appropriate financial statements to the AGSA. The SABC did not have material correction to their financial statement but they had two qualifications that impacted the reliability of the information that they provided. She then addressed the question about the level of financial expertise and stated that from auditing perspective it was difficult to comment on the performance of individuals as they could only comment on the movements in the audit outcomes.

Ms Pillay explained that in the prior year the SABC had a number of qualified areas reported in addition to the growing concern which resulted in the disclaimer opinion. With the appointment of the CEO and CFO, AGSA noted a drive from management to resolve the qualification areas and management had done well to clear most of the issues they had. The remaining issues were PPE and irregular expenditure. In explaining what steps management could implement going forward she stated that the issue around PPE could be resolved by management in the short term over the next year. That could be addressed by making sure the asset register is properly compiled and that management would be able to account appropriately for it. Irregular expenditure would be the qualification that would prove more difficult to resolve. In order to clear that qualification two aspects needed to be considered. The first one related to the internal control environment. SABC needed to stop the occurrence of current irregular expenditure so that they did not incur any more. The fact that they were incurring more irregular expenditure pointed to the fact that the control environment had significant weaknesses that had not been resolved. Since irregular expenditure had been identified by AGSA under the year for review it was up to management to make sure appropriate controls were implemented to make prevent further irregular expenditure from occurring. When AGSA looked at SABC’s current internal control management they identified that the position of the Head of Supply Chain Management needed to be filled to provide further direction in the internal control environment. It was also reported that skills training needed to be conducted in the unit. The second aspect of the irregular expenditure that management needed to deal with was around the balance of the irregular expenditure which currently stood at almost R5 000 000 000 over a number of years. The concern was raised that management had not investigated that money or whether it could be recovered from individuals or whether that irregular expenditure could be condoned. A third concern raised that the SABC could address would be on reporting performance information. It was noted that there were several indicators that management had not adequately designed systems and processes to be able to report reliable information on their performance information. That reflected in the individual skills needed to understand how to report on performance information. Those were the three areas the SABC needed to concentrate on to significantly improve their audit outcomes.

Ms Pillay, in addressing Mr Mackenzie’s question about fruitless and wasteful expenditure on broadcast content, agreed that there had been impairment around the content. She clarified that it had been identified by SABC management and not through the audit process. When management assessed the content it decided that it could not be used in future. On sustainability and encouraging clean audits, she explained that it was easy for an entity that was clean to suddenly moved to unqualified findings or to regress to even further. That happened with the Doc which had done well for three years and regressed this year to unqualified with findings due to one item. From an audit perspective AGSA tries to have regular engagements with the management teams of the different entities. This would be done by following up with management early in the audit process to provide them with feedback on how they could improve. Management needed to be on constant guard by ensuring internal controls are implemented so as to maintain clean audit outcomes and minimize the risk of regression.

With reference to the effectiveness of internal auditors she stated that across the four entities they audited ICASA, DOC and FTB were in the green meaning they received unqualified opinions. The SABC was in the yellow and had an internal audit unit that had been reporting. AGSA raised that as a yellow because they believed the issues around irregular expenditure and reporting on performance information still continued to be a cause for concern. Those were areas internal audit needed to work on with management to improve audit outcomes. Overall there were found to be internal audit units in place across the four entities.

Ms Pillay answered the Chairperson’s question about Action Plans and early warning reviews adding that interim audits were conducted at the SABC and ICASA to give management an early warning system to address findings as they are identified. Part of the process were reviews of the Annual Performance Plans to assess the usefulness of the information prior to management finalizing their plans. On some entities not being able to achieve clean audits despite acting positions she noted that experience had shown that acting positions had created some instability within the entities as the person in that acting position would not be able to make long term decisions. In some instances the person appointed to that acting positon would not have the level of skill required to carry out the functions required. As a result acting positions would often be raised as a concern. Overall in the Communications portfolio the SABC needed to address irregular expenditure incurred, adherence to supply chain process as well as skills development of the staff in the entity.

Ms Motshekga, AGSA, answered the questions relating to the Telecommunications portfolio. She noted that vacancies at the senior management level was a cause of instability as the entity was struggling to attract the right candidates hence the high number of acting employees. With regards to irregular expenditure she added that it increased instability as SAPO was unable to train its staff members due to financial constraints. In replying to Mr Mackenzie’s question about SAPO’s debtors she referred the strikes SAPO had and explained that the services rendered during that period were being disputed to date so there was a lot of money which upon tracing back the customer would dispute. Additionally the SASSA debtor was current and in isolation. It was correct that it was on a cash basis as they had to pay in advance so the bulk of the debt was a result of the strike and other random ones.

Ms Motshekga, in addressing questions on Postbank, said the AGSA looked at growing concerns at a specific point in time. They assessed the Post Office along with its division the Post Bank. An additional but separate ‘worst case scenario’ assessment was conducted where the Post Bank was stripped away leaving the Post Office on its own. Under that analysis the assets still exceeded the liabilities. She added that an investigation of the SASSA contract which helped the cash flow problems found that the contract was with the SAPO and was looked at through the SAPO and that helped the entity. So in the previous slide that mentioned the uncertainty she explained that although there was a cash flow injection from SASSA they were still making losses. That was emphasised in the audit report where it was stated that their losses and future plans were a concern. For example the contract they currently had was certain but the Post Bank licence was uncertain. Therefore the conclusion was that the analysis was conducted at a point in time and was concluded to be a going concern. Touching on the SOII in terms of SAPO the qualifications were specific to the implementation of the SASSA project. Ms Motshekga explained that the letters of records review the suspense account were highlighted to management who were informed that they could cause problems in the future. The SORR was used as a warning indicator to highlight those issues to management.

