The Standing Committee on Public Accounts convened in a virtual meeting to receive a briefing on the annual report and financial statements of the South African Post Office for the 2019/20 financial year, as well to establish the reasons for its irregular, fruitless and wasteful expenditure.
SAPO said that due to the number of findings that had been made by the Auditor-General of South Africa (ABSA) in the 2019/20 financial year, the AG had found that the extent of the work to audit both what had been rectified for the 2019/20 financial year, as well as auditing the 2020/21 financial year, had been too great to be dealt with in the time span that was required, and had asked for an extension to submit the 2020/21 annual report at the end of February 2022.
The Deputy Minister said that the Department of Communications and Digital Technology had seen some improvements in the entity's performance in the 2021/22 financial year so far, compared to the end of the last financial year. Although the improvements had been noted, the Department felt that more needed to be done to show continuous improvement to reach a more acceptable performance level. The Department had urged SAPO to put in a more concentrated effort throughout the financial year to ensure a continuous improvement in performance. The Department had also found it necessary for the entity to convene weekly meetings with the Ministry, led by the Deputy Minister and the relevant officials in the Department, to engage and assess the performance of the entity, and to deal with all the other ongoing challenges.
The Standing Committee asked questions relating to the leadership of SAPO, as well as the consequence management actions taken to eliminate irregular, fruitless and wasteful expenditure. One of the issues involving the leadership was the poor management and organisation following the unfortunate decision to strip the Postbank away from the Post Office. This had resulted in the clients of Postbank clogging up the post offices, creating slow-moving queues and preventing people from even thinking of using its parcel service, because it was a nightmare trying to do any kind of business there.
The Committee was not impressed with the responses from SAPO regarding consequence management. It concluded that in essence there was a lack of consequence management regarding all the issues of concern that had been highlighted by the Auditor-General, and nothing had been done.
The Committee did not see the South African Post Office surviving without receiving some form of financial injection from the fiscus. SAPO had made a submission to the Treasury, requesting an R8 billion injection over the medium term expenditure framework (MTEF) period. The Minister had engaged with the Minister of Finance to accommodate this request, and these engagements were ongoing. They had been hoping to receive an allocation from Treasury during last week’s presentation of the medium term budget policy statement (MTBPS), but this unfortunately had not happened. The Committee had heard about plans to improve the revenue stream, and wanted to know whether there was a costed plan of how this R8 billion was going to be utilised, and the revenue and expenses that would follow over the medium term. They wanted to know in what year the Post Office could be expected to produce any profit.
Frustrated at the lack of direct answers to their questions seeking to establish who had been responsible for SAPO's performance sinking to its current level, the Committee decided to continue the meeting on December 3, to which the full board and SAPO executives would be invited so that comprehensive responses could be provided.
Chairperson’s opening remarks
The Chairperson welcomed the Members of the Standing Committee (SCOPA), as well as the delegation from the Department of Communications and Digital Technology (DCDT) and the South African Post Office (SAPO) to the meeting. The Minister was not available, and the ministerial delegation was led by the Deputy Minister. The meeting was convened to discuss the 2019/20 annual report, as the 2020/21 report was not yet tabled. The meeting had been postponed twice before Parliament went on recess. The last postponement was triggered by the local government elections, while the first was because of the Cabinet changes that led to the appointment of the new Minister and Deputy Minister in this portfolio. They had asked for time to familiarise themselves with the issues, which was a reasonable request at the time. One would have expected that having exercised that flexibility; the full complement of the Department would have been in the meeting. He said that Mr B Hadebe (ANC), Mr A Lees (DA) and Ms B Swarts (ANC) would lead the discussions.
Mr Philly Mapulane, Deputy Minister, introduced the delegations from SAPO and the DCDT.
Delay in tabling 2020/21 report
The Chairperson wanted to know why the 2020/21 annual report had not been tabled.
Deputy Minister Mapulane said that the information the DCDT had received was that the AG had not concluded the audit of the financial statements of SAPO, and asked the leaders of the entity to explain what had happened in detail.
Ms Tia van der Sandt, Acting Chairperson: SAPO, said that due to the number of findings that were made in the 2019/20 financial year, the AG had found that the vastness of the work to audit both what had been rectified for the 2019/20 financial year as well as auditing the 2020/21 financial year, was too much for the time span that was required. They had submitted the report to the AG at the end of May and received a formal letter from them stating that due to the number of issues that they had to audit, they would not be in time, hence the entity found it prudent to ask the Minister for an extension.
The Chairperson asked for clarity on whether the Acting Chairperson was saying that the delay was from the AG, and asked the AG to clarify the matter.
The Committee Secretary said that the AG was not in the meeting, and was asked to call them into the meeting.
The Chairperson asked the entity to clarify the matter in the meantime.
Ms Nomkhita Mona, Chief Executive Officer (CEO): SAPO, said that what the Acting Chairperson had conveyed was correct, as they had formally asked for the audit to be delayed because they were dealing with issues of concern. The AG had taken longer than they normally would have, as the entity had submitted the financial statements on 31 May, and the AG office had asked for an extension for September. SAPO had also asked for an extension because they wanted to finalise the issues that they had around going concerns.
The Chairperson asked if the AG's office may have completed the work.
Ms Mona said that the AG's office had not finalised the work.
The Chairperson wanted to know how long the extension the entity had asked for was.
Ms Mona said that they had asked for an extension until February to ensure that everything was done, and hoped that everything would be finalised long before that time. She said they wanted to give themselves some time so that there was no rush.
Mr Hadebe asked SAPO to clarify why they had asked for an extension if they had submitted on time. He wanted to know what had been outstanding from SAPO, since they had asked for an extension.
Mr Lenny Govender, Chief Financial Officer (CFO), SAPO, said they had submitted the financial statements and all the information on 31 May. The request for an extension was just to address the going concerns matter regarding financial assistance, as that would improve the outlook in terms of the going concerns.
The Chairperson said that the issue was now immaterial as to whether the AG had completed the audit or not, because there had been a request for an extension because of the going concern. He wanted to know what it was about the going concerns that SAPO was trying to get sorted.
Mr Lees wanted to know what was going to happen to SAPO’s financial situation, considering the recent Medium-Term Budget Policy Statement (MTBPS) from the Minister of Finance. He was concerned that the Minister of the DCDT had chosen to not be in the meeting.
Deputy Minister Mapulane said that he had included the issue of the going concerns of SAPO in his notes of the opening statement of his presentation. SAPO was currently experiencing serious liquidity challenges.
The Chairperson said that the Deputy Minister should rather proceed with his presentation on the overview of the challenges faced by the entity, for the sake of time.
DCDT 2019/20 performance report
Deputy Minister Mapulane said that in the overall performance of SAPO, the Department wanted to highlight issues regarding general spending in the entity, particularly irregular, fruitless and wasteful expenditure. SAPO had committed to implementing 17 key performance indicators (KPIs) but had achieved only six (35%). The DCDT had expressed its concerns with their performance, which was unsatisfactory, and had received cooperation and commitment from the entity that they would work to improve their performance.
