ATC200715: Report of the Portfolio Committee on Communications on its Deliberations on the Implications of the Supplementary Budget on Vote 30: Communications and Digital Technologies, dated 14 July 2020

Communications

REPORT OF THE PORTFOLIO COMMITTEE ON COMMUNICATIONS ON ITS DELIBERATIONS ON THE IMPLICATIONS OF THE SUPPLEMENTARY BUDGET ON VOTE 30: COMMUNICATIONS AND DIGITAL TECHNOLOGIES, DATED 14 JULY 2020

 

The Portfolio Committee on Communications (the Committee), having considered the supplementary budget on Budget Vote 30: Communications and Digital Technologies on July 07, 2020, reports as follows:

 

1.         BACKGROUND

On June 24, 2020, Minister of Finance, Mr Tito Mboweni, tabled the 2020 supplementary Budget and delivered the supplementary Budget Speech. The Public Finance Management Act, 1999, read together with the Money Bills Amendment Procedure and Related Matters Act, 2009,empowers the Minister of Finance to table an adjustments budget, when necessary. The tabling of the 2020 supplementary Budget was necessitated by the impact of the COVID-19 pandemic and the economic downturn in the country.


2.         INTRODUCTION

Coronavirus disease 2019 (COVID-19) is defined as an illness caused by a novel coronavirus now called severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). It was initially reported to the World Health Organisation (WHO) on December 31, 2019. On January 30, 2020, the WHO declared the COVID-19 outbreak a global health emergency. On March 11, 2020, the WHO declared COVID-19 a global pandemic, its first such designation since declaring H1N1 influenza a pandemic in 2009.

The COVID-19 pandemic required global action by all nation states to draft and implement a variety of mitigation strategies to reduce exposure to and impact of COVID-19.  The responses by individual countries to the pandemic was critical in influencing the trajectory of national epidemics.  This has included stringent lockdowns, travel restrictions and the closure of schools and non-essential businesses.

In South Africa, the number of cases as of 15 March 2020 remained relatively low (61 confirmed cases; 0 deaths).However, President C Ramaphosa stated that ‘urgent and drastic’ measures were required to mitigate the spread of the virus and address the emergency. The President declared a State of Disaster on 15 March 2020, which gave the Minister of Cooperative Governance and Traditional Affairs, Dr N Dlamini-Zuma the power, in accordance with the National Disaster Management Act, 2002 to limit certain rights and freedoms in South Africa.

A series of regulations, specific to respective sectors, was promulgated, which restricted, among other things, the movement of persons, goods, prohibiting foreign national form high-risk countries (WHO definition) from entering South Africa from 18 March 2020, as well as a hard lockdown, which prohibited the movement of citizens.[1]

To minimise the economic impact of COVID-19, South Africa, on 21 April 2020, introduced various fiscal and monetary stabilisation measures, such as direct cash transfers to households and businesses through a R500 billion fiscal support package. This included spending on priorities in the containment of the COVID-19 virus and to offset the economic impact of the pandemic.

On April 30, 2020 National Treasury published on the “Economic Measures for COVID-19”, outlining an R500bn response, as well as identifying the funding sources for the package. Part of the funding sources for this package is a R130 billion baseline reprioritisation in the 2020/21 financial year.

Section 16 of the PFMA: Use of funds in emergency situations. The Minister of Finance may approve the use of unappropriated funds if it is for spending of an exceptional nature. This happens if postponing the spending to a future parliamentary appropriation would seriously prejudice the public interest.

The special adjustment budget provides for changes in the main appropriation owing to the categories of expenditure specified in Section 30(2) of the PFMA, by programme and economic classification.

All other adjustments not included in this special adjustment budget will be tabled in the October Adjustment Budget.

The Minister of Finance subsequently tabled the 2020 Supplementary Budget on 24 June 2020 along with the Division of Revenue Amendment Bill [B9 – 2020] and the 2020 Adjustments Appropriation Bill [B10 – 2020]. All other adjustments not included in this adjustments budget will be implemented in the October 2020 adjustments budget, with the details outlined in the Adjusted Estimates of National Expenditure.