Mr Duda explained that the team did not have any threats to their safety. He assured Members that safety was consistently evaluated. He did however highlight that the executive of the SABC felt they were under threat but thankfully that did not impact the AGSA team. The SABC content depreciated as they were considered as assets and had to be evaluated as such. The SABC had major concerns around funding however the hope was that content could be used to generate revenue. When old content was aired it lead to a decline in viewership and subsequently a decline in revenue. He hoped the current management would look at that. On oversight, there was no way of evaluating or providing feedback on the work carried out because it was a new Committee. Now that the Committee had been provided with all the information they could begin to execute their oversight role.  Assessments could begin next year after the Committee has had time to engage based on the information and action plans they had just received. The extent of assistance provided by the Committee to the entities to improve their audit outcomes would be assessed next year. He explained that the Committee was mentioned in the slide because the AGSA highlighted all the role-players that were involved. It was not a scientific process to assess the Committee’s effectiveness.

Mr Duda said when dealing with the departments and entities there had previously been a lack of consequences as a result of issues raised in the past. Despite that there were still current irregularities being picked up. The amendment to the Public Audit Act were effective as from the 1st of April 2019. Its implementation would deal with instances that occurred after the 1 April 2019. Contracts entered into before its commencement might still trigger the processes of the Public Audit Act because the flow of funds had continued after the commencement of the act and the auditing process follows the flow of funds. The lack of consequences still persisted and the irregularities still continued to be found. He explained that the AGSA did engage with the departments and entities to ascertain what processes they would put in place to address the irregularities picked up in audit reports. These were part of the early waring signs implemented in quarterly engagements. He felt that the issue of skills being a hindrance to better audit outcomes was a mixed bag. It was explained early that there were different frameworks in place like modified cash standards for example. Each framework within which the entities functioned had different levels of complexities that contribute to the outcomes of audit reports. Some entities might be challenged with consistently trying to get the right expertise and staff training in order to keep up with the ever-changing frameworks within which they operated. Failing to update the skills of the staff members meant the employees could carry out their duties poorly which would ultimately affect audit results. Those internal factors were unique to each entity and affected audit results differently.

Mr Mackenzie needed clarity on what the AGSA needed from Members now that all the issues had been highlighted.  Was he correct to understand that in the following year the Committee should address the management of the highlighted issues with the entities thereafter the AGSA will audit what the Committee had done to address those highlighted issues as part of their oversight role. He commented on the recommendation that Members should engage with role players in the entities. He asked how he could do that as a Member as he did not know how the business worked, what the different staff members were employed to do or the commercial flow in the company. He felt that he did not have the information and wondered how he would be able to meet the recommendation. He asked the AGSA to provide a detailed guide on that could be carried out by a Member.

Mr Mkulisi, Senior Manager, AGSA, explained that the presentation meant to give ways the Committee could influence the internal controls and processes based on the information presented to them through the audit outcomes that reflected certain shortfalls in the entities. He advised that Members should also interrogate the entities based on the substance their Action Plans presented to the Committee that are meant to change outcomes to clean audits.

Mr Molala did not clearly understand the issues with SAPO because at some point in time it was the exemplary entity and he was dismayed that three to four months later Members received a shocking report on SAPO. He needed to know where things went wrong. Was it the new SASSA contract that destabilized the entity? He wanted to know specific periods when the entity began to destabilize and how the contract from SASSA affected it. He was not saying that the audit and what President had pronounced was incorrect but he needed to know where things went wrong. He also asked for a clear and less technical answer a less technical response to the question of the separation of Post Bank from post office? Did he understand the AG to say that the Post Bank should remain with the Post Office? He also addressed Mr Duda’s point around the criticism faced by the AGSA that clean audits did not necessarily translate to good service delivery but rather reflected good record keeping and proper reporting. That could mean that a smart entity could escape clean audits merely through good record keeping even though they did not deliver good services. He therefore wanted to know if the AGSA would think about strengthening that aspects through amendments to the Act. That was very important because the public relied reports by the AGSA. He also felt that the criticism was true to some degree as smart administrations could outsmart audits while the clean audit did not reflect substantial positive impact in terms of service delivery. It was in the public’s interest to ensure that was not the case.  Where there were continuous clean audits over multiple years it should be followed up to ascertain whether those clean audits translated to actual service delivery. How could the mandate of the AGSA be expanded to go out into the field to verify that clean audits have translated to good service delivery?

Mr Duda, commenting on SAPO, explained that their assessment did not state that the regression was great but rather it explained that the management of the SASSA contract was a complex one to manage. Maybe there were areas that the entity had not foreseen or planned for properly. That was because on the graph where they were highlighted in red where the areas where they had missteps in managing contract. They may have correctly identified the beneficiaries, correctly placed them on the payroll, timeously released funds however it could have been the case that when cash in transit service providers collected the money from Standard Bank there were missteps. Those were the only specific areas that needed to be addressed as they impacted negatively on their financial reports in general creating gaps and confusion and causing them to regress.

Mr Duda stated that the AGSA could not comment on whether or not Post Bank should be separated from the SAPO and were not recommending anything specific in that regard. They simply analysed SAPO as an entity and highlighted the divisions that caused it to be a going concern. That decision was up to management. The criticism of the AGSA had been noted and they would take it into consideration. He felt the work of the institution had value and helped to hold institutions accountable. Once the programmes had been audited that information could be relied on to hold the entity accountable when they failed to deliver what they had reflected they had delivered. They nonetheless welcomed the feedback to close the gaps. He hoped the Committee would assist by educating communities to account for the services where entities obtained clean audits.

The Chairperson thanked the AGSA for the presentation and responses to Members. He reminded Members the assessment forms that needed to be filled in and handed to the secretariats to be later sent to the AGSA.

Briefing by the Department of Telecommunications and Postal Services on its 2018/19 Annual Report.

