Department of Communications, National Electronic Media Institute of SA; Universal Service Agency; SA Post Office; South African

Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
8 November 2005
DEPARTMENT OF COMMUNICATIONS, NATIONAL ELECTRONIC MEDIA INSTITUTE OF SOUTH AFRICA; UNIVERSAL SERVICE AGENCY; SOUTH AFRICAN POST OFFICE; SOUTH AFRICAN BROADCASTING CORPORATION ANNUAL REPORTS AND FINANCIAL STATEMENTS: BRIEFINGS

Chairperson:

www.doc.gov.za]
Department of Communications 2004/2005 Annual Report Presentation to the Committee
NEMISA Annual Report 2005
NEMISA Annual Report 2005: presentation
USA Annual Report 2004/2005 [available at www.usa.org.za]
USA Annual Report PowerPoint Presentation to the Committee
South African Post Office Annual Report 2004/2005
South African Post Office Annual Report PowerPoint Presentation to Committee
SABC Annual Report 2004/2005
SABC Annual Report PowerPoint Presentation to Committee (please email [email protected])
[please email [email protected]]

SUMMARY
The Department of Communications, the National Electronic Media Institute of South Africa, the Universal Service Agency, the South African Post Office and the South African Broadcasting Corporation briefed the Committee on their Annual Reports and Financial Statements for 2004/05.

The Committee sought clarity on the Department’s special programs, awarding of tenders as well as the large number of disciplinary cases against its staff for not following the correct procurement procedures. The capacity of the Department’s Internal Auditors was questioned and whether it had blocked a resolution in a recent Telkom shareholders meeting. The Committee was also concerned about the Department’s high rate of resignations and its large number of vacant posts that still needed to be filled.

The Committee asked what the reasons were for students not graduating from the Institute and whether women and the physically disabled were represented amongst these students. It sought clarity on the Institute’s new initiatives such as joint ventures and its commercial enterprises plan. The independence of government-funded community radio stations that were assisted by the Institute was questioned. The Committee asked for a breakdown of the Universal Service Agency’s schools and telecenters in the provinces and why it had included its 2003/2004 financial statement in its 2004/2005 Annual Report.

Members asked questions regarding the national coverage of the SA Broadcasting Corporation; television and radio coverage; sign language for the physically disabled and broadcasting of sport of national importance. They asked questions about employment equity in the Post Office; the roll out of new post offices in the rural and urban areas and product differentiation in post offices.

MINUTES
Mr R Pieterse (ANC) stated that this meeting marked the end of what the Committee had started at the beginning of the year. The Committee had begun the year with the Budget meeting and it was now ending with the Annual Reports. He was seriously concerned about the fact that the Director General of Communications was not present at this meeting as she was the accounting officer. She was only required to attend two meetings a year, namely the Budget and the Annual Report meetings and he felt it was unacceptable that she was not present. He therefore requested that the Chairperson convey to the Director General that it was unacceptable for her not to attend these meetings and it was a serious problem.

The Chairperson apologised for not informing the Committee that he had spoken to the Director General over the telephone. She had excused herself from the meeting due to work commitments and the Chairperson had accepted her excuse.

Department of Communications Briefing
Ms G Gräbe (Chief Operating Officer) briefed the Committee on the activities of the Department during the past year. She discussed the Department’s vision, mission and mandate as well as its core functions. These core functions were to develop Information and Communications Technology (ICT) policies and legislation that would stimulate and enhance the sustainable economic development of the South African 1st and 2nd economy and positively impact on the social well being of all the country’s people. Secondly, to evaluate the economic, social and political implementation impact, outcomes and processes of the said policies. Thirdly, to exercise oversight on State Owned Enterprises (SOEs) and lastly, to fulfil South Africa’s continental and international responsibilities in the ICT field.

A key performance area of the Department was policy development. Four fields of policy development were discussed namely broadcasting policy, telecommunications policy, postal policy and universal service and access to ICT services in South Africa. The Department had a number of other key performance areas namely innovative applications and research and strategic policy co-ordination, integration and international affairs (SPCIIA). A number of spheres were included within SPCIIA. These included the Department’s contribution to the integrated sustainable rural development program and urban renewal program and the international sphere. Other spheres included in SPCIIA were bilaterals as well as special programs such as gender and youth. Other key performance areas mentioned were organisational excellence and operations and lastly, financial shareholder management

Mr Harry Mathabathe (Chief Financial Officer) briefed the Committee on the Financial Report of the Department for 2004/2005. The Budget of the Department versus its actual performance was discussed. Appropriation and expenditure of the Department’s programs were discussed. The total appropriation of the Department was R1, 679 917 billion while its actual expenditure was R1, 649 939 billion, meaning that the expenditure made up 98.2% of the Department’s appropriation. What was important to note was that although it appeared that the Department had not spent R29, 978 million of its final appropriation, around R23 million of this amount had in fact been committed to other projects. The Department also gave a detailed breakdown of the institutions it had transferred payments to. The Department faced a number of funding challenges. These included challenges that had to be overcome without funding such as the Department seeking funding from the Treasury for a number of institutions.

