USAASA response to OUTA allegations; DCDT Revised Annual Performance Plan

Meeting report

Director-General’s introductory remarks

Ms Nomvuyiso Batyi, Director-General (DG), Department of Communications and Digital Technologies (DCDT), said the meeting was for the Universal Service and Access Agency of South Africa (Universal Service and Access Agency of South Africa (USAASAUSAASA) to respond to a presentation by the Organisation Undoing Tax Abuse (OUTA) which had taken place a couple of weeks ago. The meeting would be covering a number of issues.

Firstly, the PricewaterhouseCoopers’ (PwC’s) report, which OUTA had relied on, was a draft report and was not within the Department’s authority to release. National Treasury was the department that had hired PwC. Although her Department had followed up with National Treasury, it had so far not received the final report from it.

Secondly, the Department would brief the Committee on some high-level investigations in which the USAASA had been involved.

Finally, there would be the revision of the Department’s annual performance plan among its entities. The entities had changed their targets only due to COVID-19 budget cuts, as a result of this pandemic. The Department was satisfied with the revisions.

USAASA response to OUTA

Mr Basil Ford, Executive Caretaker: USAASA, responded to all the questions raised by the Organisation Undoing Tax Abuse (OUTA) at the previous meeting. (See attached report).

He then briefed the Committee on Sentech’s commencement of the Broadcasting Digital Migration (BDM) project, and reported on the progress with the installations. He also provided details of the suspension of employees.

DCDT entities’ revised APPs

Independent Communication Authority of South Africa (ICASA)

Dr Keabetswe Modimoeng, Chairperson, ICASA, made introductory remarks.

Mr Willington Ngwepe, Chief Executive Officer, ICASA, said the main highlight of the presentation was to inform Members of the parts of the APP that had been re-adjusted.

The key risks to the entity were outlined, and risk mitigation methods were indicated.

He provided a briefing on the six programmes in the APP. Those were administration, licensing, policy research and analysis, engineering and technology, regions and compliance and consumer affairs.

The entity’s revenue estimates for the current, 2021/22 and 2022/23 financial years were provided.

The current budget reduction would make it difficult for ICASA to achieve its plans to increase its capability to monitor the quality of service through the implementation of a system to manage network performance, as the current budget was not sufficient to cover the cost of equipment required for quality of service (QoS) monitoring.

As ICASA required personnel with highly specialised skills to conduct this work, spending on compensation of employees’ accounted for an estimated R1.1 billion (71.5%) of total expenditure over the medium term.

Total expenditure was set to increase from R492.9 million in 2020/21, to R539.6 million in 2022/23 at an average annual rate of 3%. The Authority expected to derive R1.5 billion (96.6%) of its projected revenue over the medium term expenditure framework (MTEF) period through transfers from the Department.

Sentech

Ms Tebogo Malaka, Board Chairperson, Sentech, stressed that the COVID-19 pandemic had definitely affected the entity’s service delivery. Since the outbreak, the board had decided to include a pandemic response in its strategic plan to prepare for the possibility that a second wave would hit South Africa.

Mr Mlamli Booi, CEO, Sentech, reaffirmed Sentech’s importance in delivering services to society, and broadcasting to society both in the private and public sectors.

He outlined the entity’s alignment with shareholders’ priorities to the Committee. The strategic pillars of the entity were optimisation and growth, talented people, innovation and digital readiness, customer-centricity, transformation, environmental preservation and reputation.

He said the 2020/21 financial year operating expenditure incorporated cost containment initiatives and focused plans to address revenue stagnation through enhancing the connectivity business solution, and the evaluation of growth opportunities to drive the acquisitive diversification strategy.

Government had funded most of the dual illumination incremental costs, since the digital signal was switched on back in 2008, and had likewise allocated such funds for the MTEF period.

The Chairperson was confident that the entity would reach all of the targets included in its revised strategic plan.

Film and Productions Board (FPB)

Ms Abongile Mashele, Chief Operating Officer (COO), (FPB) briefed the Committee on the entity’s strategic plan.

She said FPB’s digital agenda consisted of digitalisation, data analytics and business intelligence, technology trends adoption, improved information communication technology (ICT) governance and security, as well as leveraging agency and transformation.

She highlighted the key changes in the entity’s five-year strategic plan and its APP.

