Universal Service & Access Agency of SA & National Electronic Media Institute of SA: Annual Reports

COMMUNICATIONS PORTFOLIO COMMITTEE
9 November 2007
UNIVERSAL SERVICE AND ACCESS AGENCY OF SA &  NATIONAL ELECTRONIC MEDIA INSTITUTE OF SOUTH AFRICA: 2006/7ANNUAL REPORTS: BRIEFINGS

Chairperson: Mr I Vadi (ANC)

Documents handed out:
USAASA Annual Report 2006/07 Presentation
USAASA Annual Report 2006/07
NEMISA Annual Report 2006/07 Presentation
NEMISA Annual Report 2006/07 [available shortly at www.nemisa.co.za]

Audio recording of meeting

SUMMARY
Universal Service and Access Agency (USAASA) and National Electronic Media Institute (NEMISA)  presented their annual reports to the Committee. USAASA’s report looked at challenges that they faced due to changes in the mandate and the amendment of the Electronic Communication Act. It was pointed out that they suffered due to funding constraints, shortage of skills in senior management and destabilisation due to the changes that the Act brought about.  Challenges were being addressed through the recruitment of new board members and senior management.  The programme also had sustainability issues and this had impacted on Telecentres and cyberlabs that were set up by the institution.  The strategies and aims of USAASA were set out. In particular they wanted to implement a new funding plan that would allow them to spend their funding wisely.  They also wanted to focus on capacity building and the human resource issues.  Members noted the comments on funding, but warned that they needed to work to gain funding to improve universal service and access.  Members also focused on the capacity issues, disciplinary issues, the lack of skills, the problems with Telecentres and cyberlabs as well as the reasons that targets had not been met.  Members also wanted to ensure that USAASA had a working business plan that would result in the proper use of funding contributions. 

NEMISA informed members that they had gone through a period of transformation due to the fact that their mandate had changed.  They outlined changes that had to be made to the curricula, which consisted of adding more courses to the programme. NEMISA had also faced challenges with regard to funding constraints. Members questioned the institution about full funding being granted to students.  They were concerned about whether there was any benefit to the state and if students were being given opportunities once they were qualified. The Committee thought that it would be useful to have further discussions that focused on the future direction of the organisation. 

MINUTES
Universal Service and Access Agency of South Africa (USAASA) Annual Report: Briefing
Ms Cassandra Gabriel, Chairperson: USAASA Board, introduced the report.  She stated that they would give an overview of the financial year under review and would look at the business performance as well as the financial performance.  The presentation would also focus on their medium term outlook.

Ms Gabriel reminded the Committee that the organisation had been through a year of severe destabilisation due to changes in the legislation.  This in turn had sparked instability and uncertainty within USAASA itself.  She stated that the new Electronic Communications Act (ECA) had given USAASA a new mandate and management translated it in to a strategy that was broader and encompassed areas such as broadcasting.  One of the challenges was that many members of senior management had left the organisation.  This reflected the instability within USAASA and the organisation remedied the problem by electing new board members, appointing new senior management and following a rigorous turn around strategy.

Ms Gabriel said that the role of the Agency in managing the Universal Service and Access Fund (USAF) had not been aligned to the mandate of the organisation but that a new strategy was created which went beyond telecentres.  The strategy would look at schools, the needy groups of the population as well as the disabled.  Ms Gabriel informed members that the USAASA programme also lacked sustainability, which meant that there were many problems with telecentres and cyberlabs that were rolled out.  These had not measured the achievements and therefore did not know how many users there were and what impact the centres and labs were making on the community.  Part of the problem was that USAASA was working in isolation and did not have proper stakeholder participation; and they had not consulted with the relevant decision-makers and role players in the community as well as Local and Provincial Government.

The next part of the presentation focused on the Business Review.  Ms Gabriel told members that USAASA had two budgets as required by law and thus reported on two entities, being USAASA as well as USAF. USAASA was part of the Department of Communications’ budget, which was their operational budget and USAF’s budget came from contributions from operators, specifically the telecom operators.  According to the new ECA, funding also had to come from broadcasters. 

