Telkom, South African Post Office, Universal Service Agency: Briefing on Strategic Plans and Budgets

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Communications and Digital Technologies

04 March 2005
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COMMUNICATIONS PORTFOLIO COMMITTEE
4 March 2002
TELKOM, SOUTH AFRICAN POST OFFICE, UNIVERSAL SERVICE AGENCY: BRIEFING ON STRATEGIC PLANS AND BUDGETS



Chairperson Mr M Lekgoro (ANC)

Documents handed out :
 

Telkom presentation: Contributing to South Africa's Growth
South African Post Office presentation
Universal Service Agency presentation

SUMMARY
Telkom, South African Post Office, Universal Service Agency reviewed the challenges and achievements of the past year and presented their strategic plans for 2005/06.

MINUTES
South African Post Office (SAPO) briefing

Ms M Lefoka, Acting CEO, South African Post Office said that SAPO had achieved the targets they had set over the past two years and turnover had improved up to R4,5 billion. The determination of the management to turn around the organisation into a profitable entity has paid off. For example for the first time the Post Office was not operating on an overdraft facility. These improvements could be attributed to the performance of the Post Bank, which became the leading bank to service the Mzantsi account. The Post Bank had been acting as a government agency for old age pension distribution and for government bonds. SAPO had the largest network of retail network outlets in South Africa. It saw as one of its major focus areas the further expansion of retail outlets and there would be a large injection of funds in order to create this infrastructure. She noted that the regulator had given SAPO an extension of their licence. The regulations passed by the Department now required them to register as a courier company and this would have financial implications. Bills dealing with the financial sector would also have an impact such as the Dedicated Banks Bill and also the Convergence Bill. Challenges faced by SAPO was the huge burden of its medical aid and its pension fund and so its focus areas would be the reduction of the medical liability. It would also focus on fast tracking the corporatisation of the Post Bank.

Universal Service Agency (USA)
Dr S Ngulube, CEO USA, explained that USA had been established to facilitate universal access to communications. The Universal Service fund was established to subsidise companies that were providing telecommunication services in under serviced areas. The USA would establish community digital hubs to support the tele-centres. These hubs would consist of training centres, community business centres such as for the refurbishing and repair of computers. Tele-medicine and e-government services would also be housed in the centres. These would enable people to access distant medical and government services. The focus for 2005 would be the building of 60 tele-centres and ensuring that 150 schools in outlying areas were connected by satellite. The Minister had invited fourteen more companies to apply for licences in under serviced areas. Research would be conducted on the penetration of community service telephones.

Discussion
Ms D Smuts (DA) enquired about the amount of the CEO's salary package and how it was structured. She asked for an elaboration on cyberlabs, what were they. Were the tele-centres really working? Why would the government continue to subsidise SAPO when they had been making tremendous profits. She wanted some clarity on biometrics.

Ms Lefoka, replied that the CEO salary was linked to management salaries. Out of the R4 million only R2,4 million was the cash component. Tele-centres were catering for communities that were in the surrounding areas to facilitate community connectivity and they were working. Biometrics used fingerprints, pictures and barcodes for means of identification Government grants had helped to bring in sponsors, the management of SAPO was still looking forward to the day when the whole operation would be self sufficient.

If SAPO had "reduced staff costs", Mr Mohlaloga (ANC) wanted to know what happened to the people who had been retrenched. What was the problem with pension pay-outs? People in North West had complained that they had not been paid out even though they had come for four days in a row.

Mr S Nkese, Group Executive Human Resources, replied that the North West pilot project for pension pay-outs was a success. SAPO needed more infrastructure that would enable it to service the whole country. Money for different groups of pensioners was delivered on different days. When people did not collect their pension on the prescribed day, they would not be able to get it on the other days. He agreed that reduction of staff costs did mean retrenchments. The management and unions were discussing means of reducing staff costs while at the same time taking into consideration the welfare of employees.