He said the Department had seen some improvements in the 2021/22 financial year, where 70.7% performance had been reported in Q1, compared to the 24% which was recorded in Q4 of 2020/21. Although the improvements had been noted, the Department felt that more needed to be done to show continuous improvement, to reach a more acceptable performance level. The Department had urged SAPO to put in a more concentrated effort throughout the financial year to ensure a continuous improvement of performance. The Department had also found it necessary for the entity to convene weekly meetings with the Ministry, led by the Deputy Minister and the Acting Director-General, the DDG, and relevant officials in the Department, to engage and assess the performance of the entity and deal with all other ongoing challenges.
As a shareholder intervention and given SAPO’s overall situation, which was also exacerbated by the lack of funding and the impact of COVID-19, the Department had requested that the board of SAPO develop a turnaround strategy, which was developed by the entity. The turnaround strategy was approved by the board, and was submitted to the Ministry during a workshop and follow-up meeting where the Ministry made some submissions and comments on the strategy, and it was finalised on 6 October. The strategy was being reviewed by the Department. It would submit the outcomes of the review to Cabinet and inform it of the situation in SAPO and obtain its approval for the interventions that were required and to turn the entity around.
Regarding the AG's findings, he said that in the 2019/20 financial year, SAPO had recorded a total of R199.3 million in irregular expenditure. The entity would explain the various interventions that would be made to reduce the recurrence of irregular expenditure. The Ministry was not satisfied with the level of progress and urgency in addressing the audit findings, including the unauthorised, irregular, fruitless and wasteful (UIFW) expenditure that had been recorded.
The DCDT had engaged with the entity several times, and the last of these engagements was yesterday, where the Ministry had requested that SAPO adequately demonstrate the issues that needed to be investigated, and that corrective actions and consequence management actions were determined and implemented as required. They had put plans forward that would allow SAPO to provide regular updates and submit reports to the Department and the Ministry with detailed accounts of how the issues raised in respect of each area of UIFW expenditure had been investigated, including the evidence of this information. The information, including regular updates for corrective actions and consequence management, was key for the Department and Ministry to be able to monitor the progress that was being made by the entity to address the issue. Regular meetings had been held and would continue to be held with SAPO on a weekly basis to ensure that there was continuous progress reporting on the resolution of the audit findings. The Department had also requested the board of SAPO to exercise the most stringent oversight to ensure that all relevant executives and business unit managers were held accountable, and that the required interventions were implemented to ensure that there was the sense of urgency that was required to deal with the situation.
Deputy Minister Mapulane said they agreed that no one had been held accountable for the UIFW expenditure, as stated in the reports, and had shared their concerns with SAPO when engaging them. They had requested that going forward, it must provide detailed investigations of all the areas which had been identified as constituting UIFW expenditure, and that there must be sufficient control measures put in place, especially in the supply chain environment.
Regarding the going concerns, SAPO had been going through serious financial challenges for a long time. In the past few years, the core revenue of the entity had been declining -- in the 2015 financial year, its revenue was R3.43 billion, but was currently sitting at R1.51 billion in the 2021 financial year. In the strategy document that had been prepared by SAPO, called Building the Post Office of Tomorrow, the document attributes the state of affairs to a number of problems, which include:
- customer attrition;
- limited capital investment and lack of technology upgrades;
- leadership instability which led to the entity being placed under administration in 2015;
- investments without equity compensation; and
- digital communication platforms which were substituting physical letter mail, resulting in declining volumes in letter posts and driving revenue downwards.
All these factors and trends had cumulatively resulted in the solvency and liquidity crisis that had been happening at the entity over the years. This was the reason the Ministry had asked it to develop a turnaround strategy when they met with the board in August.
He did not see the South African Post Office surviving without receiving some form of financial injection from the fiscus. SAPO had made a submission to the Treasury, requesting an R8 billion injection over the medium term expenditure framework (MTEF) period. The Minister had engaged with the Minister of Finance to accommodate this request even prior to the tabling of the MTBPS, and these engagements were ongoing. They had been hoping to receive an allocation from Treasury during last week’s presentation of the MTBPS, but this unfortunately did not happen. They had requested an allocation of about R1.8 billion for now during this adjustment period, and over the MTEF.
He said that part of the reason that the audit of the annual financial statements was not concluded was to address the going concern status. They had been were hoping that this capital injection was going to be approved by the fiscus, but now that it had not been made available, they had requested that SAPO and the Department must meet urgently to identify areas that required urgent intervention so that they could approach Treasury again to see if they could reprioritise in the meantime, while waiting for the budget to be tabled in February next year.
The Ministry was committed to ensure that the entity would turn things around, and had identified possible areas where they could increase the revenue, as it had been declining over the years. In the DCDT's discussions with SAPO, their message had been clear -- that they must clean their house and get it in order.
Discussion on SAPO leadership
Mr Lees said that the AG had highlighted leadership as being one of the major factors in the decline of the Post Office. The entity was in huge distress, yet the board was not in the meeting. The board consisted of 13 members, ten of them non-executive, and three executives, while the three executive members of the board were all acting. He asked the board's acting chairperson to confirm if that was what the status of the board was right now, and why the other board members were not in the meeting.
Ms Van der Sandt said that the CEO position was permanent, but the COO as well as the CFO were indeed in acting positions. In the case of the CFO, the board had appointed someone who unfortunately, after three months had decided to resign. The entity was embarking on another process to find a new CFO. Regarding the board not being in attendance, she said they had been advised that the board in its entirety was not required -- just her presence as the Acting Chairperson of the board would be required.
Mr Lees asked if the board was a complete board and whether there were indeed ten non-executive members.
Ms Van der Sandt said that the board was a complete board, but she was unsure of the total number of board members.
Mr Dawood Dada, Group Company Secretary: SAPO, said there were nine non-executive board members, with one vacancy. The vacancy was the result of the former chairperson having left the board.
Mr Lees wanted to know the reasons for the resignation of the CFO after three months.
Ms Van der Sandt said that the reasons were given as being personal, and due to his health.
Mr Lees said that the board was looking for a taxpayer bailout at a time where there was an explosion of parcel post, and private enterprise had done incredibly well over the lockdown, yet the Post Office had not capitalised on this. He suggested that the sudden weekly meetings that started three weeks ago were possibly in attempt to prepare for this meeting of SCOPA. He wanted to know the plans of SAPO to capitalise on the massive explosion in parcel post, such as Takealot, as people were using private carriers.
Ms Van der Sandt said that there had been a capitalisation on parcel post, as the Post Office had entered into contracts with international providers, and there was also a plan to ensure that they were engaging with these entities to make sure that SAPO played a role as well.
Ms Mona said that SAPO was indeed capitalising on parcel post, as they had put together a document called "The Post Office of Tomorrow,” which focused the Post Office more on the parcel business because it was the future. They had identified that SAPO should primarily be in the parcel business, logistics and warehousing. They were currently active in that business on a smaller scale than the private sector businesses, and the unfortunate thing was that they had not pivoted as early as they should have into the new line of E-commerce and the parcel business.
