DCDT & entities Quarter 3 & 4 2020/21 performance; with Minister

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Communications and Digital Technologies

17 August 2021
Chairperson: Mr B Maneli (ANC)
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Meeting Summary

The Portfolio Committee met in a virtual sitting for a briefing by the Department of Communications and Digital Technologies and its entities on their 2020/21 fourth quarter performance and expenditure reports. It also discussed its second term resolutions, and considered and adopted its third term draft programme.

The entities which briefed the Committee were SENTECH, the State Information Technology Agency (SITA), the National Electronic Media Institute of South Africa (NEMISA), the South African Post Office (SAPO), Broadband Infraco (BBI), the .za Domain Name Authority (ZADNA), the Universal Service Access Agency of South Africa (USAASA), the Universal Service Access Fund (USAF), the Independent Communications Authority of South Africa (ICASA), and the Film and Publication Board (FPB). Matters discussed were mostly related to the achievement or under-achievement of set targets against key performance indicators (KPIs). Most entities referred to the difficulty of operating during the COVID-19 pandemic.

The report by the Department of Communications and Digital Technologies indicated poor performance. It had committed to achieving 32 annual performance plan (APP) targets, but although it had spent 98% of its adjusted budget allocation by the end of the fourth quarter, it had achieved only 16 (50%) of the targets.

SENTECH had completed its audit and received an unqualified audit opinion. The organisation had been able to achieve all its targets according to the key performance indicators under the difficult circumstances.   

SITA reported a performance of 72%, achieving only 13 of the 18 set targets. It had received a qualified audit opinion during the 2019/2020 financial year, and was awaiting the final audit pronouncement.                                                                                        

NEMISA had achieved seven of its eight planned targets, but had experienced many challenges as a result of Covid-19, with most of its beneficiaries being in the rural areas.       

The performance of SAPO remained weak, with only four KPIs achieved against the set target of 17 -- a performance level of only 24%. There was now a greater focus by the management on addressing the entity's current financial challenges. The slow recovery in business had meant a slow recovery in revenue, which had been insufficient to meet all its operating costs.                        

The SABC reported a loss that was R36.1 million worse than for the comparative period in the previous year. This had resulted in a net loss of R837.2 million in 2020/21. The revenue streams had under-performed and had not achieved the targets set for the quarter. 

For the quarter under review, BBI had achieved 15 of its 19 targets. There had been a significant decline in revenue due to the restrictions imposed under the Covid-19 lockdown. It had also been unable to raise the funds required during the year to procure new equipment and to settle amounts outstanding, and this had resulted in lower sales.                                

ZADNA had achieved nine of its ten targets. Its focus was mainly on rural areas, but it had established new ways of working and had adapted to the current circumstances to ensure its targets were achieved. 

USAASA and USAF had operated under difficult circumstances due to the lockdown restrictions. Projects were hit hard during the pandemic, as the majority of the targets required interaction. USAASA had achieved all its targets, but USAF had under-performed and achieved none of its targets.

ICASA reported that 86% of its planned targets were achieved. The reasons for non-achievement were the reconstitution of council committees due to vacancies, the suspension of public hearings during Covid-19, and the cancellation of procurement processes due to bids being non-responsive. Revenue was 8% lower than budgeted for, due to the reduced prime rate. In quarter four, savings had been realised and had been reprioritised to finance Covid-19 related costs

The FPB had  achieved 11 of its 15 targets, representing a performance of 73%. The Covid-19 pandemic had impacted on productivity, but operations had continued with remote working and virtual stakeholder engagements. The organisation was still attending to a high vacancy rate. Its statement of financial performance was a positive reflection of its ability to adequately plan and execute its operational deliverables.