Ms Gabriel reminded members that the main focus for the financial year was on the stability of the organisation and resolving the human resource issues.  They focused on translating their new strategy in to an operational strategy that then allowed for a project strategy, human resource strategy, financial strategy and corporate affairs strategy.  Ms Gabriel stated that the strategies had been put in place and had resulted in more focus and direction in the workplace. 

According to Ms Gabriel, leader skills and capacity were very important issues.  In the past, USAASA were not able to attract the skills that were needed.  The issue was resolved by the recruitment of very skilled, experienced senior management.  All USAASA projects had also been audited; and every telecentre and cyberlab had been visited and audited.  A plan was in place to revisit and rehabilitate every project and there were plans for stakeholder ownership sustainability models together with Local Government and other partners. 

Ms Gabriel then discussed the position with the Under Serviced Area Licences (USALs).  She stated that new USALs were supposed to be subsidised but the plan could not go ahead because the Independent Communications Authority of South Africa (ICASA) had not issued the licenses.  Ms Gabriel informed members of the agreement that USAASA had with the USAL licensees.  USAASA would subsidise them in stages.  The first round of subsidisation would occur after they received their licenses.  The second round would occur after they had submitted audited financial statements showing that the money was spent on infrastructure development.  Ms Gabriel said that the process was problematic but that meetings and discussions were being held in order to resolve the issues and ensure sustainability. 

New telecentres were established during the year but they had not met their target due to negotiation issues with relevant municipalities.  Ms Gabriel told members that most telecentres had been maintained as USAASA paid for the maintenance of the equipment and the connectivity fees.  The establishment of new cyberlabs had also not been achieved due to financial constraints.  Training courses were implemented as part of the sustainability plan.  Ms Gabriel explained that digital hubs were “super Telecentres” and that USAASA planned to roll out more but could not, due to changes that affected the deployment model.

Ms Gabriel stated that the sustainability of Telecentres was more successful when they were managed by entrepreneurs, as there was one person doing the decision-making.  When run by municipalities, the process was prolonged by power struggles and individual personality conflicts within the community, which had de-stabilised the management of the Telecentres. 

Financial performance was then discussed.  Ms Gabriel stated that USAASA and USAF had received unqualified audit opinions from the Auditor-General and there were no matters of emphasis during that period.  Expenditure consisted of administrative costs, marketing, auditing fees, operating expenses and capital.  Poor expenditure occurred due to destabilisation during the financial year and because the organisation did not have a proper strategy and business plan.  Ms Gabriel said that the issue was being resolved as USAASA was implementing a proper strategy and business plan and because it had acquired the skills to do so.  Expenditure for USAF consisted of community access centres’ maintenance and connectivity fees, as well as capacity building costs, cyberlab maintenance and connectivity fees for schools, and subsidisation of licenses. 

Mr James Theledi, CEO, USAASA,  presented the medium-term outlook.  He stated that it was planned to reposition the agency within the broader government programme on ICT’s.  There would be focus on service delivery and the responsibility toward universal service and access.  Mr Theledi said that the management team was focusing on defining universal service and access as this was quite an issue for them.  He informed members that times had changed and a more appropriate definition was needed that took into account data, broadband and costs in the country.  They were in the process of finalizing recommendations to the Minister on what universal service and access encompassed.  This meant defining issues with regard to the needy and the schemes that would have to be implemented, and would involve stakeholder and community participation. 

With regard to strategic objectives, Mr Theledi said that the ECA stipulated clearly what the mandate of the agency was.  He stated that they wanted to become the champions of universal service and access; they wanted to reach all South Africans who were not part of the strategic network of the country. 

Mr Theledi addressed the issue of funds.  He informed members that they were having discussions with stakeholders and the National Treasury in order to unlock funds to improve the agency as well as the industry.  Participation of the industry will allow USAASA to see what their contributions had done. 

According to Mr Theledi, a key area of the agency was research, as they needed to provide the country with recommendations on definitions and schemes that were undertaken with regard to universal service and access.  They also started working on how to evaluate and monitor universal service and access in the country so that they were able to set targets as to where they would have to be in the future. 

The agency would have to be able to assess itself in order to know whether it would be able to execute the mandate. Mr Theledi stated that there were issues around shortage of skills and their ability to retain skilled management.  They wanted to attract people from the industry, both regulators and people with policy experience. 

