SITA Strategic Plan and Problem Relationship with Saps: briefing

Meeting report

SAFETY AND SECURITY PORTFOLIO COMMITTEE
16 March 2005
SITA STRATEGIC PLAN AND PROBLEM RELATIONSHIP WITH SAPS: BRIEFING

Chairperson: Ms M Sotyu (ANC)

Documents handed out:
State Information Technology Agency Business Plan

SUMMARY
The State Information Technology Agency (SITA) presented a review of their business plan, with their key partner, the South African Police Service (SAPS). Their services had grown by 83%, and their revenue for 2004/2005 had been R651 million. Their programmes and services were aligned with the strategic plan of the Department of Safety and Security. The SAPS’ use of information and communications technologies (ICT) was ahead of global trends, but they needed more funding. Ring-fencing, SITA’s profitability, and alignment with the Integrated Justice System (IJS) remained unresolved issues between the SAPS and SITA.

The SAPS responded by questioning many of the statistics and the figures presented by SITA. They also discussed their side of the ring-fencing, profitability and IJS alignment debates.

The Committee was not satisfied with the clarity of the presentation. More detail was requested on the budget, ring-fencing, flexibility, profitability and data storage. Concern was also expressed about the lack of co-operation between the SAPS and SITA.

MINUTES

State Information Technology Agency briefing
Mr Jonas Bogoshi, Executive for Client Services, said the purpose of their presentation was to provide a quick review of their business with the South African Police Service (SAPS), as well as indicating how they were spending their money. Some people were complaining that SITA was too expensive, but he felt it necessary to point out where they were doing things right. The SAPS was SITA’s key partner. SITA had been formed to ensure that government could pay salaries comparable to the private sector. Human resources turnover had stabilised.

SITA’s many services could be divided into three categories: where SITA’s own employees provide services to the SAPS, conduit services (‘body-shopping’) and ‘in-out’ services.

Regarding their financial review, Mr Bogoshi said that their services had grown. He presented figures that indicated how their services in the hosting environment, desktops, software and network services had grown. The software investigators would grow even more. Their revenue was R355 million in 1999/2000, and R651 million in 2004/2005. This showed growth of 83%.

Mr Bogoshi also provided a breakdown of their revenue. The breakdown of their 2004/2005 revenue of R651 million was as follows: labour brokers: 18.4%; external services: 17.7%; software and hardware: 34.4%; total non-SITA revenue: 70.4%; and 29.6% estimated SITA revenue.

Mr Bogoshi said that most of their programmes were providing services and were aligned with the strategic plan of the Department of Safety and Security. They had five programmes: administration, visible policing, detective SVCS, crime intelligence and protection and security.

Mr Bogoshi explained how their services and the SAPS fitted in with global trends. The combating of cyber crimes and biometric applications were two of the leading global trends. One of the trends was a robust and secure network infrastructure. The SAPS were ahead with this trend, but they would still need more funding.

Mr Bogoshi said that, as in any marriage, there were some issues between them and the SAPS. The SAPS’ ICT requirements were growing faster than their budget. They would need to find more money, otherwise they would have a problem. Their alignment with the Integrated Justice System (IJS) led to a ‘carry through effect’ problem. SITA also did not agree with the SAPS regarding "ring-fencing". Ring-fencing was when certain SITA employees only worked on SAPS contracts. They had to deliver quality services and they would have to increase their tariffs if they were ring-fenced. SITA and SAPS also did not agree on whether SITA should be a profitable business. They had to be profitable, because every service they provided had to come from the revenue they generated.

Mr Bogoshi concluded by saying that the SAPS were a leading department in the use of ICT (Information and Communication Technologies). The pressure on the budget would increase, and the budget for ICT in the SAPS was lower than in other countries. The SAPS was an integral party of SITA. There were also other ways in which SITA could be used. There was a much greater role for SITA in an advisory capacity.