Mr Robert Nkuna, Director-General DTPS, spoke to the Auditor-General’s Audit Outcomes. He explained that the Department had achieved an unqualified audit opinion for 2018/19 financial year and that at the end of the financial year the Department addressed 83% of audit findings raised by the AGSA. Overall the Department addressed 70% of integrated findings (AGSA and Internal Audit findings). In order to address the AG’s findings, the Department had developed and was implementing an Integrated Action Plan (IAP) that focuses on: providing a systemic resolution of the findings and ensuring that root causes are effectively identified and addressed. The effective implementation of the IAP was monitored on a regular basis by the Internal Control Committee and the Departmental Executive Committee. The action plans to address the audit outcome findings on irregular expenditure were as follows: a detailed plan to be drafted and presented at the Audit Committee on how to address outstanding cases; consider application to National Treasury to approve/ condone / write off irregular expenditure; and disciplinary steps taken where possible.

Ms Joy Masemola, Chief Financial Officer, DTPS detailed that the overall spending at 31 March 2019 was 99.7% of the allocated budget. R2.9 billion had been transferred to SAPO in January 2019. Advance payments amounting to R100 million had been made to BBI (R77million) and SITA (R23million) for the SA Connect project. The administration had underspent mainly due to posts not being filled during the financial year. There had also been underspending in infrastructure mainly due to the Digital Object Architecture (DOA) project not being implemented during the financial year. The Cybersecurity awareness had not paid GCIS because the agreement had not been concluded on time.

Mr Roberts presented that the Department achieved 92% of its planned 2018/19 annual targets (24 out of 26) while spending 99% of its budget allocation. Some of the achievements included the drafting of ICT Legislation (White Paper), the e-Government Strategy, the ICT SMME Strategy, the SOC Rationalisation, the preparations for WRC-19, advancing SA’s ICT agenda and capacitating the Department. The Department did not achieve two of its 26 planned 2018/19 annual targets, as reflected below:

•           Implementation of the National e-Strategy

•           The following planned initiatives related to the implementation of the National e-Strategy were not fully implemented as planned:

•           Approval of the National Digital Skills Strategy

•           Approval of the Internet for All Framework

•           Provision of secretarial support to the Presidential Commission on 4IR

•           Broadband connectivity and sustenance of 570 identified sites

•           There was a deviation of 304 identified sites for which upgrades and service activation was incomplete by the end of the reporting period

Mr Molala had one question relating to the expenditure. He pointed out that almost the entire budget had been covered even though there were still a number of months left in the year.

The Chairperson interjected to remind Mr Molala that the period under review covered by the presentation was the previous year and not the current year.

Mr Molala’s question fell away.

Ms Kubeka noted that Mr Roberts tried to clarify that there were two outstanding matters that prevented the department from receiving a 100% clean audit and she understood him to say that the Department was still in progress to address those two issues.  However, she wanted to know about the loan that the former Minister changed from a grant to a loan and asked if there was a possibility to correct it back to being a grant.

The Chairperson sought clarity about issues relating to broadband connectivity. He felt Mr Roberts made it seem like all of them had been connected. He could not understand how something that could not be achieved in a year could subsequently be achieved in such a short space of time. He needed an explanation of the meaning behind the difference in the figures.

Mr Nkuna indicated that there were disagreements with the AGSA over the material misstatements in their books and proclaimed that they had been corrected in their books. Hence they got an unqualified audit. In terms of the broadband connectivity, they had two entities namely SITA and Broadband Infraco. There were 570 sites and Broadband Infraco needed to connect the sites while SITA needed to activate the service. Broadband Infraco connected all the sites but SITA failed to activate 300 of the 570 sites. That delay was as a result of cash flow problems. However after engaging with SITA they later corrected the delay as the department did not believe in paying in advance before performance had been tendered.  Broadband Infraco had indicated in their books that they owed the Department over a billion rand. The current Minister had since rectified that by writing to the board of BBI stating that what Parliament had proclaimed must happen because the previous Minister of Public Enterprises could not change a proclamation of Parliament. It had since been rectified in the departments and BBI’s books.

Mr Molala followed up on Ms Kubeka’s question and mentioned that as he understand it the first Minister had defied a decision of Parliament while the second Minister had erased the debt however wanted to understand why the previous Minister changed the grant from a grant to a loan and had the new Minister considered that rationale when he rectified the decision of the previous Minister. He felt the previous Minister would not defy a decision of Parliament without a good reason. He needed more background information even though situation had been resolved as it seemed to him like the previous Minister was being pitted against the new Minister which he felt was not a good look.

Mr Nkuna mentioned that he could speak on actions on new minister because the department had advised the Minister. The Department approached the AGSA and told them about the problem where upon scrutiny it was found that the money was supposed to be a grant instead of a loan. The AGSA advised that the Minister could rectify it because the decision of the previous Minister could not have amended the grant to a loan. He further stated that he could not comment on intention of the previous Minister. The Department was advised by the AGSA and subsequently advised the Minister to rectify the loan back to a grant.

Briefing by the Department of Communications on its 2018/19 Annual Report.

Ms N Batyi, Acting Director-General: Communication, DoC reported that the Department received an unqualified overall opinion for the 2018/19 audit outcomes. She detailed that finding in slides four and five of the presentation. In order to address the AG’s findings, the department had developed and was implementing an Integrated Action Plan (IAP) that focuses on: Providing a systemic resolution of the findings; and ensuring that root causes are effectively identified and addressed. Slides 7 – 12 spoke to the findings of the audit report and detailed Action Plans to address those findings.  Some of the findings and Action Plans included the following:

Misstatement in financial statements

-           Accruals not recognized

i.          Population was revisited and 2018/19 Annual Financial Statements were corrected.

-           Non-current assets: Loans

ii.          Footnote was added to the Annual Financial Statements to indicate the current porting of the loan.

iii. 2019/20 Template to be adjusted to make provision for current and non-current loans.

