Universal Services Agency Annual Report: briefing

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Communications and Digital Technologies

07 March 2006
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COMMUNICATIONS PORTFOLIO COMMITTEE
07 March 2006
UNIVERSAL SERVICES AGENCY ANNUAL REPORT: BRIEFING
 


Chairperson: Mr M Lekgoro (ANC)

Documents handed out:
 

Universal Service Agency Corporate Plan 2006 - 2009
Universal Service Agency PowerPoint Presentation: Corporate Plan and Budget 2006/07
Committee Programme
USA Annual Reports 2004/05 and 2003/4: available at
www.usa.org.za

SUMMARY
The Universal Service Agency presented an overview of their plans for 2006/07 and emphasised that the R31 million that had been allotted to the Universal Service Fund for this period would be insufficient to fund any new projects nor any new Under Serviced Area Licencees. The problems with the existing seven Under Serviced Area Licence operators would be workshopped after a service provider had submitted a review report with recommendations on the way forward.

The problems identified by the Auditor General in the 2003/04 financial year had been investigated by PriceWaterhouseCoopers. Their recommendations were in the process of being implemented. The Auditor General had given unqualified reports for both the Universal Service Agency and Universal Service Fund for 2004/5.

MINUTES
The Universal Service Agency's (USA) Chief Executive Officer, Mr Sam Gulube, briefed the Committee on its Corporate Plan and Budget for 2006/07. He apologised for the absence of Board Chairperson, Mr Chose Choeu, who could not attend due to other obligations.

Mr Gulube explained the strategic objectives, focus areas and budgets of the USA and Universal Service Fund (USF) for this year and then spoke about the challenges and opportunities that USA faced. He highlighted the fact that the USF budget for this year did not allow them to extend funding to new Under Serviced Area Licence operators and it also prevented USA from investing in new projects. For the USA to carry on subsidising any new Under Serviced Area Licence (USAL) operators and fund new projects simultaneously, it would cost about R168 million. Given that USA had been allocated R31 million for the USF this year, it was financially impossible to carry on subsiding Under Serviced Area Licence operators and fund new projects.

Discussion
Ms M Smuts (DA) asked if all the problems picked up by the Auditor General had been sorted out. She made it clear that she was refering to problems such as bank overdrafts and the buying of cars without permission that had allegedly taken place at USA. She pointed out that before the Committee could approve funding the USA, the organisation would have to inform the Committee if they now had a risk management strategy in place to prevent the problems picked up by the Auditor General from happening again.

Mr Gulube made it clear that the problems picked by the Auditor General were 2003/04 business activities, and so irrelevant to the 2004/05 Annual Report. As for 2004/05 financial activities, Mr Gulube pointed out that they were given an unqualified report by the Auditor General. He pointed out that the PriceWaterhouseCoopers report on its investigation into USA 2003/04 activities was tabled to the Board, and the findings were that there was no fraud and corruption at USA. However it did indicate that there were weaknesses as far as following the policies and procedures of the company. The report had made recommendations which the Board was currently looking into and implementing.

 

Ms Smuts requested clarity on what the latest developments with the new USALs were. It had been announced that a further fourteen new licences would be issued by ICASA this year, but now it was stated that funds would not be released from the Revenue Fund to help finance the start-up of these new USALF licences.

Mr R Pieterse (ANC) asked if the USA had conducted any research before deciding to fund any of the Under Serviced Area Licence operators.

The Chairperson asked what mechanisms were in place to make sure that the operators subsidised by USA were using the money received from USA for what it was intended.

Mr G Oliphant (ANC) asked about the Board's subcommittees: these being the Audit Committee, Human Resources and Remuneration Committee. How long had they been running, how efficient were they and were they functioning within the framework of the King Commission's recommendations? He also asked about the new projects that USA had in the pipeline.

On subsidising Under Serviced Area Licence operators, Mr Gulube pointed out that the funding of these operators was a big challenge for USA. He made it clear that "things were not going smoothly" in that area. Consequently, the Board had taken a decision to engage a service provider to review and assess the activities of the USAL operators and provide recommendations. The first report was expected to be completed by 16 March 2006, which would indicate in detail the problems facing the USAL operators. On receipt of this report, USA would call a workshop with stakeholders where the issues would be put on the table.

Mr Gulube explained that due to the restructuring of the USA Board, they were able to establish the following subcommittees: Renumeration / Human Resources, Operations / Mandates and Audit Committee. He added that all board members had twice gone to training courses on corporate governance, provided by the Institute of Board of Directors. That training had helped to ensure that the work of the board was in line with the King Commission's recommendations, as well as the Public Finance Management Act.

As to the question of new projects and the budget for this year, Mr Gulube pointed out that they had been allocated R31 million which meant that they were going to have to cancel any plans of new projects, as well as the subsidisation of any new USAL operators. The only activity that USA would be able to financially sustain this year was the maintanance of the existing business activities.

Ms S Vos asked if USA had any existing contractual financial obligations.

Mr M Mahlaloga (ANC) asked what the definition was with regard to "tele-density" as he wanted to be clear what USA meant by USAL operators. He asked what sort of licences had been awarded to these USAL operators. Did the licences awarded to these USAL operators oblige the operators to have fixed line infrastucture or could they utilise mobile infrastructure.

Mr Gulube replied that when it came to legal commitments, they had signed a service level agreement with the USAL operators that indicated that funding received from USA was specifically for the construction of infrastucture and not anything else.

As to the issue of tele-density, Mr Gulube pointed out that, internationally, when they refer to this they are actually talking about "effective" tele-density. What this meant was not just basic telephony. In terms of effective tele-density, USA had increased effective tele-density in South Africa. However, that concept was not captured in the Telecommunications Act [though it would be in the Electronic Communications Act].

Mr Pieterse asked if there were mechanisms in place to make sure that USAL operators buy infrastucture materials of good quality.

Mr Andries Louw (CFO:USA) replied that USA preferred to play an advisory role as USA did not want to appear as if they were taking over the operational activities of these USAL operators. He explained that the rationale behind this was that USA feared that if they were to play more than an advisory role, that would mean that USA could easily be blamed if any of the USAL operators failed.

The Chairperson suggested that USA brief the Committee again after USA had received the March report. The members of the Committee concurred.

Committee Programme, Budget and Business Plan
The Chairperson requested that the Committee not deal with its 2006 Committee Programme, Budget and Business Plan which the Committee was scheduled to discuss. This was because there was information that needed to be included in these documents before a discussion could take place. The Committee agreed to its Annual Report.

The meeting was adjourned.

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