ATC210514: Report of the Portfolio Committee on Communications on its deliberations of Budget Vote 30: Communications and Digital Technologies, dated 14 May 2021

Communications and Digital Technologies

Report of the Portfolio Committee on Communications on its deliberations of Budget Vote 30: Communications and Digital Technologies, dated 14 May 2021.

The Portfolio Committee on Communications (the Committee), having considered Budget Vote 30: Communications and Digital Technologies (herein referred to as “the Department” and the Annual Performance Plans (APPs) for 2021/22 reports a 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 (PFMA), the Accounting Officers must provide Parliament or the relevant legislature with their respective institution’s Medium-Term Strategic Framework (MTSF) and where applicable with its Annual Performance Plan (APP).

The Money Bills Amendment Procedure and Related Matters Act was promulgated in 2009 and provides Parliament with powers to reject or recommend the approval of departments’ budgets. The Act also makes provision for the implementation of recommendations emanating from the committee’s oversight reports.

The Committee met with the Department, ICASA, FPB, BBI, NEMISA, USAASA/USAF, and Sentech on 11 May 2021 and. ZADNA, SITA, SAPO and SABC on 12 May 2021.

 

2.         The Department’s APP 2021/2022 – 2023/24

An APP sets out what the institution intends doing in the upcoming financial year and during the Medium Term Expenditure Framework (MTEF) to implement its Strategic Plan. The document sets out performance indicators and targets for budget programmes, and sub-programmes where relevant, to facilitate the institution realising its goals and objectives set out in the Strategic Plan.

The overall purpose of Budget Vote 30 is to create an enabling environment for inclusive growth in the ICT sector by developing policies and legislation that promote infrastructure investment and socioeconomic development.

 

2.1        Mandate

Following the May 2019 National Elections, the President pronounced the establishment of the National Department of Communications and Digital Technologies. Accordingly, the Presidential Proclamations in Government Gazette dated 14 August 2019 (President Minute: 372) confirmed the transfer of administration, powers and functions entrusted by legislation to the Minister of Communication in terms of Section 97 of the Constitution.

The Department of Communications and Digital Technologies is mandated to encourage digital inclusion and economic growth, the Department of Communications and Digital Technologies is mandated to facilitate South Africa’s digital transformation by creating an enabling policy and regulatory environment.

The Department implements the provisions of the 2016 National Integrated ICT Policy White Paper, particularly the participation of multiple stakeholders for inclusive digital transformation; interventions to reinforce competition and facilitate innovation across the value chain; measures to address issues raised by ICT and convergence; and the establishment of a new national postal policy framework. It also provides for policies to address the digital divide and affordable access, supply‐side issues and infrastructure rollout, and demand‐side issues to facilitate inclusivity.

The Department derives its mandate from a number of acts and policies. Key among these are the:

• Broadcasting Act (1999), as amended, which establishes broadcasting policy in South Africa;
• Electronic Communications Act (2005), as amended, which provides the legal framework for convergence in the broadcasting, broadcasting signal distribution, and telecommunications sectors. It also allows for the granting of new licences and social obligations; the control of the radio frequency spectrum; and the regulation of electronic communication network services, electronic communication services, and broadcasting services;
• Film and Publications Act (1996), as amended, which provides for the classification of certain films and publications, and establishes the Film and Publication Board and Tribunal;
• Independent Communications Authority of South Africa Act (2000), which establishes the regulator in the sector; and
• Postal Services Act (1998), as amended, which makes provision for the regulation of postal services, and more

 

The following State-Owned Entities report to the Ministry:

• National Electronic Media Institute of South Africa,

• Universal Service and Access Agency of South Africa,

• Independent Communications Authority of South Africa,

• South African Broadcasting Corporation,

• Universal Service and Access Fund,

• .ZA Domain Name Authority,

• State Information and Technology Agency,

• Sentech,

• Broadband Infraco,

• South African Post Office and

• Film and Publication Board.

In executing its role, the Department is also guided, amongst others, by:

• The Constitution of the Republic of South Africa, 1996 (108 of 1996);

• The Public Service Act, 1994 (Act 103 of 1994) as amended;

• The Public Finance Management Act, 1999 (Act 1 of 1999) as amended.

Furthermore, Chapter 4 of the National Development Plan recognises that ICT is a key enabler of inclusive economic growth that is critical to addressing inequality in South Africa.

Taking into consideration the development in relation to the Fourth Industrial Revolution (4IR) as well as the envisaged outcomes of the Presidential Commission on 4IR, coupled with direction stemming from the NDP Five-Year Implementation Plan and the MTSF, the Department will in the medium-term focus on developing new and revising existing policies, strategies and legislation.

 

3.         Situational Analysis

3.1        External Environment Analysis

Impact of Covid-19 on the ICT Sector

The pandemic has affected several industries across the globe with ICT being one of them. The industry witnessed a dynamic change during these times with some of the technologies finding new applications and some others witnessing an all-time low.

The Information Communication Technology (ICT) sector has proved to be the pillar of many economies, both developed and developing countries. With that realisation many organisations having made investment into the ICT Sector, from new Internet Service Providers (ISP’s) to postal services companies and television and radio broadcasters. Nevertheless, it is important that the sector needs to focus on adapting to the Fourth Industrial Revolution (4IR) that is bringing new technologies, which means business models, government decisions and other choices, will have to transform due to a new set of challenges and uncertainties.

During the era of the pandemic, certain technologies gained traction including Over-the-Top (OTT) services, video conferencing technology, Artificial Intelligence (AI), video streaming platforms, team collaboration software, mobile security technology, video on demand (VoD) market, cloud gaming market amongst others. On the other hand, the technologies, which witnessed a dip in their sales and applications during the pandemic, consisted of Industry 4.0 market, wireless sensors market, robotic process automation market, and radar sensor market amongst others.

With organisations promoting working remotely, there is already an exponential rise in video calls/phone calls, as an increasing number of people are organizing meetings via apps or collaboration platforms. Digital media and Over-the-Top (OTT) content players are benefiting while Virtual Private Networks (VPNs), cybersecurity, and data security are other technologies that will see a surge as most workforces are operating remotely. Cloud services is further expected to grow, boosted by higher usage of content, gaming downloads, video conferencing, and the impact of remote access to corporate networks. There will also be an increased focus on technologies like artificial intelligence, big data, augmented reality, and virtual reality, among others going forward.

Telecommunications Sector

The telecommunications sector is a critical part of modern lifestyles and has significant influence on the growth of the country’s economy as it strengthens productivity levels. South Africa’s telecommunications sector has continued to grow despite the economic challenges faced by the nation. Mobile subscriptions, Internet penetration, and other related services continue to grow. South Africa’s fibre network and data centre markets are expanding rapidly.

The Independent Communications Authority of South Africa (ICASA) continues to work on regulatory initiatives aimed at reducing the cost to communication and engaged with Competition Commission on its final findings and recommendations report for the data services market inquiry.

The purpose of the Inquiry was to investigate the cause and reason for alleged high prices for data services in South Africa, and to make recommendations that would lead to lower prices for data services.

According to DUBLIN (2019), there are comprehensive profiles of 56 companies including Telkom, which dominates fixed-line telephony, and Vodacom and MTN, which dominate the mobile space. Other profiled companies include Cell C and Virgin Mobile, and fibre companies such as Vumatel, Vox and Dark Fibre. South African telecommunications operators experienced positive, if muted, growth in 2018 as total subscriptions, device ownership, internet penetration, and data usage continue to increase.

The South African telecommunications sector grew by over 14 per cent and was worth R187 billion in 2018. Mobile subscriptions, device ownership, and internet penetration continues to grow, and the majority of service revenue growth is due to double-digit increases in the value of data. South Africa’s fibre and data centre markets are expanding rapidly.

Telecoms companies have to adapt to widespread disruption; the structural shift from voice to data is affecting traditional margins and increases in data traffic are being offset by a proportional decline in effective data prices. The market is maturing, and operators have to compete to grow their share of the prepaid and lower-income markets, from which the majority of future growth is expected to come. Investment in the sector is highly influenced by South Africa’s poor economic growth, regulatory changes and technological developments.

 

Broadcasting Sector

The broadcasting sector plays a very important role in education, entertainment and informing the public through radio and TV (both public and commercial broadcasting). The broadcasting sector has been affected by the rapid changes in technology, which are changing the broadcasting landscape.

The process of migrating broadcasting signals from analogue to digital in South Africa with the objective of the digital migration is to clear the radio frequency spectrum currently occupied by broadcasters to enable the provision of wireless mobile broadband services and other innovative applications.

While broadcasting revenues continue to grow annually, on-demand audio and video online streaming services are causing significant disruptions in the broadcasting sector globally and will offer serious competition to South African broadcasters in the near future. The digital revolution sweeping video entertainment is affecting community TV stations; free-to-air and public broadcasters and subscription TV services have to adapt to keep up with these developments.

Local broadcasters are planning or implementing new business models to integrate their offerings with digital platforms. Sustainability concerns and numerous issues at the South African Broadcasting Corporation (SABC) undermined the sector. The delays in digital migration process also had an impact and interventions are being prioritised towards final analogue switch-off.

While television and radio revenues continue to grow, streaming services such as DStv’s Showmax, Netflix, and Amazon Prime Video are disrupting traditional broadcasting. The dramatic digital revolution sweeping video entertainment is affecting community TV stations, free-to-air and public broadcasters and subscription TV services, and traditional television and pay-tv are facing a threat of survival.

The radio sector is faced with an increase in audio content created for online delivery and via mobile phones and an increase in non-traditional players entering the market.

Postal Services Sector

The postal services sector contributes 3.16 percent to the country’s Gross Domestic Product (GDP). This includes the courier and express parcel services. Letter post is declining both in terms of volumes as well as in terms of its percentage contribution to revenue that is generated in the sector. The trend for the decline in letter mail volumes is attributed to the electronic substitution effects.

The postal and courier services social development, even though they represent traditional means of technologies keep emerging; and the developments relating to the paradigm shift brought about by the 4IR. Through identification and review of legislative gaps on the postal sector there is an emphasis for the postal sector, to ensure that postal outlets offer connectivity through internet services.

Although the courier, express and parcel services sector faces weak economic conditions, it is benefitting from the growth in e-commerce sales, increasing demand for just-in-time deliveries and from the service provided by the post office.

Increasing customer demand for speedy and flexible deliveries and the growth of disruptive start-ups and innovative delivery options are forcing traditional operators to review their distribution strategies and in some cases partner with or invest in new disruptive on demand delivery organisations to provide innovative and alternative delivery options.

While the poor economy and low business and consumer confidence are affecting the volume of goods requiring express delivery, the development of the on-demand economy is providing growth drivers for the industry.