-           Inadequate disclosure

iv.         Note under “Events after reporting date” was updated to also reflect the merger of the two departments following the Proclamation made by President Cyril Ramaphosa.

-Incomplete disclosure

v.         Annual Financial Statements were corrected and USAF was added as a Related Party.

Misstatement in annual performance

-Predetermined objective

vi.         Assess the TIDs and set targets and the need to re-table the 2019/20 APP

vii.        APR will be amended in areas where AG and DoC agreed.

-Internal control deficiency

viii.       The Annual Performance Report was amended as per the agreement of the AG with a correct Strategic Objectives as per the Annual Performance Plan

Non-compliance

-           Understatement of Irregular Expenditure

ix.         Expenditure to be regularised in line with National Treasury Framework.

Non-compliance with legislation

-           Non-compliance with B-BBEE

x.         Department in process of developing a B-BBEE Policy. Workshop was already held with DoC and its entities.

Ms Batyi presented that the Department achieved 73% of its planned 2018/19 annual targets (16 out of 22) while spending 98% of its budget allocation. Some of the achievements included the white paper on audio-visual and digital content policy for South Africa and the public broadcasting review. The areas of underachievement included 6 of its 22 planned 2018/19 annual targets, as reflected: White Paper on Audio-Visual and Digital Content Policy for South Africa submitted to Cabinet for approval; Draft Media Transformation and Diversity Charter developed; spend 100% of the budget according to the plan; four reports on financial, compliance and performance audits against the Annual Operational Plan; MDDA Amendment Bill developed: The target had been taken out of the DoC 2019/20 APP due to the transfer of the MDDA to the Presidency.

Mr Niemand, Chief Financial Officer, DoC, presented the financial performance for 2018/19. The total revenue for 2018/19 was R 1 518 384 billion which included ‘Annual Appropriation’ and Departmental Revenue’. The total current expenditure included R 105 694 million which included ‘Compensation of Employees’ as well as ‘Goods and Services’. R 30 263 million was transferred to National Treasury that included R 28 125 million of voted funds surrendered. The Department’s total expenditure of R1 488 121 per programme was as follows:

1.         Administration- R71 984

2.         Communications Policy, Research and Development - R9 162

3.         Industry and Capacity Development - R20 568

4.         Entity Oversight -R1 386 407

Discussion

Mr Mackenzie asked about the status of the broadcasting digital migration programme. There were half a million set top boxes waiting to be distributed to people with analogue sets where rural and high demand spectrum areas had been prioritized. The other four million people would be given vouchers instead of receiving set top boxes and they could use the vouchers however they desired. He asked if that was the correct assessment of the situation. If not then what were the Department’s plans for the programme. On financial reviews that had not been conducted, he therefore wanted to know about the nature of the financial reviews and who was responsible for them. What action had the Department taken to correct that? He highlighted ‘consequence management’ that had repeatedly been mentioned by the AGSA. It was a recurring theme that had also been mentioned by the President and was in line with the fourth industrial revolution. Was there any consequence management for those who did not conduct financial reviews? He asked what the current head count of employees in the departments was. What would be the ideal number of employees when the two departments merged?

Mr Molala referred to page 27 and stated that the AGSA was happy with the department’s entity oversight and the improvements. However he was interested in knowing how the R1.3 billion rand allocated to oversight was being spent.  He understood oversight to mostly involve sitting in meetings and receiving reports so he needed an explanation as to why the expenditure was so high.

Ms Kubeka referred to the areas of under achievement during the period under review on page 16 and 17, point number 2 and 5 under MDDA. She wanted to understand if those two were never achieved because they had been moved to the presidency.  What was the MDDA’s position on the Amendment Bill? Perhaps the question was more relevant to the MDDA itself. On communication, she understood that only 16 of the 22 targets had been achieved so she wanted to know what plans were in place to achieve the remaining 6 targets.

Mr Mackenzie acknowledged that print media transformation and diversity charter was prioritised as a programme but wanted to know when last a study had been conducted on the ownership patterns in print media in South Africa. Had a study been conducted at all? That question was sparked by a study he saw in the Sunday Times that was purchased from Mvelaphanda Holdings by the Tiso Black Star group which was black owned. Currently the Sunday Times had been sold to the Lebashe Investment Group that was chaired by Tshepo Mahloele. The publications included print media like ELLE, The Financial Mail and the Business Day. It therefore seemed to Mr Mackenzie that the print media in the country was much transformed and he wanted a comment on that observation.

The Chairperson referred to page 3 of the presentation and expressed concern about the budget spent in relation to what had been achieved. It seemed the Department had spent 98% but achieved far less. It may not have been an issue to the AGSA because the department accounted for the expenditure but he wanted an explanation in that regards so that reoccurrence could be avoided. On the broadcasting digital migration programme, he acknowledged that the problem was the dependency on the entities. The question was aligned to the other issue that had been raised about digital migration and the set top boxes. He wanted to know in specific detail what roles were played by the different role players so that the hindrances could be identified. It was unhelpful to amend the targets when the issues could be resolved by role players carrying out their duties correctly. He also referred to the BBBEE mentioned on page 10 and felt it was not enough to say that a policy was still being developed at a departmental level. As he understood it, the Act itself set an overarching framework for everyone in the country. If the Department had its own framework there was still an expectation that the spirit and intent of the law was achieved. Therefore it might not be enough to speak to developing a policy by the end of the year. The point was that the Department had continuously procured goods and services and he wanted to know what impact had been made in realizing that part. Was there actual change in ownership patterns as that needed to be fostered by a conducive environment? He felt that point could be extended to the Small Medium Micro Enterprise (SMME)

Mr Niemand responded to Mr Molala’s question and said that included in the R1.3 billion for oversight was R7.3 million that was allocated to the team for compensation of employees and to goods and services. R20 000 was allocated to capital. R53 000 was spent on communication, R36 000 on printing and R370 000 on travelling expenses and R1.2 million had been saved.

