Report: Deliberations on Budget Vote 27, dated 4 May 2012

REPORT OF THE PORTFOLIO COMMITTEE ON COMMUNICATIONS ON ITS DELIBERATIONS ON BUDGET VOTE 27: DEPARTMENT OF COMMUNICATIONS, AND ITS ENTITIES, DATED 4 MAY 2012

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. In terms of the Public Finance Management Act, 1999, the Accounting Officers must provide Parliament or the relevant legislature with their respective institution’s medium-term strategic plan and where applicable with its annual performance.

The Money Bills Amendment Procedure and Related Matters Act was promulgated in 2009, by which it vests powers to Parliament to reject or recommend budgets of departments, it also makes provision for the implementation of recommendations emanating from the committees oversight.

The Minister of Communications tabled the Medium Term Strategic Plan of the Department of Communications (the Department) and its entities on 7 March 2012. The Committee held briefings with the Department on 13 March and 24 April 2012.

In performing its constitutional mandate, the Committee scrutinised the alignment of Strategic Plans (2012-2017) of the Department and its entities with the following key government objectives, (i) 2012 State of the Nation Address; (ii) budget statement; (iii) government’s five priorities (health, education, employment, rural development, fighting crime and corruption); (iv) National Growth Path and some recommendations made in the Draft National Development Plan.

In doing so, the Committee would ultimately ensure the writing of the new story of South Africa , “…the story of how, working together, we drove back unemployment and reduced economic inequality and poverty”, as reiterated by our President Jacob Zuma in his State of the Nation Address.

The above fundamental objective served as government’s underlying programme of action. The Committee wanted to establish whether the funds allocated would help to transform programmes into actual service delivery action plans throughout the country, particularly in rural and underserviced areas, and beyond.

As part of fulfilling its legal and constitutional obligations, oversight visits conducted by the Committee in 2011-2012 to the Eastern Cape , Free State , KwaZulu-Natal , Northern Cape , Western Cape , Limpopo and Mpumalanga formed an important tool to measure service delivery in practice toward requisite budget allocations.

In addition, the public hearings on the state of readiness for digital terrestrial television migration, held in September 2011, assisted the Committee to respond to issues emanating from the above-mentioned oversight visits. However, there have been developments within the processes of DTT and as a result to that, the Committee will therefore conduct second round of public hearings during the course of the year.

The Department has the following s trategic outcome oriented goals:

• Competitiveness and economic growth of the ICT Industry;
• Accessibility, reliability and affordability of secured ICT Infrastructure;
• Building of an inclusive Information Society;
• Performance of DoC and ICT State Owned Entities; and
• Contribution to the Global ICT Agenda.

The Committee still hold a view that the Department should prioritise policy review. To this end, the National Colloquium on ICT Policy held in Johannesburg on 19 and 20 April 2012 was a step in the right direction.

2. Department of Communications ( DoC )

The 2012-2017 Strategic Plan was prepared in terms of the statutory requirements as defined in Chapter 5 of the Public Finance Management Act (Act No. 1 of 1999) and Chapter 1, Part III b, of the new Public Services Regulations of 2001.

The initial Medium Term Strategy consisted of five Strategic Goals supported by 17 Strategic Objectives and 72 targets as presented by the Department. The revised Strategic Plan, after the engagement with the Committee, now consists of five Strategic Goals supported by twelve Strategic Objectives and 34 targets, which are to be realised through the achievement of numerous five year targets. The Strategic Objectives are fully aligned to the relevant Government Outcomes.

Expenditure decreased from R2.3 billion in 2008/9 to R2 billion in 2011/12, at an average annual rate of 4.9 per cent, due to reduced expenditure in the ICT Policy Development and ICT Enterprise Development programmes. Spending in the ICT Policy Development programme declined as a result of the delays in finalising the digital terrestrial television standards and completing the Telkom ICT access network, while spending in the ICT Enterprise Development programme declined as allocations transferred to entities for the development ICT infrastructure for the 2010 FIFA World Cup came to an end.

The ICT Enterprise Development programme is the department’s largest programme and constitutes 65.6 per cent of total expenditure in 2012/13. Expenditure on consultants increased from R53.1 million to R213.3 million, at an average rate of 58.9 per cent. Consultants were used for infrastructure planning and to establish and operate the 112 call centre. Over the medium term, expenditure on consultants is expected to decrease to R117.3 million, at an average annual rate of 18.1 per cent, as the 112 call centre becomes fully capacitated and operational.