These include the need for speedy deliveries created by the rise in online shopping, service delivery levels from the post office, the need for just-in-time delivery of parts and components to minimize stock levels and save costs and delivery demands for medical products. The continuous development of drones, robots, and autonomous vehicles are driving ongoing change in the industry.

 

3.2        Internal Environment Analysis

Following the establishment of the Departmentin April 2020, through the merger of the Department of Communications (DoC) and the Department of Telecommunications and Postal Services (DTPS), the DCDT is in the process of finalising the development of a revised organisational structure.

As an interim measure, in the short-term, the Department is functioning with a start-up organisational structure until the revised organisational structure, aligned to the mandate and strategy of the Department, is finalised, approved and implemented. Following the approval of the revised organisational structure, the Department will develop a new budget programme structure that will allow the Department to optimally deliver on its mandate.

In terms of acquiring relevant skills to deliver on its mandate, the Department is in the process of undertaking a verification of competencies exercise, which will be followed by a structured and comprehensive skills audit. Furthermore, the Department has in place a Workplace Skills Plan (WSP) aimed at capacitating employees with requisite skills aligned to the mandate and strategy.

The Department is currently prioritising the implementation of the Integrated Digital Transformation Strategy as we move towards a paperless organisation. This programme will continue within the Department through the digitization of additional business processes and systems as part of implementing the Integrated Digital Transformation Strategy.

The Department has already consolidated some of the processes and systems, which include the review of existing operational policies and procedures. Moreover, the Department will ensure the mainstreaming of critical issues related to designated groups through the Chief Directorate: Gender, Disability, Youth and Children (GDYC).

This Unit will also ensure that all Departmental programme, policies and processes are inclusive of issues related to such designated groups and will monitor the Departmental and SOCs Gender, Disability, Youth and Children Responsiveness programmes in line with National targets.

Lastly, the impact of COVID-19 has also affected the Department and have necessitated that the officials work remotely where practically possible. In this regard, the Department has ensured that all officials have the necessary tools of trade to enable them to work effectively from home. The process of finalising the APP took into consideration the limited resources available, both financial and human, which negatively affected its capacity to execute and deliver on some of its targets.

To deliver on the mandate the Department is structured into six programmes, namely:

1. Administration;     
2. ICT International Relations and Affairs;    
3. ICT Policy Development and Research;    
4. ICT Enterprise and Public Entity Oversight;   
5. ICT Infrastructure Development and Support; and     
6. ICT Information Society and Capacity Development.

 

 

3.3        2020/21 Priorities

In line with its mandate, the Department’s priorities for the medium-term will focus on (i) Enabling Digital transformation policies and strategies, (ii) Increased access to secure Digital Infrastructure, (iii) Transformed digital society and (iv) a High performing Portfolio to enable the achievement of their respective mandates. This will contribute to achieving the desired impact of digitally enabled citizens with secure and affordable universal access.

For Outcome 1, Enabling Digital Transformation Policies and Strategies the Department will:

1. Develop 2 Country Positions to support the National ICT priorities, focused on BRICS and WTDC-2;
2. Implement the International Relations and Engagement Strategy coordinate;
3. Submit the South African Post Office SOC Ltd Amendment Bill to Cabinet for approval to introduce to Parliament;
4. Monitor the implementation of the approved Data & Cloud Policy;
5. Develop the Business Case for the Regulatory Reform Bill;
6. Coordinate the implementation of the Digital Economy Masterplan;
7. Submit the revised ICT SMME Development Strategy to Cabinet for approval;
8. Conduct a study on cost to communicate to inform the revision of the Cost to Communicate Programme;
9. Submit the White Paper on the Audio an Audio-visual Content Services Policy to Cabinet for approval;
10. Submit the Electronic Communications Amendment Bill to Cluster and Cabinet for public consultation approval;
11. Submit the PC4IR Strategic Implementation Plan to Cabinet for approval;
12. Approve the Business Case for the State Digital Services Company Bill;
13. Approve the Business Case for the State Digital Infrastructure Company Bill;
14. Introduce the Postbank Amendment Bill to Parliament; and
15. Submit the Framework on Digital Transformation and Digital Inclusion for approval and development of the implementation plan.

For Outcome 2, Increased access to secure Digital Infrastructure, the Department will:

1. facilitate for the operations of the BRICS Institute for Future Networks;
2. Conduct preliminary technical and regulatory studies to inform the draft SA’s position for WRC-23;
3. Sustain the provision of broadband services to 970 connected sites;
4. Source Phase 2 funding;
5. Source funding for Household connectivity programme;
6. Establish the Project Management Office for SA Connect Phase 2;
7. Facilitate the operations of the Digital Transformation Centre;
8. Coordinate and monitoring of 840 000 subsidized digital television installations in four provinces (Free State, Northern Cape, North West and Limpopo); and
9. Coordinate and monitor the distribution of 3.2 million vouchers.

For Outcome 3, Transformed Digital Society, the Department will:

1. Coordinate partnership programmes to support the Digital Economy initiatives;
2. Host the ICT Investment Conference;
3. Facilitate the implementation of the National e-Government Strategy and Roadmap towards digitalization of government services; and
4. Facilitate and monitor the Digital and Future Skills Programme.

 

For Outcome 4, High performing Portfolio to enable achievement of the respective mandates, the Department will:

1. Coordination of the implementation of recommendations from analysis of SOE Performance Reports;
2. Facilitation of the Tabling of submitted Annual Performance Plans of SOEs in line with the MTSF;
3. Facilitation of the development of Shareholder compacts of Schedule 2 and 3B entities;
4. Tabling of the Performance Management System for ICASA Councillors in Parliament;
5. Implementation and monitoring of the Workplace Skills Plan (WSP);
6. Implementation of one Digital Transformation priority intervention (Collaboration Platform);
7. Payment of 100 per cent of valid invoices within 30 days from date of receipt; and
8. Coordination of the implementation of the Annual 2021/22 Communications Plan.

 

4.         Annual Performance Plan 2021/22 Overview

Over the medium term, the Department will prioritise implementation of the Presidential Commission on the Fourth Industrial Revolution Report (4IR) in line with the PC4IR Strategic Implementation Plan. The 4IR Report, which contains eight key recommendations on how to deliver on a 4IR enabled South Africa, was approved in 2020 by the Cabinet.

The second priority area is Spectrum licensing, which is the lifeblood of digital infrastructure and will ensure that the Department connects the unconnected, particularly in rural areas; it will ensure that the Department reduces the costs of communications and data across the country to enable faster, and cheaper connectivity. The Department has also developed a draft 5G Policy Direction that we intend finalising and issuing by December 2021.

The third critical priority project for the Department is focused on human capital development and the future of work. This project forms part of the National Digital and Future Skills Strategy, which is aligned to the recommendations of the PC4IR Report. The National Digital and Future Skills Strategy, which was approved by Cabinet, is focused on addressing the disparities in education and sophistication in different communities in our society.

The fourth priority area is focused on policy, legislation and regulation review. The fast changing environment of the ICT has rendered a number of departmental prescripts obsolete, hence the need to update our enabling legislation and other prescripts. In this regard the Department will focus on creating a conducive policy environment for the growth and transformation of the sector. In this financial year we will prioritise key policy and legislation including but not limited to the Digital Transformation Policy, SAPO SOC Ltd Amendment Bill, Data and Cloud Policy as well as Audio, review the Under-Served Area License (USAL) and Audio-visual Content Services Policy.

Furthermore, the Department will focus on reorganizing and repurposing identified State Owned Entities into resilient, self-sustaining, and effective agents for delivering services to communities. In this regard, key pieces of legislation will be prioritised including the State Digital Services Company Bill and the State Digital Infrastructure Company Bill.

The fifth priority will focus on SA Connect. Digital infrastructure is key to economic growth for the country as a whole and forms the foundation for the digital transformation of both the private and the public sector.

The Department will therefore continue and prioritise the implementation of the SA Connect policy as well as fast track the Broadcasting Digital Migration Programme. The Department will also prioritise stringent oversight on our State-Owned Entities to ensure that they deliver on their respective mandates in the most efficient and effective manner possible.

 

4.1        Department Expenditure Overview

Over the medium term, the Department will focus on rolling out broadband to government buildings through the South Africa Connect project, implementing the broadcasting digital migration policy to release digital spectrum, and submitting legislation to Parliament to enable digital transformation. 

The Department has a budget of R8.5 billion over the medium term, of which 74.8 per cent (R6.2 billion) is allocated for transfers to public entities for their operations, and for project‐specific funding. Expenditure is expected to decrease at an average annual rate of 9.6 per cent, from R3.3 billion in 2020/21 to R2.4 billion in 2023/24. 

Driving this decrease is the conclusion of a one‐off allocation of R1.1 billion in 2022/23 for the broadcasting digital migration project, and Cabinet‐approved reductions over the MTEF period of R743.7 million, mainly on transfers to public entities (R442 million) and compensation of employees (R224.2 million). 

On next page is the Department’s total budget and expenditure estimates per programme:

The Department will rely mostly on natural attrition as a strategy to fall within the expenditure ceiling for compensation of employees. Expenditure in this regard is expected to decrease at an average annual rate of 1.2 per cent, from R302.2 million in 2020/21 to R291.3 million in 2023/24, driven by the expected decrease in the number of personnel from 367 to 343 over the same period.

Digital Migration

The implementation of broadcasting digital migration includes the provision of vouchers to poor households for devices that will allow analogue televisions to receive digital signals, and compensation to the South African Post Office for the costs of administering the voucher and distribution systems. The Department will coordinate and monitor the distribution of these vouchers in 2021/22, for which R95 million is allocated to be paid to the post office. To release spectrum  for  mobile broadband,  the  Universal  Service  and  Access Fund  was  allocated R1.1 billion in 2020/21.

Broadband Connectivity

The Department will monitor and maintain the provision of broadband services to 970 government buildings that have already been connected at a projected cost of R773.6 million over the MTEF period in the Broadband sub-programme in the ICT Infrastructure Development and Support programme.  The Department expects to finalise the feasibility study for phase 2 of the rollout by 2021/22, and use this study to secure funding to roll out broadband connections to identified facilities from March 2022/23. 

The allocation for broadband is R611.2 million and is spread as follows: R194.5 million in 2021/22, R203.8 million in 2022/23 and R 212.8 million 2023 /24.

Enabling Digital Transformation 

To achieve digital inclusion and economic growth, the Department plans to implement a number of digital transformation policies over the medium term, including the digital economy master plan; the presidential commission on the Fourth Industrial Revolution report; and the revised ICT development strategy for small, medium and micro enterprises (SMMEs).

The Department plans to submit the following legislation to Cabinet: the Electronic Communications Amendment Bill for public consultation approval; the State IT Company Bill and State ICT  Infrastructure  Company  Bill  to  achieve  greater  alignment  and  efficiency  among  state‐owned  ICT companies; and the Digital Development Fund Bill to replace the Universal Service and Access Fund. To achieve these targets,  expenditure  in  the  ICT  Policy  Development  and  Research programme  is  expected  to  be R152.1 million over the MTEF period.