Even though legally they were the only ones who had the mandate to deliver the zero-to-one-kilogram parcels in this country, the private sector had stepped in because SAPO was not doing it. The primary focus of the new strategy was logistics, warehousing, digitalisation and modernization, and also becoming a hub not only for business for the government, but generally to be able to serve their customers. They had signed up a list for international businesses, such as wish.com, Mail Americas, and another one from China, and were already doing business with them. They had also asked SAPO to be their lead into sub-Saharan Africa. These companies were pleased with the work of the Post Office and what they had done in the courier section.
Mr Lees said it was good to hear that, but the disappointing part was that it was still talks and plans, while the private sector had moved and taken the business away from SAPO, and now it had to recover. Without leadership, the recovery was not going to happen and until it happened, he doubted that SAPO was going to get too much confidence from people like himself that it would ever happen, particularly when visiting the local post offices. He would not use a post office where he would have to stand in queues with 10 000 other people who were there to collect their social grants and other things, because he did not have the time, and the service from the private sector surpassed that immensely.
One of the leadership issues was the poor management and organisation of the unfortunate decision to strip Postbank away. The question of making the Post Office competitive with private enterprise in the area of parcel post must surely be a proper separation of these two businesses. The clients of the Postbank should not be clogging up the Post Office and preventing people from even thinking of using its parcel service, because it was a nightmare to do business at the Post Office.
Ms Van der Sandt said that the executives have been working on queue management and that within the strategy document, they were working towards what they call a “Post Office in your Pocket.” The idea was to go digitally to serve their customers so they could perform Post Office transactions on their phones effectively, and not need to go into a Post Office.
Regarding the Postbank separation, she said that it had been a government decision. She would not like to comment on that, but believed there had been reasons for it. She agreed with Mr Lees that perhaps the execution had not considered the impact that it would have on SAPO, because in a normal business environment, when letting go of a major part of business, there was normally a compensation for that, and it would have allowed SAPO to at least invest in the digital solutions much earlier than they were currently doing.
Regarding management, she said that there had been a lot of uncertainties within the executive management side, especially during the 2019/20 financial year, but with the appointment of the new CEO, there had been lot of drive within the organisation to start to get their house in order.
Ms Mona agreed with Mr Lees that leadership was the deciding factor for success in any organisation. Having joined SAPO six months ago, she had also realised that the instability at the top had really impacted the organisation, and they were beginning to build from the ground up. SAPO’s decline had started about six or seven years ago, and the decline had not been stopped in time. SAPO was not a difficult business model to run and manage -- it just needed the people who were there to do the right thing. She said that they were not only focusing on the document that they had put on the table, but were also beginning to implement as they went along with the little resources that they had, because they also realised that waiting longer would be detrimental for the entity.
The issue with the long queues was correct, and had affected SAPO negatively. The fact that they were paying the R350 grants and the social grants for the South African Social Security Agency (SASSA), which they do not mind doing, was not the problem, but the manner in which they had agreed or signed off on the contract was that it had become an untenable contract, as they were losing money every time they paid money over the counter. They needed to go cashless, thereby removing a lot of the red tape and long queues that caused people to stay away from the Post Office, leading to revenue losses. They had already gone ahead on a cashless solution because they believed that they could provide this service without people going into long queues, which by itself was very inhumane and in the time of COVID-19, was a problem.
Lastly, she said that in their new strategy, they had identified several opportunities that would be revenue-generating for SAPO. They had already gone into the motor vehicle licence (MVL) renewal side, and had a major contract with the Road Traffic Management Corporation (RTMC) to do that. There were already offshoots that would help SAPO going forward, but their major roadblock was their historical debt, because they did want to make good to their creditors. However, at the same time, they needed to invest capital into new projects that would make sure that they survived.
Mr Lees suggested that they might have to start by cleaning their post offices because they were an absolute disgrace, as he had had to walk through puddles of urine to get to his post box in Ladysmith. He was disappointed to hear the Deputy Minister say he was disappointed with the consequence management, as he would have expected him to describe the consequences that were followed by the Department dealing with malfeasance and maladministration. He wanted to know what the consequences had been for the executives who were suspended, specifically former acting CEO Lindiwe Kwele, and others.
Ms Van der Sandt said that the matter of Ms Kwele had been finalised, and they had agreed to go their separate paths. The SCM head had also been suspended, but she was unsure if the matter had been finalised.
Ms Mona said that the matter had been finalised, and as far as other suspensions that were on the system were concerned, they had instructed the HR executive to make sure that the matters were dispensed with very quickly so that if people were found not guilty, they could come back to work so that they do not pay people for sitting at home. Equally, those who were found to be guilty by the processes would need to vacate their positions. The ministry had also instructed that there needed to be further investigations, because it had also been explained to the Deputy Minister that there were investigations internally which had found that people were not necessarily guilty of fraud or wrongdoing, and the money had been used in the correct way, but the only reason why the money was regarded as UIFW expenditure was that people had not followed the correct processes.
Mr Lees wanted to know what the consequences in the finalisation of Ms Kwele’s case had been, as well as how long she had been suspended and at what cost.
Ms Van der Sandt said she did not know the costs off by heart, and asked to submit a report on the matter.
Mr Lees agreed that she may submit a report, and asked whether Ms Kwele had been fired or suspended, and for how long she was suspended if she was suspended.
The Chairperson asked if Mr Lees had a list of all the suspended personnel that he wanted to ask about so that they could manage time.
Mr Lees said that he was hoping the Acting Chairperson of SAPO would provide the list of all the suspended people, and all the details pertaining to them.
The Chairperson said that the Acting Chairperson of SAPO should provide a report containing the list of all those suspended and the details of their suspensions, cases, costs and verdicts.
Ms Van der Sandt said that Ms Kwele had been suspended for about ten months. She was not fired, but the board had recommended that they part ways with Ms Kwele and agree to a settlement, and the previous Minister had accepted the recommendation.
Mr Lees said that the details of the settlement should also be part of the report.
Regarding the going concern issue, he said that via the Department, the Post Office was looking for a bailout of R1.8 billion immediately, and then R8 billion over the medium term. The Committee had heard about plans to improve the revenue stream and wanted to know whether there was a costed full plan of how this R8 billion was going to be utilised, and the revenue and expenses that would follow over the medium term. He also asked that the Committee be forwarded a copy of that plan. He wanted to know the numbers and in what year the Post Office could be expected to produce any profit.
Ms Mona said that they did have an implementation plan that was costed and showed at what point SAPO would reduce the losses, and the point at which they hoped to break even and then go into profit mode. The plan could be submitted to the Committee.
Mr Lees said that right now the operation was running at a loss and the taxpayer had refused to give them a bailout. He wanted to know if they were paying their creditors within 30 days.