The strategic goals were outlined. These included:

• Effective content regulation aligned to the Constitution;
• Public education and stakeholder partnering;
• Research and development;
• Efficient and high performing organisation.

The entity’s MTEF budget from 2020 to 2023 was provided to the Committee. The unplanned costs related to COVID-19 were also provided.

USAASA and USAF

The entity briefed the Committee its 2020/21 APP and its budget.

The development of the revised USAASA & USAF Strategic Plan for 2020-25 and revised APP for 2020-21 was a process which involved a detailed analysis of the internal and external environment. They were aligned to the National Development Plan (NDP), the MSTF, the national integrated ICT policy White Paper, the DCDT key priorities, and the adjusted BDM appropriations by the Minister of Finance.

The revised USAASA APP included seven output indicators implemented across three outcomes and two budget programmes -- business support and business intelligence.

The revised USAF APP included four output indicators implemented across two outcomes, and one budget programme divided into three sub-programmes -- broadband infrastructure, connectivity and the broadcasting digital migration programme.

The strategic focus of USAASA from 2020 to 2025 was provided to the Committee, and its institutional performance was explained to Committee Members.

USAF’s strategic focus and institutional performance, as well as its programmes and annual budget, were presented to the Committee. 

National Electronic Media Institute of SA (NEMISA)

Ms Lebo Leshabane, Board Chairperson, NEMISA, stressed the entity’s importance in the training of women and people who came from a disadvantaged background. She highlighted the fact that the entity’s beneficiaries were struggling with internet access under the pandemic. This was one of the most prominent negative effects of COVID-19 for the entity.

Mr Trevor Rammitlwa, Chief Executive Officer, NEMISA, provided an overview of the entity’s revised APP, which included programmes dealing with administration, multi-stakeholder collaboration, E-astuteness, knowledge innovation, and aggregation framework. The budget resource allocation was provided to the Committee.

State Information Technology Agency (SITA)

Mr Luvuyo Keyise, Executive Caretaker and Administrative Authority, SITA, said the Department of Planning Monitoring and Evaluation (DPME) had issued Circular 2 of 2020, to provide guidance on the revision and re-tabling of strategic plans and APPs as a result of the impact of the COVID-19 pandemic and special budget adjustment. SITA had conducted a review of its strategic plan and APP to determine if the intended outcomes, outputs and targets could still be achieved as planned.

The amendments to the APP considered current and future changes in the performance environment. The changes affected three of its five strategic programmes -- financial sustainability, thought leadership and service delivery, procurement and industry transformation.

Amendments had been made to the annual targets from quarter two to quarter four of the financial year, as per the guidelines. The entity’s strategic overview was provided, as were its strategic outcomes and targets.

.za Domain Name Authority (ZADNA)

Ms Palesa Legoze, Board Chairperson, .ZADNA, and Mr Molehe Wesi, CEO, .ZADNA outlined the list of the entity’s achievements in 2019/20 financial year. The missed opportunities were also identified.

The notable changes in the current financial year were the effects of the global pandemic and the leadership change.

The entity’s strategic goals were:

• Empowered communities;
• Improved stakeholder engagement;
• Research and benchmark studies conducted on policies that support ZADNA growth;
• Implemented registry and registrar licensing framework; and
• Improved organisational management practices.

The entity’s financial statement was provided and explained to the Committee.

South African Broadcasting Corporation (SABC)

Mr Bongumusda Makhathini, Board Chairperson, SABC, briefed the Committee on the entity’s revised corporate plan for 2020/21 to 2022/23.

The changes to the entity’s budget highlighted that:

• The SABC was forecasting a R1.4 billion net loss due to the impact of the COVID 19 pandemic. The commercial revenue had been heavily impacted by this global turmoil. Noting the significant uncertainties that prevailed, the SABC’s profitability was still expected to improve over the MTEF period, but it was important to note that these projections could be subject to significant change.
• The revenue forecast for the 2020/21 financial year was expected to be worse than the previous year by over R400 million. Due to the operating model changes and revenue enhancements strategies, commercial revenue was anticipated to aggressively improve in the ensuing financial period. One of the highlights expected over the MTEF period was the over-the-top (OTT) broadcast technology deals which would be unlocked by the digital strategy.
• The impact of the OTT deals could not be accurately estimated at this time.
• Savings were expected on total freelance and independent contractors’ costs due to the national lockdowns experienced during the first few months of the 2020/21 financial year.
• The SABC had launched a new operating model which was expected to positively impact on the cost structure of the organisation. The expected benefits of this exercise had, however, not yet been factored into this revised corporate plan, as the full impact was not yet quantifiable at this stage.
• Marketing had been budgeted at R117 million in support of the turnaround initiative realisation, but like with all operating costs, this was still subject to material change, as the realities of the impact of the COVID 19 Pandemic may force austerity measures to be introduced. This budget would be ring-fenced and monitored through the office of the group CEO.
• The marketing budget would be supported by a list of events/campaigns and return on investment (ROI) analysis.
• Investment in content would be maintained at near to originally budgeted levels throughout the MTEF period.
• The Corporation was likely to face material liquidity challenges, and financial resources would be significantly constrained. Cash conservation and austerity measures would be required.

The income, expenditure and budget risk analyses were provided to the Committee.

Among other issues discussed were the entity’s financial sustainability, content and platforms, digital, human resources, governance and partnerships.

Discussion

Ms P Faku (ANC) noted the responses provided by USAASA, and expressed grave concern about the first question, where it had claimed that it did not have all the information. She emphasised that USAASA had to take the Committee seriously and must not mislead it. Though she understood that there might be some information that could not be obtained immediately, she urged it to undertake proper research before coming to the Committee.

She agreed that USAASA had raised a lot of interesting points such as its Workplace Skills Plan (WSP) and payment within 30 days, both of which were identified in the Auditor-General’s (AG’s) report. She suggested USAASA should report to the Committee on a quarterly basis to share its financial records in order to indicate its progress.

She emphasised the importance of following relevant labour laws and regulations.

Ms Faku understood that COVID-19 had negatively impacted Sentech’s revenue generation. She highlighted to importance of capacitating the entity.

NEMISA needed to apply its mind to the AG’s recommendations, which had highlighted its failure to achieve its targets.

She urged SITA to focus on its procurement procedures as highlighted in the AG’s report. She understood that the entity had capacity issues, and was glad to hear that the chief financial officer (CFO) would be appointed on 1 December.

She was pleased to hear that ICASA’s spectrum auction was not being postponed, and thanked the entity for its service delivery despite the COVID-19, which had affected the normal operation of the entity.

Mr C Mackenzie (DA) addressed a general question to all the entities about the ongoing discussion around the second wave of COVID-19. He asked the entities if they had a contingency plan to deal with the second wave.

He enquired about progress with the Special Investigating Unit’s (SIU) active investigations at USAASA. He noted that certain USAASA employees had been suspended or were being subjected to disciplinary actions. He also noted that irregularities in the supply chain had been mentioned in the presentation, and asked who the CEO and the board chairperson were during the time the events took place.

He asked USAASA about the future career prospects for matric learners by training them in installation. Would those youths have a better career path after receiving the training?

Could Sentech could move its training completely online. In the face of a possible second wave of the coronavirus, he believed that it would be of the utmost important for Sentech to move its training to a virtual platform.  

Mr Mackenzie asked ICASA about the entity’s new funding model, where it had capacity problems, and what its vacancy rate was. At which level did it find itself incapacitated? He asked about its spectrum auction programme, and urged the entity not to delay the project. He enquired about the process of the appointment of a company to conduct the auction.

He asked NEMISA about the collaborative work that drove its mandate, emphasising that collaboration was the key to the entity’s success.

Ms N Kubheka (ANC) sought clarity on the PwC report which the DG had explained the Department was still waiting for the National Treasury to release. She stressed the importance of consequence management for all the entities which had been identified in the draft report, which the Committee had seen. She wanted to know the full details of the investigations, because the versions that had been provided were incomplete. She wanted details of what had happened, who had been responsible, and what measures had been taken against those involved.

She understood the reduced targets for ICASA were because of its reduced budget. She encouraged it to achieve those targets.

She also noted the explanations offered by .Zadna and FNP as to why they had had to readjust their targets, and their failures to reasonably achieve them.

She appreciated the work of NEMISA and USAASA, but encouraged them to work harder to achieve their quarterly and annual targets. She asked NEMISA to implement the Ag’s recommendations. The Committee was closely watching NEMISA, and urged it devise a strategy to perform better.