Mr Kholwane (ANC) asked what kind of communication systems were in place to inform people about the new addresses and post boxes. Why were post boxes in certain areas situated far from residential areas? What had SAPO done to eliminate the long lines in post offices? What were the causes for the delays in connecting post offices online? He knew of one post office had been waiting for this for more than two years. What had been done to curb crime? Why were some people employed on a part time basis - what was the problem with its human resources strategy? What had been done to promote SAPO's corporate song?

Mr Nkese replied that temporary employees were utilised because some people refused to move when they were re-deployed because of a variety of reasons. Trade unions were made aware of the situation and also were helping in that regard. SAPO had sent communications through radio and community radio stations. The call centre had received 2 000 complaints last year but only a hundred had been received so far this year. Street addresses had become the norm and people were gradually moving from using boxes. That clealy indicated that people were getting the message. The song had been released with other songs composed by different choirs of postal staff. The CD would be available music stores soon.

The Chairperson commented that most post office buildings were conducive to crime. For an example it was easy to jump the counter and rob the post office. What type of connectivity did SAPO have with the police in cases of robbery.

Ms Lefoka replied that all post offices were connected to a national control centre, whatever crime incident happened would be reported to a nearby police station. Crime trends had changed with the services offered by the post office. Hijackings and fraud were commonplace, the management was working on ways of curbing such crimes.

Mr R Pieterse (ANC) asked why urban areas had lots of resources, while people in rural areas had to travel long distances to reach an under resourced postal agency. He asked why SAPO did not install services like fax, email, photocopying machines in rural postal agencies. Why did postal agencies only operate for few hours?

Ms Lefoka, replied that postal agencies were not supposed to be commissioners of oaths. Other services such as faxes, email and photocopiers would soon be added as an improvement. SAPO was engaged with the labour unions to extend working hours.

Mr Oliphant (ANC) asked SAPO how tariff increases would affect operations.

Ms Lefoka replied that tariff increases were issued by the postal regulator and they would affect services only in the short term.

Ms M Morutoa (ANC) asked what mechanisms were in place to ensure that senior citizens were taken care of on pension pay-out days. How would the reduction of government subsidies affect employment trends?

Mr Xiphu replied that SAPO had initiated what they called the "pay-out-with-dignity" programme. They provided the elderly with shelter, chairs and water, and it had proved to work in the North West pilot project.

Ms Yengeni (ANC) commented that the report made no mention of the financial problems they had encountered and there was no link between the 2004 and 2005 budget.

Mr Ngese replied that the financial problems were mainly compounded by the medical aid liability. The review of the claims pattern would determine how much would be paid out.

The Chairperson again asked why SAPO did not have email and fax services at all post offices

Ms Lefoka replied that email services would be installed at all post offices.

Telkom Briefing
Mr Sizwe Nxasana Chief Executive Officer: Telkom, reported that the government would make free shares (for every five shares that a person owns) available to the public as part of the stipulations of the Khulisa Trust. The value of the investment had grown tremendously. He said that if a person had bought an initial amount of R500 of shares, these were now valued at R3 500. He pointed out that 57% of all Telkom’s procurement was awarded to BEE businesses. On enterprise development R40,5 million had been spent on education by the Telkom Foundation. A one-year moratorium had been placed on retrenchments, the decision had been taken in liaison with the Communication Workers Union. Market liberalisation would benefit consumers through lowering the price of domestic and long distance calls. Special rates for call centres had already started.

Discussion
Mr Pieterse (ANC) asked why Telkom services were not available in rural areas.

Mr Nxasana replied that Telkom had tried to offer public telephones. The constant move of people between rural and urban areas made the provision of phones a tricky undertaking. Prepaid phones were also another alternative. The USA had been licensing operators in rural areas to meet the targets in rural connectivity. The Second National Operator would also invest in the local loop so as to spread access to all areas.

Ms D Smuts (DA) asked what Telkom’s tariffs agreement was with the Independent Communications Authority of South Africa (ICASA). She suggested that government should sell its 38% shares to stokvels and burial societies for real empowerment. Finally she asked why ASDL had not been giving customers the satisfaction promised to them.

Mr Nxasana replied that ICASA had allowed Telkom to increase tariffs by no more than the Consumer Price Index (CPI) minus one and a half. He said that he would not be able to speak on behalf of the government concerning their shares.