Ms Mona said that they were not paying their creditors in 30 days, but had started a process of clearing out the oldest debts. She could also confirm that in the last couple of weeks, they had tried to clear out the smaller businesses to which they had owed money for a long period of time. These were the agencies that did the work for them in the far-flung areas. They had covered the debts that they had been owing to them and were in constant communication and negotiation with all their landlords about making good on what they owed them. They were negotiating reduced payment plans with some of them because COVID had also affected SAPO very badly. Some of their creditors were listening to them, and some had already given them discounts, as they also wanted to return to normalcy.
Mr Lees wanted to know if the current liabilities meant SAPO was becoming more bankrupt with the passing of every debt.
Ms Mona said that this had been the case over the past few months, and the Post Office did require an injection while they were going ahead and getting their own revenue in the areas they had identified.
Mr Lees said that there was no bailout coming, and the entity was becoming more bankrupt, and creditors must surely be foreclosing on the entity. He wanted to know what the basis for creditors not foreclosing on the entity was, and whether they were foolish enough not to foreclose on them because they were expecting a taxpayer bailout.
Ms Mona said that the entity was engaging the creditors, explaining their situation and stating that they would like to continue trading, and it seemed to be working so far. She had spoken directly to some of their landlords who had said they could not pull out on them at this moment because the Post Office had supported their businesses for years before it fell into trouble. Some creditors had threatened foreclosure, but they had managed to diffuse the situation when it happened.
Mr Lees said that he was fascinated that businesspeople were prepared to do business with a bankrupt entity in the hope that they may get paid in the future. He wanted to know if they could confirm clearly that their implementation plan contained the R8 billion injection that they expected from the taxpayer, and if it did -- and the bailout was not granted in February -- he wanted to know their back-up plan.
Ms Mona said that the plan did include the R8 billion bailout, because they were of the opinion that looking at the Postbank and the separation thereof, the Post Office had added a lot of value to that entity, and felt that they did need to be compensated at the very least. This was because even as the separation was happening, there had been reserves in that account, so it was important that they believe in it. The second element was that the Post Office business was not a profitable business on its own, not because it could not be profitable, but because of the universal service application that they had for the whole country. This meant there had to be a post office somewhere in the country where it would never make money, but would always be a cost centre for SAPO. It was because of this that they believed that it was not unreasonable for the taxpayer to at least help them fulfill those goals and obligations. They had also looked at what they would have to do in case they did not receive what they had asked for, or if they did not receive anything at all, and had built that into the model.
Mr Lees wanted to know if their employees were getting their salaries in time every month, and whether any bonuses had been paid to executives and staff in the past financial year.
Ms Mona said that the information that she had -- since she had been there for only six months -- was that no bonuses had been paid in the last couple of financial years. The staff had been receiving their salaries on time up to now, and SAPO had been paying the staff’s portion of the medical aid. The only portion that they had not been paying was the employer contribution, because the employer also subsidised it and because of SAPO’s financial situation.
Mr Govender said that over the last eight years, SAPO had not paid any performance-based bonuses to any executive or any employee.
Mr Lees wanted to know if there were any other forms of bonuses that had been paid by SAPO.
Mr Govender said that they have paid no bonuses and had made no provision for bonuses due to SAPO’s financial performance.
Mr Lees wanted to know if there had been payments to SARS of pay-as-you-earn (PAYE), value-added tax (VAT) and skills levies, and whether they were up to date.
Ms Mona said that they were not up to date, because the backlog varied. As at the end of June, the SARS backlog was up to R600 million, the medical aid portion was also around the R600 million, and the Unemployment Insurance Fund (UIF) as well as Skills Development Levy were all outstanding. All those liabilities were still there, and SAPO was currently discussing a plan to pay back, or to try and negotiate terms. They were holding meetings with all creditors, and in respect of the pension fund and medical aid, they had an agreement with the medical aid regarding a payment plan where the increased amount would kick off in January. They would keep paying them what they had been paying until the end of the year. Regarding the pension fund, they were in court and were waiting for a determination on the matter, as the creditors had taken them to court. She acknowledged that they would need to pay back the money, as it belonged to the employees.
Mr Lees said that these statutory payments had been building up since before the CEO came in as well as during her tenure, and there were criminal implications for the directors and board of executives. This had also happened at other state-owned entities such as SARS, SA Express and Denel, and he had no doubt that if it were a private company responsible for this, SARS would have acted either civilly or, if necessary, criminally by now. He wanted to know if the CEO and Acting Chairperson of SAPO were not worried about going to jail for these issues, and whether they were confident that those consequences would not happen to them. This also applied to the previous executives of SAPO who may have left the organisation, such as Ms Kwele, as there should be consequences and criminal charges laid against them for the lack of payment of statutory contributions.
Ms Mona said that this was an untenable situation both severally and personally for all the directors of SAPO, and they had hung their hopes on the MTBPS, in that maybe it could have helped them alleviate some of their issues. They did see light at the end of the tunnel as SAPO, but their issue was currently with the timing. They were worried about it, and the board had instructed them to do a going concern assessment which they had done internally. They had now decided to professionalise it and get a professional service provider to do it so that they could give a report to their principals, the board, as well as the Companies and Intellectual Property Commission (CIPC). They were hoping that by that time, things would have turned around and that they would not have to go to jail because of the transgressions.
Mr Lees said that the chances of the CEO going to jail were probably slim, considering that Dudu Myeni did not go to jail even though she had been declared a delinquent director. He would not like to be in a position where he could be declared a delinquent director, and said that he could go to the CIPC and make an application for both the CEO and the acting chairperson to be declared delinquent directors because there were sufficient grounds to do that. Anyone could do that, but he would not do so. He was surprised that they were taking this relatively lightly. It was clear to him that they were trying to appear as if they were trying to do their best to resolve this situation, but the risk was high.
The Chairperson asked the AG to respond on the earlier matter before Mr Hadebe continued with his section of the discussion. He explained what the bone of contention was earlier in the meeting to the AG, and asked them to respond on the matter in detail.
AGSA on SAPO audit delay
Mr Andries Theron, Senior Manager, AGSA, said that they had finalised the audit of the 2019/20 financial year at end of March 2021. Unfortunately, with the implications of COVID, as well as the request by management for the extensions in the previous financial year to deal with some of the significant issues and the findings picked up by the AG as a result of the split from the Postbank, as well as other shortcomings in debts, this had resulted in an overrun. An audit of the size and the magnitude of the issues of the Post Office required significant effort and attention, so this had unfortunately resulted in the audit report being late. AGSA were doing final engagements with management, and hopefully should have the audit finalised by the end of November, given the situation that they were currently faced with, as well as some problems in the institution.
The Chairperson asked if the 2019/20 financial statements had been finalised in 2021.
Mr Theron said that there had been some challenges in the submission of the 2019/20 financial statements because of the Postbank split, so there was first the late submission and then the two-month extension by the National Treasury because of COVID implications. By the time the AG received the financial statements with the magnitude of the issues that it had, management had also requested an extension to deal with the combination of all those issues. This had resulted in the audit report being finalised only towards the end of March 2021.
Mr Lees wanted to know if the Minister had informed Parliament about the delay in the annual report.
