SA Management Development Institute & State Information Technology Agency 2007/8 Budget & Strategic Plan

Meeting Summary

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Meeting report

LOCAL GOVERNMENT AND ADMINISTRATION SELECT COMMITTEE (NCOP)

LOCAL GOVERNMENT AND ADMINISTRATION SELECT COMMITTEE
10 May 2007
SOUTH AFRICAN MANAGEMENT DEVELOPMENT INSTITUTE & STATE INFORMATION TECHNOLOGY AGENCY 2007/8 BUDGET AND STRATEGIC PLAN

Chairperson:
Mr S Shiceka (ANC, Gauteng)

Documents handed out:

South African Management Development Institution presentation
State Information Technology Agency presentation

Audio Recording of the Meeting Part1 & Part2

SUMMARY
The South African Management Development Institute (SAMDI) reported that it was performing well. The number of managers being trained was increasing. Their finances were in good condition, with a small surplus on the budget (R 7.1 million). SAMDI was taking a leading role with its counterparts in Africa, and assistance was being received from the rest of the world. The challenge locally was immense due to the size of the civil service, and SAMDI had to transform in order to meet this challenge. The aim was to transform SAMDI into an academy. SAMDI would have to increase its output tenfold, although the current challenge was to increase its capacity fivefold.

Members raised questions about the effectiveness of SAMDI, and the value of its experiences in Africa. Partnerships with other academic institutions would be crucial. It seemed that not all provinces and government departments were utilizing SAMDIs services fully.

The State Information Technology Agency (SITA) reported that it was a self-funding company established by an Act of Parliament. Its main purpose was to service the Information and Communications Technology (ICT) requirements of government departments, and its aim was to be the service provider of choice. SITAs main expenses were the maintenance of networks and hardware procurement.

Members questioned the quality of the service provided by SITA, pointing out that many government departments were in fact reluctant to use its services. A large roll-over on their capital expenditure (R117 million) had to be explained.

MINUTES
Delegations from the Public Service Commission and the Public Service Education and Training Authority were not present.

Mr K Mokoena (ANC, Limpopo) took the Chair temporarily as Mr S Shiceka (ANC, Gauteng) was still in another meeting (later he was in attendance). Mr Shiceka introduced the Members of the Committee.

South African Management Development Institute presentation
Dr Mark Orkin (Director General, South African Management Development Institute (SAMDI) introduced his delegation. He said that they had prepared a detailed presentation, but would shorten it at the request of the Chairperson. The Committee required a budget from SAMDI, and this would be presented in a strategic context.

Ms Lucky Moketsi (Training Delivery, SAMDI) listed the strategic objectives. These included the development of a training framework, the establishment of executive programmes for the Senior Management Service (SMS) and the development of plans for other African countries and programmes. SAMDI wished to contribute towards the Accelerated and Shared Growth Initiative for South Africa (ASGISA) as part of its skills development mandate.

SAMDI had three delivery units. She presented the output figures for the last two financial years. This showed a steady growth. The number of persons trained by the Change Management and Service Delivery Improvement Unit had dropped from 28 064 in the 2005/06 financial year to 21 602 in the 2006/07 financial year. This was due to a big programme presented for the Department of Social Development in 2005/06. Their aims had been met. Other programmes were doing well, and all had exceeded their 2005/06 figures by far. This was due to the delivery modality, and the response to SAMDI operating as an academy, providing a good foundation.

Dr Orkin pointed out that the biggest increase had in fact been in Ms Moketsi’s unit.

Ms Moketsi continued by listing the growth in the number of personal training days during 2006/07. She presented a breakdown by provinces. Some provincial and national departments made use of other service providers. SAMDI had a large footprint in terms of local government, and had been doing well for the last two years. Their supply chain management project had been presented in 260 municipalities in all nine provinces. Partnerships had been forged between national and provincial treasuries to finance these programmes. SAMDI was being repositioned, and a vigorous campaign was being undertaken to ensure closer relations between the three different parties involved.

