The Department of Communication and Digital Technologies (DCDT) presented its revised 2022/23 Annual Performance Plan (APP) in a virtual meeting. The Department highlighted that there were 36 APP targets for the financial year. A detailed budget was produced, showing allocations to DCDT entities as well.
Members noted a lot of policy changes and three priority Bills in the new APP targets and asked if implementing these APP targets was realistic. Members noted the number of targets had decreased over the years and requested clarification.
DCDT assured the Committee that the targets were only set if they were guaranteed to be met and were resourced. The events that led to the declining targets were explained such as duplicate APP targets found in the business plans of their entities which made some redundant and that several other targets were combined.
Members highlighted the poor performance of the South African Post Office (SAPO). Concern was expressed about its function in delivering grant payments. The Post Office was allocated a large amount of funds and some Members questioned if this was a bailout in disguise or if the SAPO turnaround strategy was simply a request for more money. The return on investment for the R5.4 billion transfer to DCDT entities was called into question by Committee members.
DCDT explained that a large portion of the SAPO allocation was dedicated to its universal service obligations (USO) and public service mandate that must be met. That allocation was not a bailout. Talks with Treasury were taking place about a financial injection. Without that injection, the Post Office would cease to operate. The Department said that the SAPO turnaround strategy had been accepted and it offered to present the details in the future.
Department of Communication and Digital Technologies 2022/23 APP
Deputy Minister Philly Mapulane stated that the Acting Director-General was on leave and the presentation would be led by DDG Mlindi Mashologu.
Mr Mlindi Mashologu, Deputy Director-General: ICT Information Society and Capacity Development, said Implementation of the DCDT Impact Statement – Digitally enabled, inclusive and competitive economy and society – was summarised in four outcomes. Each outcome had targets which total 36. The activities and targets were outlined.
The financial information showed medium term allocations to various programmes during the 2022/23, 2023/24 and 2024/25 financial years. These allocations amount to R7.7 billion. 70 percent (R5.4 billion) of this budget was allocated to transfers to DCDT entities.
Ms C Labuschagne (DA, Western Cape) noted her regular absenteeism was due to attending another meeting taking place at similar times. The Annual Performance Plan (APP) presentation was different to other years. There were a lot of policy changes and at least three pieces of legislation on the list of priorities. She asked if the priorities for 2022/23 were realistic and practical? How far-reaching were the cyber security programme and its monitoring — was this only within DCDT or its entities? As DCDT was focussed on local government, what was its role in the District Development Model (DDM)? How do the allocated funds align with schedule four and five in the Constitution? A large portion of the budget was dedicated to SAPO. Were the funds going to improve the state of post offices or is this a bailout in disguise to SAPO?
Mr A Arnolds (EFF, Western Cape) commented on the number of APP priority outcomes, saying they were reduced from 41 to 35 and increased to the current 36. Why did they decrease over the years and why is there an increase of only one priority outcome this year? Looking at the transfers to entities, the R5.4 billion was an alarming amount. The DCDT entities struggle with risks such as sustainability. How was the Department going to monitor these entities to ensure service delivery for communities? Noting the decline in the transfer of funds in 2023/24, how was this decrease going to impact services?
Mr M Nhanha (DA, Eastern Cape) commented on the short duration of the presentation and said it was not very detailed. The National Council of Provinces (NCOP) requires details so that the impact on provinces can be gauged, however this presentation was thin. What was the progress in implementing the SA Connect model at pilot sites, particularly the OR Tambo district, as it was in his province and affected his constituents? He was concerned if the connectivity was somehow disrupted in those communities, how ready was the department to implement beneficiation?
Mr Nhanha said it seemed like the Department was rushing to meet the Broadcasting Digital Migration (BDM) targets. They would risk leaving people without connection to television once the country fully digitally migrated.
Mr Nhanha said one could see queues of people forming outside of post offices from as early as six o’clock to get their R350 grant. Some folks might go home without getting anything. This was not related to the performance plan but it pained his heart. There was no dignity afforded to those people. This is reminiscent of the apartheid era. Can the Deputy Minister comment on this matter? Lastly, how much does the location of the Government Communication Information System (GCIS) in the Presidency disrupt DCDT operations?
Ms L Bebee (ANC, KZN) noted the emphasis on transformation and asked how the spectrum auction would transform the telecommunications sector. Have the unattained targets due to budget adjustments or the Covid-19 pandemic, been included in the current APP?
Ms T Modise (ANC, North West) referred to slide 6, saying that licence spectrum holders would prefer to be fined than comply with licence obligations. We need clarity on how that will be dealt with. How was DCDT going to ensure people in underdeveloped areas have access to affordable ICT services since this was a Universal Service and Access Agency of South Africa (USAASA) mandate and USAASA is being dissolved?