The Supplementary Budget sets out the initial economic and fiscal response from Government to the COVID-19 pandemic. It fast-tracks processes to provide resources to frontline services, provincial and local government, as well as businesses and households, with a specific focus on the most vulnerable South Africans. Furthermore, the Supplementary Budget sets out a roadmap to stabilise debt, improve spending patterns, and creates a foundation for economic recovery.

 

3.      OVERVIEW OF THE IMPACT OF THE SUPPLEMENTARY BUDGET ON THE DEPARTMENT COMMUNICATIONS AND DIGITAL TECHNOLOGIES

In line with National Treasury guidelines, departments were mandated to assess and prioritise their allocated budgets to contribute to the R500 billion fiscal support package, as well as addressing challenges in dealing with COVID-19.  The Department of Communications and Digital Technologiessubmitted to National Treasury a proposal on where appropriated monies could be shifted or suspended.  Having reviewed the proposal, National Treasury thereafter submitted feedback and proposed the following:

The Department received a main appropriation of R3.4 billion in February 2020/21which had been earmarked for various projects, such as the SA-Connect Project, which had been allocated R184 million. R522 million had been allocated for the new model of the Broadcasting Digital Migration (BDM) project. The USAASA costs on the distribution of the South African Post Office (SAPO) amounted to R178 billion for the 2020/21 financial year, see graph below.

 

A total 15 percent of R522 million amounting to R78,3 million was reduced from the BDM budget allocation - the R78 million is from the voucher system by USAASA.

National Treasury granted provisional approval for surplus funds from interest earned amounting to R242 million to be retained by USAF for the 2019/20 financial year.

These funds will be used to assist indigent Grade 12 learners affected by the lockdown due to the COVID-19 virus.

An allocation letter was received from National Treasury confirming the budget cuts of R111 millionin line with the Adjustments Appropriation Bill,2020, which was tabled in Parliament on 24 June 2020.

 

3.1        Budget Adjustments per Programme

The impacted Programmes of the department in terms of this downward allocation include (i) Administration for -R13.447 Million; (ii) ICT Policy Development and Research for-R5.487 million; (iii) ICT Infrastructure Development and Support for -R81.833 million; and (iv) ICT Information Society and Capacity for -R10.664 million. This totals -R111.431 million in proposed total net change.

The overall budget cut amounted to R111 million, which had been confirmed by the adjustment appropriation bill.

 

Programme 2:Savings achieved with the goods and services amounting to R33 million had been mainly derived from the travel and subsistence budget, advertising, consultants and training and development venues, because these line items had been affected by the COVID-19 pandemic, and the funds allocated could not be spent.

There was no budget cut for Programme 2, as it had been negatively affected by the unfavourable exchange rate during the payment of the international membership fees, and savings declared from this programme had been shifted to the line item to cover the gap and defray excess costs in the programme.

Programme 4: Was mainly driven by the transfers to the entities, and its goods and services budget was very small. Following discussions with National Treasury, only R522 million had been earmarked for the BDM project, and 15 percent (R78.3 million) would be cut.

The Department had since requested the National Treasury to utilise the R242 million in interest that it would retain for the 2019/2020 financial year for the TV project to assist indigent grade 12 learners affected by COVID-19.

Budget cuts have necessitated that funds be redirected to provide for personal protective equipment (PPE), sanitisers, sick bays, decontamination of premises, the provision of data, and tools of trade for all employees to work remotely.

These budget cuts have affected annual performance plan (APP) targets that were presented to the Committee, and the APP will be reviewed in line with the revised budget. The revised APP will ultimately be presented to the Minister and presented in Parliament and to the Committee.

 

3.2        Key revised allocations by economic classification

In terms of Economic Classification, the suspension of funds occurred from Goods and Services under Current Payments as well as in Departmental agencies and accounts under Transfers and Subsidies, see table below.