There had been engagements and sessions between the Minister, the Department and the different entities. The Minister indicated that the Department was committed to resolving the small issues which were creating stumbling blocks affecting the entities' performances. All the entities were operating within the digital space, and had to lead by example. Performance agreement analysis would be conducted, and performance reports must be submitted by the entities

The Committee was concerned at the overall performance of the Department and its entities. Criticisms had been mounting over the inability of the entities to operate in the digital space. The Committee said that despite the Covid-19 pandemic, the Department and its entities operated in the digital space but had not reprioritised to achieve the set standards on targets.

The Committee sought clarity on the overall under-performance. The reasons reflected in the reports and presentations were not tangible, and no clear indication had been given on corrective measures and how challenges would be addressed. It pointed out that the Covid-19 pandemic had been used as an excuse, as the entities had reported on the same matters in previous quarters.

Meeting report

Opening remarks

The Chairperson said the presentations should focus on what was not achieved in the fourth quarter performance report, and the second term resolutions should emanate from the discussions and focus on recommendations. There would not be enough time to go through the details in the presentations, so the main focus of this session would be on the targets not achieved.

He extended a special welcome to the new Minister, Ms Khumbudzo Ntshavheni. An apology had been received from the Deputy Minister, Mr Philly Mapulane, and Mr V Pambo (EFF)

Minister's overview

Minister Ntshavheni thanked the Chairperson and Committee Members, and extended condolences over the loss of colleagues and ex-colleagues. As part of the work that had been done by those who had passed on, the Department would continue to deliver on its mandate. The Committee's resolutions had been reviewed, but not attended to. She made a request for the resolutions not to be discussed, as some of the matters formed part of the Department's interventions, and would also be discussed as recommendations within this sitting. 

There had been meetings and engagements with the entities, and these would be completed next week. There were matters that needed immediate attention and intervention, in particular the issue of digital migration.

The Department needed to ensure that the stumbling blocks to digital migration were resolved, and a new approach had been adopted which would go to Cabinet, and it would report back to the Committee. Counsel had been briefed, and if the matter had to go back to court, the Department would oppose it and defend the policy directives of the Cabinet. The Department was committed to resolving the small issues which could create stumbling blocks, and would take the Committee into its confidence while finalising the negotiations.

Meetings had been conducted with the South African Post Office (SAPO). Its financial statements had not been finalised and would not be submitted on time. There had been engagements with the Auditor-General (AG) to request an extension. This would result in a delay in the submission of the annual report.


Presentations by Department of Communications and Digital Technologies and entities

Department of Communications and Digital Technologies

Ms Nonkqubela Jordan-Dyani, Deputy Director General (DDG), DCDT, provided an overview of the Department's fourth quarter performance. By the end of the quarter 4, it had achieved 16 of the 32 (50%) annual performance plan (APP) targets. There had been delays with the planned set targets and a decline in performance from the previous year, which was at 74%.

Ms Joy Masemola, Chief Financial Officer (CFO), indicated that the Department had spent 98% of its adjusted budget allocation. Overall, under-spending was due mainly to the hard lockdown that had occurred at the beginning of the financial year. This had affected the implementation of projects and other activities of the Department. Spending was mainly on normal monthly commitments and projects in progress.

(See attached presentation for details).

SENTECH

Ms Precious Sibiya, Sentech director, represented the Chairperson of the entity's board and reported that Sentech had completed its audit and received an unqualified audit opinion. There were plans to address the findings, and management would present the audit action plan to ensure corrections. The executive team would brief the Committee on a high-level basis.

Mr Mlami Booi, Chief Executive Officer (CEO), says that Sentech had operated under extremely difficult circumstances during the Covid-19 pandemic. It had established a committee in the organisation looking at business continuity in order to manage the challenges associated with the effects of the pandemic. The third and fourth quarters had been a difficult period, and there were a few strategic projects planned that could not be finalised. Customers had been granted a grace period that had had an effect, but the entity had recovered and achieved the set targets according to the key performance indicators (KPIs).

Mr Tebogo Leshope, Chief Operating Officer (COO), indicated that the customer satisfaction KPI had not been achieved. The KPI was measured against the perceptions of Sentech's customers, the quality of its services, innovation and value for money. This had been difficult under the Covid-19 circumstances, with the overall customer satisfaction levels at 65% against the 76.6% set target. All other KPIs had been achieved, and the audit was completed with an unqualified opinion.