Discussion
Mr R Pieterse (ANC) remarked that the Department had highlighted the importance of policy development in their briefing. However, he felt that this policy development was missing during the deliberations surrounding the Convergence Bill and the Electronics Communications Bill. The Department had not produced green or white papers for these Bills which meant that the Committee had not had any policy to measure the final outcomes of these Bills against. He therefore enquired whether policy development had been present during these processes.

The Department had also mentioned the development of another fixed mobile operator. When would this occur as it would introduce more competition which would in turn bring prices down?

Mr N Munzhelele (Acting Deputy Director General: Policy Development) acknowledged that the Department had not produced green or white papers during the Bill processes. However, during the Bill process a concept paper had been developed where input from all stakeholders was solicited. At this stage the Department should have developed the Green and White papers but the procedure followed by the Department had allowed for the input of various stakeholders and consensus was achieved with these parties. When one looked at the urgency of the situation surrounding these Bills, the Department had actually performed extremely well. However, it would develop these papers when dealing with Bills in the future.

Mr Mathabathe replied that the Telecommunications Act amendment had provided for some initiatives by the Department including the fixed mobile operators. The original intention for amending the Act was to introduce more competition which would then bring down the prices of communicating. This had not happened as planned. The Department was therefore continuing with the status quo as the aims and objectives of these amendments had not yet been achieved. He liked to believe that the Convergence Bill would address some of these shortcomings and hopefully the Department would brief the Committee in the future on some of these initiatives.

Ms M Morutoa (ANC) sought clarity on the special programs conducted by the Department as the program directed to the launch of women in ICT portals had not been properly discussed. She therefore requested that the Department properly explain this program.

Mr G Buthelezi (Acting Deputy Director General: Strategic Policy Coordination) stated that there were three fundamental reasons why this portal had been established. Firstly it was to create awareness around ICTs generally. Secondly, it was to create awareness and interest particularly amongst women and to generate partnerships with women in ICT to ensure growth in this field. Lastly, it was to deal with the issue of networking of women in this field and to try to prioritise the access of women in this industry. The portal had proven to be extremely useful within the gender framework of the Department.

Ms L Yengeni (ANC) noted that the Annual Report stated that the Department had awarded around thirteen tenders to companies in the 2004/2005 financial year. She also saw that two of these tenders had been awarded to one company. What was the Department’s motivation for awarding more than one tender to this company? Which other companies were awarded tenders and had companies that represented women and the physically disabled benefited? Lastly, she also saw in the Annual Report that the resignation rate in the Department was extremely high. What was the reason for this?

Mr Mathabathe responded that these two tenders dealt with two funding models which were public private partnership (PPP) processes. These processes tried to evaluate the possibility of getting private funders for both these funding models and were mostly Treasury led. He was not sure why the same company was awarded these two tenders. The Department had also not achieved as much as what it had hoped to regarding the representation of women and the physically disabled in its procurement processes. A number of other groups had also been excluded and the Department hoped to align its procurement policies with Black Economic Empowerment (BEE) policies in the future.

Ms B Baloyi (Chief Director: Human Resources) stated that the number of resignations and terminations totalled twenty-five during the past financial year. The ratio seemed high in the Annual Report but it was important to remember that it was not a percentage figure but a rate. The main reasons for staff leaving were due to better opportunities in the private sector and the issue of remuneration had also become a problem.

The Chairperson noted that 188 posts were vacant in the Department. What was the hope of filling these posts?

Ms Baloyi replied that the Department was working on this situation. However, the structure of the Department had changed drastically and many of these positions had been filled meaning the number of vacant posts had been reduced.

Mr Mathabathe added that the financial impact of this structural change had been great and many vacant posts had now been filled which had placed pressure on the Department’s allocation. However, the Department had to still look at its budget in order to allocate more funds so that vacant posts could be reduced in the future.

Adv P Swart (DA) had a question on the Report of the Auditor-General. The internal audit had identified five areas of audit yet had only managed to cover two of these areas. However, the Audit Committee had stated that it was satisfied that Management would put the appropriate measures in place to address the issues it had to face. He enquired what measures Management had planned to put in place in order to deal with these issues. He felt that the Department needed to inform the Committee of these measures as they had generated an extremely positive response from the Audit Committee.

Mr Mathabathe answered that the issue had been around the Internal Audit’s capacity to do its work. The Department had undertaken a risk assessment during November 2004 and the argument that was made was that the Internal Audit should have conducted its work against the background of this risk assessment. However, based on the outcomes of this risk assessment the Internal Audit had been drawing up a programme for the next three years. The Department sat down annually with the Audit Committee and the Internal Auditors in order to determine which areas required improvement and in which areas progress had been achieved. These meetings also determined how the Department would address its shortcomings and this was probably the reason for the Audit Committee’s positive statements.