Entities’ responses

USAASA

Mr Ford said that the entity was glad to share its financial information with the Committee whenever requested by the Committee to do so. He guaranteed that the entity would do all it could to follow labour regulations.

He confessed that the entity had so far not devised a contingency plan to the level Mr Mackenzie had suggested. However, it had been reviewing its various projects and there were alternative plans in the event that certain emergencies happened. He acknowledged that Mr Mackenzie’s suggestion was valid and that the entity had to start preparing itself for a second wave.

In response to the irregularity in the supplier chain, he said he could not confidently provide all the figures and information at the meeting, and would have to submit all the answers in writing. He respected the Committee and would not want to provide inaccurate figures to mislead it.

On the entity’s active disciplinary cases, he explained the usual process of disciplining an employee for misconduct. To begin with, the entity had to find indications which pointed to potential problems with the employee, and then had to place the employee on precautionary suspension. The employee could not return before the investigation was completed. He said he was not aware of any of the SIU’s active investigations.

Mr Ford explained that the training for matric learners in installation essentially equipped them with knowledge on how electronic devices were made. They would therefore be able to use the knowledge in a variety types of installations. Although it was not a clear career path, learners who completed the training would have received very valuable knowledge and skills which would enable them to build a career.

He agreed with Ms Kubheka’s point on enforcing consequence management, and said that the entity would keep the Committee informed about the actions it had taken against employees’ misconduct. He thanked her for her encouragement in asking the entity to manage its time frame for satellite box installation. He said that a multi-disciplinary committee, which consisted of both provincial and local authorities, was working hard to make sure that satellite boxes were installed.

ICASA

Dr Modimoeng referred to a possible COVID-19 resurgence, and said that although the entity had resumed workplace-based operations, employees who came to work at the office were complying with the COVID-19 protocols.

He assured the Committee that there was no indication that the licensing was delaying the auction. Although the deadline was a bit tight, he was confident that the entity would meet the deadline. As for the appointment of an auctioneer, he said that the whole process was guided by Public Finance Management Act (PFMA).

He explained that the incapacity issue at the entity was the result of the entity’s expanding mandates, as its allocated budget had not seen a proportionate increase in relation to the expanding mandates. The entity was reviewing its wage bill, as well as managing to do more with less staff. As of October, the vacancy rate was at 5.6%. The entity was very cautious about advertising new positions which were unsustainable.

In response to Ms Kubheka’s question about the entity’s reduced targets, he said this was due to a lack of budget, since COVID-19 had resulted in a prohibition of public gatherings.  

Sentech

Mr Booi agreed with Ms Faku’s suggestion that the entity needed to look at innovation and to use it to generate more revenue and expand its business scope.

Ms Rudzani Rasikhinya, CFO, Sentech, said that the entity had been planning phases for the next three years, and had taken into consideration the impact of a second wave of COVID-19. The model which the entity was working on had made projections for different scenarios. The entity’s budget would be affected if a second wave hit South Africa. Factors such as the foreign exchange rate, interest rates, etc, would all have a huge impact on Sentech. She reminded Members that the majority of its expenses, such as rentals, were dollar denominated.

Mr Booi said that training had been done online at the entity. Although there would be training which required a physical presence, the entity would certainly pursue those targets, and he was confident that they would be met or even be exceeded.

He agreed with Ms Kubheka on Sentech’s decreasing annual revenue as a result of the contraction of the economy. He assured the Committee that the entity was doing its best to achieve its targets and deliver on its APP.

FPB

Ms Mashele said that as COVID-19 restrictions had been lowered and more activities were allowed now, the entity had shifted some of its budget to boost its screening capacity. She assured the Committee that the amount that was spent on enhancing screening capacity had been the minimum, at around R300 000.

Should there be a second wave of COVID-19, the FPB would continue its work with the minimum of interruption to the entity’s daily operation. Even now, the entity was operating with a skeleton staff working in the offices. She said the entity had incorporated the pandemic plan in its business plan.  

Moving forward, the entity would place more emphasis on expanding its services in the online market. With more services being provided online, there was a need to have more content regulations governing the online sector. She foresaw that this sector would be generating more income.

.ZADNA

Mr Wesi said that the entity had adequate funding reserves, should there be a second wave of the coronavirus. The entity was also holding more virtual trainings. Should the second wave hit South Africa, he was confident that the entity’s system would be adequate enough to withstand the pandemic and to deliver services.