 

 

4.2        Performance and Allocation per Programmes

4.2.1     Programme 1: Administration (R271 million)

Purpose of this programme is to manage the organisational resources in an efficient manner and provide support to the Department.

Budget allocation for programme and sub-programmes is illustrated below:

The Department under the Administration programme will focus on the Outcome of a High performing Portfolio to enable achievement of their respective mandates. The focus of Programme 1 will be specifically on focus on the Department to have adequately skilled staff who possess the requisite skills to deliver on the Department new mandate.

To this end, the Department will develop and implement a Workplace Skills Plan which is directly aligned to the mandate as well as to address the skills gap in the Department.

Focus will also be on implementing an Integrated  Digitisation Strategy as the Department moves towards a paperless environment. Furthermore, the department will coordinate the implementation of the Annual Communications Plan. The outputs of Programme 1 are aligned to Priority 6 of the NDP: A capable, ethical and developmental state and Outcome 2: Functional, efficient and integrated government.

The initiatives are aimed at accelerating the implementation of Departmental projects to improve service delivery. The rationale for the choice of the outcome indicators is based on the reason that Department was newand needs to lay a proper foundation through an optimal organisational structure supported by staff with relevant skills and digitised processes and systems.

The spending over the medium term will focus on providing strategic support to the Ministry and overall management to the Department.

 

4.1.2     Programme 2: ICT International Relations and Affairs (R59.8 million)

The purpose of the programme is to position South Africa as a digital technological infrastructure and innovation hub leading on digital transformation to contribute to the digital economy

The objective of the programme is to advance South Africa’s ICT interests in regional and international forums to secure partnerships for economic growth and development by:

1. developing 3 country position papers to support the digital economy by March 2022;
2. participating in the Brazil‐Russia‐India‐China‐South Africa group of countries (BRICS) agenda; the World Telecommunications Standardisation Assembly; and the Southern African Development Community; 
3. implementing and monitoring the approved international engagement strategy by March 2022;
4. coordinating and monitoring the operations of the BRICS Institute of Future Networks over the medium term; and
5. implementing, facilitating and monitoring identified programmes focusing on the digital economy through partnerships with identified partners over the medium term.

 

Budget allocation for programme and sub-programmes is illustrated below:

Over the MTEF travel constitutes the bulk of spending and increases from R3.3 million in 2021/22 to R4.7 million in 2023/24.

The spending focus over the medium term will be transfer of membership fees to international organisations within the communications sector; participating in the global discourse within the United Nations system on telecommunications, postal services, information society and green technology and pursuing bilateral engagement with countries of the South and North.

The Department will over the medium-term focus on developing Country Positions to support the Digital Economy and facilitating the implementation of the International Relations and Engagement Strategy as part of contributing to the Outcome of having in place Enabling digital transformation policies and strategies. Furthermore, the Department will contribute to facilitating the operations of the BRICS Institute for Future Networks towards achieving the outcome of increased access to secure Digital Infrastructure.

With regard to the Outcome: Transformed Digital Society, the department will coordinate the implementation of identified international programmes to support the Digital Economy initiatives.

The planned outputs contribute to the NDP implementation plan outcome of an Inclusive economy, enabled by advanced digital technologies, which provides equally accessible, intelligent and competitive products and services through government and industry while also aligning to Priority 7: A better Africa and world.

 

4.1.3     Programme 3: ICT Policy Development and Research (R52.021 million)

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

The objective of the programme is to enable digital transformation policies and strategies by:

1. implementing the digital transformation policy by March 2024;
2. implementing the SAPO Amendment Bill by March 2024;
3. facilitating and monitoring  the  implementation  of  the  South  African  Broadcasting  Corporation  Bill  by March 2024;
4. facilitating and monitoring the implementation of the data and cloud policy by March 2024;
5. facilitating and monitoring the implementation of the digital economy master plan by March 2024;
6. facilitating and monitoring the implementation of the presidential commission on the fourth industrial revolution report by March 2024;
7. facilitating and monitoring the implementation of the audio‐visual media services and network policy by March 2024; and
8. introducing the Electronic Communications Amendment Bill in Parliament by March 2024.

 

 

 

Budget allocation for programme and sub-programmes is illustrated below:

The Department will over the medium-term focus on implementing a targeted legislative Programme aimed at achieving the Outcome of having in place Enabling digital transformation policies and strategies which will form the foundation of the digital economy. Such policies and legislation will be targeted at stabilising and strengthening its State-Owned Entities.

Amongst the Regulatory Reform Bill and White Paper on the Audio and Audio-visual Content Services will be developed and submitted to Cabinet. Relevant policy, legislation and plans will also be focused on creating a conducive policy environment for the Digital Economy, which will include the implementation of Data and Cloud Policy as well as the coordinating and monitoring of the Digital Economy Masterplan.

Programme 3 will also contribute to the Outcome of a through the submission of Revised ICT SMME Development Strategy submitted to Cabinet for approval. The planned outputs are aligned to the NDP Priority 1: Economic transformation and job creation and the Outcome of Improve competitiveness through ICT adoption.

The spending focus over the medium term will be on ICT Legislation developing in line with the National Integrated ICT Policy White Paper. Over the MTEF, goods and services will decrease from R24.9 million in 2021/22 to R15.2 million in 2023/24. The budgeted amount for travel over the MTEF is R16.1 million and for Consultants: Business and advisory services is R18.9 million.

4.1.4     Programme 4: ICT Enterprise and Public Entity Oversight (R1 799 964 billion)

The purpose of the programme is to Oversee and manage government’s shareholding interest in the ICT public entities and state-owned companies.

The objective of the programme is to improve the performance of state‐owned entities through proactive oversight by:

1. monitoring the service delivery performance and compliance of state‐owned entities against strategic plans and relevant prescripts over the medium term; and
2. facilitating the implementation of a Performance Management System for councillors in the Independent Communications Authority of South Africa over the medium term.

Budget allocation for programme and sub-programmes is illustrated below:

The ICT Enterprise and Public Entity Oversight programme is also contributing to the Outcome: High performing portfolio to enable achievement of their respective mandates however with specific focus on the State-Owned Entities within the portfolio. In this regard the key focus is on undertaking stringent and proactive oversight with regards to Service Delivery performance and compliance of SOEs against strategic plans and relevant prescripts.

Specific focus will be given to strengthening the Regulator through the implementation of the Performance Management System for ICASA Councilors and the facilitating the development of shareholder compacts of Schedule 2 and 3B entities

The outputs of Programme 4 are aligned to Priority 6 of the NDP: A capable, ethical and developmental state and Outcome 2: Functional, efficient and integrated government.

The spending focus over the medium term will be on continuing to strengthen the Department’s ability to exercise oversight over the public entities and the establishment of National e-Skills Institute (iNeSI). The budgeted amount for travel over the MTEF is R13.5 million.

 

4.1.5  Programme 5: ICT Infrastructure Development & Support (R1 039 854 billion)

The purpose of this programme is to facilitate the provision of robust, reliable, secure and affordable ICT Infrastructure that supports universal access to applications and services.

The objective of the programme is to increase access to secure digital infrastructure by: 

1. monitoring and maintaining the provision of broadband services to 970 connected sites over the medium term;
2. securing funding and implementing phase 2 of the rollout of broadband  connections to government facilities over the medium term;
3. facilitating and monitoring the operations of the Digital Transformation Centre by March 2022; and
4. coordinating and monitoring 360 000 subsidised digital television installations by March 2022.

 

Budget allocation for programme and sub-programmes is illustrated below:

The ICT Infrastructure Development and Support Programme contributes towards the Outcome: Increased Access to Secure Digital Infrastructure through undertaking two key infrastructure projects in the form of Broadband roll-out and Broadcasting Digital Migration.

Other related and high impact initiatives are to facilitate the operations of the Digital Transformation Sector and to participate in preliminary technical and regulatory studies to inform draft SA Position SA WRC-23.

Note:

The Department does not make transfers to SITA and BBI. The Department makes transfers to SENTECH, SAPO and USAASA for the project on BDM.

The planned outputs are aligned to the NDP Priority 1: Economic transformation and jobcreation and the Outcome of Improve competitiveness through ICT adoption.

Infrastructure Projects

The project completion date and estimated cost will be determined through after sourcing the Phase 2 funding.

 

4.1.6     Programme 6: ICT Information Society and Capacity Development (R58 288 million)

Programme Purpose

Develop and implement strategies to build capabilities to bridge the digital divide.

The objective of the programme is to contribute towards building a digital‐enabled society through sound and relevant information society strategies and programmes by:

1. facilitating, monitoring and reporting on the implementation of the revised national e‐government strategy and roadmap by March 2022;
2. developing the African Union Artificial Intelligence Blueprint by March 2022;
3. facilitating and monitoring the implementation of the digital and future skills programme by March 2022;
4. reviewing and monitoring the framework on digital transformation and digital inclusion by March 2022; and
5. Contribute towards building a digital society by developing information society strategies and programmes over the medium term.

Budget allocation for programme and sub-programmes is illustrated below:

The Outcome: Transformed digital society focuses on key building blocks for a digital society and the digital economy. Therefore, specific focus will be given to modernisation of business processes within the public sector through the Facilitation of Implementation of the National e-Government Strategy and Roadmap towards digitalization of government services.

Another key issue is addressing the skills gap through the facilitating the implementation of the Digital and Future Skills Programme in line with National Digital and Future Skills Strategy. As well as the Programme 6, will all contribute to the Outcome: Enabling Digital transformation policies and strategies, through the implementation of the Framework on Digital Transformation and Digital Inclusion going forward.

The Department contribute to the Outcome: High performing Portfolio to enable achievement of the respective mandates. The planned outputs are aligned to the NDP Priority 1: Economic transformation and job creation and the Outcome of Improve competitiveness through ICT adoption as well as Priority 6 of the NDP: A capable, ethical and developmental state and Outcome 2: Functional, efficient and integrated government.

Over the MTEF, goods and services will decrease from R28 million in 2021/22 to R22.7 million in 2023/24. The budgeted amount for travel over the MTEF is R12.4 million and for Consultants: Business and advisory services is R25 million.

 

 

 

 

 

 

 

 

5.         Entities Reporting to the Department

Transfers

 

 

 

5.1        ICASA

The Independent Communications Authority of South Africa Act (2000) establishes the Independent Communications Authority of South Africa in order to regulate the South African telecommunications, broadcasting and postal services sectors. The authority is listed as a schedule 1 public entity in terms of the Public Finance Management Act (1999).

It derives its mandate from the following legislation:

1. The Constitution of the Republic of South Africa, 1996;
2. The Independent Communications Authority of South Africa Act No. 13 of 2000;
3. The Broadcasting Act No. 4 of 1999;
4. The Promotion of Administrative Justice Act No. 3 of 2000; and
5. The Postal Services Act No. 124 of 1998.