Transfers and subsidies decreased from R1.9 billion to R1.4 billion between 2008/9 and 2011/12, at an average rate of 10.1 per cent, as transfers made to Telkom and Sentech for the 2010 FIFA World Cup infrastructure came to an end. Between 2008/9 and 2011/12, transfers of R962.7 million were made to the South African Broadcasting Corporation to implement its infrastructure modernisation programme and IT plan. Over the same period, R1.2 billion was transferred to the South African Post Office to meet universal service obligation. Using these funds, the South African Post Office has rolled out 6.2 million addresses and 17 new post offices to communities across South Africa .

During 2013/14 and 2014/15, expenditure is expected to decrease marginally to R1 942.3 billion and R1 924.0 billion, at an average annual rate of 1.3 per cent. This was mainly due to Cabinet approved baseline cuts of R380.4 million, which impacted on transfers to the South African Post Office, Sentech and the National Media Institute of South Africa. Expenditure cuts have also been effected on consultants, travel and subsistence, and venues and facilities.

Allocations over the MTEF period are made available to fund the department’s priorities and include:

· R3.6 million in 2012/13, R3.9 million in 2013/14 and R4.4 million in 2014/15 for improved conditions of service;

· R141 million in 2014/15 for digital terrestrial television infrastructure;

· R76 million in 2012/13, R62 million in 2014/15 to fund the South African Broadcasting Corporation’s digital library and play out centre; and

· R65 million in 2012/13, R52 million in 2013/14 and R15 million in 2014/15 to fund office equipment and relocation costs for the Independent Communication Authority of South Africa.

An amount of R450 million over the 2011 MTEF period was allocated to the Department to develop a national broadband strategy that would provide guidance to all role players in the ICT sector, develop a broadband policy for all spheres of government including public entities, and deliver the broadband infrastructure and services to under-serviced and rural areas. The allocation was spread as follows: R100 million in 2011/12, R150 million in 2012/13 and R200 million in 2013/14.

Of the R100 million allocated in 2011/12, R10 million was allocated to develop the national broadband strategy, R5 million for the development of the broadband policy for the three spheres of government including public entities, and R85 million for broadband ICT infrastructure. The allocations of R150 million in 2012/13 and R200 million in 2013/14 are for the delivery of broadband infrastructure and services to under – serviced and rural areas. However, the R100 million in 2012/13 had not been used to date and, as a result, the allocations for 2012/13 and 2013/14 have been adjusted to make provision for expenditure. These allocations were adjusted as follows: R100 million in 2012/13; R125 million in 2013/14; and R210 million in 2014/15. In the outer year, R85 million efficiency savings were added to the R125 million.

Over the medium term, expenditure is expected to decrease at an average annual rate of 6.6 per cent, from R2 billion in 2011/12 to R1.9 billion in 2014/15, as the subsidy from the Department to the South African Post Office comes to an end. The baseline efficiency savings made by the Department of R78 million in 2012/13, R182.3 million in 2013/14 and R120.2 million in 2014/15, mostly caused by reductions in the Broadband ICT-universal access allocations, and the South African Post Office subsidy allocations, also contribute to the decrease in expenditure over the medium term.

In terms of goods and services, expenditure decreased from R269.3 million in 2008/09 to R175.6 million in 2010/11 due to the withholding of projects and instability in the Department as well as key internal controls that were put in place resulting in the slow spending. In 2011/12 expenditure increased drastically to R415.5 million due to the additional allocation of R100 million for Broadband ICT-universal access. Over the MTEF the expenditure is expected to increase marginally from R292.6 million to R321.1 million due to the shifting of Broadband allocation to payments of capital assets for the funding of the procurement of infrastructure.

On transfers and subsidies, spending declined from R1.9 billion to R1.1 billion as allocations transferred to entities for the development of ICT infrastructure for the 2010 FIFA World Cup came to an end. In 2011/12, expenditure increased to R1.4 billion as a result of an additional amount of R109.9 million received through the adjustment estimates (rollover). Over the MTEF, expenditure is expected to remain constant at R1.1 billion.