SA Police Services response
The Chairperson allowed SAPS to respond to SITA’s presentation. Assistant Commissioner Marélese Meyer agreed that they were in ‘a marriage with some differences’. Mr Bogoshi had said that 415 members of the police services had gone over to SITA. Three hundred of them had attended to the SAPS’ network environment when they went over to SITA in 1999. Currently they had far fewer than the 300. The SAPS had lost critical resources. External companies had brought the resources back without any payments by the SAPS, just to ensure that the services could continue. Thus, the SAPS did not agree that human resources had stabilised. The SAPS were running a great risk that some of their resources could be lost. Severance packages were awarded to employees of SITA without any consultation with SAPS, and they were still awaiting a HR plan.

Ms Meyer said they had eight service level agreements with SITA, but some of those services were not being provided. Ms Meyer highlighted the training portion. When SITA was established, the SAPS transferred their resources that gave computer literacy training to SITA. The cost for those resources was part of the Decentralised Services Service Level Agreement. The SAPS only had those services in the first year, in the second year those services were dispersed of by SITA, and SAPS had to pay to get their resources computer literate.

Regarding the relationship model, Ms Meyer said that they had a disagreement about ring-fencing with the ‘body shop’ service of SITA. Before SITA, the SAPS were 100% ring-fenced, but since the establishment of SITA, the SAPS were only 80% ring-fenced. Yet, the demands on their resources increased and they would like to know the costs of the resources to SITA.

On the issue of profitability, Ms Meyer said that the business agreement model they had with SITA allowed SITA to have a mark-up of 7% on resources. Ms Meyer knew of instances where there was a mark-up of up to 40% on those resources. They would like to know the exact costs, as they had to plan for the Medium Term Expenditure Framework. They wanted minimum mark-ups to ensure that they could spend more money on their research and development.

Referring to the financial review, Ms Meyer said that SITA provided a growth figure of 95, 5%, and that R55.5 million went into investment in software licenses. Ms Meyer believed that the figure was actually R46.6 million. Referring to the hosting services, Ms Meyer said that they spent R25.4 million on the resource environment. It was fewer resources than they had in 1999, but the human resources costs were more. There were some concerns about these costs that they would like to have settled. Regarding the total non-SITA revenue of 70.43%, Ms Meyer asked what the exact breakdown of that was.

Ms Meyer said there were some additional services not mentioned in SITA’s slide on its alignment with the Strategic Plan. SITA spent R40 million on research and development annually. Ms Meyer asked what portion of that would come back to the SAPS to enable them to have worldwide knowledge.

Ms Meyer said that they did not only want to ring-fence services because of quality considerations, but also for security purposes. The Department of Defence was ring-fenced, and they had fewer services than the SAPS. SAPS would like to have the detailed costing model on what it would cost to ring-fence their services to ensure that they maintained skills levels. Most of their critical resources were dispensed of by SITA. By ring-fencing those services they would also ensure that their resources would not be transferred.

Ms Meyer still believed that SITA was supposed to be a non-profitable organisation. They were only supposed to have a 7% mark-up, which was the model that was part of the agreement for the establishment of SITA.

Mr Johan Nelson (SAPS: Finance) said that the figures presented by SITA made no sense. The figures did not reflect the actual situation. Also, SITA indicated that the service requirement grew faster than the budget. The question arose whether SITA provided for benefits, taking the magnitude of the amount into account.

Referring to the IJS, Mr Nelson said the SAPS provided a separate allocation, as well as a provision for the "carry though effect" of the expenditure. The SAPS were also not in favour of lease agreements in terms of mainframe upgrading. It would be very expensive and ownership would become an issue. They would rather budget for it themselves by taking a structured approach. The security of the information would also be an issue.

Discussion
Ms A van Wyk (ANC) said that it was clear that there were problems between SITA and SAPS. Ms J Sosibo (ANC) said that the Committee was not given detailed information and that the presentation was not clear. She asked what SITA’s ‘dual responsibility’ was.