Ms M Smuts (DA) had four questions. Firstly, she referred to the Department’s internal audit and noted that a long list of disciplinary procedures had been undertaken in respect of procurement procedures not being followed. What were these disciplinary procedures? Secondly, Parliament had restored the right of the SA Broadcasting Corporation (SABC) to levy television licences on the public in the future. The Department’s Annual Report referred to studies the Department had conducted to increase the efficiency and cost effectiveness of television licence fees and also referred to the second phase of this project. It also mentioned a policy document that had been sent to the Cabinet by the Department which dealt with the funding of the SABC. Ms Smuts required clarity on these issues and whether the collection of licence fees and the funding of the SABC would take place differently in the future.

Her third question referred to a suggestion that had been raised during deliberations on the Independent Communications Authority of South Africa (ICASA) Amendment Bill. This suggestion was that the Department handed its shareholder functions over to the Department of Public Enterprises. The Minister had mentioned that this issue had been discussed at Cabinet level and it was also raised during the previous year’s parliamentary hearings. Additionally, the Department’s Annual Report mentioned that savings had been achieved in terms of a divestiture strategy. She sought more information on both the transfer of the Department’s shareholder function as well as the divestiture strategy.

Her fourth question was specifically on the issue of Telkom. At a recent shareholders meeting, where government owned nearly 38% of shares, there had been a special resolution from other shareholders that the golden share should now be neutralised. What was left of this golden share was currently owned by the Public Investment Corporation (PIC). There was speculation that the two shareholders that had blocked this resolution at the meeting was Government and the PIC as the percentage that blocked the resolution equalled the shares held by these two parties. Was this the case, did the Government and the PIC block the resolution? If this was the case how much was left of this golden share which the PIC now owned and what did government plan to do with this share? This question could be linked to the third question that had been posed as it had been argued that the Department should relinquish its shareholder functions so that it could then deal on the development and implementation of its policies.

Mr Mathabathe answered that disciplinary and criminal procedures were instituted if the Department had not followed specific rules during its procurement activities. The Department had conducted investigations into all these accusations in order to determine if the Department had acted maliciously or if it had actually suffered. The outcomes of nearly all of these investigations showed the Department as coming out relatively clean. Although the list of disciplinary or criminal procedures seemed long, one could see that these procedures were actually an insignificant amount when one viewed the extremely large list of procurement transactions the Department conducted every year. The criminal or disciplinary procedures made up most probably around 0.01% of these transactions. However, he noted that this did not justify the Department’s actions when it did broke procurement rules.

Regarding the efficiency of television licences, the Department had been working with the SABC to see if there could be an improvement in the rate of compliance with television licences. An example of a possibility that had been discussed was that the South African Revenue Service (SARS) could perhaps help in the collection of television licence payments in the future, as this in turn would improve the bottom line of the SABC. However, the emphasis that had to be made here was that the Department was doing this work together with the SABC. The process of handing over its public entities to the Department of Public Enterprises was underway. The Department of Public Enterprises was leading this process and had produced a document which the Department had commented on. It was important to note that there were a number of complexities regarding this process that would first have to be overcome; for example, there was the need to differentiate between National Public Enterprises and other government arms. The outcomes of both the television licence work with the SABC and the transferring of public entities to the Department of Public Enterprises would be made known to the Committee as soon as it was available.

Regarding the issue of divestiture, the Department was currently involved in a second round of investigating government investment in ICT. This process was being spearheaded by the Department and the Department of Public Enterprises that were working together in order to maximise investments in this area. The Department was currently busy finalising its position regarding the Telkom situation. However, it did not block the resolution made by shareholders at the recent shareholders meeting.

The Chairperson referred to a report to Parliament on a Joint Budget Committee hearing with the Department. This report did not seem to paint a positive picture at all. The report showed the tendency for the Department to spend more than half of its budget in the last half of the financial year and it had not given a satisfactory reason why this was being done. It seemed that the Department merely spent the funds at the end of the year so that they could not be accused of under-spending.

The report also implied that after scrutinising the Department’s expenditure there seemed to be non-allocation of funding to the ICT functions. The Department’s response in the report was that its expenditure was affected by both internal and external sources which meant that it did not determine its expenditure on its own. He sought clarity on this statement.

Mr Mathabathe stated that the Chairperson had summed up the situation correctly. However, confusion had been created by the once-off allocation of funds to the South African Post Office (SAPO). This allocation usually occurred towards the end of the financial year and amounted to more than half of the Department’s annual budget. This allocation therefore created the perception that the Department was dealing with the bulk of its allocations to various institutions at the end of the year when it was actually not. However, the allocation of these funds was also conditional. The Post Office fund had to meet certain conditions before the Department allocated funds to it. The process of determining these conditions culminated in agreement between the Ministers of Finance and Communications and it usually occurred at the end of the financial year.

What was important to note was that when the Department appeared before the Joint Budget Committee, it was decided that under-spending was in actual fact not an issue that needed to be addressed at the hearing as the Department had spent its Budget by the end of the financial year. Therefore, only policy issues were addressed during that hearing.