On the payment of capital assets, expenditure decreased from R12.8 million in 2008/09 to R2.4 million in 2010/11 due to the budget cuts as well as the reprioritisation done. Over the MTEF, expenditure is expected to increase drastically from R104.9 million to R210.9 million through procuring broadband infrastructure for underserviced rural areas as part of the broadband ICT universal access initiative.

The Department had an establishment of 434 posts. The number of filled posts increased from 270 in 2008/9 to 305 in 2010/11 due to the organisational restructuring and the lifting of the moratorium on appointments which had been imposed since 2009/10. Over the MTEF period, filled posts are expected to increase to 439, due to the Department’s revised organisational structure as approved by the Department of Public Service and Administration in August 2011.

As at 30 September 2011, the Department’s vacancy rate stood at 29.7 per cent, with 40.4 per cent of these vacancies falling between salary levels 11 and 12. The vacancy rate within senior management service was 33.8 per cent.

3. Departmental Budget 2012/13 – R1 712 339 000

According to National Treasury’s Expenditure Report for 2010/11, the Department only managed to spend 67 per cent of their allocated budget. Furthermore, in the 2011/12 3 ^rd quarter expenditure report, the Department has only managed to spend 46.13 per cent of their budget allocation of R2.2 billion.

The above expenditure trend by the Department remains a source of concern for the Committee. However, it is worth noting that Programme 1: Administration and Programme 2: ICT International Affairs and Trade have each spent above 70 per cent.

The Committee is concerned about the spending trends of the following programmes: Programme 3: ICT Policy Development has spent 44 per cent; Programme 4: ICT Enterprise Development has spent 49 per cent; Programme 5: ICT Infrastructure Development has spent 11.5 per cent; and Programme 6: Presidential National Commission has spent 56 per cent.

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

3.1 Programme 1: Governance and Administration – R152 596 000

The purpose of this programme is to provide strategic support to the Ministry and overall management of the Department. The programme consists of the following five sub-programmes:

· Ministry;

· Departmental Management;

· Internal Audit;

· Corporate Services; and

· Office Accommodation.

The Committee is concerned that not all the funded vacancies have been filled, in particular those at the level of Deputy Directors-General.

3.2 Programme 2: ICT International Affairs and Trade – R38 046 000

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. ICT international Affairs Programme consists of the following sub-programmes:

· International Affairs - coordinates the functions and responsibilities of the department to meet South Africa ’s international ICT obligations through bi-laterals, multi-laterals and tri-laterals; and

· ICT Trade/Partnerships - develops and advances the country’s interests in international trade forums through participation in World Trade Organisation ICT related initiatives and other international trade agreements, such as South African European Union Trade Agreement and bilateral agreements with Counterpart countries . South Africa ’s national interests are also promoted in these forums.

3.3 Programme 3: ICT Policy Development – R88 650 000

The purpose of programme 3 is to develop ICT policies and legislation that support the development of an ICT sector that creates favourable conditions for the accelerated and shared growth of the economy. Develop strategies that increase the uptake and usage of ICT by the majority of the South African population, thus bridging the digital divide. The ICT Policy Development Programme consists of the following sub-programmes:

· ICT Policy Development drafts legislation, regulations, policy and guidelines that govern the broadcasting, telecommunications, postal and IT sectors, thus ensuring broad based economic development within the ICT sector;

· Economic Analysis, Market Modelling and Research is responsible for economic analysis of the broadcasting, telecommunications, postal and IT sectors to determine trends and make growth projections. The sub-programme also undertakes market research to explore areas that require policy intervention;

· ICT Uptake and Usage ensures that the ICT industry adheres to and implements policy and legislation, and undertakes research to determine the extent to which policies are being implemented in the broadcasting, telecommunications, postal and IT sectors;

· Intergovernmental Relations advises, coordinates and facilitates i ntergovernmental relations with all spheres of government in carrying out the departmental mandate .;

· South African Broadcasting Corporation: Community radio stations focuses on extending signal distribution to reach all communities and extending community multimedia services at selected nodal points; and

· South African Broadcasting Corporation: Programme production makes transfers to the South African Broadcasting Corporation and other entities for producing programmes with local content on issues relating to youth, women, children, the disabled, and HIV and AIDS, for commercial and community radio stations.