Dr Orkin then introduced his Chief Financial Officer (CFO), Mr David McThomas.

Mr McThomas said that SAMDI enjoyed good governance. Many auditing queries had been raised in the past by the Auditor-General (AG), who had instructed the Institute to implement a financial management improvement plan. Of the matters raised in the past, 98% had been addressed in previous years. In fact, the Department had enjoyed unqualified reports for the last three years. Internal controls at SAMDI were sound. A new software package had ensured proper course and debt management. An automated system was, in fact, being used to recover debt, but a more complete system was requested to manage the cycle of courses.

The AG wanted to see more control of courses prior to them happening. This would enable better financial control. There was an enhanced internal audit competence, and much of this function had been outsourced. SAMDI was still responsible to an Accounting Officer, and there were three other processes. This was controlled by an Audit Committee. Top management received feedback from the internal audit process. Reviews were undertaken regarding management and strategic processes, service delivery and performance. Follow-up action was taken on meetings and workshops. Standard government service, human resource development and management policies were in place.

Mr McThomas presented the budget for the next three financial years. Two modalities had been followed, namely the budget for the Parliamentary vote, and cost recovery planning. A portion of the budget was in the form of a government grant. The budget request for 2007/08 was R 71 million, increasing to R 75.9 million for 2008/09 and R 87.3 million in 2009/10. A trading account was used to assist with cost recovery, and there was an estimate that there would be a surplus of approximately R 1.5 million in each of the three years covered by the budget. In the 2006/07 there had been a surplus of R 490 000, which meant that 99.17 % of the budget had been spent. Collection of course fees had been improved by their new automated system. The number of courses presented had increased by 23%, and the income for the 2006/07 financial year had seen a nett surplus of R 7.1 million.

Dr Orkin then discussed some of the initiatives in which SAMDI was involved. The African Management Development Industrial Network had been created. The Minister of Public Service and Administration (DPSA), Ms Geraldine Fraser-Moloketi, was the current Chairperson. The decision was to bring the approximately 80 African management organizations into a single network. SAMDI had been given a leadership role in this institution. The first executive meeting was currently being held in Pretoria, and was concerned with financial issues. The focus was on delivery of services across the continent. Assistance was being received from Japan. A training workshop had also been held in Pretoria, at which ten countries had participated.

He continued that there was bilateral engagement with the Democratic Republic of the Congo (DRC). SAMDI officials were in place there, and regular visits were conducted. They were assisting with the rebuilding of DRCs Management Development Institute. There was a language problem, as this was a French-speaking country. The Institute would be part of the state visit planned for the middle of June.

Dr Orkin added that DPSA had received memoranda from Rwanda and Burundi requesting similar assistance, and donor funding was available. Aid was also being received from Canada with a view to gender mainstreaming.

SAMDI was very representative in terms of gender and race, so when they discussed transformation the issue was one of a transformation in strategy and function. The average spending by government departments on training was 2% of the salary bill. This was good compared to the private sector, which contributed 1% of their salary bill to the Sector Educational and Training Authorities (SETAs). He emphasized that the figure of 2% was an average, as some departments spent more than others. The government was spending over R 1 billion on training. A DPSA survey showed that 43% of civil servants in the provincial departments received training during 2006. The provincial department employed 80% of civil servants. The training effort should be doubled, and he asked how much would be regarded as enough.

Every public servant should spend one week per year on training. In Singapore the figure was ten working days. Even using five days as the norm, the training of approximately 250 000 middle and junior managers in the civil service would necessitate 1.25 million training days. Even if the respective departments could handle 60% of this function internally, this still left a difference of 500 000 training days. Induction campaigns were also important, as 120 000 new persons entered the civil service annually. SAMDI would have to increase its output tenfold to meet this, although he said the current challenge was to increase SAMDIs capacity fivefold.

