Department, SA Management & Development Institute & SITA: Budget & Strategic Plan 2007/8

PUBLIC SERVICE AND ADMINISTRATION PORTFOLIO COMMITTEE
16 March 2007
DEPARTMENT, SOUTH AFRICAN MANAGEMENT AND DEVELOPMENT INSTITUTE & STATE INFORMATION TECHNOLOGY AGENCY: BUDGET AND STRATEGIC PLAN 2007/8

Acting Chairperson: Mr R Baloyi (ANC)

Documents handed out:
Estimates of National Expenditure / Budget vote data
DPSA Budget 2007/08 : Powerpoint presentation
SAMDI Budget 2007/08 : Powerpoint presentation
SITA Budget 2007/08 : Powerpoint presentation: Part1 & Part2

Audio Recording of the Meeting

SUMMARY
The Department of Public Service and Administration, the South African Management and Development Institute and the State Information Technology Agency briefed the Committee on the strategic objectives and initiatives of the organisations, detailed the financial performance for 2006/07, the major challenges for the short and medium term and presented the budgets for the 2007/08 financial year.

Committee members raised questions about the organisations’ strategic plans and the implementation of their programmes and initiatives. Most of the questions asked were related to the improvement of service delivery.

MINUTES
Department of Public Service and Administration Presentation
Prof Richard Levin (Director-General, DPSA) briefed the Committee on the department’s six strategic programmes:
Programme 1 : Administration;
Programme 2 : Human Resource Management and Development (HRM&D);
Programme 3 : Management of Compensation (MOC);
Programme 4 : Information and Technology Management (I&TM);
Programme 5 : Service Delivery Improvement (SDI); and
Programme 6 : Governance (GOV).

Prof Levin listed the outputs on which the estimates of national expenditure for the period 2007/08 to 2009/10 were based and presented the operational plans for DPSA's programmes.

The medium-term expenditure framework for the period 2007/08 to 2009/10 included changes in the budget structure to accommodate the Governance programme, the consolidation of previous sub-programmes and the addition of new sub-programmes.

Prof Levin presented the department’s budget allocation and the allocations per programme for 2006/07 to 2009/10. The most significant fluctuations in the MOC allocations over the period were the once-off payment to the Government Employees Medical Scheme (GEMS) in 2006/07 and the provisions made for the Policy and Procedure on Incapacity Leave and Ill-health Retirement (PILIR) in 2007/08 and 2008/09. Prof Levin mentioned that the management of PILIR will be decentralised to the departments in 2009. Fluctuations related to Governance were mainly the once-off payments to the African Peer Review Mechanism, GEMS and the Global Forum.

The 2007/08 economic classification of the department’s budget was presented as a pie chart with 66% allocated to goods and services, 28% to compensation, 5% to transfers and 1% to capital expenditure. A breakdown of the compensation paid to employees for the period 2003/04 to 2009/10 and the DPSA establishment changes for 2004/05 to 2006/07 reflected the growth in the department over the last three years. Prof Levin said that the present high vacancy rate of 20% posed challenges related to the recruitment and development of staff but that the organisation had stabilised in terms of the vacancy rate and staff turnover.

Discussion
Mr M Sikakane (ANC) asked for clarification on the involvement of the DPSA with India and Brazil.

Prof Levin replied that India, Brazil and South Africa are recognised by the developed countries as the leading economic powers amongst the emerging markets of Asia, Latin America and Africa. The India/Brazil/South Africa (IBSA) initiative emerged out of the economic co-operation between these countries. The DPSA saw an opportunity for co-operation on a governance level as the three countries face similar challenges and can learn from each other by sharing best practice with regard to the implementation of Batho Pele and other budgetary and anti-corruption initiatives.

Mr Sikakane asked what job categories are classified as middle management and if the review of remuneration of middle managers will result in an increase or a decrease in benefits.

Prof Levin replied that some key professional posts were included in the middle management levels and that a review of remuneration can be expected to result in an increase in benefits.

Ms M Matsomela (ANC) asked for clarification of the development of a guide on the appointment of board members, listed under the SDI programme.

Prof Levin replied that the guide was for the boards of public entities and include issues of the remuneration of board members, the number of boards one person may serve on, shareholder management and general corporate governance factors.

Ms Matsomela asked for details of the new sub-programme for Community Development Workers (CDW) mentioned in the changes to the budget structure of the department.

Prof Levin replied that there was a need to establish the CDWs within the department’s organisational structures to support its focus on improved service delivery. He did not envisage an increase in the CDW component.

Ms Matsomela asked how the items listed under the changes to the budget structure, affected the budget.

Prof Levin replied that the main effect on the budget was the restructuring of Governance. The new subprogrammes resulted in an increase in the budget while the rationalisation of other programmes resulted in an improvement in performance and a more coherent operation that did not imply an increase.