The Chairperson noted that when reading the Department’s Annual Report against its Strategic Plan; the Department had only mentioned the objectives it had achieved in its Annual Report and had failed to mention the objectives it had failed to achieve. He suggested that in the future the Department create a balance in its Annual Report to include both its achievements and the challenges it still faced.

National Electronic Media Institute of South Africa (NEMISA) Briefing
Mr P de Klerk (Acting Chief Executive Officer) introduced NEMISA as well as its senior members to the Committee. Mr V Makaya briefed the Committee on the core business of the NEMISA which was training. NEMISA offered training in three main areas, namely creative multimedia, radio production and television production. Mr P de Klerk emphasised that a new ICT environment existed due to rapid technological advances. This included the convergence of technologies, growth in satellite communications, growth in broadband technology, the growth of the internet and miniaturisation. The South African media landscape had also been characterized by mergers and acquisitions, advances in digital and communications technologies and the blurring of distinctions between telecommunications, broadcasting and information technology. A number of new challenges also existed for training and development.

New opportunities therefore existed for NEMISA as it possessed the appropriate technology. It therefore needed to broaden its approach in training, content development and service delivery as well as to be repositioned based on the strategic models of self-reliance and sustainability. NEMISA therefore had a new mandate which was to take it into the future and to offer new products in skills, content production and service delivery that would make the institution an advanced multimedia skills developer and content generator. NEMISA had a number of new strategic imperatives as it required a change of mindset and needed to be proactive as well as self-sustainable. NEMISA had a new operational plan which had been endorsed by the Department and the NEMISA board and the implementation of the new vision would be gradually phased in over the next few months. The NEMISA Management Committee would finalise its operational plan over the next few weeks.

Ms I Louw (Senior Manager: Corporate Services) briefed the Committee on NEMISA’s Financial Report. The total income for the year 2005 was R20, 132 million as compared to R17, 921 million for the year 2004. NEMISA’s total expenditure for 2005 was R23, 461 million and its net deficit was R3, 329 million. During the year the organisation experienced a forced entry into its premises which resulted in equipment with a book value of R823 543 being stolen. NEMISA submitted an insurance claim and its net proceeds were R441 277.

Discussion
Mr Pieterse remarked that out of the twenty-four students that had been trained by NEMISA only twenty-one had graduated. What were the reasons for the other three students not graduating? He also enquired how many of these students were women and what the gender ratio was in terms of those students who passed and those who failed. How many of the students were physically disabled as it was extremely important that NEMISA included this group?

Mr Makaya replied that there were thirty-one students that remained within the creative multimedia training courses. Within this thirty-one there was a 20:11 ratio in favour of women. There were three reasons for students dropping out. The first reason was that students dropped out on the basis of performance. The second reason was that students dropped out due to choices they made, for example some received better employment opportunities elsewhere. Lastly, some of the students dropped out because of health reasons. The gender ratio of students who had graduated in the fields of radio production and television production were 6:5 and 11:7 in favour of women respectively. With regards to enrolling students who had disabilities, NEMISA had found this issue to be extremely challenging. There had been a disabled student enrolled in the radio production unit. However, the new operational plan recognised this problem and the new plan extended from the work it done with the University of South Africa (UNISA) to NEMISA requesting help from the disability desk of the Department with regards to this issue. NEMISA also planned to employ trainers who had the expertise needed to train students with disabilities.

Mr Pieterse asked whether NEMISA had a relationship with the Media Diversity Development Agency (MDDA) as its training programs were very similar to the training programmes of this organisation, particularly regarding the development and training of community workers. Lastly, would NEMISA extend its relationship with the University of Malaysia beyond the year 2006?

Mr K Khumalo (ANC) commented that NEMISA had omitted to mention the challenges it was facing, yet many of its senior board members such as its Chief Executive Officer and its Chief Operations Officer were only acting members. It had also mentioned the importance of changing its mindset and for it to be more proactive, but did not specify how this would be done. He remarked that the assumption could be made when looking at the labour market, that NEMISA had not been addressing the constituency it was supposed to be serving in terms of the types of students it was supposed to be training. Secondly, he commented that the commercial enterprises, NEMISA was proposing was promising; however he was not completely sure of its intentions.

Lastly, he remarked that Parliament had just passed two Bills, namely the Convergence Bill and the Bill dealing with ICASA amendments. These Bills allowed for universal service application where the digital divide would be bridged so that certain sectors would then enjoy better access. However, it was important that NEMISA check during the course of its market analysis whether it would be justifiable for it rather to act normally if it was unsure of the path it was planning to take. The problem was that while convergence was taking place in terms of the broadcasting communications services there were a number of operators that were asking why they were being asking to contribute to institutions such as the MDDA and the Universal Service Agency (USA). It was therefore important to first determine what the intention of planned joint ventures would be.

Mr de Klerk responded that many of the questions that had been raised by the Committee showed the need for NEMISA to return to Parliament so that it could brief the Committee in much greater detail about the structure, activities and future plans of the institution.