Mr Theledi informed the Committee that there were challenges around the image of the agency.  The name itself was an issue.  They also needed to focus on the brand development and were already in consultation reviewing the brand. 

The Agency also looked to improve their financial mandate by focusing on supply chain management, risk management and accounting for all assets. 

Discussion
Mr K Khumalo (ANC) commented that there was a certain amount of money used by a senior manager that was not recovered by USAASA.  He wanted to know why this was. 

Mr Khumalo also referred to the key performance targets, wanting to know why most of them had not been met.  He addressed capacity issues and wanted to know what USAASA needed for assistance. 

Mr Khumalo said that he had visited Limpopo and noticed that all the Telecentres operated differently.  He was curious as to what standards of measurement applied and why the problem existed. 

Mr Khumalo also commented that USAASA seemed to work in African communities and neglected Coloured, Indian and White communities.  He stated that being too particular had led to neglect. 

Mr R Pieterse (ANC) agreed with Mr Khumalo, saying that they needed a template on which to measure the performance of a Telecentre. 

Mr Pieterse also commented that USAASA needed support as they had been plagued by a huge exodus of skills which could have contributed to funding issues.  Mr Pieterse warned, however, that they would have to work to get funding.  He also said that they would have to make USAASA the preferred employer. 

Ms L Yengeni (ANC) addressed the issue of the lack of business plan, which resulted in funding that was not used appropriately.  She wanted to know if their new plan was a working one and in which way it was different from the previous plan. 

Ms Yengeni wanted to know how weaknesses would be identified and what method they would use so that they problems would not reoccur. 

Mr S Nxumalo (ANC) stated that he had questions concerning the cyberlabs.  He wanted to know how they worked.  He said that he knew that they provided computers to schools and that the community was able to utilise them in order to learn computer skills.  However, the computers were not being used as there were no qualified teachers present at the labs to instruct the community. 

Mr Nxumalo enquired if the USALs project was working and what could be done to improve it. 

Ms Gabriel said that most of the questions were operational and therefore senior management would answer them.  She addressed the issue of the relocation allowance, saying that the senior manager had been dismissed for financial mismanagement and that the USAASA Board had been advised by their legal advisors not to pursue the case as the money had been signed off by both the CEO and COO.  The legal costs were already very high and had exceeded the amount of money that had been taken by the senior manager.  Ms Gabriel informed members that the board had then made the decision to write the debt off. 

Mr Theledi responded to issues regarding targets that had not been achieved.  He said that they had tried to provide explanations as to why there had been some shortcomings,  but there were a number of issues at hand.  Mr Theledi referred to problems with USALs, saying that they could not provide them with funding because of licensing issues.  USAASA would rely on ICASA to license more USALs and would look at the availability of funding from the Treasury so that they could give funding to new USALs.  Mr Theledi said that the report focused on the challenges that USAASA were facing with regard to management, instability and leadership but that they had experienced achievements in service delivery in telecentres and cyberlabs. 

Mr Theledi, in response to Ms Yengeni’s query as to whether the new plan would work, explained that in previous years the Agency had not been a permanent fixture and that it had resulted in a sense of instability.  He added that with the new ECA they had now received clarity on the permanency of the agency.  Mr Theledi also said that they now had a new and skilled management team and performance agreements to enable them to monitor performance.  This would allow USAASA to implement the strategy and improve on access gaps within the country.  He stated that USAASA had consulted stakeholders and were confident that the new plan would work.  Mr Theledi also informed members that there was a policy plan from the government that focused on universal service and access.  He then added that USAASA’s focus would be on implementing the plan so that there would be greater service delivery and that more monitoring and evaluations would take place. 

Mr Theledi stated, in regard to USALs, that there were challenges and success stories.  Mr Theledi said that they were rolling out more USALs and that USAASA would provide a detailed report on each of them. 

