Department of Communications Strategic Plan 2013/2014: briefing by Auditor-General & Department of Communications

Meeting report

The Chairperson invited Members to raise questions on an earlier presentation made by the Department of Communications (DoC).

Mr A Steyn (DA) asked members of the Assessment Board how many targets had been missed. It would appear that the homework had not been done when the targets were set. There were insufficient resources set out and not enough provision had been made for consultation. This was why the targets had not been reached. He asked why the targets had been set if the resources were not in place. A budget needed to be in place. Members had not been told what the funding options were. He asked if the targets in the second quarter were cumulative. If not they should not have been included in the third quarter report.

Mr Steyn said that a serious problem was the DoC's oversight over the state owned enterprises (SOE) under it. If an intervention plan had been identified, he asked why it had not been implemented. Gauteng had a project to get schools on-line. He asked if it was part of the project reported by DoC. Memorandums of Understanding (MoU) between departments had been delayed. He asked if this was why the Free State had taken on a private company to manage its website at great cost.

Ms W Newhoudt-Druchen (ANC), speaking through a sign language interpreter, noted that 62 targets had not been covered. Only three targets in terms of gender, children and disability had been achieved. She had noted that 600 schools were still not connected. 54% had been connected.

Ms J Kilian (COPE) was a little concerned where the DoC had given itself a mark of achievement where it did not seem to have been achieved. The Department might have been a bit lenient in its assessment. Things did not look good even by their own assessment. There were many examples, but she used the adherence to good corporate governance standards as an example. The scorecard should have been in place before the target was set. The SOEs had not been monitored adequately, and this could not be regarded as an achievement. She wanted to know how this could be recorded as achieved. She was also concerned by specific areas of under-performance. Integrated Communications Technology (ICT) policy development was clearly an important area. This was a lot of focus on the international market, but this was not where the priority should lie. She wondered if the focus of DoC should not rather lie domestically, by making communication cheaper and expanding the broadband network. This latter area she regarded as a dismal failure.

Ms Kilian said that DoC had said it was difficult to evaluate the number of jobs created, but had reported on 30 000 new jobs. She asked how this could be monitored. The DoC should be a catalyst for job creation in the ICT industry, but she wanted to see the evidence. She asked what had happened to a Green Paper process. Legislation could not be amended without a comprehensive overhaul of the industry.

Ms R Lesoma (ANC) felt it was not clear which document was under discussion.

The Chairperson asked Members to stick to the presentation made previously.

Ms M Shinn (DA) said that the major issue facing South Africa was the restricted radio frequency plan. She had not seen any indication of how the spectrum would be allocated. There did not seem to be any progress. International affairs had seen eight out of 21 targets met. This had been one of the programmes in the previous reporting period that had spent almost all its budget. As more than half the targets had not been met, she expected a significant underspend.

Ms Shinn said that in terms of broadband, the adjusted expenditure report for the previous year had shown that the there had been no penetration in the first half of the year. In the budget for the current year, the target was 7%. She wanted an explanation on how this would be measured as it seemed like a guess.

Ms A Muthambi (ANC) asked how many new members had been appointed by the Minister to the ICT policy committee. They should come from the industry. There were two representatives from Multichoice and one from eTV, but no-one from the South African Broadcasting Corporation (SABC). MTN was the only cellular network not being represented. According to her calculations, meetings would cost DoC R4 million. It seemed that the mandate had been outsourced. The public broadcaster might be compromised. She asked if there was a different role for the panel compared to that of DoC. Policy making was the job of the Department. She asked how the funds would be sourced. She asked how ready the Department was to roll out set-top boxes for the digital migration. She asked who would finalise the implementation plan. On human resources (HR), many targets had not been reached due to HR constraints. Members were tired of hearing this story. She asked why it was so difficult to appoint people. She asked how much had been spent on consultants. She asked it was necessary to move people in the Department, as there should be in-house capacity. One of the challenges was the DoC's oversight role over SOEs.

Ms Muthambi said that most of the quarterly targets had not been achieved, and she was concerned over spending patterns.

Ms S Tsebe (ANC) was concerned over the achievement of targets. She was concerned that one of the slides had not been corrected even though DoC had realised the error. It betrayed a lack of confidence.

Ms R Morutoa (ANC) asked about job creation.

The Chairperson called for honest answers to the questions.