There was no doubt that NEMISA had a great deal of political encouragement as its imperatives had to meet the national objective like any other institution of government. This meant that NEMISA had to consider the type of students it trained as well as the other responsibilities it had and the objectives it had to achieve. These issues had been addressed in NEMISA’s new operational plan; yet it was too early to brief the Committee on this plan. NEMISA had a corporate vision but it still needed to be finalised to a greater extent.

The corporate plan also dealt with the issue of partnerships and joint ventures of other institutions. NEMISA did not have the linkages it should have with a number if institutions such as the MDDA. The operations plan described in detail how NEMISA would be dealing with this issue and its market analysis would include the issues that had been raised by the Committee. In terms of the issue of commercial enterprise, NEMISA had at the current moment a facility for content generation. This facility alluded to some of the projects NEMISA had been involved in directed by the Department and other organisations. NEMISA wanted to develop this facility but it also used this facility to train its students. NEMISA was working on a new project to train people in the field of high definition as it was estimated that around six hundred people trained in this field would be needed for the World Cup in 2010. The institution had been using its content generation facility which it called a commercial enterprise to plan this project. While conducting this project NEMISA also charged fees to people for whom it was doing work. This generated income and helped the institution cover some of its overheads. It was therefore important that this commercial enterprise structure was not confused by the Committee as being a structure that only had a commercial intent as this was not the case. NEMISA was still essentially a training and development institution. He asked for the opportunity to brief the Committee on the new operations plan in the future.

Ms M Smuts (DA) noted that NEMISA appeared to be the locus of cooperation between the Department of Communications and the Department of Provincial and Local Government (DPLG) in the form of the funding exercise provided by the French Embassy. Ms Smuts had over the years expressed her concerns regarding community radio as it received a great deal of help from the Department which led to a danger of community radio returning this help. There was an inbuilt danger that when Government agencies aided broadcasters these broadcasters would stray over the line of editorial independence and would then support Government. She understood that in terms of this cooperation between the Department of Communications and DPLG, the purpose was to get the two sectors to communicate and that this project produced a twelve-part radio drama series which explained how local government worked. It could be argued that in this instance it would also be the job of radio to explain how local government did not work. How did NEMISA avoid becoming a propaganda arm for both Departments? Had NEMISA been successful in ensuring that the people involved had been sticking to the aim of this initiative which was to explain how local government worked? It was obvious that mayors and councillors would have been interviewed during this project and the question was whether these people had been limited to one party.

Mr de Klerk acknowledged the importance of radio stations remaining independent and objective so that it presented the work done by local government in a balanced way. NEMISA supported this principle fully.

Mr Makaya answered that the bulk of the production in terms of content took place at the radio and television stations. NEMISA only provided support in terms of training in the understanding of certain issues so that the community radio stations could enter communities and address these issues. The community radio stations actually produced the programs and therefore were responsible for editorial independence.

Adv P Swart (DA) noted that NEMISA’s Annual Report had mentioned the theft of equipment to the value of R823 000 of which the institution had recovered R441 000. However, the expenditure statement mentioned theft of around R76 000. He enquired whether these two items were related.

Ms Louw replied that the total purchase cost of the equipment that had been stolen had been over R2 million. However, the book value of this equipment had been around R800 000 and was the value that had been mentioned in the Annual Report. NEMISA had received around R1.4 million from the insurance company after it had instituted its claim. The net proceeds reflected in the report were therefore the difference between what NEMISA had in its books and what it had actually received. The amount in the expenditure statement was the direct cost involved in terms of replacing the equipment after the theft. However the actual cost of the equipment was reflected in the balance sheet.

Universal Service Agency (USA) Briefing
Dr S Gulube (Chief Executive Officer) briefed the Committee on the management structure of the USA as well as its corporate governance and the implementation of the Public Finance Management Act (PFMA). He highlighted the fact that this was the first time the USA had presented an Annual Report to the Committee as it had only been formed in 2003. He also requested that the Committee address the implementation challenges of the PFMA faced by smaller organisations such as the USA.

Within the sphere of corporate governance and the implementation of the PFMA, the USA had to develop and implement its own policies and procedures. The USA had concentrated firstly on the development of its policies and 99% of its policies had been developed. Skills development had also been focused on by the USA and it highlighted the fact that it had instituted compulsory training in the PFMA for all its staff members.

The Agency’s 2003/2004 Financial Statement was also presented to the Committee as it had not been included in the 2003/2004 Annual Report. The Auditor General had qualified this financial statement. The reason for this qualification was that no satisfactory auditing procedures could be performed to obtain reasonable assurance that all donations transferred to the Agency by donors for the World Telecommunications Conference had been recorded. However, the USA argued that these donations had been paid to the Department who had then transferred it to the USA. No corruption had therefore occurred as the Department would be able to show the sources of these transfers and these source documents would be acquired from the Department in the future.