The policy mandate is derived from the following change agenda:

1. National Development Plan 2030;
2. Broadband Policy (SA-Connect), 2013;
3. MTSF 2021 – 2025;
4. 7 Government Priorities (Priority 2);
5. Policy on High Demand Spectrum and Policy Direction on Licensing of the WOAN, 2019;
6. District Development Model; and
7. Operation Vulindlela.

The impact statement is centred around Access for all South Africans to a variety of safe, affordable & reliable communication services for inclusive economic growth.

The outcomes for ICASA are summarised in table below:

Outcome	Outcome Indicator	Baseline	Five Year Target
Access to quality broadband services increased	Average Download Speed	15 Mbps	50 Mbps
Status of Social Cohesion (inclusive of diversity of views) enhanced	Percentage of status of Social Cohesion (inclusive of Diversity Views)enhanced	-	50%
Rights of Consumers Protected	Level of Consumer Rights Protection	-	5
Competition in the ICT sector promoted	Number of procompetitive regulatory interventions	3	15
Organisational service delivery maintained	Percentage of organisational service delivery maintained	91%	91%

In order to achieve the aforementioned outcomes, the Authority has amongst others; planned the following outputs (targets) for the 2021/22FY: 

• Finalisation of the process to licence IMT spectrum in the 700 MHz, 800 MHz, 2.6GHz and 3.5 GHz bands;
• Issuance of an individual electronic communications network service licence for purposes of operating a wireless open access network; 
• Implementation of the Elections Monitoring Plan (the process will be concluded by the publication of the Elections Monitoring Report in the 2022/23 FY);
• Development of regulations on the Must Carry Obligations; 
• Promulgation of the National Radio Frequency Plan, 2021 (updating of the 2018 NRFP); and
• Development of a Network Performance Management System. 

The achievement of the outputs planned for the 2021/22FY will be pursued against the backdrop of the risks posed by the COVID-19 pandemic. The pandemic has had (and continues to have) a direct and indirect impact on the Authority and its operations. It impacts the wellness of the Authority’s personnel; the manner in which its staff execute their duties and fulfil their functions; the organisation’s ability to interact with its stakeholders as well as the manner in which such interactions can take place (especially in relation to regulation-making processes) etc.

Amongst others, the Authority intends to:

• roll-out an electronic data records management system (to digitize its records);  
• increase the frequency of review of its IT systems (and report on the security of its IT systems); 
• ensure a high level of network and systems availability;
• implement the annual Occupational Health and Safety Plan;
• maintain its level of risk maturity and compliance maturity; and 
• implement a Workplace Skills Plan.  

Over the medium term, the Authority will focus on increasing internet access by licensing the international mobile telecommunications spectrum by 2021/22 thereby increasing access to wireless broadband services, protecting consumers against unfair practices by service providers, increasing competition in the telecommunications and broadcasting sectors, and developing a framework for dynamic spectrum management. The Authority also plans to increase its capability to monitor quality of service through the implementation of a system to manage network performance.

The authority plans to issue 13 community television licences per year over the medium term and monitor 245 broadcasting licences.

5.1.1     Expenditure Analysis

Expenditure is expected to decrease at an average annual rate of 4.2 per cent, from R559 million in 2020/21 to R491.4 million in 2023/24, mostly as one‐off funding of R84.7 million in 2020/21 and R48.2 million in 2021/22 for the licensing of spectrum ends.

As the Authority requires personnel with highly specialized skills to conduct this work, spending on compensation of employees’ accounts for an estimated 74.1 per cent (R1.2 billion) of total expenditure over the medium term.

Total expenditure is set to increase from R520.2 million in 2021/22 to R563.8 million in 2023/24 at an average annual rate of 3 per cent.  

The Authority expects to derive 96.8 per cent (R1.5 billion) of its revenue over the medium term through transfers from the Department and the remainder through interest on investments.

 

5.2        SABC

The South African Broadcasting Corporation is listed as a Schedule 2 public entity in terms of the Public Finance Management Act (1999). Its mandate is set out in its charter and in the Broadcasting Act (1999) and requires it to South Africans with radio and television broadcasting services. It is also required to provide a wide range of programming that displays South African talent in educational and entertainment programmes; offer a diversity of views and a variety of news, information and analysis; and advance national and public interests.

As the national public broadcaster the SABC must offer, in all South Africa’s official languages, a range of informative, educational and entertainment programmes that showcase South African attitudes, opinions, ideas, values, talent and artistic creativity;

Through its programming the SABC reflects South African attitudes, opinions, ideas, values and artistic creativity and talent.

The SABC offers a plurality of views and a variety of news, information and analysis from a South African point of view whilst at the same time advancing the national and public interest.

Like every other public broadcaster, the SABC is facing a world in transition, and has to devise and implement a set of strategic responses to the challenges facing the delivery of public service broadcasting.

The SABC is expected to fulfil its mandate within a very challenging context. In terms of the economic context: 

• Continued subdued economic performance, following a year of significant contraction. It will take time to get back to pre-pandemic levels;
• The continuing effects of the COVID-19 pandemic –unknown impact of anticipated subsequent waves, and the success of the vaccination programme;
• Tax revenues can be expected to remain subdued in line with the national economic activity;
• Debt levels (national, corporate and consumer) will remain high;
• The reduced levels of industry-wide spend by multinational and local advertisers is expected to continue;
• The country’s overall economic performance will have a negative effect on the SABC’s revenue generation efforts, both in terms of advertising revenue and TV licence revenue.

Over the medium term, the corporation will continue to focus on implementing its turnaround plan to ensure financial sustainability. This entails improving the collection of licence fees, and creating new and compelling content to increase audience share and advertising revenue. To support operations that ensure sustainability, the corporation will rely on legislative, policy and regulatory changes by the department.

Among these are the repeal of legislation that mandates pay-tv networks to carry the corporation’s channels for which adequate compensation has not been finalised; and policy and regulatory support that makes it obligatory for pay-tv service providers to oblige their subscribers to have valid television licences.

The corporation is enacting other commercial strategies to increase revenue, audience share and operational efficiencies. As such, the corporation will enhance its focus on new and compelling content.

 

5.2.1     Expenditure Analysis

The budgeting process over the MTEF period aligns to the targeted completion of the SABC Turnaround plan. This allows management to make conclusions on the forecast's successes and achievements of the Turnaround Plan over the MTEF period. Importantly, this budget also highlights areas where continued attention is required in some areas of the business.

Total revenues are expected to grow by 28 per cent, 17 per cent and 13 percent respectively for each of the years from financial year 2022 to financial year 2024.  This growth is driven by advertising revenue. Management expects the advertising revenue growth trend noticed in the third and fourth quarter of financial year 2021 to continue with radio expected to exceed financial year 2020 actuals and financial year 2021 revised targets.

TV licences will average R1.2 billion over the MTEF period with R1.12 billion budgeted for the financial year 2022. This is a budgeted growth rate of 29 per cent in FY2022 and growth of 8 per cent in the following year.

Permanent employee costs are expected to decline by R317 million to R2.06 billion in financial year 2022 and is expected to account for 28 per cent of total costs over the MTEF period compared to 40 percent in financial year 2021 or 38 per cent attained in financial year 2020. No budgeted salary increases over the MTEF period except for expected medical aid contribution increases. ICs increase by 9 per cent for financial year 2022 with return of outside broadcasts planned. No annual increase provision has been made in financial year 2023 onwards, based on the current alternatives being discussed, yet noting the breakeven forecast. The other alternatives to reduce the Payroll, over and above the increases, have not been factored into this Budget

Signal & distribution costs only budgeted to decrease by an average 4 per cent annually over the MTEF (2% reduction in FY2022) period. This is an annual fee reduction of only R80 million by financial year 2024.

Broadcasts cost increase by 50 per cent in financial year 2022 to R508 million due to royalties from revenue growth and audience research amongst others.

There has been an increase in marketing costs by 548 per cent or R152 million to support revitalization of both TV and Radio platforms. This will also support growth in TV licence fee collection. Marketing will average 5 per cent of advertising revenue over the MTEF compared to the 1 per cent for the past three years.

Consulting fees include a R29 million budget for office & studio moves and relocations.

Operational expenses grow due to anticipated increased repairs and maintenance, subscription services for enterprise-wide services, e.g., PABX system, increases in travel as regulations are relaxed, organizational learning and development.

The SABC is budgeted to make a loss of R603 million in financial year 2022 with forecast breakeven in financial year 2023 where operating results have been budgeted at a profit of R150 million.

Expenditure is expected to increase at an average annual rate of 4.2 per cent, from R6.4 billion in 2020/21 to R7.2 billion in 2023/24, driven by increased investment in content, audience research and broadcasting costs.

The corporation expects to implement risk‐mitigation plans and optimise its personnel structure. Accordingly, the corporation’s number of personnel is set to decrease from 2 899 in 2020/21 to 2 523 in 2023/24.

The corporation is mostly a self‐funding organisation. Transfers from the department account for an estimated 3.4 per cent (R644.4 million) of revenue over the medium term, while proceeds from television licence fees account for an estimated 17.1 per cent (R3.5 billion).

The remaining 74.3 per cent (R15.5 billion) is expected to be generated by advertising and other commercial activities. Total revenue is expected to increase from R5.2 billion in 2020/21 to R7.5 billion in 2023/24 due to an anticipated R2 billion increase in advertising and commercial revenue, and a R280 million increase in the collection of television licence fees.

 

5.3        South African Post Office (SAPO)

The SA Post Office is mandated through the Postal Act 44 of 1958 and the Postal Services Act 124 of 1998 to provide affordable and accessible postal and financial services to all South Africans.

These Acts provide for the regulation of postal services and the operational functions of the company, including its Universal Service Obligations (USO), as well as the operation of the Postbank.

The USO mandates the SA Post Office to provide services such as address provision, basic letter and accessible mail delivery and collection services to all under serviced areas.

The SAPO strategy is centered on modernising and digitising the SA Post Office into an organisation that caters to the needs of a modern society. This is executed through five pillars, namely:

1. Multi-channel platform, inclusive of an e-Commerce digital mall
2. Process financial payments via a multi-method payment and financial gateway
3. Store goods via a national warehousing network
4. Send and receive physical items via a reliable and secure national distribution network
5. Provide convenient and better access to government services

Over the medium term, the post office will continue to focus on providing universal access to postal and related services, stabilising its financial position, optimising its personnel to ensure operational effectiveness, and distributing social grants on behalf of the South African Social Security Agency.

 

5.3.1     Expenditure Analysis

Expenses have continued to exceed revenue resulting in continued losses, which is not sustainable. The post office generates revenue through the provision of postal and courier services. Revenue is expected to increase at an average annual rate of 8.5 per cent, from R4.4 billion in 2020/21 to R5.6 billion in 2023/24.