Deputy Minister Mapulane said that the matter had been tabled with the Speaker in the National Assembly in line with the rules, and that they would get a copy and share it with the Standing Committee.
Discussion on SAPO consequence management
Mr Hadebe said the report indicated that since 2016, the new turnaround strategies and plans were adopted, which included elements of what successful postal operators around the world had implemented. However, the Post Office had failed to implement any of those plans and he wanted to know whether the plan that was adopted on 6 October had anything new or different from the elements of the successful postal operators around the world. What was SAPO going to implement differently this time around, and did their plan still include the elements from successful postal operators around the world?
Ms Mona replied that the plan did include elements from successful postal operators around the world, because they had gone back to the previous plan and looked at the elements that they could lift from it because they were still relevant today within the postal service. With postal services, some elements change over time and some do not, and a few changes must be made here and there. The biggest problem was that there was no shortage of good ideas at SAPO, and there were good people who were thinking and could get things done. The only challenge they had had in the past was that they just did not implement, which was why they had decided not to wait for an injection of capital and started implementing the plan as soon as they received the go ahead from the board and discussed with the Ministry about the elements that they could still implement, even if it was a phased-in approach. Implementation had not been the only problem because to implement effectively, there needed to be some form of capital injection to do the things that were needed. Even when there was money injected at some stage, it was mainly used to liquidate the creditors, and they planned to do this slightly differently this time around. They would use a hybrid approach, using a portion of the injection to pay creditors and another portion of it to implement strategies that would ensure that they were sustainable into the future.
Mr Hadebe said that according to the AG's report, there was funding available for their plans and the issue was implementation. He wanted to know if they had held the people who had failed to implement their plans accountable, so that when they embarked on the new turnaround plan, there was still zero tolerance for non-compliance and implementation of their plans. He wanted to know who was responsible and whether those officials were still part of the entity, and asked if they were going to continue allocating tasks to staff who could not implement the previous strategy.
Ms Mona said that the money had been used to liquidate previous credit, and the issue of holding the responsible officials accountable would be covered in the investigation that the DM instructed them to do, because it was going to be a wide ranging and broad investigation, as they needed to know what had led to the problem that they were currently facing. The current staff at SAPO had been given directives and they knew what was expected of them so that they would not feel that they were being ambushed when consequences were meted out to them. They were not able to bring in new resources at SAPO because of their financial situation, as they would not be able to pay for them. They were now looking to at least bring in some of the skills that they needed, as they would be going into logistics and warehousing, so they needed logistics specialists, and were also looking at bringing digitisation and modernisation. They were going to need IT specialists -- people who were going to help them get to that level. This was also why they also had hopes that with the assistance that they applied for, they could at least get some of those critical resources.
Mr Hadebe asked if it was still the same people who had failed to implement the previous strategy that were expected to be able to execute the new turnaround strategy.
Ms Mona said that most of the people who were there in the past, especially at the executive level, were no longer with SAPO. Some of them had joined SAPO in the last two years and more people were going to be brought in as time went by.
Mr Hadebe referred to irregular expenditure, and said that according to the AG report and SAPO’s report on the 2019/20 financial year, the opening balance was R1.4 billion in irregular expenditure, and for 2019/20 SAPO had incurred R215 million in irregular expenditure. The AG had highlighted that their systems and processes were effective in detecting only the instances of irregular expenditure and the accurate disclosure of such, but were unable to prevent irregular expenditure, so they were continuing to incur irregular expenditure. He said that the top five incidents of irregular expenditure at SAPO included:
- They were paying contracts without the actual contract.
- They were splitting quotations and deviations where it was not needed, as they split their quotation to avoid competitive bidding processes.
- There were bid amendments that were done with no approved final report, and in all these instances there had been minimal, or no, official held accountable for the breach of the supply chain policies.
He said that their response left much to be desired in terms of their reasons for not having effected consequence management, as they had said that all transactions were legitimate and that they had received value for money. He wanted to know how they had arrived at the conclusion that they had received value for money if they did not go through the competitive bidding process, and wanted to know the reasoning behind the lack of consequence management for the officials that had clearly transgressed and violated their own policy, as well as the Constitution of this country.
He also asked them to do a breakdown of the payments without contracts, and wanted to know how they had derived what needed to be paid if there was no contract, as well as the number of people who were responsible for this. He also wanted to know if those people were still within the supply chain unit and if they had continued with the practice. Who were the officials responsible for the splitting of quotations to avoid competitive bidding, as that was a deliberate action? They knew that if they had not split those contracts, they would have been forced to go on an open tender process.
Mr Govender responded that regarding the contracts, they had broken down the amounts in slide 15 of the presentation and most of the R198 million that was spent. In most of these cases when the contracts expired, the procurement process was initiated, but for whatever reason the procurement process was not concluded, resulting in those expired contracts continuing to be utilised, resulting in irregular expenditure.
Referring to the splitting of the quotations, he said that what would happen was that -- in the dignity services of R42.8 million, for example -- where a Request for Proposal (RFP) process would have been initiated, the process was not initiated because the threshold for the RFP was R1 million, so in terms of the dignity services of R42.8 million, quotations were obtained rather than following the RFP process of the tender process to ensure those contracts. He said that there should have been a breakdown as to how long SAPO took to conclude a procurement process. What should have happened in the six or seven or nine months before the contract expired, the procurement process should have been initiated for the services required, and they needed to be concluded timeously so that by the time the contract expired, they would have a new service provider in place to continue with their service.
Mr Hadebe said that Mr Govender had not responded to his question. The fact was that they did not ensure that new contracts were in place six months before the expiry of the contracts, and as such, they made payments without contracts. He wanted to know who the responsible persons were, and what had been done by the entity in that regard. He was interested in what was done by the entity to remedy the situation and to ensure that it did not recur in the future.
Mr Govender said that this was in relation to the 2019/20 financial year, and unfortunately some of the expenses in that year, because they were historical, had also continued into the 2020/21 financial year. There were various officials responsible for the expenditure, and some of the officials involved were no longer with SAPO.
Mr Hadebe said that Mr Govender was giving a general response and asked him to be specific, as this was a transgression of R83 million in payments without contracts. Surely SAPO should be at the point where by now they had quantified who did what for which contract, and what action was taken? He said that the AG was complaining about a lack of consequence management, and Mr Govender’s response was not giving a satisfactory answer in terms of having acted on those officials. He wanted to know if all of them had left and none of them had been held responsible for what transpired in 2019/20, and added that if none of them had been held accountable, the chances of them continuing incurring irregular expenditure were high.
Mr Govender said that they had updated the presentation covering the irregular expenditure and asked to go through each detail.
Mr Hadebe said that the Committee had had an opportunity to read and understand what had happened, but what the Committee wants was the officials who were responsible and what had been done about it. It defeated the purpose of the meetings if there had to be revised presentations, because the questions that the Members asked in the meetings were based on their preparation.
The Chairperson agreed with Mr Hadebe, and allowed him to continue to guide the process.