The USA also listed the deliverables that were realised by the Agency during the 2004/2005 financial year. The Agency also subsidised a number of Under Serviced Area Licence operators (USALS) and these subsidies amounted to R30 million. A problem the USA had faced in the past that it had not spent the money it had been allocated. It had addressed this problem and its spending had increased from R2, 346 million in the 2002/2003 financial year to R43 million in the first half of the 2005/2006 year. The 2004/2005 Auditor General’s Report was unqualified although a number of matters of emphasis had been raised. A number of challenges that the USA still faced were also mentioned. These included the implementation of the new Electronic Communications Bill, the subsidisation of a greater number of USALS, skills development and retaining board members.

Discussion
Mr Khumalo remarked that the statements that had been made by the Auditor General regarding the 2003/2004 Annual Report were extremely serious and needed to be discussed further and looked at in greater detail by the board. However, the USA had been extremely courageous in being upfront with the Committee regarding the problems they had encountered and were still encountering. He also felt that although the USALS were to be funded by the USA over a three-year period it was important that the Agency had a strategy to make these institutions self-sustainable as this would not occur purely through funding in these three years. It was also necessary that Parliament investigate the remuneration of board members as there seemed to be large discrepancies regarding this remuneration and it was affecting many institutions negatively, not only the USA

Rev M Khumalo requested the breakdown of USA schools and computer centers by province in order to determine if certain provinces were favoured while others had been excluded. He had the impression from the Annual Report that provinces such as the Western Cape were favoured while the rest of the country was not covered.

Mr C Choeu (Chairperson of the USA Board) gave the spread of USA schools and telecenters in the provinces. In Gauteng there were two schools and thirteen telecenters. In the North West there were twenty-five schools and thirteen telecenters. In the Eastern Cape there were fourteen schools and twenty telecenters. In the Free State there were seventeen schools and eleven telecenters. In Limpopo there were thirty-one schools and twenty-five telecenters. In Mpumalanga there were forty-three schools and fourteen telecenters. In the Northern Cape there were twenty-five schools and eight telecenters. In the Western Cape there were eight schools, six telecenters and ten libraries. Lastly, in KwaZulu Natal there were forty schools and twenty telecenters. This distribution was based on the distribution of the population in under-serviced areas.

Adv P Swart (DA) noted that the Committee had only recently received the financial report for the 2003/2004 financial year. It was presenting its financial report for 2004/2005 when the Committee had not dealt with the earlier financial statement yet. He enquired whether the Committee had dealt with this 2003/2004 financial report yet as it contained a large number of matters of emphasis that needed attention.

Dr Gulube responded that the USA’s 2003/2004 Annual Report had not contained the Financial Statement for that financial year. The USA therefore included this 2003/2004 Financial Statement in its 2004/2005 Annual Report.

South African Post Office (SAPO) Briefing
Mr K Mampuele (Group Chief Executive Officer) outlined the activities of the South African Post Office during 2004/2005 which included a number of highlights. The SAPO had achieved a number of key achievements which included improved financial performance. Its turnover had increased by 6% since the previous financial year and its operating expenses had only increased by 3%. Its primary liabilities had also decreased from R2.3 billion to R929 million.

Mr N Buick (Group Chief Financial Officer) briefed the Committee on the Income Statement of the South African Post Office for the 2004/2005 year. The net profit for the Post Office was R1, 068 million which was a huge improvement from the 2003/2004 financial year where there had been a deficit of R74, 723 million. The Post Office’s total assets for 2004/2005 were R4, 608 billion which was an increase of around R1, 5 billion from 2003/2004. Its total capital expenditure amounted to R435, 933 million and a breakdown of this expenditure was given. A key achievement was the large improvement in the working capital of the institution. The cash that had been generated from its operations totaled R371 million and its short-term investment excluding the Postbank was R333 million. A financial overview of the last five years was also given and showed the remarkable improvement of the South African Post Office’s finances.

Mr Mampuele finally briefed the Committee on the way forward and the focus areas for the 2005/2006 financial year. After its turnaround the South African Post Office was well positioned to face the additional challenges posed by trends in the postal industry. The future aspirations of the institution would be supported by its strategic posture as well as five strategic themes. The Post Office had also identified a number of areas where it could work in partnership with government departments in the future. An example of an area was aiding the Department of Home Affairs with the issuing of identification documents. It was extremely important that the institution’s mission and vision was revised in order to reflect its new strategic posture. The future Post Office structure was presented which included the development of business centers, communication centers, ATMs and retail services.

South African Broadcasting Corporation (SABC) Briefing
Mr A Trikamjee (SABC Non-Executive Board Director) briefed the Committee on the successes of the SABC during the past financial year; this included the solid delivery of its mandate as the public broadcaster. Mr D Mpofu (Chief Executive Officer) discussed the activities of the SABC during the 2004/2005 financial year. Several goals had been set when the SABC Board came into office and after its first full year in office a detailed assessment of the progress of these goals was made.

The way forward for the SABC was also highlighted. It was committed to its role as a corporate citizen and undertook to support the corporation in efforts to strengthen bonds and to invest in South African society. It was also committed to celebrating the country’s cultural and linguistic diversity and to project an image to the outside world that promoted investment and tourism. Lastly, it planned to focus on the positive aspects of the country. The influence of the public broadcaster could also not be overstated, and the SABC was committed to exploiting its benefits and planned to focus efforts towards content, people development, transformation, nation building and social cohesion.