Ms C Mokoena, General CFL, explained that ADSL was capital intensive. The performance of ADSL depended on coverage and some areas were dependent on exchanges with no ADSL. There was a system where consumers could phone in and enquire about the ADSL connectivity in their area. That system would then give Telkom an indication of the number of consumers who were interested in ADSL. Prices would go down as more people use ADSL. The distance should not be more than 3-5 kilometres to the exchange, in rural areas distances tend to be longer. There were areas where that technology was not feasible at all.

Mr Khumalo K (ANC) asked how Telkom fights fronting in their procurement programmes. He asked why telephone call prices were so high when compared to countries such as the United Kingdom and Canada.

Mr Nxasana replied that Telkom had reached an agreement with those companies whose services they were procuring. Telkom could not dictate to them how to change their shareholding, but there was a standard criteria which measured the empowerment status of suppliers. For example, after two years those companies could sell their empowerment shares but they would never be considered for tenders again. Once companies were found to be fronting, their contracts were terminated as stipulated by the contract.

Mr Kholwane asked what was the role of the Telkom Foundation and how far was the roll-out to schools.

Ms N Vokwana, CEO Telkom Foundation, replied that the School Connectivity project was started in 1998 and its evaluation had revealed that the project had not achieved the expected outcomes. It mostly helped with school administration, there needed to be an element of teacher training together with internet connectivity which added value. The Foundation had then initiated what is known as e-learning resource centres which had video decoders, satellite connectivity and the content was sponsored by the Mindset Channel. In April 2005 the teacher training component would be intensified. The equipment had sometimes become a victim of vandalism but communities had been helpful and security organisations were consulted to help with this.

Mr R Molhaloga commented that the report did not mention the wonderful work done by the Foundation. What would be the effect of liberalisation on Telkom shares especially after the introduction of the SNO and the licensing of 300 Voice Over Internet Protocol? What was the level of the Vodacom profits on Telkom shares.

Ms Yengeni asked who paid for missed calls and why were they charged.

Ms N Moholi replied that Telkom does and will not charge consumers for missed calls, external auditors had proven that. Telkom would only bill customers when a call was answered. When a call goes to voicemail or answering machine then a customer would be billed because the call was answered. It was not a missed call. Some people drop the phone when calls go to voicemail, those calls had been billed the moment voicemail takes over. On the other end of the line the call would appear as voicemail although the caller did not leave a message. If a person drops the phone while it is still ringing then no one will be charged.

Ms Magazi asked what had being done to eliminate cheating of public telephones.

Ms Moholi replied that this problem was being faced by all operators world wide. The fraud management system monitors the trends of calls that were made from phones. The software would automatically disable a line when they detected extraordinary call patterns. The system cut off those lines after a certain threshold had been exceeded. There were particular countries to which extraordinary call patterns were detected and Telkom would monitor those countries more carefully. In the case of abuse of private telephone numbers, when cheated customers complained, Telkom would then compensate those customers. Some customers even went to the extent of blocking international calls.

Mr Khulwane asked what was being done to reduce the rate of copper cable theft because it affected the day to day operation of companies. What had been done to translate the Annual Report into all official languages?

Mr Nxasana replied that copper theft incidents had dropped as alarms had been installed. Certain hot spots were linked to security and police facilities. Criminals then move to outlying areas to steal copper, but Telkom had been proposing legislation that would enable scrap metal dealers to be prosecuted when found with stolen material. On the education of shareholders and the translation of the report, Telkom was working with community radio stations to inform communities in their own language about Telkom matters.

The Chairperson asked what type of business opportunities were available for people. What was Telkom's view on unbundling the local loop. Some people were saying that a Convergence Bill that did not address

Mr Nxasana said that liberalisation would open up business opportunities for people that were operating public pay phones and users that would be running the local loop in various communities. Distribution channels, collection of accounts and sales opportunities would be in abundance for local business people. The unbundling of the local loop would be covered by the regulations alongside the development of the Convergence legislation but the manner in which it will come out was not yet clear.

Meeting adjourned.

 

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