Ms W Ngwenya (ANC, Gauteng) noted DCDT was midway through the Medium-Term Strategic Framework (MTSF) 2019-2024 plan. How has DCDT contributed towards the achievement of government priorities such as economic transformation and job creation? DCDT plans to allocate R5.4 billion to its various entities. Was this amount value for money? If yes, how were these entities assisting DCDT to reach its goals?
Mr A De Bruyn (FF+, Free State) stated that is questions were covered. Noting the Post Office’s poor performance, it was obvious to him that there will be no return on investment “and it looks like it’s going to be another cash cow”. Considering this, he asked DCDT to explain the large amount of funds allocated to SAPO.
Mr Mashologu replied that according to the District Development Model, DCDT works with other departments to understand the particular situation in each district. A programme was started where they work with the municipalities to assess their functions and their requirements. DCDT then discusses with its entities about providing the services/infrastructure that the communities in that district lack.
Mr Tinyiko Ngobeni, DCDT DDG: ICT Infrastructure Development and Support, replied that the DCDT cybersecurity role was stated in the National Cybersecurity Policy Framework (NCPF). DCDT focuses on awareness by: Ensuring that citizens were aware of cybersecurity threats and coordinating with and enabling the private sector to deal with threats. The NCPF requires DCDT to establish a cybersecurity hub to which threat information is sent in collaboration with international partners and national stakeholders. Other entities include the State Information Technology Agency (SITA) tasked with keeping government information secure and the police who deal with cybercrime and cyber defence. These programmes equipped stakeholders with information so they may prepare or prevent cyber threats from coming to fruition. Most shared information was technical.
On the status of SA Connect, DCDT have completed Phase 1 of the SA Connect model. During this phase, DCDT provided connection to 970 government facilities (including schools and clinics) and maintained connectivity to these sites. In OR Tambo District there were about 178 government facilities (out of 970) which have maintained connectivity. Those were not all the facilities in the region, but there will be a connectivity expansion through SITA.
On beneficiation, Broadband Infraco (BBI) and Sentech will focus on community connectivity. During Phase 1 in most provinces, DCDT used SMMEs (Small, Medium and Micro Enterprises) to establish infrastructure. This contributed to SMME development and job creation. During Phase 2 DCDT plans to use BBI and Sentech to roll-out a core and access network for communities isolated from the broader connective web. The local Internet Service Providers (ISPs) can then use the infrastructure to provide services to communities. This would ensure remote and rural areas were provided with connectivity. With the infrastructure and provision of connectivity in place, these SMMEs will grow and contribute to job creation.
About DCDT "rushing" to meet digital migration targets, in October 2021 government urged indigent households to apply for support. Qualifying households would get a set-top box installed. We have adopted an accelerated installation rate and about 50% of those who applied by the end of October have received set-top boxes. The deadline for the digital migration programme was to be concluded by 31 March 2022 but has now been moved to 30 June 2022. We are aware of people that will need to be reached after this date, but government will strive to connect those households by 30 September 2022.
On the obligation of spectrum licensees, the Department had been working with the Independent Communications Authority of South Africa (ICASA) and the sector to ensure that those obligations were part of the Invitation to Apply (ITA) for licensing of spectrum. When licensees obtain spectrum, they are already aware of these obligations. DCDT recognises the need to monitor implementation of obligations proactively. The Department was developing a monitoring framework (regulated by ICASA) to regularly monitor licensees.
Ms Joy Masemola, DCDT Chief Financial Officer, replied about the declining priority target outcomes over the years saying the decline was due to the ceiling on compensation of employees. Normally forecasting was done with a tool utilised by National Treasury. In the previous years, positions became vacant and remained so because the organisational structure of the combined department was not finalised. Filled posts were on a contract basis. The organisational structure was to be finalised in 2022/23. Once finished, National Treasury would engage if funds were lacking. Previously, due to benchmarking, DCDT was allocated R300 million and was able to utilise those funds fully.
On the transfer of R5.4 billion, these allocations were accepted by National Treasury by mainly looking at benchmarking from previous years. ICASA and SAPO get the bulk of the money. Those funds were for their operations and SAPO was still engaging Treasury about its financial crisis.
On monitoring the use of the funds, before DCDT can affect a transfer to an entity, quarterly reports are required from the entity. The DCDT SOE Oversight branch will check those documents to ensure funds were used in the manner intended. Only then can Finance effect the payment for the next quarter.