Mr Hadebe said that all he wanted was a clear indication of consequence management and where those who were responsible for the transgressions were.
Deputy Minister Mapulane said that what was in SAPO’s presentation in terms of consequence management was that no one was to be held accountable, so when the Department met with them, they had requested that they do an investigation as required by law and identify who was responsible so that there could be consequences. Right now, the investigation had not been conducted, so it would be done as committed by the CEO and the acting chairperson of the board.
The Chairperson wanted to know why the investigation had not been done, because that was a standard operating procedure and protocol as far as such matters were concerned. He wanted to know how SAPO intended dealing with the matter, other than pursuing consequence management action.
Mr Hadebe said it seemed that SAPO had already formulated a view and a stance on the matter -- that no one should be held accountable -- and the new executive authority had come and said that was unacceptable, and told them to go back. He wanted to know who within SAPO had arrived at the initial decision to not hold the officials accountable, and whether it was the same people who were now being forced to perform consequence management on those who were accountable.
Ms Mona said that within SAPO there was a financial misconduct committee (FMC), where all matters that were deemed irregular went through. The committee was made up of executives, and was not at the board level. Their duties were to do investigations and compile reports on the investigations, which were also reviewed by the FMC.
The Chairperson said that the injunction of the executive authority had the support of the Committee because the legitimacy and credibility of this process had been called into question. The Committee should rather wait for the report, because at this point there were no merit in engaging in an incomplete process, as it was now November. He then asked SAPO to provide an interim or progress report on the review of the decision, notwithstanding the fact that some persons may no longer be with SAPO, but it was worthy to investigate, nonetheless. He asked that the report be submitted to the Committee by the end of February as the first interim report, along the lines which the DM and Mr Hadebe had highlighted.
Mr Hadebe said he agreed with the Chairperson, but his question had not been answered. He understood that there was a committee that was responsible for the processes, but ultimately the accounting officer also had a responsibility to ensure that there were consequences. He wanted to know if the CEO had compared the report that was furnished to her saying no one should be held accountable, and whether those that would be reviewing this decision were still part of SAPO, or if it was going to be a new committee.
Ms Shumi Sontange, Acting Group Executive: Supply Chain Management, SAPO, said that there was a clause 22 about how investigations must be conducted, but they had taken note of what the DM had indicated to SAPO yesterday, that they needed to do the investigations and take note of what the Committee was saying. The reason why it had not been done was according to clause 22 of the instruction from Treasury, which indicated that they must conduct investigations if it was suspected that there was possibility of fraud, so as this was discussed at FMC and the report was submitted, but there was no possibility of fraud that had been detected by the committee. As it was indicated now, they would follow the instruction to do the investigation, but initially it was not done, in line with what the National Treasury instruction notes required.
Mr Hadebe said that that was not the only instance where they were expected to effect consequence management, as the Public Finance Management Act (PFMA) was clear that anyone responsible that permitted or caused irregular expenditure must be taken to task. It should not be only when it was related to fraud.
Ms Sontage said that they would investigate it, as they were guided by the instruction note, but they would also follow the guidelines of the PFMA.
Mr Hadebe wanted to know if they were not aware of the provision of the PFMA in relation to the irregular expenditure.
Ms Sontange said that they were just indicating what National Treasury stated in terms of the investigation, but they would submit a report, and were aware of what was expected of them.
The Chairperson said that there was an overreliance on instruction notes and the appreciation of the PFMA, and that should not be happening. The directive of the Committee stood -- it wanted an interim or progress report by the end of February.
Ms C Mkhonto (EFF) said that she understood that at the executive level there were new members that had been hired, and the CEO was saying that they were going to move from the analog system to a digital system that would make their processes user friendly and upgrade their performance. She wanted to know if the staff, specifically from middle management and downwards, were adequately qualified to execute these duties to ensure that SAPO could executive the turnaround strategy successfully.
Ms Mona said that as SAPO had traditionally been a mail business, their skills were geared towards fulfilling those needs, and with the upgrade to a digitalised system, their staff were not fully trained and some of them would not be able to do the work that was required. There would be a need for reskilling, and they would also need to deploy some of the staff elsewhere, because there would still be a need for people to deliver the parcels. She admitted that when trying to change the culture in an organisation such as SAPO, there was a need for people who thought differently to what had brought the organisation to where it was. They would also be doing recruitment in some specific areas.
Mr Hadebe said that the AG had reported that SAPO’s bid evaluation committee did not pay attention to details when evaluating bids. He wanted to know the sanctions that had been imposed on the bid evaluation committee for failing to pay attention to detail.
Ms Sontange said that the bid evaluations committee would not be a standing committee where details were not being followed, and if it led to irregular expenditure, that would also be taken through the FMC and there would be consequence reports that done and consequence management that needed to take place. It differed on the committee and the details that had been highlighted, but there was no one standing committee in terms of a bid evaluations committee.
Mr Hadebe said that he fully understood that, hence the question he had asked on who the bid members were and the sanctions that were imposed on them. He asked if the bid committee members were still part of the entity and whether they were still responsible for evaluating the contracts.
Ms Sontange said that the bid evaluation committees differed, as they were cross-functional.
The Chairperson interjected and said that Mr Hadebe’s question was very specific, and added that the AG would have been specific on the management matters insofar as what Ms Sontange referred to. She should not speak in generic terms -- they were past the point where one would say there were various committees. They should not play hide and seek, as the AG’s reports were not generic and spoke to specific issues. The bid evaluations committees had a finding against them, and the question was what SAPO had done about the finding.
Ms Mona said that it seemed that there may not have been any action taken, but she could not be conclusive in her report. She asked the Committee to include the response when they provided a written response to the questions.
Mr Hadebe said that it seemed they would be receiving the same responses to the questions, and concluded that in essence there was a lack of consequence management for all the issues of concern that were highlighted by the Auditor-General, and nothing had been done. “We are here to probe whether there has been progress in acting on the AG findings, and it is a very difficult pill to swallow when only now, when we are expected to have been dealing with 2020/21 audit findings, that we are told that they will go back and investigate the matter”, he said. There were clear signs and indications that SAPO was comfortable with the situation as it was, and they did not want to hold people accountable. He wanted to know whether this was the attitude of the board, and asked the acting Chairperson of the board to respond to the matters, because section 51 subsection E (III) of the PFMA also gave the board the power to act on these matters. He wanted to know what the views and decisions of the board were when these issues were brought to their attention, because the management had clearly failed.
The Chairperson agreed with Mr Hadebe, and added that it also raised the question of the audit action plan in response to the outcomes of 2019/20.
Ms Van der Sandt said that the board was not comfortable with the situation, and that the UIFW expenditure had been brought to the audit and risk committee, which had given instructions to the executive and had confirmed with the CEO that they were in the process of incorporating it in the audit action plan. Her understanding was that the action plan had been brought forward for the executives to action.
Mr Hadebe wanted to know what the instruction from the audit and risk committee had been, and when it was issued.
Ms Van der Sandt said that she would need to go back to her notes, as she could not recall the dates.