There was a downward revision of a total of R33.131 million as a result of reduction in non-essential goods and services such as travel and subsistence, and venues and facilities. Cut mainly effected on subsistence & travel, advertising, consultants, training & development, venues and facilities and other items, see table below.

 

As mentioned previously, a further downward revision to a total of R78.300 million was as a result of reduction in the number of budgeted vouchers disbursed to households for the Broadcasting Digital Migration Programme. Hence the total downward revision in the allocation of the budget vote is R111.431 million.

 

4.         IMPLICATIONS OF SHIFTED FUNDS ON PROGRAMMES OR PROJECTS

As noted above, Programme 4 was mainly driven by transfers to the entities, and its goods and services budget was very small. Following discussions with National Treasury, only R522 million had been earmarked for the BDM project, and 15 percent (R78.3 million) would be cut creating a shortfall of R43 000 households qualifying to be migrated.

 

4.1        Reprioritised funds from Programme 4

National Treasury had approved R242 million for USAASA to provide Integrated Digital Television Sets (IDTVs) to matriculants from indigent households. This programme was a part of BDM Phase 2. More than 150 000 households would receive IDTV, which would offset the reduction through the reallocation of the budget.

A tender for the procurement of IDTVs has been issued by USAAS, and the closed on 2 July 2020. The evaluation process will take place over one to three weeks, depending on the level of complexity. USAASA has engaged at a local and national level, with an aim to assist matric pupils and ensure that IDTVs were distributed to the correct households. Below are a few issues for noting relating to the IDTV evaluation process:

  1. The voucher value is yet to be determined.
  2. USAASA will assess the market value of the IDTV through the procurement bid evaluation process and provide an accurate voucher value of the IDTV.
  3. The voucher can be used by the qualifying household either to acquire an IDTV with related antennas or Set-Top-Box as per the Cabinet Revised BDM Model, December 2019.
  4. The DTT reception devices refers to either an IDTV or Set-Top-Box that comes with related antennas depending on the area of coverage whether is DTT of DTH.

With the renewed BDM programme approach, Phase 1 involved the depletion of the stock that was currently at the Post Office, and it is being ensured that there is stakeholder involvement and participation across all provinces. The registration and localisation framework is also taking place during Phase 1.

Phase 2 involves the voucher system which will impact on the affordability of the migration devices such as decoders and Integrated Digital Television (IDTV) sets. USAASA is committed to ensuring that the BDM programme is implemented.

The shortfall of 43 595 will be compensated through the subsidy rollout of IDVTs for the 2020 Grade 12 learners’ indigent households. 

The number of the IDTV sets for 2020 Grade 12 learners to be procured will be increased through shrewd price negotiations process within the budgeted amount of R242 000 000.

The Agency is collaborating with DTT PMO Office and Sentech and other stakeholders will need to investigate other cheaper alternative means to ensure a seamless migration of views within the budgeted amount.

 

5.         OBSERVATIONS AND RECOMMENDATIONS

The Portfolio Committee on Communications, in interrogating the presentation by the Department of Communications and Digital Technologies and USAASA,observed and derived recommendations to the Minister comprising the following:

 

5.1        Observations

The Committee noted:

  1. with concern the impact of COVID-19 pandemic on the budget of the Department and its entity, USAASA;
  2. with concern that as a result of the COVID-19 pandemic, the Department had a downward revision of its budget to R111 million;
  3. with great concern that there still are no clear timelines on the delivery of the BDM programme as was resolved during the budget vote report of the Committee and that the information provided to the Committee is contradictory;
    1. that the DTT programme deadline remains December 2021;
    2. however, that Phase 2 of the programme would only be completed in the 2021/2022 financial years.
  4. with appreciation the introduction of IDTV’s to qualifying indigent households with matriculants;
    1. withcaution that learners are more prone to require data and laptops in line with the Fourth Industrial Revolution technologies;
    2. and accepted Minister’s response that the IDTV’s were issued in line with the DTT process and were specific to indigent households that were already identified to receive government subsidy and is a response to households who have matriculants impacted negatively by the National State of Disaster; and
    3. that the tender process for IDTVs is at evaluation stage;
  5. that the procurement process relating to the IDTV project needs to be clarified;
  6. that the focus for USAASA should be to rollout broadband infrastructure, especially to rural areas;
  7. that delays in migration process were contrary to service delivery;
  8. that STBs are available to be purchased by unsubsidized people at all retail stores;
  9. with concernthat the COVID-19 pandemic may negatively impact on:
    1. the distribution of STB’s;
    2. indigent HH; and
    3. overall DTT rollout;
  10. and commended the collaboration between USAASA and Sentech to finalise and speed up the BDM project;
  11. that USAASA and the Department will align their APP’s in line with the budget reductions;
  12. that the standards for STB’s has been altered (by ICASA) to allow manufacturers to manufacture cheaper STB’s;
  13. that an agreement with Sentech is underway and close to finality;
  14. that DTT budget is ring-fenced by Treasury specifically for the programme rollout and that only the interest of the fund is being used for procuring of IDTV’s for indigent Households who have matriculants; and
  15. in conclusion its appreciation of the nimbleness on the part of the Department in implementation of a revised DTT model including the issuing of IDTV’s for indigent HH with matriculants.

On other pressing matters relating to the SABC, the Committee noted that

  1. that the Deputy Minister is engaging the SABC unions and will inform the Committee once the process is concluded;
  2. that the PCC is not in agreement with the Section 189 process that the SABC is embarking on; and
  3. that the Department was working with the regulator in order to ensure that the SABC benefit from all paid TV sets in the country.

 

5.2        Recommendations

The Committee recommends that the Minister should ensure that the Department:

  1. provide clear timelines for the delivery of all phases of the BDM Programme;
    1. provide clear timelines for the switch to digital signal;
    2. ensure that the switch-off of analogue signal does not disadvantage the general public, especially the previously disadvantaged communities;
    3. implement clear timeframes for distribution of STBs;
    4. accelerate the process of distribution of STBs in order to ensure a quicker migration process; and
    5. ensure that installation of STBs is effective and speedily implemented;
  2. ensure that proper governance and implementation processes of the digital migration are in place ahead of the switch off date;
  3. closely monitor timelines towards the Switch-Off date of December 2021;
  4. continue to strengthen connectivity of all rural areas of South Africa;
    1. provide citizens with improved access to broadband connectivity;
  5. ensure the use of vouchers for the purpose it is intended for;
  6. collaborate with the Department of Basic Education in order to ensure that learners are equipped with enough data and capable technology such as laptops in line with the Fourth Industrial Revolution policy;
  7. take necessary precautions to ensure that procurement processes and tenders are compliant with legislation, policy and regulations of government;
  8. develop a stakeholder engagement plan and marketing strategy for the unsubsidized DTT market; 
  9. ensure that recipients of IDTVs pay their own television licences;
  10. present to the Committee a report on the progress of the implementation of  the IDTV project;
  11. ensure that the database of indigent householdsis updated and reconciled in order to ensure that the correct households receive IDTVs; and
  12. encourage the payment of TV licences by all South African citizens in general so that the SABC can derive revenue to be financially stable to continue local content production.

 

The Committee expects the Deputy Minister to report back to the Committee on her engagements and the wayforward with the SABC unions once the process is concluded.

Lastly, the Committee further expects that the Department will ensure that the SABC benefits from all purchased TV sets in South Africa.

 

[The Democratic Alliance reserved its position on the report.]

 

Report to be considered.

 

 

 


[1]The Social and Economic Impact of COVID-19 on South Africa, sourced at: https://www.silkroadbriefing.com/news/2020/04/16/social-economic-impact-COVID-19-south-africa/ - 9/07/2020

 

Documents

No related documents