Business revenue was over-achieved by 9%, mainly due to the fact that the TV portfolio was 13% above budget and Direct-To Home (DTH) portfolio was 19% above budget due to channel uptake from content aggregators, as well as SABC streaming services. Operating expenditure was 1% below budget, mainly due to operational activities deferred during the lockdown. Earnings before interest and taxes (EBIT) were R88m above budget, which was attributed to revenues being above budget, and under-spending on operational expenditure, owing to delayed activities during the lockdown.

(See attached presentation for details)

State Information Technology Agency (SITA)

Luvuyo Keyise, Executive Caretaker at SITA, said that the organisation had achieved 13 of the 18 set targets, resulting in a performance level of 72%. The target for earnings before interest and taxes, depreciation and amortization was achieved due to savings in the cost of sales in the IT infrastructure, savings related to the Covid-19 restrictions, and additional revenue that materialised from mainframe revenue which had not been budgeted for.

During the 2019/2020 financial year, the organisation had received a qualified audit opinion. Management had developed an action plan in order to address the findings, and it was awaiting the final audit pronouncement in August 2021.

National Electronic Media Institute of SA (NEMISA)

Ms Molebogeng Leshabane, Chairperson of NEMISA, reported a performance level achievement of over 50% in the previous year, and said this had substantially improved. Performance had been affected due to Covid-19, and there had been many challenges during the financial year involving most beneficiaries in the rural areas. The challenges had led to no training of people on gadgets and connectivity in rural areas. This was a struggle for NEMISA, but work was being done and partnerships were being formed.

Mr Trevor Rammitlwa, CEO, said that the Covid-19 pandemic had negatively impacted on face-to-face training interventions. A performance recovery plan had been put in place to mitigate the challenges. The lack of IT infrastructure and connectivity devices in rural areas for online learning opportunities was a challenge. There was a lack of internal capacity to offer optimum support to learners.

NEMISA had achieved seven of the eight planned targets set for the fourth quarter. This translated to an overall achievement of 87.5%. The target not achieved was programme 3 -- e-Astuteness development. There had been 30 audit findings for the 2019/20 financial year. The action plan had 43 action items, and 42 of the items had been addressed, while one was in progress.

(See attached presentation for details)

South African Post Office (SAPO)

Ms Tia van der Sandt, SAPO Chairperson, said the presentation information and results on the third and fourth quarters did not reflect the amount of work that had gone into the entity during this period. During the quarters under review, seeds had been planted under the previous leadership. These had already started to bear fruit in quarter one and beyond into the new financial year. The payment system had been transferred to Postbank, and an improvement in outcomes had been seen. E-commerce deals had been formed and completed in the new financial year. SAPO was actively engaging with other entities such as SITA and SENTECH to maximise the different strengths in order to put in place cost-effective solutions. During this period, it also actively engaged with key customers who had complaints, and had turned the business around to ensure an increase in revenue.

Ms Nomkhita Mona, CEO, said she was excited at the strides SAPO had made in the last quarter in number of areas. They were dealing with a business that had been negatively affected by the Covid-19 pandemic in a number of different areas. The business model of SAPO had become obsolete and was not ready for the e-commerce space. Tremendous progress and development had been made in the last quarter, and they were already working on a plan that spoke to the post office of the future. While the performance history of SAPO was negative, it was important to note that it had been under-performing for a number of years. It had not moved fast enough to catch up and necessarily change its business model. They were encouraged and confident that things could turn around to ensure the success of the new SAPO of the future. It delivered key services to communities, and its role and mandate should not be taken lightly.

Mr Jerel Ruthnam, Head of Strategy, said that the business recovery of SAPO remained slow, which contributed to increased financial challenges. Organisational performance remained weak, with only four KPIs achieved against the set target of 17, which was a performance level of 24%. There was a greater focus by management to address the current financial challenges of the organisation.