Ms Batyi clarified the question for Mr Niemand and explained that he needed to talk about the transfers to the entities.

Mr Niemand said that they money appropriated to the entities was R1.3 billion and it was transferred on a quarterly basis as when it was requested from the department. The entities submit quarterly reports which are assessed by Entity Oversight to check that the money had been used for the intended purposes. Thereafter Entity Oversight will instruct that funds be transferred to entities that had complied in their quarterly reports. He clarified that not all of the R1.3 billion was allocated to the entities as a portion of that was for the operational budget for the Entity Oversight team. In terms of the BBBEE, he cited the speech made by the Minister on 9 July 2019 where she indicated that the department would spend R900 million on SMME’s and small businesses which the Department was carrying. The fact that the department did not currently have a BBBEE policy did not mean they were not cautious to that requirement when allocating funds. They had sessions with the DoC, DTPS and their entities to develop the policy which would be finalized by 31 December 2019. After the departments and entities had internalized the policy it would be implemented by April 2020. On the performance versus budget allocation he explained that after money had been allocated to the entities the department was left with R133 million. The department spent 79% of the R133 million and that amounted to R105 million. He said that was more or less in line and made sense. The start-up structure for the new Department had been finalised and headcount of the two departments combined came to about 380 staff members.

Ms Batyi, on the broadband digital migration, stated that it had been achieved at a high level but it was not achieved on the technical indicator prescriptor which was where the Department was found wanting. On the various role-players in the broadband digital migration project she indicated that the department, SAPO, Sentech, Bosasa, other broadcaster and an advisory body that was setup by the former Minister. The relevant ones for the present day were SAPO for the distribution and logistics and that went to the question of storage facilities. Bosasa was the national empowerment fund responsible for funding the broadband digital migration project. They also distributed set top boxes that were sitting at SAPO. Sentech made sure the network was operational. There were 500 000 set top boxes sitting in storage. Installers had to be appointed to install the set top boxes and since the contracts had run out new installers had not been appointed as yet. The Minister would pronounce on the new delivery model for the set top boxes.

Ms Batyi, replying to Ms Kubeka, said those had been moved not to the MDDA but to the Presidency. There was a process of moving them. Someone had to confirm that the two targets would be moved to the Presidency and that GCIS would be responsible for them. Currently the two targets were neither with the department nor with GCIS. On ownership patterns in print media, the target referenced did not talk to ownership targets. Rather, it was designed to make sure that a BBBEE counsel be set up to ensure that ownership patterns in print media would be reported. It was a function that would be moved to Presidency. On audio visual training for youth as content producers and over the top services she stated that the focus had mostly been in the North West as it had been in the Freestate the previous year. The Department had limited funding so they partnered with different entities such as UNISA and Cida so that they could receive people with the appropriate technical skills to assist with the training programme. The Department coordinated the process making sure the producers were in place. With reference to the budget spend and the 98% versus the 73% achieved, she explained that during the financial year funds are shifted away from programmes that did not perform well and the broadband digital migration programme was one of those. Those funds would be channelled elsewhere. A programme in the SABC was paid for with funds taken away from the BDM. The expenditure would increase but the delivery of programmes that weren’t doing well would decrease. The Minister would advise on the new delivery model for the broadband digital migration project.

The Chairperson referred to the statement about the funder appointing the installer and stated that he was not certain that was the mandate. The Committee had to know where problems originated from in order to enable them to reflect and make recommendations. Pointing to the 500 000 set top in the warehouse he wanted to know what the costs associated with storing the set top boxes were. In addition, how functional or obsolete would the boxes be after a prolonged period of time in storage? What was the entire cost of protecting the programme as the Committee needed to know? Were those associated costs part of the funds shifted away from the programme to other more viable programmes or were they additional costs? The Committee needed the whole truth no matter how unpleasant it was so that they could make the right decisions. The Department had a budgetary allocation for Entity Oversight and they needed to take the Committee into confidence on those findings.

The Chairperson indicated that the Committee could not exercise its oversight function if it had not seen any action plans. The Committee ought to be better placed in understanding the roadmap about migration so that they could better monitor the project. The problems should be easily identifiable so that the Committee could respond. He felt that the explanation given above only led to more questions. Were the costs associated with storing the boxes part of the funds shifted away from the programme or were those additional costs?

Mr Molala asked whether the set top boxes in storage would still be technologically relevant once taken out of storage to be put to use. He advised Mr Niemand list the specific costs associated with Entity Oversight as that would give better clarity. Simply listing R1.3 billion had been spent on Entity Oversight looked suspicious.

Ms Batyi did not want to misstate on how much it cost to store the set top boxes and gave an undertaking to report back to the Committee with the answer within seven days. Since the broadband digital migration project was under review she felt it was only fair that the Minister guided the Committee as to where it was going to. It was currently being reviewed. Sentech had only provided the network but they had not done any internal investments because the DTT network they provided had been rolled out in South Africa a number of years ago. Only pockets of that network were being utilised and it would be best if Sentech provided information as to why they were not realizing the revenue they had hoped to achieve. The issue of the installers had been in the domain of Bosasa and Ms Batyi did want to debate what the legislation said as there were other schools of thought there but Bosasa’s function was to make sure the project was funded. She would advise the Minister to inform the Committee as to the new revised model.

The Chairperson said as a matter of principle that even though the issue of the warehouse did not have current actuals it was over and above the funds channelled away from the project to the SABC due to non-utilisation. He wanted confirmation that was indeed the case.

Ms Batyi confirmed the actuals as no one had anticipated that the boxes would remain in storage for such a long time.