The Committee noted the amendments on various legislation that will be brought before Parliament but requests that the Minister focuses on the overarching policy review unless there are urgent technical adjustments to the current policy which impede service delivery.

3.4 Programme 4: ICT Enterprise Development – R1 122 855 000

The purpose of programme 4 is to oversee and manage government’s shareholding interest in public entities. Facilitate growth and development of small, medium and micro enterprises ( SMMEs ) in the ICT sector. The ICT Enterprise Development Programme consists of the following sub-programmes:

· Public Entity Oversight provides oversight on state owned enterprises by managing government’s shareholder interests in public enterprises to support the attainment of key national goals and strategic priorities; and

· Small Medium and Micro Enterprise Development facilitates the growth and development of ICT SMMEs .

The Committee noted with concern that most of the Strategic Plans and Budgets submitted before it, in the 2012/13 financial year, did not take into consideration the findings of the (i) oversight visits by the committee, (ii) recommendations from the Budget Review and Recommendations Report (BRRR), and (iii) did not have an Annual Performance Plan broken into quarterly targets. Furthermore, some of the tabled Strategic Plans lacked substantial information hence the Department and some entities had to rescind and re-table.

3.5 Programme 5: ICT Infrastructure Development – R280 240 000

The purpose of programme 5 is to promote investment in robust, reliable, secure and affordable ICT infrastructure that supports the provision of a multiplicity of applications and services. The ICT Infrastructure Development Programme consists of the following sub-programmes:

· Applications and Research is responsible for technology research and analysis, applications and content development, analysing the legal environment to promote infrastructure technologies, and managing the use of the national frequency spectrum;

· Meraka Institute conducts research and develops ICT applications in the national interest. (transfers to the entity ended in 2009/10);

· 112 Emergency Call Centre provides a single national emergency number, from which all emergency calls will be routed to the most suitable local response unit; and

· . za Domain Name Authority is responsible for administering and managing the . za domain name space.

3.6 Programme 6: Presidential National Commission (PNC) – R29 952 000

The purpose of programme 6 is to facilitate the development of an inclusive information society by promoting the uptake and usage of ICT for improved socioeconomic development and research. This programme is currently under review and is likely to change during the 2012 MTEF process. Programme 6 currently consists of the following sub-programmes:

· Planning, Coordination and Evaluation ensures that South Africa has proactive and progressive national plans on information society and development, with sectoral , provincial and local government inputs. This entails assessing the impact of ICT programmes and projects;

· Information Society and Development Cluster supports the effective and efficient functioning of the information society and development institutional mechanisms, such as the inter-ministerial committee on information society and development, the information society and development intergovernmental relations forum, the forum of South African directors-general for information society and development, and the intergovernmental relations forum technical committee such as Information Society and Development Multi-stakeholder Forum and ICT Indaba;

· e-Applications facilitates the implementation of information society related projects and programmes to attain the sectoral targets of the information society and development plan, and maximises the benefits of the information society for the development of women, children, youth, people with disabilities and poor communities; and

· PNC Operations provides responsive, timely and comprehensive strategic and administrative support that strengthens the PNC on information society and development as a knowledge driven organisation.

The Committee noted with concern that despite the undertaking or assurance by the Department that the required consultation with The Presidency to dissolve the PNC in order to change its name to Information Society, this has not been concluded to date.

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) – R52 000 000

SAPO’s mandate is to provide postal and related services to the South African public. SAPO was granted an exclusive mandate to conduct postal services to South Africa by the Postal Services Act (1998). The Act makes provision for the regulation of postal services and the operational functions of the company, including, its universal service obligation.

SAPO Limited was established on 1 October 1991 as a public company in terms of the Companies Act, 61 of 1973. The State is the sole shareholder represented by the Minister of Communications. As a state owned entity, SAPO complies with the Public Finance Management Act (PFMA) and all its regulations as far as Schedule 2 entities are concerned. SAPO further has to comply with the Protocol on Corporate Governance in the Public Sector (1997). Although King II compliance is in place, SAPO has already started to adopt some of the good governance principles identified in King III.

