ATC110526: Report on Budget Vote 27: (Department of Communications) & its Entities

Communications and Digital Technologies

REPORT OF THE PORTFOLIO COMMITTEE ON COMMUNICATIONS ON ITS DELIBERATIONS ON THE BUDGET VOTE 27: (DEPARTMENT OF COMMUNICATIONS) AND ITS ENTITIES, DATED 26 MAY 2011

 

The Portfolio Committee on Communications, having considered the strategic plans of the Department of Communications and its public entities, reports as follows:

 

1.  Introduction

 

Section 55(2) of the Constitution of the Republic of South Africa (Act 108 of 1996), states that the National Assembly must provide for mechanisms (a) to ensure that all executive organs of state in the national sphere of government are accountable to it; and (b) to maintain oversight of (i) the exercise of national executive authority including the implementation of legislation; and (ii) any organ of state.

 

The Portfolio Committee on Communications considered the Budget of the Department of Communications on 9 March 2011, 15 April 2011 and 20 and 24 May 2011.  The purpose of these meetings was to outline the department’s budget for the 2011/12 financial year and its strategic plan for 2011–2013.

 

The strategic plans of the department and its entities must take into account the following six key areas:

·         Define concepts

·         Market analysis

·         Workforce

·         Risk and Opportunities

·         Investment and Innovation

·         Monitoring and Evaluation.

 

In performing its constitutional mandate, the Committee scrutinised the alignment of strategic plans of the Department of Communications and its entities with the following key government objectives:

·         2011 state-of-nation address

·         Budget statement

·         Government’s five priorities

·         Twelve deliverable government outcomes

·         New Growth Path

·         The Minister’s signed performance agreement with the President.

 

The Committee also took note that most of the policies within the sector are due to be reviewed.

 

2.  Department of Communications (DoC) - R1 889 112 000.00

 

The 2011-2014 Strategic Plan was prepared in terms of the statutory requirements as defined in Chapter 5 of the Public Finance Management Act (No. 1 of 1999) and Chapter 1, Part III b of the new Public Services Regulations of 2001.  The Medium Term Strategy comprises eight Strategic Goals supported by seventeen Strategic Objectives, which are to be realised through the achievement of numerous three-year targets.  It is fully aligned to the relevant Government Outcomes.

 

Expenditure increased at a marginal rate from R1.9 billion in 2007/08 to R2.1 billion in 2010/11, at an average annual rate of 3,8 per cent. This was due to the following additional allocations: R500 million in 2007/08 to Sentech for the national wholesale broadband network; R600 million in 2008/09, R450 million 2009/10 and R150 million to Telkom for the implementation of the ICT access network; R200 million in 2008/09 and R100 million in 2009/10 to Sentech to fund the satellite backup for the 2010 FIFA World Cup; and R100 million in 2009/10 and R110 million in 2010/11 to Sentech to cover the costs associated with the envisaged increased operational expenditure during the dual illumination period.

 

Over the medium term, expenditure is expected to decrease marginally at an average annual rate of 4.7 per cent, from R2.1 billion in 2010/11 to R1.8 billion in 2013/14, as the implementation of 2010 FIFA World Cup infrastructure and other initiatives come to completion. In 2010/11, a final allocation of R150 million is made to Telkom for the 2010 FIFA World Cup.  In 2011/12, R25 million is allocated to the Universal Service and Access Agency of South Africa, and Universal Service and Access Fund to: build capacity and procure necessary supporting infrastructure to expand ICT access to South Africans in the under-serviced areas; and also allocated R180 million in 2010/11 and R220 million in 2011/12 to subsidies poor households with purchasing of the set-top-boxes as part of the migration from an analogue to a digital broadcasting platform.  The baseline efficiency savings made by the Department of R314.7 million in 2011/12 and R479 million in 2012/13, mostly caused by reductions in the South African Post Office subsidy allocations, also contribute to the decrease in expenditure over the medium term.