Mr Winile Lamani, Head: Project Services, USAASA, responded to questions concerning telecentres.  He stated that they had looked at international models and had implemented an entrepreneurship model.  An entrepreneur would apply for the centre and an agent would set it up.  Mr Lamani said that a second approach used a non-profit organization, where a group of people in the community would come together and run a Telecentre.  This resulted in differences in telecentres.  He said that the telecentres that were run by entrepreneurs were more successful and that those run by communities seemed to encounter operational issues.  Mr Lamani warned that USAASA however had identified a weakness with regard to some telecentres run by entrepreneurs.  He stated that the agency had not previously had contracts with entrepreneurs that enabled USAASA to ask how the entrepreneurs would reinvest money back in to the community.

Mr Lamani discussed the design of telecentres.  He stated that ideally the demands of the community would have indicated what that telecentre needed.  Previously USAASA had used a standard model but soon realised that different communities had different needs.  They now focused on strengthening awareness, because the more aware a community was, the easier it was to know what the community really needed. 

Mr Lamani addressed the cyberlab issue.  He stated that previously they had set up labs in schools without a strong partnership with the Department of Education (DoE).  The problem was that the teachers were too scared to use the computers themselves and therefore could not teach the learners how to use them.  Mr Lamani said that USAASA could train the teachers how to use the computers but that the newly acquired skill could result in the teacher then requiring a commensurate increase in salary, or leaving because of the additional qualification, to seek work elsewhere. USAASA could provide the computers and other equipment but it was the DoE’s responsibility to ensure maintenance and ensure that proper personnel was employed to teach learners how to use it. 

Ms Yengeni expressed concern with regard to implementing cyberlabs in schools.  She said that she was worried about shifting responsibility to the DoE as nobody wanted to take responsibility. 

Mr Khumalo wanted to know what the Telecentres contained. 

The Chairperson commented on the name of the organisation.  He sated that it was not recognisable to people and that it did not say anything about what the agency really was. 

Ms Gabriel commented that she did not like the name either and said that they could address the issue when the ECA was considered again the following year. 

The Chairperson wondered whether there should perhaps be consideration given to merging the Media Development and Diversity Agency (MDDA) and USAASA in the future. 

Ms Gabriel thanked the Chairperson for the idea of an advisory committee.  She said that they had discussed it and they were keen to implement it because it was important to account for contributions made by stakeholders especially as to how the money was being spent. 

On the idea of merging with the MDDA, Ms Gabriel commented that it was her opinion that it was not good to have separate organisations doing different things in a converged environment, but that separation of powers and responsibilities could sometimes create a more effective output.  This could then result in more efficiency.  Ms Gabriel warned that tampering with MDDA could cause problems. 

Ms Smuts commented that the MDDA and USAASA had to be separated entities. 

Ms D Smuts (DA) commented that the new USAASA instilled confidence but that they would have to spend more money on branding. 

The Chairperson then focused on the entrepreneurship model wanting to know if they should be moving in that direction as it seemed to be successful. 

The Chairperson wanted to know if USAASA had a funding committee who looked specifically at funding contributions, allocation and expenditure. 

Mr Pieterse commented that figures needed to be put in place. 

Mr Kholwane also wanted to know what USALs needed to survive. He further enquired how USAASA wanted Parliament to help with accessing USAF funds. 

Ms Gabriel discussed definitions.  She stated that the definition of universal service and access fund would have to include mobile issues as well as broadband.  She added that USAASA would have to focus on usage and uptake, as well as cost and affordability, which were major problems for the country.  Ms Gabriel said that people still did not have access because it was too expensive.  Another issue was that people did not know how to use new technology. 

Ms Gabriel the commented on the fund relocation issue.  She stated that the issue was finalised after the Auditor-General completed the report on the matter. 

Mr Theledi looked at the management of funds.  He stated that the agency would focus on having more transparency around the funds and that it would include having an advisory committee as well as clear instructions as to how funding would be accessed. 

Mr Theledi also focused on the issue of the entrepreneurship model.  He said that USAASA did not want to give computers and then not be involved in the implementation process.  They wanted to ensure integration with the community, and accountability as well as sustainability.  Mr Theledi said that this required governing structures, sustainability plans and integration at the local level.  He warned that they USAASA need to ensure that entrepreneurship did not take from the community without allowing for the community to benefit first. 

Mr Theledi also warned that USAASA would needed to deal with under-serviced areas in the country.  He stated that they could use USALs to help with the problem but said that they faced challenges in that they found established operators working against USALs.  Mr Theledi explained that there were issues concerning inter-connection.  They needed to promote a situation where they would find people who could work with USALs and promote access in under-serviced areas. 