SAPO has the following strategic goals:

• Implement appropriate governance structures on all levels;
• Diversification strategy implementation;
• Optimisation;
• Remain financially sustainable while delivering on government’s social mandate;
• Consolidation of functions;
• Provide an efficient retail channel network;
• Deliver on license requirements and agreed targets; and
• Provide secure and efficient integrated systems/enablers for the Group.

SAPO has the following key challenges:

· Economic crisis – a threat to growth and sustainability;

· Human capital – lack of appropriate skills;

· Competitive nature of the business – protection of license rights;

· Bridging the digital divide – ability to react and innovate to capitalise on opportunities immediately;

· Expansion of footprint – positioning SAPO within the socio-economic challenges of the country and associated costs; and

· Cost of compliance – legal, regulatory and licence.

The Committee noted:

· the challenges or concerns that the postal offices are not in line with the current provincial demarcation;

· the IT system’s inability to deal with high volumes of transaction, e.g. during pension payout days;

· the non-functioning of Public Internet Terminals ( PITs );

· that its recommendation in 2011’s Budget Vote Report on the SAPO subsidy which comes to an end in 2014 has not been addressed;

· the disregard in corporate governance or King Code III by SAPO executives; and

· that the Post Office continues to make use of labour brokers. The plan to convert such employees into permanent positions needs to be expedited.

While the Committee has noted some progress in the corporatisation of the Postbank , it is equally concerned about the delays in implementing the necessary preparatory work (application for a banking licence, registration, appointment of Board members and senior executives) of the Postbank despite the fact that Postbank Act was enacted in 2010.

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

4.2 Sentech - R165 800 000

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. In accordance with its mandate as an SOE, Sentech’s strategy is informed by and aligned to Government’s Medium Term Strategy Focus (MTSF) goals for 2012 – 2017 periods and by the corporate objectives as set by its Board of Directors.

In the State of the Nation (SONA) address, the President outlined the role of SOEs in enabling economic development and job creation in the context of the country’s ‘infrastructure build’ programme. Accordingly, SENTECH will accelerate implementation of the Digital Terrestrial Television (DTT) and National Wireless Broadband Network (NWBN) infrastructure rollout projects – in alignment with the Presidential Infrastructure Coordinating Committee (PICC) imperatives for this MTSF period.

Signal Distribution: In consolidating the analogue signal distribution portfolio, Sentech has gone a long was in assessing and reviewing the tariff structure within the provisions of the ‘common carrier’ status that was enjoined in the Company’s licence conditions prior to the ECA conversion process.

DTT: The rollout of the DBV-T2 transmitter infrastructure is on track to reach 95 % of the population as provided for in the Broadcasting Digital Migration (BMD) Policy. The consultative process with the industry on DTT broadcasting tariff model has been completed – which will enable the publication of an ‘open’ tariff model that will provide certainty of planning and investment to the industry; and

NWBN: The business core of NWBN has been revised to ensure alignment with the Departments National Broadband Implementation Plan

Sentech has the following strategic focus areas:

· Customers and Stakeholders;

· Infrastructure;

· Solutions and Interventions;

· Employees;

· Sustainability; and

· Governance

These strategic focus areas are the core of Sentech’s strategic plan and provide the company tangible means of measuring its achievements and progress. Sentech will then report in a meaningful way to the Shareholder, on how the company has lived up to the ambitions it has set for the future.

The Board is confident that SENTECH will achieve its performance objectives, in particular, the rollout of the DTT transmitter network and the NWBN within the frameworks stipulated by the Shareholder.

The Committee commends Sentech on their effort to respond, (i) to the issue of signal distribution tariffs reduction for community broadcasters and thereby contributing to their sustainability, and (ii) for turning the company around into a going concern.

The Committee noted with concern that:

• for the current financial year 2012/13, Sentech requires an additional funding of R 12 000 000 in preparation for DTT migration; and

· Sentech has not yet rolled out the National Broadband Network due to the lack of finalisation of National Broad Band Implementation Plan by the Department.