A Commission of Inquiry had been held during 2006, and expert advice had been received. The aim of this was to transform SAMDI into an academy. This would be a move towards facilitation, collaboration and massification. SAMDI would then play a coordinating role with universities, private academies and other institutions. At present there were 7 000 civil servants at director level, and these could be trained externally. The second level contained approximately 250 000 civil servants, and all role players were needed for their training needs. A training framework was needed, whereby approved curricula would be made available. Some universities were already doing training on SAMDIs behalf. The Institute was doing different and daring things, and thinking out of the box.

In conclusion, Dr Orkin explained that the framework for learning should be generic and functional. Different levels had to be addressed, and much was happening on this front already. There was a need to understand the whole landscape, and some form of sharing was needed for maximum impact. Workshops had been held to initiate the process. Provinces faced a numerical challenge. The way forward was to establish a learning framework. He noted that the oldest provincial academy was in the Western Cape.

Discussion
Mr Mokoena said that the presentation had been a breath of fresh air. He was critical of the inward looking approach of some departments, and the programmes offered by SAMDI did not seem attractive to all departments.

Mr A Manyosi (ANC, Eastern Cape) noted an inconsistency between what government wanted to achieve, and what the public service was ready to deliver. Dr Orkin had spoken about the need for an induction program for the public service, for example an introduction to the Batho Pele campaign, and this was a vexing aspect. He asked how successful the collective efforts envisaged by SAMDI would be. He said that the area seemed to wide and growing. The training demands needed a well-oiled vehicle to service them. He noticed that there was an understaffing factor of 0.83%, and asked how critical these vacant posts were. He questioned what the effect of the understaffing was. The numbers seemed minimal, but SAMDI had large responsibilities. The presence of SAMDI seemed to be more appreciated by some provinces than others.

Mr A Moseki (ANC, North West) said that one must remember the purpose of establishing of SAMDI. He thought that the most strategic reason was to ensure that the public service had the required skills. There was a challenge of transformation. There was a need to invest in the training programme at some time. He asked if SAMDI could say with any certainty if the programmes would have any impact in change management. He asked about the international partners involved. He asked if SAMDI also looking at playing a role in other African states. He asked what the effectiveness of the monitoring system was. They had met with the local government SETA. A happy partnership had begun. A range of skills had been identified. He asked if SAMDI would assist the SETA. Local government was the most important sector of government, and SAMDI would have to help to achieve this.

Mr Mokoena asked how SAMDI would deal with fraud and corruption. The kind of assistance that was been given to the neighbouring states was commendable. He asked how South Africa would benefit from this assistance. He questioned the lull in training during December. People should be encouraged to work. The attitude was poor, also evidenced by offices being closed on Fridays, and had to be changed. He asked how SAMDI would rate itself in terms of other role players in the fields of skills development, quality assurance, effective training and financial management. If SAMDI was doing well, what were the reasons for their success; and if not how could the Committee assist. The budgetary controls seemed good. He asked how they managed to achieve an unqualified report while other departments struggled. There were many culprits who had under-spent on their budgets. SAMDI was a mirror of government, and was showing them what to do. He noted that some provinces had not done any training in 2006. If teachers attend the workshops they should be certified.

Mr Shiceka, having assumed the Chair, noted that R 1 billion had been spent to train 43% of civil servants. His logic said that this amount would have to be doubled to train all civil servants. It might then be that the quality of training would be poor. Money was being spent on the education of children, amounting to 23% of the gross domestic product. The returned value from this was poor. SAMDI was dealing with the training of government officials, and he asked what their relationship with government was. The government SETA had lots of work, and he asked if their methods could be improved. This was an international phenomenon, and he queried if the standards which South Africa wished to apply were not too high, given the development level of the country. The question was how to get holistic resources, and how satisfaction could be measured. He asked about the income sources and expenditure, as government often could not account for its funding. On the question of human resources, he had looked at the capacity of the department and in the provinces. He asked if there were enough people to develop human resources, and at what qualification level officials were. SAMDIs handling of its budget had been impressive, as the under-expenditure was less than 1%.