Mr Hadebe asked the acting Chairperson how she was going to know if it had been acted on if she did not know the dates. She should be able to know if her own instruction had been adhered to.
Ms Van der Sandt said she did understand and took note of the concern of the Committee. It remained a concern for her as well, and admitted that she had been removed from the audit and risk committee and did not have sight of what they had discussed on this matter. Her removal from the committee was in line with the ruling that the chairperson of the board did not sit on the audit and risk committee.
Mr Hadebe said that ultimately all these issues were supposed to be reported to the board so that it approved the recommendations, and the chairperson would be in a better place because she came from that committee. If they were serious about consequence management, they could not put such a report in front of the Standing Committee, where the AG reflects no consequences and no effective consequence management. Surely something should have been done long ago, and at least by now they should be in a position of perhaps having a preliminary report into the instruction that had been issued by the audit and risk committee?
Ms Van der Sandt apologised to the Committee because she did not go back to her notes regarding the audit and risk committee, and she could not categorically say whether timelines had been instructed at that point in time.
Mr Hadebe asked who was responsible for implementing her instruction, as they could be in a better position to respond.
Ms Van der Sandt asked to review her notes, as she was unsure whether the current CEO had been part of the meeting, but the instruction was given to executives.
Ms Mona said that the information that she had stated that in January 2021, the FMC had presented to the audit and risk committee, which had then instructed on that date that there should be consequence management. Since then, there were warnings issued to some of the people that were found to have been in contravention since that time. They had projected dealing with all the audit findings, and the action plan had been dealt with even at the executive committee (Exco) level, making sure that they were dealing with a high level of findings, so it was an ongoing process.
The Chairperson said that he was getting a sense of isolated access to information insofar as what the Committee had been told. He asked Ms Van der Sandt how long she had been acting as the chairperson.
She replied that she had been in the position since August last year.
The Chairperson asked if she had left the audit and risk committee around that time.
She said that it had been more recent than that.
The Chairperson said that then she must be aware of the January resolutions.
Ms Van der Sandt said she was.
The Chairperson asked why it was so hard to get the information from her.
Mr Hadebe asked how many meetings of the audit and risk committee she had been a part of, because surely by then she was supposed to have attended at least three meetings, as its meetings usually happened at the end of each quarter.
The Chairperson also wanted to know the number of board meetings that took place this year, for her not to be able to have some knowledge of the progress in relation to her instructions.
Mr Hadebe added that sitting in board meetings was not just a formality -- it was for deliberating on matters that were affecting SAPO and taking resolutions, and the resolutions had to yield positive results, and to achieve those positive results they must be based on tangible outcomes.
Mr Dada said that besides the scheduled quarterly meetings that the board had every quarter, they had 14 meetings in total, including the regular quarterly meetings.
The Chairperson asked how many times the ARC had meetings.
Mr Dada said that there had been five ARC meetings in this calendar year.
The Chairperson asked if the issues raised by the committee were not discussed at those meetings.
Ms Van der Sandt said that there was a proposed plan that had been coming through from the executive levels, so normally the committee would decide what to bring to the board regarding the discussions.
The Chairperson asked if the issues raised in this meeting had been brought to the board.
Ms Van der Sandt said that the issues have not been brought to the board.
The Chairperson said that there was seemingly a laissez faire attitude to the issues at board level and it did not inspire any confidence, given the extent of the problems and the fact that SAPO wanted a bailout. He really wanted to believe that the board would be far sharper on the matters that were currently being presented, and was not confident that the quality of responses did justice to the request that SAPO had made to Treasury. The fact that some of the issues had had to be raised by the new executive which came in August and had been in office for three months, raised the question as to what had been happening prior to that. Some of the resolutions had been raised in January, and now it was November, which left him worried about the situation in terms of whether the quality of due process had been improved to handle and process issues. He was not convinced that the board could turn things around, as it did not inspire confidence.
Ms Van der Sandt said that she took note of the concerns raised by the Chairperson, but he needed to understand that the executives were dealing with financial issues, and there were several of instances where what would have been dealt with in a normal organisation by more senior managers, was being dealt with executively at SAPO. What the board requested from the executives did not always get executed with speed, because time constraints from the executive side were a problem. She noted the concerns and would ensure that they gave them absolute priority in order to reach a position where the board got their questions answered.
The Chairperson said that the board, which was the accounting authority, was making requests to the executives for information and that had not been done. He asked whether this was what Ms Van der Sandt was implying, even though the board had had 14 meetings this year.
Ms Van der Sandt said that because she had not been part of the last few ARC meetings, she could not state what had transpired in those meetings.
Mr Hadebe said that he finally understood why the board members were not in the meeting, because there would have been the chairperson of the ARC forming part of the meeting and they would have been in a better position to respond to these questions. He thought it had been deliberate that the rest of the board was not in the meeting, because board members usually sat in these meetings. He said the ARC was accountable to the board, and section 51 of the PFMA stated that the accounting authority must take action and disciplinary steps for officials that had caused and permitted irregular expenditure. The board was saying that they were not aware of the instructions, and he asked where the ARC reported to if the board was not aware of its own instructions.
Ms Mavivi Myakayaka, Non-executive board member, SAPO, said that she had just tuned in because the acting chairperson of the board was supposed to be representing them.
The Chairperson interjected to ask her to explain what she meant about the acting chairperson being meant to represent them. He asked whether it had been the decision of the board that it was the acting chairperson who would represent them.
Ms Myakayaka said that the acting chairperson was meant to represent them in all the parliamentary processes.
The Chairperson asked why she was deviating from that resolution.
Ms Myakayaka said that she was not deviating -- she was trying to help.
The Chairperson said that this was the challenge that the Committee was faced with, which was the point that he had been making -- that the board was represented by an individual. It may be to the benefit of the Committee to schedule a meeting with the full complement of the board of SAPO, including all the tiers of the sub-committees, because the fractured governance detail was a problem.
Mr Lees said that scheduling a meeting with the whole board and its sub-committees would be a sensible move, given the situation at SAPO. He proposed that such a meeting should include an oversight visit for the Committee to the central sorting facility in Gauteng between Tshwane and the airport, as there was a massive operation there that was chaotic.
Ms Myakayaka said that whether the board members had to participate in parliamentary proceedings needed to be sorted out, because the executive members did not have a mandate to participate in such meetings and relied on the board chairperson to relay information.
Mr Somyo said that Ms Myakayaka was not assisting the Committee, nor was she aiding SAPO. She was speaking about issues that needed to be sorted out internally by SAPO. The Chairperson was correct in stating that the Committee needed to have a meeting with the full complement of the board, and agreed with Mr Lees’s suggestion, as it would help the Committee to be at the place of operation. SAPO was dealing with major governance issues which required the whole board to discuss them. It was not wrong for the chairperson of the board to be mandated to represent the board, but in this instance the Committee was not receiving some crucial information, so the board was needed to assist.