Ms Gabriel commented that there was a major issue with funding as they had problems accessing money for USAASA as well as USAF.  She said another challenge was the inability to spend the funds once received, because they did not have operational funds.  Ms Gabriel asked the Committee if it would consider allowing the USAF to pay for its own project management when the ECA was discussed again.  She suggested that a certain percentage be allocated for operational funds.  Ms Gabriel stated that the amendment would help to alleviate operational problems. 

According to Ms Gabriel, they had also asked for emergency funding from the Treasury but had not received anything.  They now needed to deal with why funding was not flowing in to the organisation. 

Mr M Kholwane (ANC) commented on the amount of money that was written off.  He wanted to know whether it had been written off before or after the report was prepared. 

Mr Kholwane then noted that it was a requirement that disciplinary matters were reported but that the matter was not discussed in the report.  He wanted to know why that was the case and whether there were any other disciplinary matters. 

Ms Gabriel said that USAASA would report on the disciplinary matters when they were resolved.  USAASA could not talk about the issues while they were still ongoing as it would infringe on certain rights. 

National Electronic Media Institute (NEMISA) Annual Report Briefing
Mr Peter de Klerk (CEO) informed members that the management team had focused on preparation for repositioning of NEMISA during the financial year.  A new mandate meant that they would have to become an advanced industry-led multimedia skills developer and content generator.  NEMISA, due to the change in mandate, then redefined their target market, study programme and student source and were forced to build capacity in order to deal with the new situation.  The challenge was building capacity without having received any funding. 

NEMISA thus also had to develop a completely new programme.  According to Mr de Klerk, the aim was to establish a new NEMISA that offered a fully integrated study programme that addressed the need of a fast growing and ever-changing ICT sector.  The new study programme would include radio production, television production, animation, graphic design in multimedia, broadcasting engineering and telecommunications. 

Mr de Klerk informed members that new curricula had been developed as part of course development.  New teaching material and learning material was needed as well as the redevelopment of the resource centre.  New trainers were employed and technology was upgraded.  They also focused on establishing accreditation procedures and recognition of courses. 

Mr de Klerk informed members that NEMISA had received an unqualified report from the Auditor-General. 

Mr Vuyo Makaya, Chief Operational Officer, NEMISA, informed members that NEMISA was re-launched with a new mandate, a new strategy and a range of new courses.  In terms of the management of training and development, NEMISA had to develop a study programme; particularly the curriculum, and they developed teaching and learning materials. 

Mr Makaya stated that NEMISA had developed both the industry and curriculum advisory body.  The industry advisory body would help the institution with marketing and directions to be taken with regard to training and development.  The curriculum advisory body would look at the relevance of curricula, and whether the curricula would meet the needs of the industry. 

NEMISA also conducted training programmes targeting people with disabilities, to provide them with usable skills. NEMISA was also training SABC staff on the fundamentals of High Definition Television. 

In terms of accreditation, a number of documents had to be put together.  This included the curriculum that had to be developed, the employment of fulltime staff and the development of quality monitoring systems.  Processes and systems were developed for quality assurance. 

Mr Makaya addressed capacity building.  He said that senior managers were appointed to strengthen the team so implementation of the strategy was supported.  NEMISA had also acquired more equipment to support both new and existing programmes that had been put in place. 

Ms Karen de Wet, Chief Financial Officer, NEMISA, discussed the financial performance.  She confirmed that NEMISA had received an unqualified report but that two issues had been raised.  The issues related to exercises that were not carried out with regard to fixed assets as well as a problem regarding intangible assets.  Ms de Wet told members that NEMISA had undertaken to correct the issues for the next financial year. 

A review was given which looked at the Statement of Financial Performance and the Statement of Changes to Net Assets.  Ms de Wet informed the Committee that the organisation had experienced a net deficit and explained that the figure was influenced by prior year corrections that stemmed mainly from errors or adjustments that were required in terms of the lease agreement. 

Discussion
Mr Pieterse commented that NEMISA should not be celebrating achieving an unqualified report as that was what they were meant to do anyway. 