To ensure these imperatives are achieved, expenditure is expected to increase at an average annual rate of 7.5 per cent, from R6.2 billion in 2020/21 to R7.7 billion in 2023/24.

Compensation of employees accounts for a projected 58 per cent (R12.6 billion) of expenditure over the medium term. R1.5 billion over the medium term is allocated to fund universal service obligations to provide accessible and affordable postal services in underserviced areas. This allocation is expected to allow the entity to maintain 2 120 points of presence, including post offices, retail postal agencies and mobile units.

 

5.4        State Information Technology Agency

The State Information Technology Agency (SITA) is governed by the State Information Technology Agency Act (1998), as amended, and is listed as a schedule 3A public entity in terms of the Public Finance Management Act (1999).

The State Information Technology Agency Act mandates the agency to provide IT, information systems and related services to and on behalf of government departments and organs of state. The agency is required to maintain secure information systems and execute its functions according to approved policies and standards.

 

Overview

COVID 19 outbreak has contributed significantly to the changes in the operating environment of government which affects the service delivery environment at large. COVID 19 resulted in a significant improvement in government society’s perception of technology and its role in achieving government priorities coupled with the increased willingness to utilise digital technologies to render and access public services.

Impact of COVID 19 on SITA’s strategic direction is fairly positive, the pandemic has elevated the critical role that SITA plays in the transformation of government and places increased pressure to prioritise the acceleration of the digitization programme.

Most clients are prioritizing the deployment of digital technologies there is an increased demand for connectivity and application development services by most of SITA’s clients. SITA will leverage on this demand and continue to implement digital innovations in government that demonstrably improve the effectiveness, speed and accuracy of public services.

There is a need to review our solution provisioning space implement tactics to ensure rapid service delivery prioritise the resolution of challenges relating to enablement and readiness to deliver.

SITA has five strategic programmes to support its mandate, namely:

1. Thought Leadership: to provide well researched, tested innovative and secure solutions, products and services aimed at digitizing government to improving citizen’s experience of government services;
2. Digital Infrastructure: to optimise and or build the required computing capability such as platforms, networks, storage etc. to enable the provisioning of digital services and solutions at increased availability, flexibility, scalability, predictability and security;
3. Skills and Capability Development: to develop, build and or buy the required digital skills and capability to enable the strategic drive to digitize government while building a culture of performance, accountability, corruption free and consequence management;
4. Financial Sustainability: to ensure effective and efficient financial management and commercial awareness in investment decisions to ensure financial growth and sustainability;
5. Procurement and Industry Transformation: to advance transformation of the ICT sector to stimulate; and economic growth development of local ICT content and radically transforming the procurement capability towards the reduction of unemployment and poverty alleviation, supporting skills development and promoting fair, equitable, transparent and cost effective procurement services.

Over the medium term, the agency will focus on creating partnerships with research institutions to ensure that innovative digital solutions are developed and implemented in government. It will also ensure that the skills of agency personnel keep pace with the evolving technological landscape; and ensuring that the state and its citizens are able to transact, communicate and interface in a secure and safe environment.

 

5.4.1     Expenditure Analysis

Expenditure is expected to increase at an average annual rate of 5.5 per cent, from R7.2 billion in 2020/21 to R8.5 billion in 2023/24. Goods and services accounts for an estimated 65.3 per cent (R15.9 billion) of expenditure over the medium term, mostly for the provision of IT services.

Compensation of employees accounts for an estimated 28.8 per cent (R7 billion) of expenditure as the agency requires highly skilled personnel. As the implementation of the strategic projects such as South Africa Connect, cloud infrastructure and the Gauteng broadband network are expected to require substantial capital investment over the MTEF period, R1.2 billion is earmarked for the acquisition of assets.

The agency generates revenue by providing ICT infrastructure and services to government departments and organs of state. Revenue is expected to increase at an average annual rate of 12.1 per cent, from R6.2 billion in 2020/21 to R8.7 billion in 2023/24.

 

5.5        Sentech

Sentech was established in terms of the Sentech Act (1996) and is incorporated as a State-Owned Company in terms of the Companies Act, No. 71 of 2008. It is listed as a schedule 3B public entity in terms of the Public Finance Management Act (1999). It is responsible for providing broadcasting signal distribution services to licensed television and radio broadcasters.

The strategy for Sentech is optimising existing products for existing customers (core), expanding from existing business into ‘new to the company’ business (adjacent) and developing and inventing solutions for the markets that do not exist (transformational). This is supported by three strategic goals, namely (i) Sustainable business growth; (ii) Enable digitally connected people and communities; and (iii) Achieve excellent customer and stakeholder satisfaction.

Strategic projects include the Digital Migrations where Sentech will drive finalisation of the digital migration process to enable South Africa to realize spectrum efficiency and enhance service quality benefits of migration and to effectively achieve analogue switch-off as outlined in the new delivery model. Sentech is contracted to rollout STBs for the subsidised market and is expected to complete installation of 860 000 STBs by the end of financial year 2022.

Another strategic project is the National Satellite to ensure technological sovereignty now that the technological impasse is developing across the world. Sentech is playing a key role in supporting the shareholder’s aspiration of establishing a South African communication satellite.

The impact statement for Sentech is digital solutions to empower people by bridging the digital divide, the service access gap and by contributing to knowledge, intelligence and a well-informed society. Through this, we will overcome inequality and enrich lives.

The Sentech Board has adopted a set of strategic objectives for the 2021–2025 planning period to ensure that the Company achieves its public service mandate objectives aligned with Shareholder priorities:

Enabling digital transformation policies and strategies: will continues availing capital resources to support the DCDT in establishing a new State Digital Infrastructure company;

Increased access to secure digital infrastructure: Sentech will play a significant role in supporting broadband initiatives including SA-Connect and the rollout of Sentech Connect e-services. Sentech aims to lead digital migration going forward and to promote STB uptake in the short to medium term period;

Transformed digital society: Sentech continues to invest in digital reskilling and upskilling of its employees to ensure a fit for purpose workforce of the future; and

High performing portfolio to enable achievement of their respective mandates: Sentech will continue ensuring effective and good corporate governance and achievement of strategic objectives and mandate.

Over the medium term, the entity will continue to focus on providing customers with satellite services, analogue and digital television and radio services, and streaming services. This will enable the entity to ensure that it provides digital television coverage to 85 percent of households per year, and that digital terrestrial television is available for 99.9 percent of households each year. It will also continue to work towards switching off the analogue signal as part of the broadcasting digital migration project, and will assist the Universal Service and Access Fund with the installation of Set‐Top Boxes.

 

5.5.1     Expenditure Analysis

Sentech’s financial plan reflects the company’s current and, long-term economic goals, risk tolerance, and future expectations. Having delivered solid financial performance in the 2020 financial year, the Company is going into a period of evolution, focusing on maintaining the position of being a leading provider of broadcast signal distribution infrastructure.

This focused view is supported by a strong financial position, and the Company is well positioned to capitalise on the opportunities ahead. Sentech is forecasting a cash balance of approximately R1.9 billion by end of March 2021.

These funds will be used to diversify the company’s product and services in order to address the customer concentration risk, and several projects will be implemented in this regard.

The State Digital Infrastructure Company (SDIC) strategy was developed in financial year 2021, and a sustainable broadband business (SOC Rationalisation) case will be developed in financial year 2022, with optimised cost structures for the merged entity to achieve revenue growth with positive EBIT and net profits.

Increased broadband network coverage and 1 000 sites planned to be connected by the end of financial year 2024 are arrangements earmarked for customer satisfaction, and planned initiatives should improve the customer satisfaction index by 5 percent year on year during the MTEF period.

This financial plan provides insight into Sentech’s financial position for the near future and presents a reference and framework for decision-making. This budget will be used to control expenditures, evaluate plans, and make better decisions when unexpected changes occur.

Sentech is projecting continuing revenue of R1.27 billion and operating expenditure of R1.3 billion from continuing operations, resulting in an operating profit of R154 million for the 2021/22 financial year. It is projected that the analogue network will be gradually switching off and TV revenues decreasing, and even with the STB installation once-off revenue (R25 million) ending in September 2021, resulting in a R19 million (1%) decrease on 2020/21 financial year forecasted R1.3 million.

The Company ought to generate about R500 million new revenues to attain the R1.8 billion goal in the next five years. Operating expenses were increased from the forecasted 2020/21 financial year by the forecasted R1.3 million.

Goods and services account for an estimated 45.7 per cent (R1.8 billion) of expenditure over the MTEF period, mostly for service expenses such as satellite costs; and spending on compensation of employees accounts for an estimated 41 per cent (R1.7 billion) as the entity’s work requires highly skilled personnel. Total expenditure is expected to increase at an average annual rate of 4.4 per cent, from R1.2 billion in 2020/21 to R1.4 billion in 2023/24.

The entity expects to derive 90.6 per cent (R3.8 billion) of its revenue over the MTEF period through television, radio and streaming services rendered to customers, and the remainder through transfers from the Department through project‐specific funding for dual illumination, which is the operation of analogue and digital signals.

Revenue is expected to increase at an average annual rate of 1.4 per cent, from R1.3 billion in 2020/21 to R1.4 billion in 2023/24. There is significant decrease in cash generated from operations in financial year 2022 compared to financial year 2020, and in turn, reduced cash balances due to there being no dual illumination funding in the outer years of the MTEF period.

Additionally, trade debtors cleared balances owed from prior periods in the 2020/21 financial year. Management is positioning the Company for future growth and there will be cash outflows amounting to R200 million per year for M&A transactions during the financial year 2023 and financial year 2024 respectively.

 

5.6        Broadband Infraco

BBI was established in 2007 in terms of the Broadband Infraco Act No 33 of 2007 (the Act) as a State-Owned Entity (SOE). The organisation was registered in 2008 with the then Companies Intellectual Property Registration Office (CIPRO), now known as the Companies and Intellectual Property Commission (CIPC) as an entity owned by the Government of the Republic of South Africa and the Industrial Development Corporation (IDC) of South Africa.

The Company launched commercially on 18 November 2010. Per the requirements of the Companies Act, No. 71 of 2008, BBI was converted from a private company to a State-Owned Company (SOC) with the CIPC with effect from 2013. BBI is a Schedule 2 public entity in terms of the PFMA.

BBI’s legislative mandate and objectives are set out in the Act. The main objectives are to expand the availability and affordability of access to electronic communications, including but not limited to, underdeveloped and underserviced areas (in accordance with the Electronic Communications Act, No. 36 of 2005 (the ECA)), and commensurate with international best practice and pricing, through the provision of electronic communications network services and electronic communications.

The organisation’s purpose is in line with the National Development Plan (NDP) of establishing national, regional, and municipal fibre-optic networks to provide the backbone for broadband access.