The Expenditure in the ICT Enterprise Development programme is expected to decrease over the medium term, from R2 billion to R1.1 billion, at an average annual rate of 17.9 per cent due to final allocations to Sentech and Telkom in 2010/11.  The decrease in transfers and subsidies over the medium term, from R2.1 billion to R1.1 billion, is due to discontinuation of South African Broadcasting Corporation: Technology as a programme under SABC Public Broadcaster and the reduction of the subsidy to the South African Post Office.

 

Expenditure in compensation of employees increased from R97.7 million in 2007/08 to R164.6 million in 2010/11, at an average annual rate of 19 per cent.  This substantial growth is the result of an increase in the number of staff, from 286 in 2007/08 to 428 in 2010/11, and due to inflation related salary adjustments.  As at September 2010, the vacancy rate of the Department was 29.07 per cent. This represented 125 positions that have not been filled resulting from the organizational review.  Over the MTEF period, spending is expected to increase R171.7 million to R188 million, at an average annual rate of 4.5 per cent due to inflation related adjustments.

 

The Department is composed of 428 staff members excluding the Minister and the Deputy Minister, of which 343 positions are funded and 87 are unfunded. Over the 428 staff members, 312 positions were filled as at 30 September 2010.

 

Revenue for the Department is mainly derived from dividends as a result of its shareholding interest in Telkom and Vodacom, and from administration fees. Administration fees comprise of all fees collected by the Independent Communications Authority of South Africa from telecommunications operators and the South African Post Office licence fees, which are paid directly into the National Revenue Fund.

 

Total receipts increased from R4 billion in 2007/08 to R5.8 billion in 2009/10 due to the R3.9 billion from extra-ordinary proceeds received from Telkom for the sale of Vodacom shares. Total receipts then decreased to R899.3 million in 2010/11. The medium term receipts are expected to stabilize at R913.4 million in 2011/12, R928 million in 2012/13 and R943.4 million in 2013/14.

 

3.  Departmental Budget 2010/2011

The Department of Communications budget is structured into the following six programmes

 

3.1 Programme 1: Governance and Administration – R148 505 000.00

 

The purpose of this programme is to provide strategic support to the Ministry and overall management of the Department.

 

The Committee noted the high vacancy rate at managerial level and that the department is in the process of finalising its organogram and filling of the vacant posts.

 

 

 

 

 

 

 

3.2 Programme 2: ICT International Affairs and Trade – R 40 890 000.00

 

The purpose of this programme is to ensure alignment between South Africa’s international activities and agreements in the field of ICTs with South Africa’s foreign policy.

 

3.3 Programme 3: ICT Policy Development – R 94 699 000.00

 

The purpose of this programme is to develop ICT policies, legislation and strategies that support the development of an ICT sector, which creates conditions for the accelerated and shared growth of the economy and to develop strategies that increase the uptake and usage of ICTs by the majority of the South African population, thus bridging the digital divide.

 

3.4 Programme 4: Finance and ICT Enterprise Development – R1 289 416 000.00

 

The purpose of this programme is to oversee and manage government’s      shareholding interest in public entities and to facilitate growth and development of Small, Micro and Medium Enterprises (SMMEs) in the ICT sector.

 

The Committee noted that there is no integration of strategic plan between the department and its entities and that resulted in the duplication of roles and functions

 

3.5 Programme 5:  ICT Infrastructure Development – R280 911 000.00

 

The purpose of this programme is to promote investment in robust, reliable, secure and affordable ICT infrastructure that supports the provision of a multiplicity of applications and services.

 

The Institute of Satellite and Software Applications (ISSA) is a directorate in the department and not a stand alone entity.  It has two aspects into it – a space technology and software applications development.  The Committee has noted the ongoing discussion between the Department of Science and Technology (DST) and the DoC on whether ISSA’s space component cannot be moved to DST.  If agreed, DoC will incorporate the software applications unit into Maraka eSkills Institute.