Mr Pieterse stated that the courses that they offered were interesting and wondered whether NEMISA would make them available to members of Parliament.  This could allow them to circulate it amongst their constituencies.

The Chairperson reminded the Committee that NEMISA was a teaching and learning institution.  He wanted to know what NEMISA’s strategy was for students.  The Chairperson noted that the students were subsidised to a great extent and wanted to know what the returns were to the institution and how the public benefited from it since public funds were being utilised. 

The Chairperson was also interested in the racial profile and how the organisation could be expanded. 

Mr Nxumalo wanted to know the number of students that had graduated.  He was also curious as to why some funding was not spent.

Mr Kholwane discussed issues of disciplinary matters within the institution.  He wanted an explanation on the deficit, and wanted also to know about the disputed payment in the report.

Ms de Wet responded on the unspent conditional project funds, and stated that the funds were money received for projects that were ongoing.  She also responded to the question on the net deficit.  Ms de Wet informed members that it was a reflection of the entire years’ adjustments that had come through from previous years.

Mr de Klerk said that NEMISA had challenges with their image but that they were using their marketing budget to remedy the problem. They were also using print media and community radio to reach outlying areas.  Mr de Klerk stated that they were improving.  He discussed their demographic profiling, saying that NEMISA now had representation in every single province in the country. 

Mr de Klerk reminded members that the reason that NEMISA had came about was in order to cater for the underprivileged in rural areas, specifically young black women.  The idea was to bring them in to the broadcasting industry and give them opportunities.  They therefore had to be fully subsidised.  However, the new NEMISA had a broader mandate and the profile had changed.  NEMISA now had paying students as well as subsidised students.  Subsidisation occurred in the form of bursaries and the supply of accommodation.  They would also offer research programs and internships to students when they became qualified. Mr de Klerk, added that because the new mandate was so broad, NEMISA would have to generate their own revenue and not just rely on government funding

Mr de Klerk informed members that students had not graduated yet but that they would know the results at the year end.  He also told the Committee that the racial profile mirrored the national profile. 

Mr de Klerk added that NEMISA was growing exponentially.  According to the new mandate, they were a training institution but they also had other responsibilities such as becoming the government’s content development agency.  New skills were needed every day and thus the mandate grew every day.  Mr de Klerk warned that they could only generate funding at a certain pace and therefore needed to invest for growth ahead of time. 

The Chairperson asked NEMISA to elaborate on the free bursary.  The Chairperson said that there were thousands of students who needed funding, but that NEMISA students were getting full bursaries with accommodation.  He wanted to know how they decided who received bursaries and whether the state benefited in return. 

The Chairperson also wanted to know the extent to which they were servicing the private sector and if they should be focused on training courses and skills development. 

Mr de Klerk said that there were many discussions being held about whether NEMISA should be privatised or not.  He stated however that state intervention would be needed to cater for new skills that were needed every day. 

Mr Pieterse stated that the programme was plagued by a skill shortage.  He wanted to know if students were placed in a work environment after they qualified or if they were left on their own. 

Mr Pieterse wanted to know how NEMISA could benefit from a fully funded student, particularly if they had a placement programme.  He warned that there was not a general perception of the benefit of the training coming through and that NEMISA needed to increase the pace of delivery. 

Mr de Klerk responded to Mr Pieterse’s comments.  He said that NEMISA could not be an employment agency, but that they could provide an environment where students could be recruited by potential employers.  NEMISA  had built training programmes and internships into the learner program.  He stated that students were already being offered jobs and that some students were already doing work during the vacation.  NEMISA would keep members informed as to their development. 

Ms Yengeni questioned the racial category slide.  She expressed confusion as to how the calculations worked and asked the CFO to explain. 

Ms de Wet informed the Committee that there were errors on the slide but that the graph was correct.  She told members that NEMISA would circulate an adjusted version. 

The Chairperson suggested that the Committee needed to have discussions concerning the route being taken and where NEMISA was going.  He noted that there was a critical shortage of skills and that it affected training.  He also noted that the lack of coordination was a government issue.  They would have to look at different options such as privatisation, refocusing their objectives or keeping NEMISA as it was. 

The meeting was adjourned.