Dr Orkin replied that it was difficult to say if the Batho Pele principle would be achieved. A small scale induction course had been designed, and there was good demand for it. The Department of Home Affairs alone had 800 new recruits. Training could not solve everything. It had to be coupled to an infrastructure. Links were also needed to performance management. He was uncertain if their training was making a difference. There was a good range of programmes, the uptake on them was good, and important areas were being addressed; such as the supply chain management system as the procurement of goods and services was a problem area. However, the coverage was small, and hence there was a need to outsource more.

He added that he would rank SAMDI at six out of 10 in respect of skills development training, but only at two out of 10 for the volume of the program. This was a new challenge for the organization's strategy. The quality assurance process design was good. Training and promotion should be linked to performance management.

Dr Orkin added that international relations programmes were being piloted, and they had learnt much from their experience in the DRC. Sudan was now also on the horizon, and international donors were keen to get involved. They were getting good experience from learning how conflict-ridden countries were solving their problems. SAMDI was playing a supportive role by producing course material and curricula. Government had to give direction. Trainers had to be trained, and there was a growing industry focussing on the development of motivational skills. Monitoring & Evaluation (M&E) was taking place in all spheres of government, and was the mandate of the DPSA. More detail could be provided. An impressive strategy was in place to monitor the performance of departments. Within each department there were overall aspects of an M&E framework. This was a very ambitious program on the part of DPSA.

Dr Orkin finished by saying that SAMDI was responsible for training officials and preparing curricula. However, they did not have a good knowledge of the target group.

Ms Moketsi commented on the quality of training and certification. SAMDI intended to regulate training. They would help to set standards. Short programmes were not accredited. It was a long process to accredit courses. There was a foundation management programme in place, and five different SETAs were involved. SAMDI had the capacity to deliver, but training was not a panacea. They had a mandate to train, and went out of their way to conduct needs analyses. The players had to be identified. They had learnt a lot from seeing the facilities of their African counterparts, and had learnt how to deal with different circumstances.

Mr McThomas replied that vacancies were a result of the natural flow of people. A total transformation process was happening in the context of academies. Different teams were dealing with different aspects of the process. There was a need to change the mode of delivery, and facilitators were part of the training process. The achievement of unqualified reports had led to the department winning the 2005/06 South African Local Government Association (SALGA) award. They had supported the different institutions involved in the governance process. The Minister had been thorough. The Portfolio Committee on Provincial and Local Government had wanted a financial improvement plan, workshops and detailed activities had taken place. This had been done in a proactive way. An active audit committee was in place. An agreement had been concluded with the AGs office on the conducting of an interim audit. An active risk committee was in place. An 80% reactive model was being followed in terms of risk. SAMDI had improved its corporate resource management training division, especially in terms of supply chain management. A financial management course was being rolled out for CFOs. This was specifically targeted at provincial government.

Dr Orkin added that there was cooperation with the business sector. Old Mutual was becoming involved with a programme for management training. However, the public/private interface was difficult. CFOs were receiving training at the Liberty Life academies, and municipal CFOs needed the same opportunity. He said that any questions which he had overlooked would be answered by email. Anti-corruption was the focus of a new course. Provincial outreach was a question of distance and history. Older provinces had their own academies in place. SAMDI was trying to liaise better with local government.

The Chairperson returned to the human resources issue.

Dr Orkin replied that this was not being addressed on a national level, and DPSA would help there. SAMDI would do a needs analysis for those who asked. Each department had its own human resource department. Courses were available, and were well subscribed.

The Chairperson said that talks should perhaps be held with DPSA.

Dr Orkin replied that this was a timely question, as a set of standards had just been completed.

The Chairman explained that the Select Committee operated differently to the Portfolio Committee, as it had more of a provincial slant. It still followed a broad national interest, but the focus was on provincial matters. Courses should be designed for Members of Parliament. Hopefully leadership academies would be established for politicians.

Dr Orkin responded that he was interested in this matter, and would be pleased to engage with it. He would prefer the push for this to come from leaders. It should begin with local councillors, as Parliament was a different proposition.