 

3.6 Programme 6:  Presidential National Commission (PNC) – R34 691 000.00

 

The purpose of this programme is to facilitate the development of an all inclusive information society by promoting the uptake and usage of ICTs for improved socio-economic development and research.

 

The name of the PNC will change in the next financial year to Information Society Programme (ISP).  The Presidency has been consulted regarding the dissolution of the PNC.  In the past few years, it has functioned as a unit of the department absorbed with its own budget. 

 

The Committee recommends that the budget allocation of the Department of Communications be approved.

 

4. Entities of the Department of Communications

 

For the financial year under review, the Department has the following entities and agencies reporting to the Minister of Communications and the ICT regulatory authority:

 

4.1 South African Post Office (SAPO) - R180 442 000.00

 

The South African Post Office has been granted the mandate to conduct postal and financial services in South Africa through the Postal Act and the Postal Services Act 1998. This Act provides for the regulation of postal services and the operational functions of the company, including its Universal Services Obligations. The SA Post Office complies with the legislation governing State Owned Enterprise’s (SOE) and is guided by various postal, courier and financial regulations laid down by the regulatory bodies such as ICASA and the Financial Services Board.

 

The strategic overview of the SAPO includes success factors such as the review of the SAPO government structure, the implementation of the new Companies Act, compliance with the King III code, the implementation of the Postbank Act, the development of an appropriate labour model, succession planning, change management, performance management, employee development, employee wellness and improved labour relations. Major projects include a review of the SAPO business and operating model, strengthening the information technology platform, the diversification of source of revenue, strengthening the procurement processes, developing a funding plan for the SAPO group and synergies and consolidation of the various business units.

 

SAPO has the following strategic programmes:

 

·         Develop customer intelligence

·         Organisational re-alignment around customer

·         Customer experience improvement

·         Solution development per customer segment

·         Profitability and rationalisation

·         Product and solution development per segment

·         Product and solution delivery per profitable and preferred channel

·         Measuring risk and profitability per segment and channel

 

The Committee noted the concern raised by SAPO about the government subsidy that will be phased out on the financial year 2013/14. SAPO will face difficulties in complying with their obligation to rollout universal services and in building more infrastructure. 

 

The Committee urges DoC and SAPO to further engage on the issue of the government subsidy.

 

The Committee also noted that the 1998 White Paper has not been reviewed.

The Committee was satisfied with SAPO’s pro-active planning of diversifying the various business units and that there was sound strategic leadership.

 

The Committee recommends that the budget allocation of SAPO be approved.

 

4.2 Sentech - R 279 000 000.00

 

Sentech is a schedule 3b State Owned Enterprise (SOE) operating in the broadcasting signal distribution and telecommunications sector. In terms of the Electronic Communications Act 36 of 2005, the main objective of Sentech is to provide electronic communications services and electronic communications network services in accordance with the Electronic Communications Act.

 

As a State Owned enabler in the ICT sector, Sentech’s Medium Term Expenditure Framework (MTEF) strategy for 2011/12 is informed and driven by the DoC’s Strategic objectives as adopted by Cabinet as key imperatives for the current MTEF period. Sentech’s strategic plan is aligned with the 2011 State of the Nation Address (Government priorities), the New Growth Path, the Medium Term Expenditure Framework Budget allocation and the Department of Communications Strategic Plan.

 

Sentech’s strategy for the MTEF period focused on consolidating the broadcasting signal distribution products and services, termination of unsustainable services, implementing the National Wireless Broadband Network (NWBN) strategy, preparing for the launch of commercial Digital Terrestrial Television and evaluating business models for new managed network services. These pillars present the organisational turnaround strategy that would ensure long term sustainability. In order to deliver on its strategy, Sentech would invest in resources and expertise to develop a deeper understanding of its current and future customer needs.