Ms Reneilwe Langa, SAPO Acting Group CEO, replied that the transfer of funds to SAPO was not a bailout. The funds were meant to support the universal service obligation in terms of the Postal Services Act and the SAPO Act. SAPO has a universal mandate to have operations across the country. SAPO branches which fall within the universal service mandate will never be profitable. Their main purpose was to ensure people were serviced. SAPO was subsidised on this basis.
SAPO had challenges rendering the Social Relief of Distress (SRD) R350 grant payments which it started rolling out in May 2020. The grant is issued monthly for a maximum period of three months, therefore SAPO could not enter into long-term obligations. Due to the economic dynamics, the need for the grant was huge and SAPO experienced many challenges such as long queues. One measure introduced to prevent these queues was to pay people based on their identification numbers, where people with specific numbers were to be paid on particular days. Since the need for the grant was so big, people who were not supposed to be paid on a day would still flock to the post offices. The cash was packaged according to what post offices needed. A lot of people would arrive, and the cash would then be depleted and people would not be able to get their money. The introduction of an SMS system which notifies individuals was identified as a solution and continuous work with the cash-in-transit companies is done to manage this.
Ms Langa explained the dissolution of USAASA was not going to dissolve the mandate. It was instead using new ways to ensure funds were optimally used. DCDT is dealing with some of the limitations in scope in the Electronics Communications Act (ECA) and aligning it with the National Integrated ICT Policy White Paper. The realignment of the institutional framework was to ensure it remains beneficial to people that were needy. The people were still protected.
On SOE monitoring, the SOEs were developed to render services described by the mandates they operate under. Most entities have a governing structure in place. The entities were required to establish strategic corporate plans which need to be aligned with broader priorities. DCDT will then monitor how these plans were integrated. There was also a shareholder’s compact which was an agreement. It was a tool for monitoring what the entity was committing to in agreement with the shareholder. Entities would be monitored by looking at their quarterly performance and were scrutinised against the agreements made in the corporate plan. Allocated funds must have a purpose, it was not blanket funding and she used SAPO as an example.
Mr Ngobeni added about foreign government transfers that DCDT was a member of various international bodies and collaboration across various countries was required. For instance, cross border spectrum interference must be managed by the International Telecommunication Union ITU). Frameworks were internationally developed and many countries across the world are members of this body. These frameworks facilitate the review of technologies requiring standardisation and access to spectrum. There is also the Forum of Incident Response and Security Teams (FIRST) which enables sharing of cybersecurity threat information across the globe so that South Africa can mitigate this before it reaches our shores. DCDT pays membership fees to these bodies.
On Ms Bebee’s question about spectrum licensing and its contribution to transformation, with emphasis on how the auction will benefit those who will have access to funding. DCDT was reviewing the best way to enable participation by small operators in the sector. It was required to invest a lot of infrastructure before using the spectrum, hence DCDT was working on a revised policy of spectrum: For instance, the revised policy on 5G.
Deputy Minister response
Deputy Minister Mapulane replied about the presentation lacking detail saying the Committee normally takes issue with its length and that parts could be summarised. This presentation was identical to the one presented on 3 May 2022 to the Portfolio Committee. Not much was changed since the intention was to summarise but the has been made available to the Committee. He apologised for having misunderstood the expectation.
Moving to SAPO let us obtain the proper context. The data showed SAPO’s declining performance as late as 2015. In 2016 the situation worsened because of the changes taking place in the market. The Post Office was unable to adapt as technology interrupted its operations. The Committee might remember the 2014 Post Office strike that led to SAPO having to absorb its many casual workers employed through labour brokers. Its increased personnel budget meant that 60% of the allocated funds go towards salaries and DCDT recognises that this is unattainable.
There were a couple of factors impacting the viability of the Post Office. The 2019 R2.9 billion bailout was not utilised for its intended purpose. As a result, it had very little impact on SAPO. The Post Office is experiencing liquidity challenges and has been discussing with National Treasury if it could offer more resources to capitalise the Post Office. The Post Office will not continue to operate without a financial injection and the financials were there for the Committee to view. However, the R500 million was not intended for the bailout.
Without a bailout for SAPO, the country would experience serious problems. The future of about 15 000 employees was on the line. As Ms Langa explained, the R500 million was for the universal service obligations imposed on the Post Office by legislation. SAPO was required to operate in areas where it was not profitable. These services were important basic services rendered to the community, mostly in far rural areas. The R500 million compensates for those obligations. The Post Office argues that the amount was insufficient to cover the calculated cost.