Mr Moseki thanked the delegation for their presentation. More detail could be released at a future meeting. The development of skills at a local level was a concern, and SAMDI should double its efforts.

The Chairperson appreciated the honesty of the answers provided by Dr Orkin and his team.

State Information Technology Agency
Mr Sagren Naidoo (General Manager: Finance, State Information Technology Agency (SITA)) introduced his delegation.

Mr Lucas Mogasho (General Manager, Strategic Services, SITA) reported that SITA had been formed in 1998 by an Act of Parliament. It was funded as s Schedule 3A Public Company, and was therefore required to be financially self-sufficient. Its aims were to improve service delivery and to promote efficiency in public bodies. They were required to lower costs and improve services for government departments. They were also briefed to provide secure Information and Communications Technology (ICT) systems and to reduce redundancy. He then presented the values and services of SITA. He presented the human resources statistics, and pointed out that SITA was well representative in terms of its employment equity programme. They had achieved a target of 40% female staff members.

Mr Naidoo pointed out that these figures related to permanent staff only. They were also staffed by contract workers and learners.

Mr Mogasho continued with a breakdown of the revenue generated in each region.

Mr Naidoo explained that the amounts for their major clients like the SA Police Services (SAPS) and South African National Defence Force (SANDF) reflected their headquarters areas only. The amounts spent at offices and bases outside of this were included in the relevant regions.

Mr Mogasho described SITAs website. It was currently available in seven of the official languages, but was being translated into the remaining four. A tracking system had been introduced which would track the progress of identity document applications, and was based on Short Message System (SMS) technology. A Gov Tech meeting would be held in Cape Town in August 2007.

One of the main drivers in ICT was convenience. Major programmes included the move towards eGovernment and identity management. There was also an imperative to move towards open source software. SITA was looking at forging strategic outsourcing and partnership programmes.

SITAs objectives included the management of current operations optimally, repositioning itself to be the leader in the public sector, leadership in ICT sector and the forging of partnerships. These objectives could not be done in a vacuum. It had also launched initiatives in change management strategy, service improvement programmes, revitalization of the e-government programme, where a high level draft had been written, and the sharing of programmes.

An integrated financial management system had been acquired which would replace the current system. They were looking at providing up-to-date network facilities, catering for Voice over Internet Protocols. The solutions to their challenges would not be at the cost of service delivery, and would be applied across departments. An ICT academy was necessary, this was a important.

Mr Naidoo added that SITAs planning must include moves towards new networks. It usually took five to six years to establish these. Revenue had also doubled in the last financial year. SITA had a major investment in infrastructure. ICT technology became obsolete quickly, and the average useful life-span of hardware was five to six years. Of the last financial year capital expenditure (CAPEX) budget, only 70% had been used.
R117 million had been rolled over. A constraint that SITA faced was that it was not allowed to borrow money, and had to manage its business on a cash basis. Most of its expenditure went into capital assets.

Mr Mogasho said that peer comparison had been done. SITAs performance was closely in line with other companies in the business. However, SITA operated on smaller margins. The productivity of its employees was in line with most companies. This information had been provided by an independent research company. The challenges included the constraints of their funding model and the upgrading of their networks to next generation technology. They were also bound by the SITA Act on one hand, and could not force other departments to comply with their regulations.

Mr Mogasho concluded by stating that there was a skills shortage. Youth and internship programmes were necessary. An ICT Academy was to be established in partnership with the industry. Local skills had to be used. The client base was reluctant, and SITA had to engage with them.

Discussion
The Chairperson said that SITA must be the service provider of choice. As democracy allowed for choice. The provincial footprints needed explanation. The level of computer literacy in government was not high, and it would be difficult to implement these programmes, if the users were not ready for them.