The NDP aims to “eliminate poverty and reduce inequality by 2030.” BBI operates on the premise that the national, provincial, and districts backhaul require State intervention to allow services into underserviced areas.

The private sector intervention needs to be complemented by public funds in the form of incentives, subsidies, and grants to address the social objective of connecting all and bridging the digital divide.

BBI provides long-distance national and international connectivity to licensed and license-exempt customers, for projects of national importance and to previously underserviced areas. The existence of BBI is intended to improve market efficiency in the long-distance connectivity segment by increasing available long-distance network infrastructure.

It also avails capacity to stimulate private sector innovation in the telecommunications services and content offerings. BBI is in a unique position to deploy both a commercial and a social mandate, thereby contributing to the competitiveness and development of the South African economy. Essential to the sustainability of BBI is the requirement for the commercial mandate to be competitive and viable, thereby enabling the social mandate of the organisation.

The main objects as set out in the Act are to expand the availability and affordability of access to electronic communications:

• Including but not limited to underdeveloped and under-serviced areas;
• In support of projects of National Interests;
• In accordance with the ECA and commensurate with international best practice and pricing; and
• Through the provision of electronic communications network services and electronic communications services.

Over the medium term, the entity will focus on implementing the South Africa Connect broadband policy, and on expanding and maintaining its long‐haul network to support client needs. This will also include monitoring the performance of the undersea West Africa cable system, which enables connectivity between Europe and Africa. The entity facilitates the connection of 713 government sites to broadband, and aims to maintain the time taken to restore faults on the core network at 7.5 hours.

 

5.6.1     Expenditure Analysis

Over the past few years, the ICT sector continued to experience economic pressure. As a result, revenue generation was difficult; BBI was still able to report an increase in revenue. The momentum for revenue growth is expected to continue to increase with the implementation of the sales strategy.

Revenue is based on signed contracts (including the new contracts signed-up in 2020/21) and existing SA Connect sites connected. Contracts that expire during 2021/22 are included in revenue, based on specific probabilities of retention based on respective client relationships, at prevailing market pricing for similar services. High and low probability pipeline revenue is included at assumed probability percentages. Management also included specific additional opportunities identified within existing and new anchor customers as part of BBI’s growth strategy. The achievement of this growth strategy is imperative for the continued success and sustainability of the Company. The next phase of SA Connect, called SA Connect Phase 1C, for connecting an additional 345 sites, has been included in detail in the financial plan. 

Cost of Sales is based on actual contracted costs and new contracted costs for Eskom and TFR. The Eskom lease costs are expected to increase by more than inflation to mitigate ADLash risk and to extend the core network. Specific contracted reductions and inflationary increases include a year-on-year increase of 27 per cent (including SA Connect). 

Operating Expenditure: average inflation projected at around 5 per cent and specific inflation is factored in for IT costs and building rentals. A key assumption that was made is that BBI will fill critical positions through fixed term contracting of critical resources, as opposed to the current outsourcing arrangements in place. This is done to create flexibility in the workforce during the SOC Rationalisation process currently underway. Overall operating expenditure increases by 17 per cent year-on-year. This increase arises because of the low base of operating expenditure during the 2020/21 financial year. Critical positions remained vacant for a large part of the 2020/21 financial year and ad hoc repairs and maintenance were very low in comparison to the financial plan. 

It is assumed that the Shareholders’ Loans would have been converted into equity by the start of the corporate plan period. This is a critical enabler to the success of this corporate plan.

A further key assumption is that BBI will, for the first time in its 11-year existence, require Shareholder assistance. This is mainly because of BBI rolling out capital infrastructure to the value of almost R411 million over the last five years, only utilising its own cash generated from operations. This included cash that should have been retained to fund its working capital needs. This Shareholder assistance is a critical enabler for this financial plan.

Concluding the Capex spend during the 2021/22 financial year, further described below, will bring the Net Book Value of Assets of the Company to R1.6 billion. 

Trade debtors increase to around R140 million, and collections are budgeted at an average of 60 days.

The deferred income liability is budgeted to reduce to R218 million at year end. The total CAPEX is budgeted at R747 million for the 2021/22 financial year. It covers all the priority 1 projects included in the Capital Plan.

Expenditure is expected to increase at an average annual rate of 4.3 per cent, from R673.7 million in 2020/21 to R763.8 million in 2023/24. This is driven by increased spending on goods and services, which accounts for 55.1 per cent (R1.2 billion) of total projected spending over the medium term, mostly related to the cost of providing connectivity services. As the entity increases its connectivity infrastructure service offerings, revenue is expected to increase at an average annual rate of 9.9 per cent, from R557 million in 2020/21 to R738.5 million in 2023/24.

 

5.7        The FPB

The Film and Publication Board was established in terms of the Films and Publications Act (1996), as amended, and is listed as a Schedule 3A public entity in terms of the Public Finance Management Act (1999).

Its mandate is to regulate the creation, production, possession and distribution of certain publications and films by classifying them; imposing age restrictions on content; and rendering the exploitative use of children in pornographic publications, films or online material punishable.

Over the medium term, the board will focus on improving and automating the registration process for distributors; conducting a targeted 20 000 inspections to ensure compliance with relevant legislation; and reviewing classification guidelines to take into account societal norms, standards and values.

 

5.7.1     Expenditure Analysis

Expenditure is expected to increase at an average annual rate of 4.6 per cent, from R113.8 million in 2020/21 to R130.2 million in 2023/24. Compensation of employees accounts for an estimated 54.7 per cent (R203.4 million) of expenditure over the MTEF period.

The board expects to derive 84.8 per cent (R307.7 million) of its revenue over the medium term through transfers from the department, and the remainder through fees for classification and registration. Total revenue is expected to increase at an average annual rate of 4.6 per cent, from R113.8 million in 2020/21 to R130.2 million in 2023/24.

 

 

5.8        National Electronic Media Institute of South Africa

The National Electronic Media Institute of South Africa was established as a non‐profit educational institute in terms of the Companies Act (1973), and is listed as a Schedule 3A public entity in terms of the Public Finance Management Act (1999).

Its mandate is to enhance the market readiness of students in various broadcasting disciplines and support the development of e‐skills for South Africans. The institute is also responsible for the implementation of e‐skills programmes in collaboration with its partners.

Over the medium term, the institute will focus on implementing its operating model and e‐skills agenda in collaboration with government, education, business and civil society. Identified e‐skills priority areas include government e‐enablement, creative new media industries, e‐inclusion and social innovation. As such, the institute aims to provide specialist technology skills to 17 750 citizens by 2023/24, and increase the number of learners trained in e‐literacy from 30 000 in 2020/21 to 250 000 in 2023/24.

 

5.8.1     Expenditure Analysis

Expenditure is expected to increase at an average annual rate of 1.9 per cent, from R97.4 million in 2020/21 to R103.1 million in 2023/24. Goods and services, mainly rental costs, account for an estimated 32.6 percent (R97.9 million) of expenditure over the medium term, while transfers and subsidies to higher education institutions to fund e‐skills projects account for an estimated 34.8 per cent (R106 million).

The institute derives all of its revenue through transfers from the department, which is expected to increase in line with expenditure at an average annual rate of 1.9 per cent, from R97.4 million in 2020/21 to R103.1 million in 2023/24.

 

5.9        Universal Service and Access Agency of South Africa & Universal Service and Access Agency Fund

The Universal Service and Access Agency of South Africa (USAASA) was established under the Electronic Communications Act, 2005 (Act No. 36 of 2005 as amended by Act No. 1 of 2014) to promote the goals of universal access and universal service in the under-serviced areas of South Africa. Licensees are required to contribute to the Universal Service and Access Fund (USAF) which is intended for use in incentivising and subsidising the roll-out of electronic communications networks in under-serviced areas. 

In executing its role, the Fund is also guided, amongst others, by:

• The Constitution of the Republic of South Africa,1996 (Act No. 108 of 1996);
• The Public Finance Management Act, 1999 (Act No. 1 of 1999) as amended);
• The Preferential Procurement Policy Framework Act,2000 (Act No. 5 of 2000);
• The Broad-Based Black Economic Empowerment Act,2003 (Act No.53 of 2003); and
• The Infrastructure Development Act, 2014 (Act No.14 of 2014).

The National Development Plan, Vision 2030 (NDP, 2012) is the national framework for the development of the South African economy and society broadly. The NDP describes the critical role of innovation, research and development in fostering sustained competitiveness and profitability in the economy, in the face of a world economy that is rapidly transforming into knowledge and network economy.

Evidence suggests that an increase in public investment in innovation, research and development, and related infrastructure and access, will enable South Africa's economic development, competitiveness and sustainable growth.

In turn, the Medium Term Strategic Framework (MTSF) is a high-level strategic document and is the central organising framework to guide the rolling five-year implementation and monitoring of the NDP, Vision 2030.

In response to the strategic priorities of the 6th Administration, and informed by instructing legislation and policy, the Universal Service and Access Agency of South Africa (USAASA) has defined its role/purpose (primary object), in the 2020-2025 Strategic Plan as to:

1. Strive to promote the goal of universal access and universal service; 
2. Foster the adoption and use of new methods of attaining universal access and universal service; 
3. Conduct research into and keep abreast of developments in the Republic and elsewhere on information communication technology, electronic communications services and electronic communications facilities; and continually survey and evaluate the extent to which universal access and service have been achieved; and
4. Manage the Universal Service and Access Fund (USAF) in accordance with the provisions of the Act.

 

USAASA impact statement is Progressive realisation of the goal of universal access and universal service in South Africa. USAF impact statement is Enhanced access to ICT and digital broadcasting services in identified underserviced areas.

The Universal Service and Access Agency of South Africa (USAASA) was established under the Electronic Communications Act, 2005 (Act No. 36 of 2005 as amended by Act No. 1 of 2014) to promote the goals of universal access and universal service in the under-serviced areas of South Africa. Licensees are required to contribute to the Universal Service and Access Fund (USAF), which is intended for use in incentivising, and subsidising the rollout of electronic communications networks in under-serviced areas.

The fund’s sole mandate is to make is to subsidise ICT equipment and services, as well as electronic communications and broadcasting networks for needy people in underserviced areas. The Universal Service and Access Agency of South Africa manages the fund.

The USAASA five-year Strategic Plan, in support of the National Development Plan, reflects USAF’s contribution to strengthening the universal service and access sector, and unlocking its potential to grow the economy, create jobs, and contribute to reduced inequality and reduced poverty. This is in line with the outcome of the 2019-2024 Medium Term Strategic Framework (MTSF) to “improve competitiveness through ICT adoption”. 