Ms Matsomela asked how the re-evaluation of jobs affected the department’s ability to attract and retain good staff.

Prof Levin replied that the retention of middle management was a challenge. The re-evaluation of posts created some instability and there was frustration with the change management process. Inconsistencies were found, particularly at levels 11 and 12 but also at levels 9 and 10. The EQUATE Job Evaluation system was benchmarked against other systems in use by the private sector. It was criticised for being a one-size-fits-all type of system and the question was asked if more than one evaluation system should be used. It was felt that EQUATE could be an effective system and would be able to deal with multiple levels but there was some debate on the matter.

In reply to the Chairperson asking if the budget figures corresponded to the department’s strategic plan, Prof Levin said that they did.

South African Management and Development Institute Presentation
Dr Mark Orkin (Director-General, SAMDI) outlined the structure of the Institute’s presentation to on the 2007/08 budget and said that the Institute was presently engaged in major organisational changes to support a new strategic orientation and cannot yet provide precise details on the programmes as these are still being determined and have yet to be approved by the Minister.

Mr Rufus Motlana (Deputy Director-General, SAMDI) briefed the Committee on the institute’s strategic objectives. Four key Governance and Administration cluster priorities were identified and the relevant programmes for each priority were listed. Six strategic objectives were set for the period 2007/08 to 2009/10 and a further five focus areas for 2007 were detailed. The objectives for the three Governance of Resources components of Finance, Internal Audit and Human Resource Management and Development were discussed.

Mr Motlana reported on the training statistics for the period 2006/07. The actual Person Training Days (PTDS) per delivery unit were compared to the previous years’ outputs and to the budgeted PTDs. The number of PTDs increased by 2% but was 24% less than the target. An explanation for the variances in the statistics was provided. Dr Orkin commented that an increase of 46% over the previous year’s PTDs was unrealistic given that the Institute’s staff resources remained unchanged. A graph illustrating the PTD for the current and previous years was included.

A comparison was made between the percentage distribution of government employees in each province and the percentage PTDs in the provinces to determine what use was being made of SAMDI’s services. Mr Motlana outlined the initiatives that were taken to improve the efficiency and effectiveness outputs of the Institute.

Ms Marilize Hogendoorn (Executive Manager: Finance, SAMDI) presented the budget allocation Vote 11 (previously Vote 12) for the period 2007/08 to 2009/10 to the Committee. She highlighted the additional funding of R10 million that was approved for the establishment of the new Academy for 2007/08, increasing to R15 million in 2008/09 and R25 million in 2009/10.

Ms Hogendoorn presented the revenue and expenditure of the Institute for 2007/08. In addition to the voted grant (Vote 12), SAMDI also derives revenue from operations. It was expected that an amount of R5.259 million will be under spent during the year because rent for new office accommodation was budgeted for but was not realised.

Mr Oliver Seale (Chief Executive Manager: Corporate Resource Management Training, SAMDI) briefed the Committee on the aims and objectives and the required result areas of the Institute’s Monitoring and Evaluation (M&E) system. Three main work streams were identified and the lead and partner agencies identified for each work stream. Mr Seale provided a progress report on SAMDI’s capacity building strategy and listed the main M&E action plans for 2007.

Dr Orkin briefed the Committee on the transformation to the Academy and highlighted the need for a major paradigm shift within SAMDI. Estimates of National Expenditure (ENE) data showed that government departments spent an average of 2% of total staff budget on training. An amount of R1.2 billion was claimed to have been spent on training but a DPSA survey showed that 43% of staff in provincial departments reported that they received no training in 2006. Dr Orkin said that the previous approach of training senior management and hoping it will cascade down to the lower levels was not effective in South Africa. Frameworks adopted by Canada and Australia require 5 days of training per year and a ten fold increase in current training levels will be necessary for South Africa to achieve that.

Dr Orkin illustrated the significant increase in the number of PTDs that was achieved when use was made of a consortium of universities, technicons and private sector service providers to provide Management and Leadership Development training. The large public sector institutions are keen to develop new sources of income and SAMDI’s role will change from being a small-scale service provider to being a facilitator and a monitor.

Dr Orkin outlined the vision for and the activities of the new Academy. Learning frameworks are being developed for the different levels to link training opportunities to the needs of the job. He listed the projects identified for the internal task teams and concluded with the challenges for the future (see document for full details).

Discussion
Mr Sikakane asked whether SAMDI will not be put out of business by encouraging other institutions to take over training.

Dr Orkin replied that SAMDI’s approach was to rise to the President’s challenge to massify what government can achieve and to accelerate service delivery. The involvement of the tertiary institutions and all other available resources was essential to address the need for training. It was necessary for SAMDI to focus on ensuring the quality of the deliverables rather than doing the training itself.

Mr Sikakane asked how the substance and relevance of external training can be ensured.