Briefing by the GCIS on its 2018/19 Annual Report

Mr K Semakane, Acting Deputy Director-General: Corporate Services indicated that the department had 43 targets for the 2018/19 financial year.  41 (95%) targets were achieved and 2 (5%) targets were not achieved. Those fell under the following programmes: Administration; Content Processing and Dissemination; Intergovernmental Coordination and Stakeholder Management

Mr M Currin, Acting Deputy Director–General: Stakeholder Management, provided an overview of the achievements under the Intergovernmental Coordination and Stakeholder Management programme. Some of them were as follows: provided strategic leadership and communication support in planning and implementation of transversal communication campaigns; successfully led the 100 Men March against Gender Based Violence in collaboration with various stakeholders, across all the provinces; and 18 post-Cabinet media briefings and/or media statements were issued to communicate the Cabinet decisions to the public.

Mr M Langa, Chief Financial Officer, GCIS, presented the 2018/19 financial performance and declared that the GCIS obtained a clean audit opinion from the AGSA. He detailed the expenditure per the programmes listed above as follows:

Administration

The final expenditure was R155.341 million and 95.9% had been spent. R 6571 million had been underspent.

Content Processing and Dissemination

The final expenditure was R 143,287 million and 96.7% had been spent. R 4 922 million had been underspent.

Intergovernmental Coordination and Stakeholder Management

The final expenditure was R 112,651 million and 99.3% had been spent. R813 thousand had been underspent.

Discussion

Ms Mthembu applauded the team for the good work and appealed to them to assist other entities to achieve clean audits. She congratulated them for maintaining a clean audit for five consecutive years.

Mr Mackenzie admitted to never having read the Vukuzenzele newspaper and vowed to read it. He echoed Ms Mthembu’s sentiments and congratulated the Department for achieving a clean audit. Turning to page nine of presentation that talked about 1800 community and stakeholder liaison visits, he asked for a profile of the stakeholders as well as what activities occurred during those visits.

Ms Kubeka’s questions had been addressed by both of the speakers and felt that the GCIS should have presented first to set the bar high for the other departments and entities. She likened the approval over the performance by the GCIS to a mother who felt elated when their child did well. However, she asked the GCIS to share their strategy with the other departments and entities so they too could achieve good audit outcomes. This was because the AGSA pointed out the Committee were also under evaluation in carrying out their oversight duties that was why she wanted the strategy to be extended to the other entities and departments.

The Chairperson said creating balance between good service delivery and clean audits was critical. However, there was a similar expectation that if service delivery was being adequately carried out then the allocated funds had to be spent completely.

Mr Roberts thanked Members for the compliments and assured the Committee that they would help other entities achieve a similar result. He attributed their success to the involvement of management as the acting Director-General took audit reports and good governance very seriously. The Acting DG took internal audits extremely seriously and ensured the Department was adequately prepared for external audits. Once the internal auditors delivered their reports the team produced an action plan. That way the external auditors could easily perform their assessment and find no faults. The external auditor relied on the findings of the internal auditors. Mr Langa as the newly hired Chief Financial Officer had also maintained clean audits. The MDDA was created by the GCIS but was taken away from the GCIS and felt that perhaps they would do well again now that they had returned to the GCIS.

Mr Michael Currin, Acting Deputy Director–General: Stakeholder Management, thanked Members for the compliments and said that team work contributed a huge part to their success. He credited a lot of the success to director general. On community and stakeholder engagement he noted that the GCIS practised development communication. GCIS was formed on the premise of a democratic communication system. It was meant to give people information about the achievements of ordinary folks. It showed how people could get support and make a success of their lives against all odds. That is why Vukuzenzela was an important publication. The community stakeholder engagement were the premise upon which GCIS built sustainable communication practices. Other government communication systems were top down where information was given on a ‘take it or leave it basis’.  However, on GCIS field worker who were district officers visited communities to meet with stakeholders like traditional leaders, ward counsellors and the civil society structures. Those meetings took place in a two way process. First, public information was shared like the projects carried out last year on gender based violence. That illustrated that information was pushed into the communities in collaboration with the stakeholders. Stakeholder engagements involved youth and small business formations that required information. Those stakeholders stated that the Provincial Department of Economic Development had not done an information blitz and asked the GCIS to hold one and bring the different role players together. So the job of GCIS field workers was to respond to the information needs of communities and GCIS would deliver on them.

Mr Currin stated that the MDDA could testify that one of the stakeholders they always met were the community radios and community print readership. The branch that fell under was the one that he was responsible for and did not have huge budgetary allocations but sometimes those structures found it more useful to get information that they couldn’t get elsewhere. 

Ms Kubeka advised that in future there be better gender representation of the delegation.

Briefing by the MDDA on its 2018/19 Annual Report

Ms Z Potye, Acting Chief Executive Officer, MDDA, detailed the entity’s performance for 2018/19 stating that it achieved an unqualified audit of 2018/19 financial statements. Some of the entity’s highlights included the following: On outstanding performance achievement, 80% (16) of the 20 KPIs in MDDA 2018/2019 Annual Performance Plan were achieved. MDDA continued its unbroken record of unqualified audits and approved 20 Broadcast and 12 Community and supply chain management print projects. The targets not achieved were as follows:

- Governance and Administration - the reason for non-achievement was the Board recommended that the IT strategy and plan be submitted to the Audit & Risk Committee first. It will be submitted in Q1 of 2019/2020.

- Community Broadcast Media – the reason for non-achievement was because some of the projects selected for Board approval were non-compliant or were not approved for lack of innovation, etc. A draft funding policy to strengthen the selection and funding criteria was submitted to the Board for implementation in 2019/20

- Strategic Programmes- the reason for non-achievement was that the development of strategy was delayed as MDDA was initiating research into state of digital readiness of community media prior to working on digital migration strategy. This information was essential to a meaningful strategy.

Some of the key audit improvement areas were identified as follows:

-           Acting CEO

a.         Improved record management system is needed to be implemented to ensure timeous submission of documents for audit.