The SABC had also enjoyed strong financial results with excellent revenue performance. It was still the dominant and primary source of news for some 24 million or 80% of South Africa’s adult population and this included radio and television news. A balanced scorecard of the SABC’s activities was also given and included the areas of growth and financial health; its national priorities and mandate; innovation and customers; people and success behaviours and lastly, operations and process control. The SABC strategy was obviously working and it therefore needed to consolidate and grow. However a number of challenges still lay ahead and were mentioned. The overall thrust was to continue to produce solid financial results, and invest the fruits of this success in local content for existing and new platforms, infrastructure upgrade and rollout and human capital development.

Mr S Moketle (Chief Operations Officer) discussed the key SABC goals that supported public broadcasting. He also gave an overview of the operations of the SABC for the 2004/2005 financial year and great strides had been made in transforming the SABC in terms of corporatisation and its separation into the Public Broadcasting Service and Public Communications Services (PBS and PCS). In terms of the SABC Public Service Mandate, progress had been made in the areas of universal access and service, language and in reflecting the diversity of the nation in its programs. The audiences watching the SABC television channels had increased by 4% points in the first half of the 2005/2006 financial year and radio audiences had stabilised. Revenue performance was exceptional during the first half of the current financial year. Key strategic initiatives of the SABC for the 2005/2006 financial year were also presented.

Mr R Nicholson (Chief Financial Officer) briefed the Committee on the SABC Financial Report for the year that ended 31 March 2005. The total revenue was R3, 314 billion which was an 18% increase from 2004. The total operating expenditure was R2, 918 billion which was an 8% increase from 2004. The Corporation recorded an after tax profit of R240 million in 2005, against an after tax profit of R1, 7million in 2004. A breakdown of the funding provided to the SABC was also given and expressed as a percentage of the total revenue. A consolidated balance sheet, a consolidated cash flow statement and a consolidated income statement for the year ending 31 March 2005 was also given.

The SABC had experienced the best year in the history of the corporation and now had a strong foundation with which to build in the future. However, challenges remained as the SABC was entering one of the most difficult and exciting periods in its history. These challenges were mainly linked to technological change, new licenses and amendments and increasing competition.

Discussion
Mr. R. Pieterse (ANC) asked by how much the SABC footprint had increased and when it would cover the entire country. He said there was a perception that Afrikaans was dominant; however if you looked closely English was the dominant language. There was a lack of sign language for the blind. Had the SABC included this in their strategic plan? Sport was a major theme and he wanted to know if the SABC was broadening its broadcasts to everyone and not only for pay channel customers. He also wanted to know if post offices for rural areas were part of the Post Office’s plan.

Mr. Matlala wanted clarity from the SABC how client satisfaction was measured.

Ms. D Smuts (DA) was encouraged by Mr Mpofu’s vision that he intended the SABC to reflect the plurality and diversity of views. She asked for more information on the recent major conference hosted by the SABC on media freedom. With reference to trade extension, she asked if the SABC was indulging in advertorial projects and what was their policy on this. She was concerned about SABC editorial independence in allowing the Government Communication and Information System (GCIS) to flight a 13-part series on Government's socio-economic initiatives in the run up to the local government elections. She asked how the SABC would ensure that there was a balance between editorial independence and the incumbent government not using the SABC to promote its own viewpoint.

Mr. M. Mohlalonga (ANC) raised a concern about the differentiation of services offered by the SA Post Office in the rural areas and the townships. In terms of the Employment Equity Act, he did not see adequate black representation in the workforce of the Post Office. He asked what was the percentage of the total SABC budget spent respectively on news, entertainment, sport and education. He also felt it was unfair that retail stores and banks should be forced to pay TV license fees as this was not for consumption of content. He suggested the SABC consider an alternative such as a tax instead. Freedom of expression was central to the public service broadcaster who should not be subject to any form of commercial or political pressure.

The sourcing of programs from Britain and the USA, at much cheaper prices, was a worrying factor since it was at the expense of locally produced programs. He said the SABC owed nobody an apology or answer for not showing the incident on TV involving the leader of the ANC in KwaZulu-Natal, since the SABC was only following its editorial independence.

Mr. Mohlalonga wanted clarity on why the Henry Howell Memorial Trust had increased and how the unsecured loan of R 7 358 from Auckland Park Programme Trade B.V had come about. What progress had the SABC made on covering the Kwe, San and Khoi languages as these communities received exposure only when they had problems or were moved. There were about 1.5 million people with impaired hearing and this created a need for subtitles. What was the SABC doing about making provision for blind and deaf people in their services?

Mr Mpofu said increasing its footprint was of paramount importance to the SABC whose goal was 100% coverage of the country. This was subject to the availability of money, transmitters and technology to complete the task, but they were busy with covering new areas like Ulundi and Kuruman.

The perception that English was the dominant language was accurate. They were keenly aware of this; however there were historical factors that explained it.