The slow recovery in business meant a slow recovery in revenue. Revenue growth initiatives had not achieved the planned annual target, and had been insufficient to meet all operating costs. The revenue shortfall contributed to the monthly cash deficits to meet all liabilities. SAPO would continue to focus on the implementation of revenue recovery, growth initiatives and projects.

(See attached presentation for details)

South African Broadcasting Corporation (SABC)

Ms Yolandi van Biljon, CFO, said the SABC had reported a loss that was R36.1 million worse than the comparative period the previous year. This had resulted in a net loss of R837.2 million in 2020/21. The revenue had been below budget, while the revenue for the quarter was almost identical to the prior year's comparative period. The revenue streams had under-performed and had not achieved the set targets for the quarter. This could be attributed to non-compliance by licence holders. Quarter four had regressed from the previous quarter, in particular with regard to a reduction in renewals and debt collection. There had been a year-on-year increase in TV licence collection, but there was a decrease in quarter four compared to the third quarter. The sales division had underperformed against the revised budget, but sponsorship revenue had exceeded expectations and the news channel revenue had exceeded the performance in the previous period. TV consumption had shown a recovery, but the changes in the lockdown levels had impacted negatively on viewership and revenue. Radio had performed well and almost fully recovered from the impact of the pandemic.

The overall performance had shown a regression. The corporation had not anticipated the impact of the Covid-19 pandemic, and had been unable to revise its KPIs. In addressing the challenges, there were well developed implementation plans, fresh new content, and ongoing marketing efforts which it was hoped would lead to recovery.

(See attached presentation for details)

Broadband Infraco (BBI)

Ms Leah Khumalo, Chairperson, said that for the quarter under review, 15 of the 19 targets had been achieved. Of the four targets not achieved, three pertained to financial sustainability, and one to resilient network targets. The CEO would go into the challenges, which were related to infrastructure, the vandalism experienced and the requirements for funding necessary as the merger was taking place, as directed by Parliament.

Mr Andrew Matseke, CEO, said that the areas of under-achievement were sales of contracts. There were challenges with funding, and the organisation was unable to take advantage of the business potential. A 1% year-on-year decrease in revenue was noted when compared to the same period of the previous financial year. Delays had been caused by the inability to access sites due to restrictions imposed under the Covid-19 lockdown. This had been a significant contributor to the decline in revenue. Furthermore, the pandemic had contributed to long sales billing cycles. BBI was also unable to raise the required funds during this year to procure new equipment to provision services to customers and to settle amounts outstanding for core network equipment. This had resulted in lower sales.

Mr Ian van Niekerk, CFO, said that the financial year end had been concluded, and BBI had received an unqualified report with one finding.  Cash resources were down to R18 million, and debtors' days had decreased to 45 days. Shareholders’ loans were now reflected as equity, and no medium- or long-term funding had been received during the year. Revenue had been below budget, with cost of sales increasing year-on-year by 3%. Cash generated by operations had been positive for the fourth consecutive year, despite the difficult circumstances. The majority of the audit findings had been attended to.

(See attached presentation for details)

.za Domain Name Authority (ZADNA)     

Ms Palesa Legoze, Chairperson, reported that nine out of ten targets had been met. ZADNA focused mainly on rural areas due to the internet governance outreach and stakeholder engagement training programmes, which had been a challenge during the Covid-19 pandemic. However, it had established new ways of working and adapted to the current climate to ensure the set targets were achieved.  

Mr Molehe Wesi, CEO, reported that ZADNA had operated effectively, remained in a positive financial state, and had received an unqualified audit opinion. There had been engagements with the other SOEs and partnerships had been formed, with the most recent being those signed with NEMISA and SITA.  ZADNA’s governing body and structures continued to mature at a satisfactory rate for both the third and fourth quarters.

Mr Justice Tembo, CFO, provided only a small part of the financial overview. The Minister interrupted, saying that going into each quarter would take too long.