On return on investment, the Post Office has quite an expansive footprint (although some of them had closed as they found themselves in a very difficult situation). One finds a Post Office in nearly every area. Since its footprint was so large, it can be used for other government services. DCDT had requested a turnaround plan from SAPO. This plan was submitted and approved by Cabinet. The preoccupation of SAPO was to implement this strategy which talks to a number of issues. If the committee wants a briefing on the details of the strategy, it can be arranged. DCDT was confident that this plan will work if the necessary cash injection were to be received. SAPO can be salvaged.
The Deputy Minister replied about SA Connect saying even though Mr Ngobeni responded, Mr Nhanha might have referred to a broadband roll-out project implemented by USAASA. Two areas were identified: One in the Northern Cape and the other in the Eastern Cape in OR Tambo and those projects were continuing. The SA Connect Model consists of two phases. The first phase was funded by the fiscus and was really a pilot since the need for broadband was huge and requires a lot of resources. Public facilities were identified as in need of connection. Phase 2 would be using state-owned entities – SITA, Broadband Infraco and Sentech – and the industry. Treasury requested a feasibility study for Phase 2. Once completed, the study reported a cost that was too high for the state as determined by Minister.
Phase 2 was reviewed and the revised approach was approved by Cabinet. Current discussions with Treasury were “to come up with the financials” and submissions were made so funds can be allocated for Phase Two. Some allocations (just over R200 million) have been made for this financial year and other allocations are expected in the outer year. SA Connect Phase 2 is being implemented, the only challenge was the full availability of the funding. On the disestablishment of USAASA, all the projects funded by USAASA have been given to BBI such as OR Tambo and they will be concluded. There is a steering committee chaired by the Minister that meets twice a week to review progress made in this programme.
We were accused of fast-tracking the migration from analogue to digital, but DCDT always responded that the broadcasting digital migration was to be fully migrated in 2015 as per the deadline given by ITU. The other countries have migrated, and some counties have completed their migration with less resources. We have been left behind, which was why the President announced that March 2022 would be the deadline.
DCDT had been working towards that deadline even though there was litigation by eMedia in which the court mostly ruled in favour of the deadline since it was a national priority project. Five provinces have completely phased out analogue distribution and continuous work was being done to meet the deadline. The BDM programme had always emphasised that no one will be left behind. The public received messages from DCDT explaining how free hardware and installation will be provided to eligible households, but the response had been underwhelming. Some people apply only once they lose signal, but they will be accommodated. Those who have applied have been connected. Those who applied later would be in a queue to receive set-top boxes.
The Deputy Minister added to Mr Ngobeni’s response about disestablishing USAASA. He assured Ms Modise that the mandate will continue even in the face of a dissolving USAASA. The idea was that employees will return to the apartment and continue providing the services that have been provided by USAASA.
Adding to Mr Ngobeni's response on the spectrum. Receivers of licensed spectrum from the auction will be given the obligation to connect public facilities such as schools and police stations. The numbers have been shared with the licensees and they were comfortable with that.
Ms Labuschagne thanked the DCDT for their answers and requested a presentation on the SAPO turnaround strategy and noted the importance of SAPO. It was apparent that most problems were financial in nature. This was not the only struggling SOE, but each had its own reasons for struggling. Many of those challenges stem from being uninformed about changes in the community. Instead of a turnaround strategy, had the Department ever thought outside the box to ensure that certain services were rendered to rural areas? Vulnerable people in rural areas that receive grants were afforded poor service. Post office employees were frustrated and unsure of their future. They deal with the most vulnerable people who must queue. Mostly it was not the fault of either group. Most of the turnaround strategies ask Treasury for more money.
This cannot continue and therefore the request for a completely new model for postal services. For instance, the need for post offices was not constant throughout the country. Certain urban areas do not need post offices. Rural areas might require post offices that deliver more than one service. In this way the country does not lose its infrastructure and services in rural areas were maintained. She was amazed to see DCDT struggle with this as it was responsible for digital services and preparing for the fourth industrial revolution, yet the country still had trouble running post offices.
Ms Labuschagne accepted the feedback on monitoring SOEs, but something in the system must be wrong. This could be the criteria that SOEs must give feedback on. The SOE monitors were not the culprits “so the entities must be lying in those reports”. In her eight years at the NCOP every monitoring body had said the same thing. People give information in reports and based on that information money was allocated. It happens every year, but these entities were in ever-growing trouble. The SOE monitors should have workshops and engage with National Treasury to look at the criteria DCDT had set before dispensing more money to a broken system because the track record proves this.
Mr Nhanha asked again how the location of GCIS in the Presidency disrupts DCDT operations.
The Chairperson noted that ample time would be afforded in the future to engage the relevant entity on points raised by Ms Labuschagne. He then allowed Mr Mapulane and his team to respond to the follow-up questions.