He asked for legislative assistance to enable the majority of people to watch sport of national interest because the majority were simply unable to afford pay TV. The SABC wanted to have a dedicated channel for the 2010 World Cup.

The measurement of client satisfaction was not only done by the increase in numbers, but through a cluster of factors such as socio-economic development, infrastructure roll out, listenership and customer satisfaction.

On the issues of plurality, independence and objectivity, the SABC’s views were that this was crucial and one could not pay lip service to it. This required both public participation and trust in order for the SABC to fulfill its role in providing information to South Africa.

The Conference on Media Freedom was very refreshing and was driven by board member Mr Thami Mazwai. It was the first of its kind and dealt with the role of the media in identity, belonging, ideology, and tabloid journalism. The SABC partnered with the University of Limpopo and the South African National Editors Forum (SANEF).

On the GCIS program, the SABC had a duty and would not deprive citizens of their right to information because of what government did. The SABC would still maintain editorial control. It was a political reality that the incumbent government had an inherent advantage, which required the SABC to act very carefully in its guidelines on covering the incumbent government during local government elections.

Freedom of expression was not just editorial independence, but independence included freedom from political and commercial control. Government presently contributed only 2% of SABC funding while business contributed 85% of income.

On the issue of purchasing cheaper British and US television programs, Mr Mpofu said that the SABC had to comply with quotas that the Independent Communications Authority of SA (ICASA) regulations set out for local content. He said the programs that produced the best money in terms of advertising revenue were now the locally produced South African television programs.

With regard to the incident surrounding the Deputy President in KZN, he had intervened personally to have an investigation launched when it came to his attention that the SABC had issued two different explanations for what had happened. The SABC wanted credibility as a public institution, so it was important to inform the public in this case.

Mr. Robin Nicholson, Chief Financial Officer, stated that the reason why Standard Bank paid TV licenses was that they played SABC content. The Henry Howell Memorial Trust was established on the death of an SABC staffer who died in testate. The Trust was used for staff dependents and university students. The SABC’s long-term goal was to reposition the Trust to provide university bursaries to previously disadvantaged students.

He said that Auckland Park Programme Trade B.V. was used to circumvent content restrictions during apartheid and the SABC board intended to use it to pay for the Soccer World Cup rights in 2006 after which it would be wound up.

On the question of trade exchanges, he said the SABC did not do direct advertorials or trade exchanges, but they would get companies like SA Airways to sponsor airfares if a shoot was done in another venue. This was a means to fund the public service broadcaster and was covered by editorial policy.

Mr. Solly Mokoetle, Chief Operating Officer said they had a responsibility to the San, Kung and Kwe and that the SABC had opened a broadcasting station at Vlakfontein in the Northern Cape to broadcast both Kung and Kwe languages. It broadcast equal time for the Kung and Kwe and in time the San would also be catered for.

In terms of sign language, the SABC would increase it to 5% of broadcast time and they would in future only used disabled people to act in programs instead of using actors who played the role of disabled people.

Mr. K. Mampeule, Group CEO SA Post Office stated that pensioners would not have to wait so long for pensions at the post office in future and that the Post Office planned to open one post office for every 10 000 people in the future. They would be rolling out post offices, not postal agencies, and by increasing the number of services offered by the post offices, they would be able to reverse the loss-making model.

The Post Office was obligated to provide a core of services to the public and certain local requirements dictated that they keep more textbooks in post offices in the rural areas. Every senior level manager would adopt two post offices in which they would monitor the work conditions and service delivery.

Professor S. Nkese, Human Resources Executive said the Post Office was committed to ensuring that their employees reflected the demographics of the community they served.

Mr. Pieterse stated that during an oversight visit they had come across equipment from the old Bophuthatswana (BOP) television station in the North West and he wanted to know what this equipment was going to be used for.

Mr. Lekgoro requested that the SABC look into the possibility of giving more airtime to labour and trade union issues such as a labour bulletin.

He stated that there was a very poor area in Limpopo province in which only 26% of households had television and 69% had radios. He asked the SABC and Department of Communication if there was anything they could do to enable this community to acquire television and radios.

Mr. Mohlalonga (ANC) wanted to know what the SABC was doing about access to satellite and broadband for the public and he mooted the possibility of government introducing a tax whether you owned a television set or not.

Mr Mpofu replied that the issue of the 26% penetration in Limpopo was a function of poverty and the SABC could do very little about that. On the issue of closing the digital divide, broadband and access, the SABC measured the annual service licenses in terms of teledensity. The SABC did have programs on labour issues and unemployment, but would look at ways of becoming more focused and maybe have a labour program in consultation with the Sowetan covering labour cases, but they would not have a program specifically on Cosatu.

Mr. S. Mokoetle said that BOP television had been closed down. The legislation passed by the Portfolio Committee had stated that the facilities of the North West regional broadcaster would be used for the production of regional content. The SABC’s intention was to use this equipment and revamp the studios, but the cameras were all outdated as they were analogue and not digital.

The meeting was adjourned.