(See attached presentation for details)

Universal Service and Access Agency of South Africa (USAASA) and Universal Service and Access Fund (USAF)

Ms Mapuleng Moropa, Board member, standing in for the USAASA chairperson, said the major highlights were on broadcasting digital migration (BDM) and board projects.                                                   

Ms Chwayita Madikizela, Acting CEO, said that projects were hit hard during the Covid-19 pandemic, as the majority of the set targets required interaction. The restrictions imposed by the lockdown prohibited human interaction, and it was challenging to execute projects.

Mr Sipho Mngqibisa, Executive Manager, said USAASA had achieved all its KPIs per the set targets. USAF was responsible for implementing the key projects, and had underperformed. USAF had not achieved any of the set targets.

Mr Frik Nieman, CFO, said USAASA had 14 audit findings and 13 of these had been resolved. USAF had 11 audit findings, and six of them had been resolved. On financial performance, USAF had no activities involving expenditure.

(See attached presentation for details)

Independent Communications Authority of South Africa (ICASA)

Dr Keabetswe Modimoeng, Chairperson of ICASA, reported that 86% of the planned targets had been achieved. The reasons for non-achievement were the reconstitution of council committees, the suspension of public hearings during the Covid-19 lockdown, and the cancellation of procurement processes due to bids being non-responsive.

Mr Willington Ngwepe, CEO, said that the revenue was comprised of appropriations and interest on short term investments. ICASA was 8% lower in terms of revenue budgeted, due to the reduced prime rate. In quarter four, savings had been realised and were reprioritized to finance Covid-19 related costs.

(See attached presentation for details)

Film & Publication Board (FPB)

Ms Zama Mkosi, Chairperson, said this would be the final presentation of Ms Abongile Mashele, the COO, as she was leaving the organisation. There was an acting COO, and the FBP was busy with the recruitment and selection processes to fill the vacancy.

Ms Mashele reported that 11 of the 15 targets had been achieved. The Covid-19 pandemic had impacted on productivity, with 17 staff members infected and 1 death, and the organisation still had vacancies. The FPB had been able to reduce the vacancy rate to 4% with a secondment to the Chief Information Officer (CIO) post, and had filled the post of Research Manager. The high vacancy rate was due to the moratorium on recruitment and selection processes. There had been engagements with labour on the moratorium.

The statement of financial performance was a positive reflection of the FPB’s ability to adequately plan and execute its operational deliverables. Revenue had been collected against the annual budget. The revenue for the year to date was under-collected as a result of lower online distribution and classification fees. Total expenditure, excluding commitments, was 90%. Including commitments, it was 107% of the annual budget. The amount had been spent on enabler and flagship projects.

(See attached presentation for details)

Discussion

The Chairperson thanked the Minister and the entities for the presentations.

Mr P Faku (ANC) welcomed the input of the Minister, and extended condolences to the McKenzie family, as the Committee would always remember him.

There were serious problems with entities not meeting set targets. It was unacceptable for an entity to spend more than 90% of the budget and achieve only 50% of its deliverables. Some of the entities were duplicating roles. How were some of these entities going to merge? Plans must be presented to the Committee. SAPO was running at a loss, and nothing was happening. The Committee trusted the Minister to ensure that these entities performed.

SENTECH provided the same reasons for its performance each time at Committee meetings. There was a need to investigate the performance agreements of ICASA councillors. The SABC was unable to collect revenue from TV licences in order to generate income. Most entities were not responding to audit findings. These were serious problems, and although the current climate under the Covid-19 pandemic was understood, the entities were not performing according to the set standards.

Mr Z Mbhele (DA) welcomed the Minister, and said he looked forward to future engagements with her. They were halfway through the five-year cycle, and he doubted that there would be a significant turnaround in performance. What would the Minister consider the Department and the entities should identify as the number one priority to achieve within the short to medium term,?