SABC

An SABC official said the Corporation had learnt from the experience of dealing with COVID-19. It had also introduced a remote working policy, and most of its employees were still working from home. The entity was also providing safety measures and necessities for journalists. The entity’s contingency plan to deal with a second wave had been matured with time.

SITA

Mr Keyise responded that COVID-19 had affected the entity in two broad areas. Number one was that because the entity was not fully automated, the procurement process required its employees to be physically in office to go through hard copy documents. If a member of staff was infected with COVID-19, then the entire building had to be fumigated. However, he gave an assurance that the entity was working towards full automation in the procurement process.

The second area was that COVID-19 had affected its main client, which was the government’s budget bottom line. So far, the entity’s reserves should be able to sustain it for a relatively long period of time. The entity was also cautiously exploring capital investments to increase its reserve fund.

NEMISA

Ms Leshabane confirmed that the entity had engaged with all its stakeholders to provide them with feedbacks on what the AG expected from all of them. All stakeholders were now aligned in terms of the evidence that needed to be provided for the training.

She responded to Mr Mackenzie’s question on the collaboration which was used to drive the entity, and assured him that collaboration still remained the key that drove the entity. The only difference now was that the mandate of NEMISA had been expanded. The entity used to be a media and broadcasting institution, but it had now transformed into a fourth industrial revolution (4IR) institute that provided training in high-tech areas. It was still working collaboratively with other stakeholders to reach other areas. Its model had been expanded to reach more disadvantaged people in the country.

Ms Leshabane commented on the AG’s findings. Despite the unqualified audit, the evidence which had been provided in the previous financial year was no longer rendered as sufficient to the Auditor-General. There seemed to be a change in the AG’s requirements.

Should a second wave of COVID-19 hit South Africa, it would definitely impact negatively on NEMISA. As most of its beneficiaries did not have devices, they would have to get to central locations to receive training online.

She said the entity had a capacity issue. It had just appointed a new CEO who had commenced his duties on 1 October.

Mr Thilivhali Ramawa, Chief Financial Officer: NEMISA, explained to the Committee on the high percentage of the entity’s administration budget. He said that NEMISA’s share model cost includes the costs of directors, the 3 buildings that it was renting, as well as the salaries of trainers and lecturers and IT cost. These expenses all fall under administrative cost and were all related to training. Due to COVID, the entity had to provide data allowance for its students. He clarified that these expenses although were being placed under administrative cost were essentially training expenses.

Mr Trevor Rammitlwa, Chief Executive Officer: NEMISA, said NEMISA had put in place new control measures in accordance with the AG’s findings, and had communicated with its main partners so that they could work together to resolve problems.

Regarding Mr Mackenzie’s question, he said that a contingency plan had been added which involved getting platforms zero-rated so that youth and target markets, such as those in rural areas and people who lacked resources, could have access to training materials and would not be affected by a COVID-19 second wave.

He assured the Committee that NEMISA was still working very closely with its collaborative partners.

DCDT

Ms Batyi explained what the Department was doing to address a possible second wave. It was working closely with the Department of Labour. All department employees received an SMS daily, asking them to indicate if they had any medical condition or any of the COVID symptoms. An employee would be able to go to the office only after receiving an indication. Although the Department was providing 100% service at level one, it was still doing rotational shifts. All employees working from home were required to submit progress reports in order to monitor their performance.

Ms Batyi anticipated further budget cuts for her Department and its entities in the foreseeable future, and it was prepared for that. It was already looking at strategies in place to retain optimal staff and utilising the 4IR in order to operate in a more cost-effective manner.

Further discussion

Mr Mackenzie said he understood that the costs of dollar denomination would impact Sentech, and asked if a strategy was in place to deal with that.

He commended the SABC’s remote working policy, and encouraged all departments and entities to look at their remote working policies.

He asked the Film and Publication Board how it charged online users for the content that they posted online.

Ms Mashele responded that the entity charged for the online platform that provided film production facilities or an online distribution platform. In the case of a blogger who used a licensed FPB website, the blogger would not be required to be registered.

Mr Booi responded to Mr Mackenzie that the entity was monitoring the changes in the exchange rate, and was looking at plans to contain the expenditure as a result of the rand/dollar volatility.

The Chairperson summarised the key points of the meeting.

The meeting was adjourned.