-           CFO

b.         External review of annual financial statements to ensure accuracy and completeness

-           Acting HR & Corp Affairs Manager

c.         Vacancies in key positions and instability in the environment. Improvement of Human Resources practices and adherence to policies and best practice is required

-           Acting Director: Strategy, M&E

d.         Performance information target setting and technical indicator definitions to be revisited to ensure compliance with National Treasury guidelines.

Mr Y Asmal, Chief Financial Officer, MDDA outlined the Annual Financial Statements. The 2018/19 audited Revenue amounted to R 88,097,306 while the Expenditure amounted to R 76,334,280. The total surplus (deficit) was R 11,763,026. On fruitless and wasteful expenditure, the entity did not incur any fruitless and wasteful expenditure in the 2018/19 financial year. The entity did however incur R39 million irregular expenditure in the 2018/19 financial year. It was incurred on the centralised broadcast equipment tender. The irregular expenditure was as a result of key documents that could not be found when the Internal Audit unit reviewed the tender process to confirm that appropriate processes have been followed. Processes were underway to get a condonment approval from the National Treasury.

Discussion

Mr Molala gave an assurance that the Committee would look in to the boards concerns and offer assistance as they wanted the MDDA to succeed. On funding of community radio stations he was struck that two to three entities like the SABC had claimed to fund community radio stations and he wanted to know how these entities interacted with one another on that aspect. How could the entities work in collaboration on that aspect as opposed to working individually and opposition? He wanted to know which other entities were funding community radio stations so that they could all work together.

He referenced the previous presentation the DOC where they talked about the training of broadcasters and wanted to know if the DOC had reported that on behalf of the MDDA or was it something they did separately which was not related. He asked because the President had been emphatic about an integrated model of service delivery that was meant to make more of an impact. He had the same question about the digital training of the youth which also appeared to be an inter-sector project. He needed to understand where the lines had been drawn and if there were no demarcations then why couldn’t they be integrated? In addition, he was concerned with the unions. He felt Ms CEO sounded intimidating when she spoke on the matter as she said there were no relations with unions or that they didn’t exist or that they didn’t cooperate or that they failed to meet the threshold. It was unclear to him. What exactly was the problem and did it relate to what Ms Togna said about the necessity for an inquiry into the unions? He asked for clarity on that situation. Lastly, on board members saying that the legacy reports should have reflected the need for an inquiry, he asked for a report detailing the context and history so that the inquiry could be informed. That was because the MDDA had indicated that they had a long history of problems. The report would empower the Committee to launch an inquiry and he said that the Committee would consult with its legal minds.

Mr Mackenzie, commenting on the insufficiency of five directors, asked when the current board had been appointed. It seemed to be a standard clause drafted into Parliamentary legislation that the minimum requirement was nine directors. When the Ikamba Institute Bill wanted nine directors after having only three directors the Committee interrogated them on that decision and were informed by the Chairperson that legislation required that a minimum of nine directors be appointed. He pointed out that the President had been talking about austerity measures because the country was in a financial deficit. He therefore asked if the MDDA could not survive without a board and alternatively exist as a department in the GCIS. To illustrate his point he referred to the points 3, 5 and 6 in the presentation and said that those could easily be carried out by the GCIS which would subsequently render the funding under point 1, 7and 8 irrelevant.  Wouldn’t the MDDA be better served as a department within the GCIS which would remove the problems with the directors? He declared that tackling corruption resulted in threats being received but wondered if it was solely the board’s responsibility to combat corruption. What about middle and senior management? Were they not competent enough to tackle corruption? He also asked what the R48 million under broadcast funders was.

Mr Gumbu echoed Mr Molala in relation to threats faced by the board. He wanted to know if there were any other areas they need assistance with in addition to capacity.

Ms Mthembu wanted to know whether the training in North West was still ongoing so that the Committee could appeal to the entity to assist Members do a good job in their constituencies.  She also asked what criterion was used to recruit the trainees.

The Chairperson wanted to know how the problems with the board affected the financial decision making especially with regard to irregular expenditure. That was indicated in the financial statements attached to the Annual Report. Was it the case that they were depended on the board or on were they dependent on the MDDA as an entity reporting to the department doing the oversight. He raised the point because if it related to a tender that had irregularities and its implementation was in the current period then outside that condonation it would be a recurring matter from the AGSA point of view and it would mean the Committee was not executing their oversight role properly. On skills he referred to the MDDA said about looking at external reviews for their audits and pointed out that a great lesson learnt from the GCIS was that internal audits helped a great deal to pick up problems before the AGSA did. He echoed Mr Molala’s point about launching an internal inquiry. About the board, he asked if the assistance they required from the Committee involved restarting the recruitment process from last November or was it about completing what happened in that period. He asked for clarity on the role of the Minister as part of the problem had been clarity on whether the Minister or the Committee would be responsible for appointing the board of the MDDA. That needed to be clarified so that the issue of the board could be resolved as it affected the functionality of the entity.