Mr N Chirwa (EFF) said SENTECH always provided the same reasons and mentioned the Covid-19 pandemic for not performing. Was it going to regress as long as Covid-19 existed?  Entities had to give tangible reasons to the Committee on what exactly had happened and what had been affected. Which programmes had SENTECH planned and failed to execute, and how had Covid-19 prevented the execution of these plans?

NEMISA did not have contingency plans in place, and had given reasons based on connectivity in the rural areas, but no interventions had been presented. It had indicated that no people were trained due to gadgets and connectivity in rural areas. This was not enough. How would these challenges and training needs be addressed? SAPO had indicated there was a delay in forming and concluding partnerships. What had caused these delays and with whom should these partnerships be formed? How would SAPO ensure that these partnerships were concluded?  They were all aware of the internal human resources (HR) issues within the SABC, which was all over the media. Robert Marawa had been fired via an sms text. These things could not just happen, and the Committee remain quiet. Had the SABC followed the correct HR procedures? Could the Minister indicate in detail which entities had been engaged with, and what some of the deliberations had involved?

Ms N Khubeka (ANC) requested that the amendments to legislation be fast tracked. The Department was configured to ensure amendments took place because the other entities relied on it. The Committee was aware of the posts that were vacant and the challenges that came with these vacancies. It could see that some of the entities tried and had been pushed under difficult circumstances. The work done by the entities was appreciated, but they needed to accommodate Covid-19 and not make excuses. The Committee want to see SAPO performing to set standards and like the other entities. SAPO played an important role when it came to services to the poorest of the poor. She asked how BBI planned to tackle the challenges of vandalism. What measures would the SABC put in place to improve on TV licence fee collection? It was important for the Minister to note that the entities had their own boards. The merging of entities would affect the structure of the boards.

Responses

Minister Ntshavheni invited the SABC to respond on the two matters -- the end of Robert Marawa’s contract, and the collection of TV licence fees.

Mr Ian Plaatjies, COO, SABC, said part of the corporation's cost reduction strategy was to reduce the independent contracts. Robert Marawa had tweeted that he was let go via a sms, but he had been informed three months prior to his contract coming to an end that it would not be renewed.

Ms Van Biljon said the new website enhancement would ensure an increase in payments. The SABC was also looking into a geographical online system to make collections better, and an amnesty programme was being explored with the Department.

Minister Ntshavheni said most Members had raised the fact that they were unhappy regarding the poor performance by the Department and the entities. It was important to know that one could start a process, and what was important could be prioritised and things could be done differently. Entity oversight was important, and there must be analysis and alignment of performance agreements with set targets. Performance agreement analysis would be conducted, and performance reports must be submitted from the entities. The importance of the process of performance agreement analysis was to ensure that executives were paid for performance. The digital migration report was due in the first week of September, and the rest was due in the last week of September. The initiatives would be reported to the Committee to ensure resubmission before tabling within the medium term.

Covid-19 could not be used as an excuse. All the entities were operating within the digital space and must lead by example. SENTECH and NEMISA had reported under-performance due to Covid-19, but this should not hamper performance within a digital environment.   

There had been a meeting with SAPO yesterday, and the organisation had to report in three weeks on corrective measures. A meeting with BBI would be conducted on the issue of vandalism.                         The legislative amendments would be fast tracked, and funding models for SAPO and the SABC would be look at.  New organisational structures would be signed off and sent to the Department of Public Service and Administration (DPSA) regarding all vacant posts. It was important to note that it was not only about filling vacant posts, but also that one might be at risk of attracting the wrong skill set.

Concluding remarks

The Chairperson said there were major areas of concern emanating from the Committee and the Minister. The Minister and the teams would report back on issues raised and progress made. Important interventions had been made, in particular with regard to the SAPO situation. The Committee supported the Minister and was confident that she would take the Department to new heights. It appreciates the approach she was adopting on accountability.  Resolutions would be monitored during meetings and sittings.             

The draft Committee programme was adopted.

The meeting was adjourned.

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