Mr M Dirks (ANC) said it would be best not to continue the discussion with the board member, because it was problematic when a board member did not know whether he or she could participate in governance processes. He questioned the kind of induction that had taken place when the board member was appointed, and said that it was best to move on from the discussion because the board members were not aware of their own functions.
Ms N Tolashe (ANC) agreed that they ought to move on from the discussion, and added that it was a blessing in disguise that the board member had spoke out, because the Committee had nearly been left with the wrong impression that the board was coherent.
The Chairperson said that the acting chairperson of the board had said that they had been advised that only the chairperson of the board should attend the meeting, and he wanted to know whose advice it was.
Ms Van der Sandt said that it was the advice of the Company Secretary.
The Chairperson asked the Company Secretary on what basis he had given that advice.
Mr Dada said that the Post Office largely interacted with the Portfolio Committee on Communications, and in all those meetings, the chairperson would be representing SAPO with the executives, and the invitation would be sent to all other members, because it was an open forum and even members of the public may attend those meetings. He said that this was the standing arrangement.
The Chairperson asked who the arrangement was made with.
Mr Dada said that it was an arrangement that they had made with the board.
The Chairperson asked if this had been communicated to SCOPA.
Mr Dada said that in this instance they had had the preparatory meetings with the DM, and only the chairperson was invited to the preparatory meeting.
The Chairperson asked if they had communicated with SCOPA.
Mr Dada said that they had not.
The Chairperson said that they should not migrate to the standard operating procedures of other committees, because SCOPA was an entirely different committee of interaction and engagement. This had been an error on their part, and the guidance and advice was wrong. He said that the board was the accounting authority, and not an individual, because it was decisions of the collective which guided the entity in the execution of its work. What had transpired in the meeting today showed that there were serious lapses insofar as the operations were concerned, and this was precisely why the entity was where it was. It was totally unacceptable and unbecoming of such an institution and frankly, it did not inspire any confidence, nor did it satisfy the Committee that things would turn around with the kind of urgency that was required. The meeting would be adjourned, and the Committee was going to have a new date where they would expect to have the full complement of the board, as there were also serious issues that needed to be discussed with the ARC, and the Committee was not going to receive the responses that it desired under the current arrangement.
Mr Hadebe said that he would ask one question and then the meeting could be closed. He said that the AG had also indicated that there was inadequate training of staff in the supply chain management, and the training ought to have assisted SAPO to understand and interpret legislation that was relevant to supply chain management correctly. He wanted to know why SAPO was setting its staff up for failure by not training them, because they clearly were unable to correctly interpret legislation as it related to the supply chain. He also wanted to know if any action had been taken on this finding by the entity and whether they had trained the staff, the kind of training the staff had received, and whether they were able to interpret the legislation correctly.
Ms Sontange said that they had started training the staff who were scattered regionally, and were also training at the head offices. They also have a compile a report monthly, where they pick up irregularities that happen when they extend their training to the regional level. There was a senior manager who was responsible for the training in the regions, who was responsible for training the colleagues at that level, but the head of SCM at the national level was responsible for the training. On issues where there was a misinterpretation of the regulations, those were corrected, and there were corrective actions taken against employees where they were of a different opinion as to what was in the policy.
Mr Hadebe asked if they had done in-house training and not accredited training, and wanted to know if they had done a skills audit to ascertain what type of training was required to capacitate members. He said that when staff members were responsible for supply chain, there ought to be very clear training which was targeted at the specific needs of officials. He asked if the officials working in supply chain and the finance department were suitable and qualified, and whether the training offered was responding to the lack of understanding of issues.
Ms Sontange said that they had done a skills audit at SCM and identified where people were lacking understanding on executing their respective responsibilities. Because of the funding problem at SAPO, they had involved National Treasury (NT) to train the staff as well in the processes and procedures from the NT perspective. In the SCM training, having identified the lack of skills and understanding, they had taken the staff through the policy and all the other Treasury regulations, but had not done the accredited training because of a lack of funds.
The Chairperson said that the issue of the board was at the heart of the progress that needed to be made by SAPO. The Committee would visit SAPO on 3 December, and the logistical issues would be communicated in the coming days. This meeting would be suspended and continued with the full complement of the board on 3 December. Other related visits and site visits would also take place on and around that date. He suggested that they leave no stone unturned in preparing for the meeting, and that the Committee would want full responses to all the issues. This was important because when entities applied for bailouts, SCOPA needed to be involved in those processes because it had a perspective which other parliamentary committees may not have. For a long time, SCOPA had not been party to those decision-making processes, and it was a shortcoming which must be corrected. As they awaited the audit to be finalised and the annual report by the end of February, they wanted to make appropriate recommendations to the House about the Post Office, and today's meeting had been the clearest indication of the position that SAPO was in.
Ms Van der Sandt expressed her sincere apologies for not having all the information ready, and assured the Committee that they would ensure that all the information requested would be available on 3 December.
Deputy Minister Mapulane expressed his appreciation to the Committee, and said that the robust nature of the engagement had been the hallmark of the Committee as they knew it. He appreciated the feedback and the comments made by the Committee, and said that they would await its correspondence and then prepare accordingly for 3 December. He also thanked the Members of the committee for supporting the stance taken by the Department, that there must be consequences for the irregular expenditure and that there must be a proper investigation conducted. Lastly, he said that the decision to have regular weekly meetings was not because of the invitation from SCOPA, but it was a decision that had been taken by the Ministry, having looked at the strategy that had been prepared and the current challenges. He said that when the Ministry was appointed, they had met with the board in August and requested that the entity prepare their turnaround and immediately after that, they had work-shopped a plan in September, and it had been finalised in October.
He said that the bulk of the concerns shared by the Committee were the same concerns that the Department and the Ministry shared.
The Chairperson said that this was what happened when for a long time one lets sleeping dogs lie, because when one wakes them up, there is a systemic collapse of systems and processes and cherry picking on the implementation of laws and regulations. The issues around irregular expenditure were very basic, and at the meeting on 3 December, the Committee wanted to meet with the FMC so that they could understand their rationale for the implementation of the full schedule of consequence management. The Committee wanted to understand the basic things, such as the audit action plan, because if the Post Office collapsed, the country would be placed at risk. The risk of its collapse was a social anxiety, and a political and economic headache, from whatever perspective one looked at it.
He said that the stranglehold that SAPO had on the socio-political and socio-economic outlook of the country demanded that they double their efforts more than anything else, to be on a trajectory of progress and turning things around. State-owned entities (SOEs) needed to be disabused from the thinking that bailouts were a default position for administrative collapse. One could not, and must not, throw financial solutions to non-financial problems. The stringency which needed to be applied to the terms and conditions of any bailout must be the absolute guarantee that things had to turn around.
There must be an appreciation from the SAPO leadership in its entirety, at board level and at the executive level, that the Committee expects nothing other than due compliance with regulations. The Committee was leaving today with a very unfavorable picture of the SAPO, and it was incumbent on them to inspire the necessary confidence for the Committee to give them the necessary support to do the right things. Their moment of reckoning was on 3 December to shape up or ship out.
The meeting was adjourned.
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