 The USAASA Strategic Plan 2020-2025 responds to the following Revised Medium -Terms Strategic Framework Apex Priority Areas: 

1. Priority 2: Economic Transformation and Job Creation; and
2. Priority 3: Education, Skills and Health

USAASA as an administrator as the Universal Service and Access Fund has the following key focus areas for 2021-22 financial year that are administrative in nature:

1. USAASA integrated plan of action in support of the implementation of National Strategic Plan (NSP) on gender-based violence developed
2. Stakeholder Engagement Strategy reviewed by Board and implemented
3. Enterprise risk maturity level from 2020/21 baseline improved
4. 100 per cent of valid invoices paid within 30 days from date of receipt
5. Reduction of wasteful and fruitless expenditure to 20 per cent of R389 000 USAASA AFS 2019-2020 incrementally from baseline of 2019 by 2024
6. Reduction of irregular expenditure to 15 per cent of R32.2 million USAASA AFS 2019/2020 incrementally from baseline of 2019 by 2024

The USAF Strategic Plan 2020-2025 responds to the following Revised Medium -Terms Strategic Framework Apex Priority Areas: 

1. Priority 2: Economic Transformation and Job Creation; and
2. Priority 3: Education, Skills and Health

In response to the strategic priorities of the 6th Administration, and informed by instructing legislation and policy, the Universal Service and Access Fund (USAF) has defined its role/ purpose (primary object) in the 2020-2025 Strategic Plan as to:

1. Provide connectivity to primary health facilities, educational institutions and needy communities;
2. Provide incentives to network licensees to construct, operate and maintain networks in underserviced areas; and
3. To broaden access to digital broadcasting services by qualifying households.

USAF key focus areas for 2021-22 Financial Year are as follows:

1. A total 810 000 subsidized Set-Top-Box installations coordinated and monitored in four (4) provinces (Free State, Northern Cape, North West and Limpopo);
2. A total 2 266 474 DTT subsidised digital television installations coordinated and monitored;
3. A total 289 058 DTH subsidised digital television installations coordinated and monitored;
4. Provision of broadband internet connectivity to 280 sites to identified local municipalities;
5. A total 100 per cent of valid invoices paid within 30 days from date of receipt;
6. Reduction of wasteful and fruitless expenditure to 20 per cent of R4 million USAF AFS 2019-2020 incrementally from baseline of 2019 by 2024; and
7. Reduction of irregular expenditure to 15 per cent of R63.5 million USAF AFS 2019-2020 incrementally from baseline of 2019 by 2024.

Over the medium term, USAF will focus on the implementation of the Broadcasting Digital Migration project, which will ensure the release of much‐needed spectrum. The fund will also provide sites with Internet connectivity and maintain these connections.

 

5.9.1     Expenditure Analysis

Carrying value of assets of which: Acquisition of assets Receivables and prepayments Cash and cash equivalents is estimated at R3.3 million for 2021/22 financial year.

The agency is allocated R350 million over the MTEF period through transfers from the department. This will mainly be used to implement phase 2 of the broadcasting digital migration project, which is expected to be completed during the MTEF period. Of this amount, R95 million will be paid to the South African Post Office over the medium term for distribution costs.

Total revenue is expected to be at R 177 million in 2021/22 financial year, down from R256.6 million in 2020/21 financial year. It will further decrease to R86.8 million over the medium term. Total expenses for 2021/22 financial year are projected at R177  million down from R365.6 million in 2020/21 financial year. The downward trend in total expenses is projected at R86.9 million by 2023/24 financial year.

Compensation of employees is projected at R62.3 million during 2021/22 financial year with goods and services at R114.8 million in the same period. Total transfers received are projected at R177.1 million for 2021/22 financial year.

For USAF, the total expenses are estimated at R1.14 billion in 2021/22 financial year, a stark increase from R666.6 million in 2020/21 financial year. There is an estimated steady decline in total expenses at R127.4 million in 2023/24 financial year.

The fund is allocated R1.4 billion over the medium term, mostly for implementing projects related to broadcasting digital migration. This funding is expected to increase from R500.4 million in 2020/21 to R1.1 billion in 2021/22, and will be used to provide vouchers to low‐income households for devices that will allow analogue televisions to receive digital signals once the analogue signal is switched off.

The fund derives all its revenue through transfers from the Department and has no personnel. Total revenue is expected to decrease at an average annual rate of 39.1 per cent over the medium term as the one‐off allocations for broadcasting digital migration conclude in 2022/23.

Total USAF revenue is projected at R1.4 billion during 2021/22 financial year. It is set to decrease to R127.4 million in 2023/24 financial year. Transfers received are estimated at R1.4 billion in 2021/22 financial year and will decline to R127.4 million in 2023/24 financial year.

Total expenses for the administration of broadband infrastructure and connectivity as well as Broadcasting Digital Migration are estimated at R663.5 million for 2021/22 financial year. These expenses are set to decrease over the medium term to R127.4 in 2023/24 financial year.

 

 

 

5.10      .ZA Domain Name Authority (.ZADNA)

.ZADNA is a statutory, not-for-profit entity established in terms of Chapter X of the Electronic Communications and Transactions (ECT) Act 25 of 2002 to administer, manage and regulate the .ZA namespace.

In addition to the statutory responsibilities, .ZADNA is normally expected, and sometimes required, to assume secondary responsibilities that are associated with domain name industry and the Internet community. These are: 

dotCities, .ZADNA oversees the operation and policy setting for the ZACR-operated dotJoburg, dotDurban and dotCapeTown (dotCities) that launched in 2014. The ICT Policy White Paper has entrenched .ZADNA's dotCities role as it stipulates that the domain name regulator must now endorse and manage current and future dotCities

Internet Governance, .ZADNA participates actively within ICANN processes that relate directly to the Domain Name System 

(DNS). This is because of the strong linkages existing between regulating a ccTLD such as .ZA (a .ZADNA function) and developing policy for the DNS (an ICANN function). .ZADNA also participates in AfTLD, AfriNIC and the United Nations' Internet Governance Forum (IGF) .ZADNA serves as the Secretariat to the South African Internet Governance Forum (ZAIGF), which assumes the responsibility of convening the ZAIGF on an annual basis in conjunction with the Department of Communications and Digital Technologies and other stakeholders.

 

5.10.1   Expenditure Analysis

No financial performance information provided.

 

6.         Committee Observations

6.1        The Department

Having considered the Strategic Plan and APP of the Department, the Committee noted:

1. its appreciation for the good work done by the Department and its entities;
2. that the role of South Africa in the BRICS landscape was to seek strategic alliance in areas of common interest such as joint research and innovation;
3. with great concern that National Treasury has stopped the application for funding the distribution of IDTV’s to indigent matriculants;
4. that the Western Cape DTT rollout will commence in September 2021;
5. with concern of the budget shortage of R970 million which negatively impacts BDM service delivery;
6. that the Department was engaged in awareness campaigns for purchasing of STBs with SABC and other radio stations as well as mobile operators;
7. that the BDM process was subject to various challenges such as disgruntled installers due to non-payment;
8. with great concern the ability of the Department and its entities to meet the Broadcasting Digital Migration (BDM) deadlines;
9. with greater concern that the R194 million allocated for SA Connect was not sufficient and would be used primarily to maintain the 970 sites already connected; and
10. with concern that ICT management at the Department is flagged as a high risk consistent with the findings of the Auditor General.

 

6.2        ICASA

Having considered the APP of ICASA, the Committee noted:

1. its appreciation for the presentation made by ICASA;
2. that ICASA was operating in a naturally litigious environment; 
3. with concern that the temporary allocation of spectrum may not continue, especially whilst the litigation processes are in place;
4. with concern the vandalism and theft of base station equipment as well as raise awareness of the substantial criminal sentences meted out therefore;
5. noted that ICASA faced budgetary constraints. However, the Department was able to assist with additional funding, particularly for spectrum auction; 
6. that ICASA has requested to National Treasury for additional funding for critical programmes that have not been met;
7. that the “Must-carry” process was underway and that ICASA awaits draft regulations in order to conduct a consultation process;
8. that the timeframes for finalization of regulations will be concluded in this financial year with the deadline for input being 21 May 2021;
9. that the term of ICASA councilors will soon be coming to end with one vacancy to date; and
10. commended ICASA for the progress made thus far in an attempt to auction spectrum.

 

6.3        SABC

Having considered the APP of the SABC, the Committee noted:

1. its appreciation for the presentation received from the SABC;
2. and commended the SABC for indicating that the entity may break even in its financial position;
3. with concern that the SABC 3 channel remained operating at a loss;
4. that advertising services was the bulk of SABC’s revenue;
5. with concern that the method of collection of licence fees was not effective and not sustainable as a revenue generation stream;
6. with concern the unavailability of sufficient funds for the unfunded mandates;
7. that the Sports Broadcasting Regulations had enabled the SABC to obtain broadcasting rights, and as such it will be broadcasting the upcoming Olympic games;
8. that the Annual Performance Plan lacked adequate details as to the use of streaming platforms, which could greatly assist in revenue generation;
9. that SABC’s strategic partnerships do not include the private sector;
10. with disappointment that the SABC did not yield to its directive that retrenchments be implemented as a last resort;
11. that SABC service providers are paid within 30 days from receipt of invoice in compliance with the PFMA;
12. that the SABC has conducted a comprehensive audit of all properties and received approval for disposal;
13. that discussions on signal distribution costs with Sentech were at the final stages;
14. that the SABC does not have any plans to close down any of its radio stations; and
15. that sales and revenue performance have increased over the last two quarters.

 

6.4        USAASA/USAF

Having considered the APP of USAASA/USAF, the Committee noted:

1. its appreciation for the presentation made by USAASA/USAF;
2. with concern that the entity appears to lack the necessary capacity and relevant human capital to deliver on its targets;
3. and welcomed the appointment of the interim Board and supported it in its work on the turnaround strategy;
4. with concern that the Board has been appointed for an “interim” period with ambiguity on the time frames of the appointed of the Board; and
5. that the unsubsidized households have not been adequately factored into the planning thereby increasing the risk for low or no uptake of unsubsidized STBs.

6.5        SITA

Having considered the APP of SITA, the Committee noted:

1. its appreciation for the presentation made by SITA;
2. and commended SITA for the good work to date;
3. that the caretaker commits to working with the interim Board to ensure a smooth transition;
4. that SITA is collecting all monies and not writing off any debts owed by government departments;
5. That SITA was signing multi-year contracts to ensure invoices are sent out on time and request for payment within 30 days;
6. that Home Affairs requires to update its systems and improve its ICT infrastructure taking note of all the complaints targeted at SITA;
7. that SITA was working well with the South African Police Services (SAPS) and R500 million has been spend on its IT services  and on the track and trace system, which is saving costs for that Department;
8. that SITA was in the process of developing a system to ensure integrated government systems; and
9. and commended the progress made in cleaning up procurement processes.