 

The rollout of the Digital Terrestrial Television network is one single project that Sentech would focus on over the next three years. With effect from 1 April 2011, Sentech would implement a new management approach to DTT based on the project status, network rollout, funding and accounting and reporting. As per the Broadcasting Digital Migration Policy, the policy make mention of both terrestrial as well as satellite standard for the migration from analogue to digital and all citizens currently receiving analogue terrestrial services must still receive television services after the switch-off of analogue.

 

Sentech has the following four key strategic objectives:

 

·         Stabilising the organisation

·         Sustain profitability

·         Customer satisfaction and retention

·         Network performance

 

The Sentech strategy for ensuring sustainability of the proposed National Wireless Broadband Network (NWBN) is based on building a strong foundation for creating Universal Access to Broadband services, spearheaded by government intervention where market forces were or may be reluctant to invest in building these networks. The projected growth figures for the NWBN are primarily driven by the e-Learning and e-Health services that require connectivity for schools and clinics respectively. According to Sentech about 27 578 schools are not connected in the country due to financial challenges.

 

The Committee recommends that the budget allocation for Sentech be approved.

 

4.3 Universal Service and Access Agency of South Africa (USAASA) - R58 168 000.00

 

The Universal Service and Access Agency of South Africa (USAASA) was established under the Electronic Communications Act No. 36 of 2005. The role of the agency is to promote the goals of universal access and universal service in the under serviced areas of South Africa.

 

USAASA has the following strategic objectives:

 

·         Provide universal service and access strategy, policy and leadership

·         Facilitate interventions in ensuring affordable and equitable access and usage

·         Monitor and evaluate effective use and social appropriation

·         Efficient and effective management of the Universal Service and Access Fund

·         Achieve project based organisational excellence

·         Facilitate multi sectoral networks towards improving the public profile of the universal access and service

 

The Committee notes USAASA’s commitment to achieve Universal Access by 2020.

 

The Committee recommends that the budget allocation for USAASA be approved.

 

The Committee noted the transfer of R260 930 000.00 from the Universal Service Access Fund (USAF) to USAASA allocated as follows:

 

·         Programme 1: Handover of existing access centres – R 7 913 000.00

·         Programme 2: Rapid deployment of access centres – R 19 800 000.00

·         Programme 3: Broadband infrastructure in Under-Serviced Areas – R 9 000 000.00

·         Programme 4: Broadcasting digital migration (subsidisation of set-top-boxes) – R220 000 000.00

The Committee noted that there has been no fund allocated to address specific needs for people living with disabilities.

 

4.4 South African Broadcasting Corporation (SABC) - R 126 137 000.00

 

The South African Broadcasting Corporation was established in terms of the Broadcasting Act (1936) as a government enterprise to provide radio and television broadcasting services to South Africa.  As provided for in the Broadcasting Amendment Act (2002), from October 2004 the SABC has been incorporated into a limited liability company with two operational divisions: public broadcasting services and commercial broadcasting services.

 

The SABC has the following strategic objectives:

 

·         Putting broadcasting and broadcasters back in the forefront of what the organisation is about and editorial integrity back into the platforms and programmes of the SABC in particular News

·         Build brands that reflect excellence and the South African identity in every way

·         Building the digital SABC and integrating the digital future into all plans and actions

·         Having an operating model that is simple and easily understood supported by an organisational design that assigns accountability directly to those charged with execution of the Enterprise plans and good governance

·         Building an organisation that is economical, efficient and effective

·         Focusing on the performance of the Enterprise at every level and holding individuals accountable for delivery

·         Managing and reporting on strategy development and implementation, operational performance and risk management

 

The Committee has noted that SABC is in the process of finalising its proposed structure.  The Board is meeting on 06 June 2011 to approve the structure.

 

The issue of the repayment of the government guarantee, funded through Nedbank was deferred to a separate discussion between the Committee, National Treasury, SABC and the Department.

 

The Committee commended SABC for a job well done on its election coverage in particular to the provision of the sign language interpreters and subtitles. The SABC must continue to provide such services post-elections.