Mr Arnolds repeated his question on why the priorities decreased from 41 to 35 and finally 36. He wanted to ensure if this was going to be a norm for priorities.
Ms Thulisile Manzini, DCDT DDG: Administration, replied about the location of GCIS, saying that before DCDT there had been the Department of Telecommunications and Postal Services as well as a separate Department of Communications. GCIS belonged to the latter. In the National Macro Organisation of Government (NMOG) process led by the Department of Public Service and Administration (DPSA), GCIS has separated it. DPSA concluded that the strategic location for communicating government programmes and departmental communication should be in the Presidency. This does not necessarily cause disruption, because in DCDT we also use GCIS for communication and programmes.
On the question if it was realistic to implement all the APP targets, Ms Manzini replied that most of the targets do not necessarily need finances for implementation. The Strategic Planning and Monitoring (SPM) unit visited all DCDT branches to ensure all targets put forward will be met. The principle had always been that no target was put in the APP that requires resources that were not there.
Mr Justice Libago, DCDT Director: Monitoring and Evaluation, spoke to the priority targets. The targets were not static, they change depending on changes in the MTSF. Targets were developed while engaging with the Department of Planning, Monitoring and Evaluation (DPME) and National Treasury. This was done to ensure priorities and mandates were met. APP targets were streamlined once DCDT engages with its stakeholders. It saw that APP targets were duplicates of targets set in the business plan of entities. The duplicated APP target were removed or changed but he asserted that such targets were not unimportant. When targets were prioritised, DCDT looked at the mandate, budget and MTSF with DPME, Auditor-General and National Treasury. Targets have a huge impact but do not undermine the other projects being worked on.
Mr Stevens Maleka, DCDT Director: Strategic Planning (DCDT) added that the APP was amended in the previous financial year. There were three targets under Programme Five: Sourcing of SA Connect Phase 2 funding, funding for household connectivity programmes and establishment of the project management office for SA Connect Phase 2. While amending the APP, these were combined into one. There were two targets in the Broadcasting Digital Migration (BDM): Subsidised digital television installation and distribution of 3.2 million vouchers. Upon revision, this was combined into one target which dealt with switching off SABC analogue television transmitters across all provinces. That was how the five targets had been reduced to two. That was one of the reasons the current number was 36 targets.
Deputy Minister response
The Deputy Minister replied that DCDT was ready to present the SAPO turnaround strategy. The strategy was presented to the Portfolio Committee. Some details were sensitive and must be presented in a way that protects the information. Ms Labuschagne commented on using turnaround strategies to get money from Treasury and these were not real turnaround strategies. It was unfair to criticise an unseen document and to generalise the document without seeing the presentation. He asked her to wait for the details of the strategy and she can come to a conclusion if the strategy is substantive or not. It is also very unscientific because arguments must be based on facts and evidence. When you make a general statement, it does not help. DCDT can present the details of the document so that the Committee can engage in criticism.
On the critique about failing SOEs, for the Department, it was a question of how to conceptualise development. Sometimes the SOEs must be able to operate during market failure. However, running services through publicly owned companies was intentional. The SOEs will remain part of the Department’s approach to implementing plans. There must be efficiency, professionalism, value for money and the SOE must run properly. The Department of Public Enterprises (DPE) was doing this work. Some SOEs will remain part of government. Our government was not lean – as opposed to others who may have a different view. Those were debates for another day.
On the R5.4 billon allocated to entities, Deputy Minister Mapulane reasserted that 70% of funds were allocated to the entities. This allocation was in line with the mandates of those entities. DCDT relies on agencies to implement its mandate which was why 70% of the budget allocation was dedicated to them. All DCDT entities were funded by the state and have their own mandates.
In his closing remarks, the Deputy Minister noted that conversations on some issues result in disagreements which are due to different ideological perspectives. This Parliament provides the opportunity for sharing of different ideas and the Department welcomes that. He thanked the Committee. On the lack of detail in the presentation, he assured the Committee that all the details were contained in the documents. DCDT was willing to engage with the Committee at any time and constructive suggestions were welcomed.
The Chairperson thanked Deputy Minister Mapulane and his team and commented that a shorter presentation was preferred so that Members have ample time to engage in discussion as they did in this meeting. If a presentation takes up most of the time that creates problems.
The Committee considered the previous meeting minutes.
Mr Arnolds noted the committee request for a report on the 970 broadband sites was not included in the minutes. The minutes were adopted with this amendment.
The Chairperson thanked Members for being able to meet even though they were challenged by load shedding and needing to attend two meetings at once.
The meeting was adjourned.
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