Rev K Meshoe (ACDP) said he had not received proper information and the presentation had not been helpful. The figures indicating the growth of services looked very impressive, but he did not understand their meaning. He asked how growth was measured. Mr Bogoshi apologised for his extensive use of acronyms and promised that he would come back to the Committee with more detail within 14 days.

Ms Van Wyk said that they presented the costs for 2004/2005, but that the Committee was actually interested in the budget for 2005/2006. She asked for an indication of what the 2005/2006 costs of SITA to the SAPS would be.

Mr Bogoshi said SITA did not have the figures for 2005/2006. It was still with the SAPS, because the agreements had not been signed.

Mr V Ndlovu (IFP) said that if they were not dealing with the new budget, all of their questions were irrelevant. It was a problem.

Ms Van Wyk understood that SITA did not have the figures because of the breakdown between them and the SAPS. She said it was unfortunate and hindered the Committee, because they would have expected SITA and SAPS to have done their planning together. There was a lack of a good partnership between the organisations. She called upon the organisations to get their act together and start working together. The Chairperson said that there was no way that these two structures could work together, but not agree. She said it was good that both organisations were present in the meeting so that the Committee could hear both sides. Mr Bogoshi agreed that the situation was unhealthy.

Ms Van Wyk asked if the increases resulted in measurable improvement in their services to SAPS. They would need a clear explanation of what advantages the huge increase of 83% in revenue growth would bring to the SAPS.

Ms Van Wyk referred to the revenue composition and said that SITA had said their actual revenue was only 29.57%, but they also said that they acted as labour brokers. The percentage shown for labour brokers was 18.37%. She asked if the 18.37% of the labour brokers should not have been added to the 29.57% of the estimated SITA revenue.

Mr Bogoshi replied that they had people working for SITA that delivered services directly to the SAPS. Those were the labour brokers, who got people from other companies to work for SAPS. External services referred to outside people maintaining the SAPS’ networks, and estimated SITA revenue were derived from what SITA had done for the SAPS. This was what came to SITA.

Ms Van Wyk thought that it was extremely important that the service agreements between SITA and SAPS were signed. She said the Committee could not continue to approve budgets of that magnitude if they were not in agreement.

Mr Bogoshi agreed that they would need to come to a point where the agreements between SITA and the SAPS were signed. He believed that they had done everything that they were supposed to do.

Ms Van Wyk did not agree that the increase in staff would be a reflection of the increased need for IT requirements in the SAPS. The SAPS worked in shifts and everybody did not always need access to a computer.

Ms Sosibo also thought that SITA should be a non-profit organisation. She asked for clarity on the issue of profit. Mr Bogoshi said that every service they provided needed to add to their revenue. They had to budget for profit to ensure a surplus that could take care of cash flow, research and development and the training of people for IT. Mr Radebe (SITA) said they needed to ensure that they could sustain themselves. The National Treasury would absorb all the profit they made.

Mr V Ndlovu (IFP) said he did not know what cross-cutting between departments, ring-fencing and flexibility meant. Mr Bogoshi said that ring-fencing did not make business sense, as it would mean that a person would only work 25% of the time, but would be paid 100% of the time. They had to ensure that the overall costs for ICT went down. Flexibility made more business sense, otherwise there would be no way to reduce costs.

Mr Bogoshi said that they were talking with the SAPS. It was not a healthy relationship between a customer and a supplier. The Chairperson said that they did not expect a service provider and a customer to be friends, but somewhere someone would suffer. It would definitely not be the Committee who would suffer. The Chairperson said that SITA were there to stay, but they had to do what was expected of them.

The Chairperson asked the SAPS to prepare a document responding to SITA’s document, as she wanted their response documented. SITA would also be called in to respond. It was important for SITA and the SAPS to work together. The Chairperson accepted SITA’s report, but said they would need further information.

The meeting was adjourned.