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

4.3 Universal Service and Access Agency of South Africa (USAASA) – R59 800 000

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’s initial M edium Term Strategy consisted of the following Strategic Objectives:

· Provide thought leadership on universal service and access throughout South Africa ;

· Facilitate interventions in ensuring affordable, equitable access and usage of ICTs ;

· Facilitate and sustain multi- sectoral partnerships towards improving integrated service delivery;

· Ensure efficient and effective management of the Universal Service and Access Fund; and

· Enhance the strategic and operational capacity of USAASA

According to a September 2011 risk profile exercise, the top ten risks were identified:

• Lack of communication to the potential beneficiaries of the set-top boxes;
• Inadequate guidance in developing the Universal Access and Service Strategy;
• Insufficient skills to achieve the objectives;
• Insufficient funding to implement the objectives;
• Lack of a fraud prevention plan policy;
• Minimal intervention by legal division to provide legal advice;
• No disaster recovery plan and disaster site;
• No aligned corporate strategy vis -avis business plan in tern of operational model;
• Incorrect recruitment and placement; i.e. not acquiring right people at the right time; and
• No quality and quantity checks made of goods / services received prior to approval and payment of invoices

The revised Strategic Plan, after the engagement with the Committee, consists of the following Strategic Objectives:

• Deploy 200 community access centres through an entrepreneurship model – R31 285 000 from Universal Service Access Fund (USAF);
• Connectivity upgrade programme – R7 000 000 from USAF Development of National Universal Service and Access Strategy – R2 850 000 from USAF; and
• Subsidize 489 383 Set-Top boxes – R230 000 000 from USAF.

The Committee is concerned that, for the current financial year 2012/13, USAASA requires an additional funding of R620 000 000 for Set-Top boxes subsidy. The subsidy for aerial and installation costs with the financial year could have a negative impact on the total number of beneficiaries.

However, the Committee commends the swift action by the Minister to remove the entire USAASA Board members as per its recommendation and the appointment of the Executive Caretakers.

Furthermore, the Committee is concerned:

• about the maladministration which has led to the suspension of the Executive Managers;
• about the high vacancy rate at the executive management level which could translate into instability within the organisation; and
• the process of repositioning USAASA as recommended in the BRRR has not yet begun.

4.4 South African Broadcasting Corporation (SABC) - R132 500 000

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:

· Restore its liquidity status to that of a going concern by embarking on the implementation of an accelerated turnaround strategy;

· Increase and/or maintain audience share across all platforms through the implementation of multi-platform, multi-channel strategies that are informed and driven by audience needs;

· Deliver on a Digital Terrestrial Television value proposition and offering that attracts new audiences and retains the SABC traditional audience base;

· Restore the integrity of the SABC and Brand reputation;

· Increase revenue through effective and efficient collection of licences fees;

· Increase the SABC’s share of advertising spend through vigorous marketing to the Trade;

· Identify wastage and implementing effective cost cutting measures to improve the SABC financial position;

· Put in place innovative and cost effective technology platforms and infrastructure that will facilitate delivery of the SABC mandate of universal access;

· Involve the public in defining the SABC’s policies through the review of editorial policies in line with legislative requirements; and

· Define a viable operating and business model that is efficient and yet support the delivery of the SABC’s mandate and strategy.

The Committee was informed that for the current financial year 2012/13 the SABC has instituted monitoring mechanisms that will regularly track those factors that negatively impact on the financial performance of the organisation with a particular focus on the following:

• declining audience share;
• declining advertising revenue share;
• declining sports revenues;
• procurement of compelling content;
• lack of alignment of compelling content to individual brand strategies;
• schedule stability defined in terms of a 36 month content schedule;
• improvements in the management of content, content planning and acquisition;
• sports costs reduction;
• management of people costs;
• management of fruitless and wasteful expenditure through strategic procurement and sourcing;
• performance management and revision of the Delegated Authority Framework (DAF);
• Preparation for Digital Migration and Multi-Channel Environment;
• Implementation of the recommendations of the Auditor-General; and
• Performance contract of employees.

The Committee has noted the following issues:

• funding model of the public broadcaster – insufficient funding from government;
• possible decline on advert revenue due to a possible ban on alcohol advertising; and
• budget for the refurbishment of the SABC buildings.

The Committee raised concerns regarding:

• non-compliance of SABC with legislation of separating the public and the commercial services when it presented its strategic plan;
• the management of the Siemens and Atos contract which has impact on digital migration;
• skills audit that was supposed to have been completed in March 2010 as reported in the Strategic Plan of 2009/10 financial year; and
• lack of performance agreements that were supposed to have been completed.