Mr Motlana replied that capacity building was a cycle and that the training provided must address the specific needs of the strategic areas identified. The actual roll-out of training involves service providers but the programmes and courses that are developed must be tailored to the needs and practices of the department concerned.

Dr Orkin said that SAMDI will change from being trainers to being a controlling body that monitors and evaluates the outputs from service providers to ensure the substance and relevance. The Academy will be a department and will follow government guidelines.

Ms Matsomela asked how the commitment of the employees of universities and technicons can be ensured.

Dr Orkin replied that SAMDI will work with the service providers to develop the curriculum. The curriculum will be approved by SACWA and service providers will get endorsements only if they use the approved curriculum.

Ms Matsomela asked to what extent the collection of debt had improved with the new debtors system.

David McThomas (Chief Financial Officer, SAMDI) replied that the debtors system was a labour-intensive manual system that resulted in many human errors being made. The conversion to Pastel resulted from a financial management improvement plan following an adverse audit comment. A more accurate debtor database was now in place. An increase in queries from customers to reconcile their records and to make payments was experienced but there was an enhancement in the recovery and accuracy of the Institute’s debtors. A new quotation and pre-numbered booking form system was also developed to ensure that no money went astray.

Ms Matsomela asked whether the internal audit function should be outsourced, how it works and to whom does it report to.

Mr McThomas replied that although outsourced, the internal audit component and the risk management committee report to the DG. Dr Orkin said that the practice of outsourcing the internal audit function was prevalent in other small departments, such as Science &Technology.

Ms Matsomela asked if the R10 million granted for the Academy would be sufficient to realise its goals.

Dr Orkin replied that it should be sufficient for the initial development phase. He added that the Minister was assisting to obtain donor funds to augment the funds allocated by the treasury.

The Chairperson commented that further interaction with the Committee will be needed in preparation for the proposed round table discussions on the restructuring of SAMDI.

State Information Technology Agency Presentation
Mr Jonas Bogoshi (Chief: Strategic Services, SITA) presented the agency’s 2007/08 budget to the Committee. He explained SITA’s mandate, funding model and objectives and gave a summary of the agency’s vision, mission and values. The mandated services to government were listed and a breakdown of the 17 major accounts, that generate 83.3% of total revenue, was provided. The agency was divided into six business units and the amount of revenue per business unit was detailed.

Mr Bogoshi briefed the Committee on the reasons for, the approach followed and the strategic imperatives for the transformation of SITA. He reviewed the agency’s performance in 2006/07 against the previous year’s outputs. The Customer Satisfaction Index (CSI) improved from 47% to 62%, the number of tender days was reduced from 242 to 76, revenue increased from R2.9 billion to R3.1 billion and profit before tax increased from 3.9% to 5.11%.

Seven trends and drivers were identified and the objectives and initiatives for 2007/08 were outlined.

Mr Bogoshi presented the consolidated statement of financial performance to the Committee and pointed out that the 2007/08 budget for operational expenses included once-off costs for the re-branding of SITA and planned building refurbishments. The 2005/06 actual and 2007/08 budgeted amounts for cost of sales, depreciation, total assets, equity and liabilities and property, plant and equipment movements were provided. The budget for capital expenditure (Capex) and a cash flow statement were included.

Mr Bogoshi concluded by listing the agency’s major challenges for the year ahead. These were a constraining funding model, the weaknesses in the legislative mandate, a scarcity of skills within the industry and improving cash flow by recovering R800 million owed to it by a reluctant client base.

Discussion
Mr Sikakane asked if the present outdated legislation prevented the agency from interacting with local governments.

Mr Bogoshi replied that there was nothing to prevent SITA from working with the municipalities. However, they do not have to work with SITA. He was aware that some municipalities are spending government money on systems without knowing what they are doing. SITA proposed a framework of standards to be adhered to by both government and local authorities so that all the systems and equipment can work together.

Mr B Mthembu (ANC) noted that a strategic plan was not included in the presentation and asked if it was available.

Mr Bogoshi replied that the strategic plan was available and that it will be forwarded to the Committee.

Mr N Gcwabaza (ANC) asked what measures are in place to prevent sensitive government information from leaking out to unauthorised persons and organisations.

Mr Bogoshi replied that access security measures have been built into the systems and networks developed by SITA. Access to the systems was being monitored. SITA classified the different levels of security required and security clearance necessary to ensure a minimum level of access control.

Ms Matsomela noted that the South African Policy Service (SAPS) was a major client. She was aware of many complaints from people that their cases are not being followed through because information was lost and asked if SITA was aware of the problem.

Mr Bogoshi replied that he was aware that SAPS had  a problem with case data. SITA had  been working on a case register system with SAPS but this had  not been completed. Another problem was that SAPS had bought lots of personal computers but the network could not accommodate them all. SITA was working on the development of a new network system for SAPS.

The meeting was adjourned.