 

The Committee further notes the stability within the Board and the Executive and the progress made in the development of the turnaround strategy.

 

The Committee noted that SABC intends to rollout 300 low power transmitters in the next three years to improve its footprint for coverage.

 

The Committee recommends that the budget allocation for SABC be approved.

 

4.5 National Electronic Media Institute of South Africa - R 33 473 000.00

 

NEMISA was established as a non-profit organization in terms of the Companies Act (1973). It provides much needed skills training at an advanced level for the broadcasting industry. It is accredited by the Council for Higher Education and offers diploma courses, short courses and internships in three subjects: TV production, radio production and creative multimedia.

 

NEMISA has the following strategic focus areas:

·         To transform NEMISA into a technology, Research and Development driven organisation

·         To enhance financial viability and institutional sustainability

·         To improve the organisational efficiency, security and effectiveness

·         To improve and align stakeholder and strategic partner relations both internally and externally

·         Expanded the accessibility and reach of the NEMISA product offerings

 

The Committee notes that NEMISA is in the process of reviewing its mandate and its operational requirements.

 

The Committee recommends that the budget allocation for NEMISA be approved.

 

4.6 Independent Communications Authority of South Africa (ICASA) - R 313 378 000.00

 

ICASA is responsible for regulating the telecommunications and broadcasting sectors in the public interest so as to ensure affordable services of a high quality for all South Africans. In addition to developing regulations, ICASA also issues licenses to telecommunications and broadcasting service providers; enforces compliance with rules and regulations; protects consumers from unfair business practices and poor quality services; hears and decides on disputes and complaints brought against licensees; and manage the effective use of radio frequency spectrum.

 

ICASA presented the following strategic focus areas:

 

·         Ensure effective participation by HDIs in the industry

·         Ensure the provision of broadband services

·         Optimise the use of the radio frequency spectrum to support the widest variety of services

·         Promote the protection of consumers and accessibility for persons with disabilities

·         Promote the development of public, community and commercial broadcasting services in the context of digital migration

·         Ensure compliance with legislation and regulation

·         Strengthen and modernise ICASA

·         Promote competition

 

The Committee requested that ICASA reprioritise its strategic focus areas in line with the allocated budget.

 

ICASA presented the following reprioritised strategic focus areas:

 

·         Local loop unbundling

·         Broadband

·         Spectrum monitoring and assignment equipment and related software

·         A review of the existing regulatory framework for broadcasting services to support the introduction of digital terrestrial television

·         Universal Service

·         Auctioning of Spectrum

·         System Automation – online application data.

 

The Committee notes and appreciate ICASA’s effort of holding a Summit with people living with disabilities on 15 and 16 March 2011 at Birchwood Hotel, Boksburg.  The Committee requested ICASA to keep it informed about the implementation of the resolutions that were made in the Summit.

 

The Committee has noted that ICASA headquarters will still be based in Sandton until its lease expires in October.  It is of the view that after the lease has expired, ICASA must move to a place that will also be accessible to the general public.

 

The Committee recommends that the budget allocation for ICASA be approved.

 

4.7 .za Name Domain

 

The Committee considered the allocated budget for .za Name Domain although it could not appear before the Committee to make presentation.

 

The Committee recommends that the budget allocation for .za Domain be approved.

 

5.  Recommendations

 

The Committee, having considered and examined the Business Plans (Budgets and Strategic Plans) of the Department of Communications and the entities accountable to it, recommends that:

• the department must conduct an audit on the implementation of the 1998 White Paper  with a view for its review if necessary
• USAASA and DoC must engage National Treasury on the funding of the smart phones and television access devices for people with disabilities
• DoC, Sentech and other stakeholders must engage National Treasury on the funding for school connectivity and also exploit the possibility of using Universal Service Access Fund (USAF) for this purpose
• DoC must engage all its entities to streamline their strategic plans to avoid duplication
• the budget allocation of the Department of Communications and the entities accountable to it be approved.

 

Report to be considered.