The Committee commends the:

• frank admission by the Board and the Executive in relation to not meeting the Government Guarantee conditions; and
• prioritisation of the rollout of the low power transmitters to enable viewers and listeners who are currently not able to access any of the public broadcasters services.

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

4.5 National Electronic Media Institute of South Africa - R34 100 000

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:

· Technology, research and development excellence;

· Financial viability and institutional sustainability;

· Organisational effectiveness;

· Stakeholder engagement; and

· Expanded reach.

The Committee noted that NEMISA is contemplating merging with the Institute for Satellite and Software Applications (ISSA) and eMaraka Skills Institute to form one integrated ICT institution.

The Committee raised a concern about the impact of the merger in terms of achieving their strategic objectives and the impact it could have on their human capital.

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

4.6 Independent Communications Authority of South Africa (ICASA) – R389 800 000

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:

• Transformation of the ICT sector;
• Ensure the provision of broadband services;
• Optimise the use of the radio frequency and numbering resource to support the widest variety of services;
• Promote the protection of consumers and accessibility for persons living 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; and
• Promote competition.

Furthermore, ICASA presented the following strategic priorities:

• Local Loop Unbundling (LLU);
• Access to Broadband and fair pricing across the broadband value chain;
• Spectrum monitoring and assignment equipment and related software;
• Review of existing regulatory framework for broadcasting services to support the introduction of DTT;
• Promoting Universal Service and Access; and
• Licensing of Spectrum.

Operational Priorities

• Head Office relocation;
• Organisational realignment; and
• Formulation of a self-funding model.

The Committee commends the Minster for the finalisation of the ICASA Performance Management System for the Chairperson and Councillors of ICASA.

However, the Committee is concerned about:

• the lack of implementation of the resolutions taken on the Summit of People Living with Disabilities on 15 and 16 March 2011;
• non-compliance to the legislation by ICASA which include monitoring postal services and telecommunications’ operators due to the lack of human capital and necessary resources;
• non-finalisation of the relocation process; and
• one third of senior managers being in acting positions.

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

4.6 . za Name Domain Authority R1 500 000 000

The authority will appear before the committee in due course. However, the Committee recommends that the budget allocation for . za Domain be approved.

5. Recommendations

The Committee, having considered and examined the Strategic Plan and Budgets of the Department and its entities, recommends that the Minister should:

1. fill all the critical funded vacant positions in line with the President’s call;

2. endeavour to spend the budget allocations in all their programmes as required in order to render effective and efficient service delivery;

3. strengthen the capacity in ICT Enterprise Development especially in relation to the management of entities;

4. engage National Treasury for the possibility of an additional funding to the regulator to procure monitoring equipment that would make it possible with ICASA to comply with its legislative mandate to effectively monitor and enforce activities by licensees;

5. continue to engage National Treasury on the shortfall of DTT budget allocation to the SABC, Sentech and USAASA;

6. prioritise the corporatisation of the Postbank to become a fully fledged bank; and

7. expedite the appointment of the new USAASA Board in order to comply with the King Code III

Furthermore, the Committee recommends that:

8. USAASA should institute a skills audit amongst its employees to ensure that the skills required for its operations matches the available human capital;

9. USAASA should speed up current disciplinary processes;

10. SAPO should present a long-term sustainability strategy to mitigate the decline in mail volume;

11. SAPO needs to refurbish their offices to accommodate its employees and walk-in customers needs e.g. sufficient air-conditioning systems and customer toilets where possible;

12. SABC should strengthen and capacitate its corporate services division in particular the legal services to ensure a corporation is able to deal with litigation filed against it;

13. SABC should provide a comprehensive report on the skills audit which was supposed to have been completed in March 2010;

14. SABC must comply with the provisions of PFMA and the Broadcasting Act with regard to public and commercial services;

15. SABC should provide a comprehensive report on the Siemens and Atos contract;

16. SABC needs to conduct thorough research to identify relevant best practices that are used to maximise the collection of television licences;

17. NEMISA should present a comprehensive report on the contemplated measure and a possible impact the merger could have on their various organisational deliverables including human capital; and

18. the budget of the Department of Communications and its entities be approved.

Report to be considered.