Ms Martina Della Togna, MDDA Board, answered all the questions about the board. The MDDA was established by an Act of Parliament in 2002 and began operating the following year. How it was structured and the formula used to design the nine person board was beyond her legal expertise. She explained that five member of the board were elected through a Parliament process. The Chairperson was appointed by the President, one member represented the interests of the shareholder and was traditionally appointed by the GCIS, one member represented the national association of broadcasting which were the commercial broadcaster taxed through the Act to pay the 0.2 percent annually and there was one member representing the traditional print media sector. She confirmed that Parliament had a key role to play in appointing at least six of the board members. Different industry bodies also nominated members and exampled Mr N Monare director MDDA who had represented the print media and was the deputy manager for Tiso Black Star. The Chairperson, Mr N Munzhelele, had started in August the previous year. Herself, Dr N Mbava and Mr R Lamola had all been nominated and subjected to the same process SABC board members had been subjected to in 2017. The MDDA was an organisation that was meant to foster diversity which she felt suggested it was more than a unit within the GCIS. She said that with all due respect to her government colleges. She doubted that the private sector would agree to a ring fenced tax straight to a government department. There was a need for an independent institution to look at develop and ownership trends as well as to foster diversity in the context of the fourth industrial revolution. There were three things the board needed from the Committee. The first was to build the capacity of the build by filling the vacant posts. That could be done through the discretion of the Committee and felt they couldn’t comment on that. They needed individuals with strong skills in governance, law, human resources, the fourth industrial revolution, audience research and market skills. Secondly, the Committee could review the legislation as the Act was old and didn’t take into consideration digital media. She advised the Committee to consult with the sector to understand how the Act could be improved. Thirdly, she reiterated that the Committee launch an inquiry as there were many issues like the R35 million that was listed under irregular expenditure that was launched by a former board member reported in the 2017/18 financial year. Thankfully it was picked up by a good audit executive that was recruited to compliment the CFO and acting CEO.

Ms Togna confirmed that the board had confidence in the executive but explained that the issues did not only relate to dishonest staff members but also to the former board, project and other things. She reiterated that there had been threatened and signalled that they were worried about the executive management who had to fulfil multiple roles in order to ensure that the entity functioned. On unions, she was a worker orientated person who had previously lost her job at Parliament because she was on the side of the workers. She explained that unions were used for different things at different times and that it had been difficult for the board to read whose interest they had touched and why there had been a dramatic fight back. The Minister had more information on that and referred the Committee to there. She felt a board was necessary and listed the time each member had left to serve on the board.

Ms Z Potye addressed the funding of radio stations and mentioned that community radio stations might also approach non-profit organizations for funding. The MDDA worked with the Open Society Foundation for training purposes. The institution carried a mandate to support radio stations for example by replacing a studio in the event of a fire. Some of the MDDA projects had been funded in terms of movable property vehicles by the National Lotteries. The MDDA had received 200 plus applications and their budget might not fulfil that number so they asked National Lotteries to fund qualifying NPO’s from the MDDA. The National Lotteries asked for a proposal and said they may be able to assist. The SABC might also want to fund a community radio station and that might explain the duplicity. On the training of broadcasters, she detailed that one of the programmes run by the MDDA was the governance and administration support programmes which was HR and IT. There were five programmes and part of the mandate was to ensure that ensure that the community media sector was developed. That was achieved through a sub-programme called Training and Research which had training programmes and research programmes.

Ms Potye referred to Mr Mackenzie’s question about the ownership patterns in print media and stated that the MDDA looked at that through the previously mentioned unit.  They were in the process of procuring a service provider to update a study conducted in 2009. If a station or a community television station, for example the one in Limpopo, needed a feasibility study they could approach the MDDA to fund the study. Once they were licensed the MDDA would fund them however she admitted it was too expensive to fund community television stations.  It would cost R20-25 million to fund one community television broadcaster and that was money that could be otherwise channelled to many other projects throughout the year. She said the MDDA would find synergies with entities that had similar mandates and programmes so as to work in collaboration. That had already been done with Cida? In terms of the unions she explained that they had signed a recognition agreement with them in June the previous year. There was and still is a need for a union at the MDDA. About 16 staff members had signed the agreement. The MDDA had written to the union three months ago requesting that shop stewards be appointed and that had not been done. Nor had they provided their constitution or fulfilled any of the things contained in the agreement so as a result the MDDA terminated their membership. After the termination they only remained with four members. That happened after 12 years of going to the Minister to ask for the union to meet with them. Multiple letters had been written that went unanswered.

Ms Potye, in response to Mr Mackenzie, explained that the mandate of the MDDA was to ensure that there was diversified news for all. She had been an employee of the GCIS for 12 year and was deployed to the MDDA. The relationship between the two was that GCIS ensured that citizens received current and empowering information while the MDDA ensured that the information was available in multiple languages that were accessible to all South Africans. Hence why they were following up on the statuses of sign and Khoisan languages so they would be ready to absorb them. She indicated that more than 156 community radio stations had been funded in all 11 official languages. The same was the case for print and television. The MDDA furthered the diversification of voices.

Mr Asmal said investigations had been launched to ascertain where the losses had occurred in the private sector and those had been finalised. Part of the process involved the finalisation of a disciplinary process. Since everything had been finalised they would take the report to the board for recommendation to take it to National Treasury for condonation. The highlighted the impact of an insufficient board because if all five members weren’t present they wouldn’t be able to approve the report to take to National Treasury. The losses incurred were not financial but rather related to documentation management from the irregularities. They had owned up to the irregularity picked up before the AGSA found it and it was disclosed. On external reviews, it was correctly pointed out that it was something that was key and was needed going forward. The AGSA financial process in the MDDA was very strenuous as the AGSA could not obtain financial statements or the ones they reviewed were of poor quality. Management and the board members had worked hard over the three months to better assist the AGSA to carry out their audits. That indicated to him that better internal controls were required. Since they produce quarterly reports they actually might not need external reviews. He gave an example of the commitment register that displayed R52 million which upon review indicated R86 million for the previous financial year. That was identified because the CFO and the finance manager conducted their own review.  He said there was a lot of work to be done and they had begun implementing their internal controls and processes.

The Chairperson was relieved by the sense of clarity. He reminded the MDDA that they were under the yellow and should not drop to the red. He was confident that with the Committee’s support they would rise to the green.  He said that something could be learnt from the GCIS. The Committee would reflect and give recommendations as there were expectations for that.

Consideration and adoption of 4th Term Draft Committee Programme.

The Committee adopted the 4th Term Draft Committee Program with amendments.

The meeting was adjourned.