 

6.6        SAPO

Having considered the APP of SAPO, the Committee noted:

1. its appreciation for the presentation received from SAPO;
2. and welcomed the appointment of a Chief Executive Officer;
3. and commended the appointment of six regional managers;
4. with concern the numerous bailouts received by SAPO over the last few years and questioned whether a further bailout strategy would work;
5. with concern that universal service obligation subsidy was received by SAPO in addition to trying to enforce a postal monopoly; 
6. that the delivery standards of SAPO have increased;
7. that SAPO motor licensing department has shown improvement by R7 million;
8. with concern that staff morale was below 60 per cent;
9. with concern that landlords were not paid on time;
10. with further concern that suppliers have not been paid;
11. with concern that the financial statements of the entity have declined;
12. with concern that SAPO indicated that 16 post offices were closed for owing rental totaling R 4 million; the committee questioned the accuracy of these figures;
13. with great concern that some SAPO offices are without power;
14. with concern that the separation of SAPO and Postbank will lead to the financial detriment of SAPO; and
15. with disappointment that SAPO competitors were way ahead when it comes to service delivery.

 

1. Sentech

Having considered the APP of Sentech, the Committee noted:

1. its appreciation for the presentation made by Sentech and the update received in respect of progress of implementation of BDM;
2. and commended the entity for its role in the transformation on SMMEs and BBBEE;
3. that Sentech fees and charges structure was based on the CPI which amounts to 3 percent;
4. that Sentech informed the Committee that due to the fact that OTTs affect the success of public broadcasting in general, it will continue to assist the SABC by offering assistance on digital broadcasting; and
5. that Sentech is prepared for the risks of a possible Covid-19 third wave although the STBs installation may be affected as installers would not be able to move around freely.

 

1. .ZADNA

1. Having considered the APP of .ZADNA, the Committee noted:

1. with appreciation the presentation made by .ZADNA;
2. with appreciation for the clean report received by the entity;
3. that .ZADNA provides assistance to women, youth, people living with disabilities and new entrepreneurs;
4. and commended .ZADNA for services supplied to public schools with domain names;
5. that .ZADNA was developing its own training programme;
6. with concern that .ZADNA relies on external services for the internal audit functions;
7. with great concern that the target for the development of a registry framework was not attained, which unfortunately speaks to the core mandate of the entity;
8. that .ZADNA was using external resources for legal capacity to develop this registry framework;
9. that in preparation for the third wave of COVID-19, the entity holds awareness campaigns online;
10. that strategic partnerships of .ZADNA include CIPC to boost cyber registration; the FPB on child safety online guidelines, NEMISA from a digital skills perspective and MIC SITA to deliver on 4IR economy amongst others; and
11. that .ZADNA will undertake a DNS practitioner programme which will be formally accredited.

 

6.9        BBI

Having considered the APP of BBI, the Committee noted:

1. its appreciation for the presentation made by BBI;
2. and commended BBI as being one of the best performing entities;
3. that engagements about the merger between BBI and Sentech were at an advanced stage;
4. that there currently is no need for consideration of a Public Private Partnerships in respect of the formation of a State ICT Infrastructure Company;
5. and commended BBI for the achievement of APP targets responding to service delivery and support; and
6. that the R100 million funding requirement in the funding plan was intended for capital investment in the network.

 

 

6.10      NEMISA

Having considered the APP of NEMISA, the Committee noted:

1. its appreciation for the presentation made by NEMISA;
2. that the costs related its course offering are reasonable;
3. that NEMISA will continue to ensure that enrolled interns receive financial support; and
   1. with appreciation that NEMISA is currently in discussions with SABC to assist young people to participate in programs on a freelance basis;
4. that NEMISA is responsible for digital skills training and accreditation for all citizens;
5. that NEMISA works closely with the Department of Basic education in order to ensure that skills are imparted and in particular, with provincial departments;
6. that NEMISA has seven co-Labs in different provinces with various networks such as NGO’s, in order to reach all citizens;
   1. that in the medium term 2 more co-Labs will be established in the remaining provinces;
7. that courses done at NEMISA can be accredited; and
8. that NEMISA was preparing for the Covid-19 third wave by ensuring that it fully rolls out online learning and continue to deliver virtual training on digital platforms.

 

 

6.11      FPB

Having considered the APP of FPB, the Committee noted:

1. its appreciation for the presentation made by FPB;
2. and welcomed the newly appointed Board at the FPB;
3. that the core mandate of FPB is effective content regulation; 
4. with concern that vacant positions are still prevalent at FPB, in particular the prolonged acting position of the Chief Executive Officer; and
5. cautioned against acting in positions for lengthy periods without appointments;
6. with concern that some content classification is not adequate especially in movies with extreme violence;
7. with appreciation that the FPB plans to conduct campaigns to educate public, especially children and youth on cyberbullying;
8. with further appreciation that the FPB is working with schools and communities in this regard;
9. that the FPB has not demonstrated new fruitless and wasteful expenditure;
10. with concern the lack of ICT skills at the FPB because of the low pay grade thereby discouraging the Board from soliciting specialised ICT skills; and
11. positively that FPB also uses the services of SITA however also has a database for service providers that fall outside the skills base provided by SITA.

 

7.         Committee Recommendations

7.1        The Department

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

1. provides the Committee with clear timelines in respect of the rationalisation of entities reporting to the Department including conversion of USAASA/USAF into the Digital Development Fund;
2. ensures that processes are in place to fast-track the BDM process and to avoid delays. 
3. implements processes to ensure the challenges around the delivery of the BDM resolved;
4. and its entities provide clear timeframes to meet the Analogue Switch OFF (ASO) for BDM;
5. and its entities utilise SITA platforms to address ICT challenges;
6. puts in place processes for the efficient delivery of the DTT voucher system;
7. secures adequate funding to improve the distribution of the voucher system to all indigent households;
8. takes decisive action to clean up under performance across all entities;
9. provides stringent time lines on its plan to fill vacant positions in all entities entity;
10. reports back to the Committee on mitigating factors for inadequate funding of all its entities including the Department;
11. provides quarterly updates on the BDM implementation process and roll out targets;
12. provides detailed plans of the Department relating to implementation of BDM to the unsubsidized household market;
13. considers revising dates for the tabling of amendments to legislation to Parliament to be sooner than 2023; and
14. continuously and quarterly updates the Committee on all processes relating to rationalisation, recapitalisation and repurposing of its entities including protecting the independence of ICASA.

 

7.2        ICASA

The Committee recommends that the Minister should ensure that ICASA:

1. put emphasis towards mitigating litigations even though it operates in a highly litigious environment;
2. reports back to the Committee on stakeholder consultation strategy to mitigate litigations;
3. continues with the allocation of temporary spectrum provided it serves to relieve congestion of networks during COVID-19 and is not in direct contradiction with the litigation processes;
4. must promote awareness in communities through awareness and education campaigns, amongst others in order to ensure that communities are aware of penalties imposed for theft and vandalism of base stations;
5. reports back to the Committee on an awareness and education campaign action plan;
6. promotes policy coherence and consistency when finalising the “Must Carry” regulations; and
7. takes steps to address its funding challenges in order to avoid the collapse of the regulator and thereby the halt of service delivery.

 

7.3        SABC

The Committee recommends that the Minister must ensure that

1. the Broadcasting Act is amended expediently to ensure relevance of the SABC in the digital economy;
2. systems are in place to deal with the operating loss of the SABC 3 channel;
3. effective strategies are in place to improve the collection of TV licence fees;
4. challenges borne out of Sports Broadcasting Regulations are addressed and that the Committee must be updated in respect thereof;
5. the streaming services platforms ecosystem is adequately explored to identify opportunities for the public broadcaster to compete as a content provider as well, so as to capitalise on the advantages of subscription-based funding models, which will assist with revenue generation for the SABC and reduce its heavy reliance on variable advertising revenue";
6. the SABC develops efficient strategy to invest in compelling content;
7. the SABC addresses audit findings as indicated by the Auditor-General; and
8. the SABC submits a detailed report on the audit on disposal of assets as well as an indication in terms of adherence to the laws of the country in carrying out those processes.

 

7.4        SAPO

The Committee recommends that the Minister must ensure that:

1. SAPO puts processes in place to improve customer satisfaction;
2. security concerns at SAPO are resolved and evaluated continuously even though SAPO indicated an improvement;
3. strategies are put in place to improve staff morale;
4. processes are in place to timeously pay rentals to landlords;
5. suppliers are paid on time;
6. SAPO improves its financial position and urgently addresses the going concern issues;
7. all SAPO buildings undergo maintenance;
8. SAPO puts in place processes for comprehensive service delivery; and
9. SAPO management sends comprehensive answers in writing to questions not answered during the session.

 

 

7.5        USAASA/USAF

The Committee recommends that the Minister must ensure that USAASA/USAF:

1. fills all critical vacancies;
2. undertakes remedial plans to ensure adequate capacity is developed to deliver on its targets;
3. provides a detailed plan on building capacity and investment in human capital to deliver on its targets;
4. strengthens its internal controls;
5. improves on irregular, wasteful and fruitless expenditure with intent to eradicate the malpractice in the near future;
6. improves on irregular and wasteful expenditure targets;
7. improves on its supply chain management system;
8. provides clear tracking timelines relating to Analogue Switch Off to digital;
9. addresses all matters raised by the Auditor-General are and all targets improved; and
10. fast-tracks the digital migration implementation process.

 

7.6        SITA

The Committee recommends that the Minister should ensure that SITA:

1. upholds the uptime and maintenance of its ICT networks;
2. assists municipalities to achieve seamless integration with variety of service delivery ICT systems;
3. automates all procurement processes including reporting on cancellation of tenders so that there is an online profiling specifically for public scrutiny; and
4. implements processes for a cohesive track and trace system.

 

7.7        Sentech

The Committee recommends that the Minister should ensure that Sentech:

1. plays a central role to speed up the distribution of Set-Top-Boxes (STBs).

 

7.8        . ZADNA

The Committee recommends that the Minister should ensure that .ZADNA:

1. creates an online template to monitor service delivery objectives;
2. undertakes a collaborative approach with NEMISA to achieve efficient results; and
3. achieves the target of the development of a registry framework.

 

7.9        BBI

The Committee recommends that the Minister should ensure that BBI:

1. implements a coordinated approach with Sentech and SITA to promote connectivity;
2. reduces irregular expenditure with intent to eradicate the malpractice in the near future; and
3. fills all vacancies for critical positions.

 

7.10      NEMISA

The Committee recommends that the Minister should ensure that NEMISA:

1. improves its performance and delivery targets.

 

7.11         FPB

The Committee recommends that the Minister should ensure that FPB:

1. fills all vacancies including to prioritise the position of CEO; and
2. continues to deploy adequate systems to ensure the wellness of employees who are regularly exposed to violent and sexual content because of the nature of the work of content review.

The Democratic Alliance (DA) reserved its right on the Budget Vote report.

 

The Committee recommends that the House approves Budget Vote 30: Department of Communications and Digital Technologies.

 

Report to be considered.