Mr Mokoena said that in future it would not be necessary to include vision and mission statements in presentations. This was part of the old system, and institutions needed to present on their core business rather. He looked at the client list, and noted very few government departments. He cited the example of the disaster management centre in Pretoria. Management had waited so long for SITA to service their requirements that they had been forced to buy equipment outside because of the slow response. SITA had seemed like a saviour, but this was not so. He asked what could be done to change the perception that SITA could not be relied on for urgent tasks. He commented that the financial statement given was vague, and queried the heading of other expenses. He did not know how SITA could improve on service delivery, but perhaps it would improve in the future.

He pointed out that the cluster overseen by this Committee dealt with nine national departments. There were few figures under the assets and liabilities column. The roll over of R 117 million meant that service delivery was suffering somewhere else. He asked what other challenges SITA faced. It was now time for the organization to justify its existence, and it should be considered as a Chapter 9 business. A challenge for SITA was the reluctance of clients to use their services, but he asked who could blame them. He thought that SITA had perhaps been called to present to the Committee before they were ready. They would get the Committee’s support, but needed to be more convincing. He also asked about the high number of resignations of senior staff.

The Chairperson said that the engagement should be taken as a process, and another meeting would be called. There seemed to be no evidence of transformation. There were also questions about performance bonuses.

Mr Moseki responded that an entity was needed that provided quality service. Once this had been done, then the quality would be shown and the reluctance to use their services would be gone. He asked why this reluctance was still there. It was good to have an ambitious vision, but he felt that SITA was punching above its weight. The South African Police Service (SAPS) was a major client, but several police stations were still expecting delivery of equipment, and he wondered if SITA had the capacity to deliver. In terms of procurement, local service providers were used. He needed to know the benefit to the local community, and if they were providing the quality required.

Mr Manyosi said that SITAs goals were ideal. It was an objective to improve service delivery. There should be a direct response to the outcries due to inconvenience caused to citizens by poor delivery. People had complained. He asked why service in the private sector was better. He saw the weak legislative mandate as a challenge.

Ms F Nyanda (ANC, Mpumalanga) noted the funding constraint on SITA, and found it strange that there should be such a big rollover. She asked how many clients had been trained in Mpumalanga. Concerning the office infrastructure costs, she asked when this had been done.

The Chairperson asked the delegation to answer whichever questions they could; and the rest could be held over for a later meeting. One official did not know what to do. No money was being voted from Parliament to support SITA. Money could translate wishes to reality. Since 2004 Mr Mavuso Msimang, SITA CEO, had never been to a hearing at Parliament, and this was seen as a sign of defiance. State agencies must appear when called to account. He asked for an explanation on the awarding of performance bonuses. He asked what SITAs human resources retention and knowledge management strategies were. SITA claimed that up to 64% of clients were happy with their services, but there was a different perception at ground level. Their turnaround needed to be speeded up. He asked for an explanation of other expenses and income sources mentioned in the presentation. The issue of the use of open source software in the ICT environment had been raised by Mr Mark Shuttleworth. He asked if SITA had met with him. He asked which areas were experiencing shortages and backlogs, and if their legislative mandate was too weak for effective operations.

Mr Mogasho responded that SITA depended on its client base for performance feedback. Statistics did not say much. Information was needed about why clients were not satisfied. SITA needed to improve its service programme, and identify the weak points. He noted the reluctance of government departments, but they must want to come to SITA for service. They would need to engage with the Ministry and Department of Provincial and Local Government regarding the inconvenience being caused to citizens.  Key issues would be extracted from this engagement, which would lead to blueprints for improved service. They were busy with a pilot programme.

SITAs footprint in the provinces was still low key, but learnerships and skills development were being offered to people in all provinces. Their national learnership program had persons from around the country involved, and there were two persons from the Free State and one each from the Eastern and Western Cape on the project team. A pre-requisite for acceptance for learnerships was the possession of an appropriate degree or diploma.

He said that there had been research into the level of computer literacy. The Police often preferred to work manually. Work had been done with the Department of Education regarding e-education. Computer literacy was an issue there too. However, as most people were able to operate a cellular telephone, acquiring computer literacy was as gradual a process. A further example was the way most people had been able to make the transition from using bank books to operating automatic teller machines. Efforts were being made to educate all, using community centres with advisors being present.

Mr Mogasho continued that the proof of the employment equity status of the SITA structure was that there were two men and two women comprising the executive level. Overall, the organization had more than 40% female employees. The figures were spelt out in detail in the Annual Report.

He asserted that SITA was making a difference to its clients. They wanted to be a global leader in the field. There was no competitor in their role in South Africa, and they must there benchmark themselves on a wider scale. A number of government departments made use of their services. There were many, yet some only used SITA on an ad-hoc basis. The list published in the presentation was not comprehensive. He asked if they were optimal service providers. He would address the issue of SITAs responsiveness. A challenge was the perceptions held by government departments, and this could only be addressed by providing good service.

Mr Mogasho had neither statistics on the number of persons who had been trained, nor did he have the number of senior officials who had resigned recently, at hand. There was generally a high attrition rate in the information and technology sector. The academy would allow for the recruitment of skilled people. He estimated annual staff turnover to be 8%. The issue of performance bonuses would be dealt with at a later date. A written reply would be made to the issues raised by the Commissioner of Police regarding the payment of these bonuses.

He agreed that there was an absence of leaders in the organization. This was a serious issue, and he would take it back to the organization. The level of SITAs success could only be based on feedback received. He had a list of key projects, and where they were being implemented. SITA was an enabler to government departments, and had to ensure adequate service delivery. A human resources retention strategy was in place, even though it might not be transparent. It had been estimated that it would take three years to turn SITA around, and two still remained. There were specific initiatives which he would make available to the Committee. Responsiveness was a weakness. They had engaged with Mr Shuttleworth on the open source software issue, and if fact he would be part of the Gov Tech meeting. He was co-operating closely with SITA.

Mr Naidoo replied that SITA had been established under the Companies Act as a Propriety Limited company. It therefore did not benefit from a budget vote. Engagements with government departments were in terms of service level agreements and contracts. They were dealing with public funds, but had no direct funding and had to be self-sustaining. Other expenses were divided into three categories, namely training, research and development into the latest technology to replace legacy systems, and performance incentives which were part of the company’s human resources retention strategy. Other income was mainly interest on investments, which amounted to approximately 90%. Smaller contributions came from the rental of office space to National Treasury and the takings from the cafeteria. He could provide precise amounts if needed.

He said that the R 117 million was only in respect of CAPEX, not operational expenditure. Service delivery had therefore not been neglected. Initially, the R 117 million would have been spent by 31 March 2007, but the Board had allowed this money to be rolled over. Future expansion would be made to the building infrastructure in the 2007/08 financial year. There was a wide footprint in the rest of the country. Office space were a combination of SITA-owned and rented. There were some places in the country where business sense dictated that SITA should not operate. Profit was not the main driver, and there were a lot of squeezes on income. Where profit was made, it was ploughed back into the company. Office properties required a significant capital investment in maintenance. SITA had specific requirements in construction and air conditioning to maintain their equipment, and the cost of security was also included in this budget item.

The Chairperson thanked the delegation for their presentation. He had not said that Mr Msimang was undermining the Committee, as matters had not yet reached that level. However, the Committee was still not impressed with his continued failure to appear. The point of the bonuses had been raised, because there were questions as to the amounts being given. The delegation did not need to respond to this. The trend to pay out huge amounts should be checked, but he accepted that incentives were needed. He referred to the failures of the new national traffic system, e-NATIS, and the South African Airways booking system. Quick responses were needed in these cases. The next meeting with SITA would be held in 2008, and he hoped that they would indeed be the service provider of choice by then.

Mr Moseki echoed these comments. Subcontractors had to offer value for money.

The Chairperson suggested that a workshop be held to sort out some of the problems raised.

Mr Naidoo said there was much potential. SITA were very passionate about what they were doing. Their name should be synonymous with ICT in South Africa.

The meeting was adjourned.

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