Mr Steyn had some more questions. On the funding of the project management team, he wanted to know what the source was. An interim figure of R3.8 million had been reported. He did not know what was still outstanding. On the analysis of quarterly reports, it seemed that meetings had not been held with the SOEs. He asked if this meant that reports to be presented in the current series of meetings had not been interrogated by the Department. Two meeting had been held with the inter-branch co-ordinator. It was reported that the terms of reference had been adopted, but no meetings had been held. Something did not gel. On International Computer Driver's Licence (ICDL) training, this was part of creating jobs and there was no progress due to a lack of response from the colleges. He wanted to know how this process would be expedited. On restructuring, the process had been delayed due to objections from the trade unions. Members had been told earlier that the unions were on board. This could have far-reaching consequences.

Ms Kilian asked what was being done to speed up matters.

The Chairperson went through the different progress and noted that more than half of the targets had not been achieved. There had been delays with the majority of them. He asked what role was played by internal audit. Only the third quarter was under discussion and there might have been similar problems in the other quarters.

Mr Gift Buthelezi, Acting Director-General, DoC, explained that the quarterly report had been presented as it was. The role of internal audit was important.

Ms Lesoma interjected.

Mr Buthelezi said that a committee had been established to determine the basis of internal audit. A number of issues were not being taken on. There were capacity issues. The quality was not good. KPMG had been appointed at one stage to assist. The bigger audit committee worked with the Auditor-General (AG). The Deputy DGs present were all on the performance board. Performance based on personality was a challenge. If the DG of the day did not like one, resources were not allocated. This was the culture DoC was trying to deal with.

Mr Farhad Osman, Chief Director: Senior Performance Management, DoC, said that where relevant targets had been rolled over, this informed future planning. This might lead to some repetition. Electronic systems were in place which categorised targets as achieved, partially achieved or delayed. All directors had to account for their performance. Reports were presented to the audit committee and relevant evidence made available to the AG. The performance were monthly. Two had been held and one delayed. The terms of reference had been adopted at a later meeting. The October meeting had not been held due to the non-availability of members.

Mr Jabu Radebe, Acting Deputy DG, DoC, said that Gauteng on-line and the school connectivity project were separate issues. DoC had undertaken to connect 1 650 schools. Of these 600 were still outstanding. This was 54%.

Mr Themba Phiri, Deputy DG: ICT Policy, DoC, said that there had been meetings with the Premiers of Free State and Mpumalanga, leading to MoUs. DoC had a long-standing website project. The FS was told that the DoC would invest in the project. Young people would be employed to conduct workshops and implement the programme. The two issues were unrelated.

Mr Sam Vilakazi, Deputy DG: Administration, DoC, said that DoC had taken another look at its priorities. Some of the targets were not key projects despite having budgets and the opposite applied in other cases. It was a collective process. Lower priority areas would be dealt with later.

Mr Buthelezi said that DoC was trying to get the SOEs to follow its example on the working with women, children and those with disabilities. There was a lot of programming with schools and Further Education and Training Colleges (FET). These latter institutions reported to the Minister of Higher Education. There was agreement on the processes. It might be better if Members were to exert their influence over the Minister of Higher Education and the provincial departments.

Mr Vilakazi said that the target on good governance spoke to a specific area. Entities had to keep up with developments, hence the need for a scorecard. This was just one component of the overall activities of oversight. There were a host of measures to ensure good corporate governance with the SOEs. Regular follow-ups were made. There had been a recent exercise to check on levels of compliance. An oversight branch had been created but the Deputy DG was still to be appointed. The Minister would soon be convening a panel to conduct interviews. There was one chief director, two directors and one deputy director.

The Chairperson asked what these people were doing.

Mr Vilakazi replied that the role of officials was to co-ordinate activities at an SOE level. Documents needed to be completed and reports made. SOEs were given feedback on their performance. On-site meetings were held. Issues ranged from compliance to action plans on queries from the AG. Some entities were performing well. Where there was poor co-operation the Minister would intervene. Turnaround times were fast. The other party had to address the issues, resulting in delays at times.

Ms Kilian asked if the DoC believed that the relationship between itself and the entities was not what it should be. The Department was setting a poor example in corporate governance. The DoC should take the lead.

The Chairperson wanted to know which entities were at fault.

Mr Vilakazi said that some entities had delays on occasions. Some others, such as the SABC, were frustrating due to their continued lack of response. This delayed the submission of consolidated reports. Some took legal advice before answering any question.

Mr Phiri answered on policy review. There was a committee of 22, appointed by the Minister. There were some vacancies. About R1.2 million had been budgeted for meetings. National Treasury (NT) issued guidelines on remuneration, which were strictly followed. There had been no nomination from the SABC. The Minister was concerned. There had been a junior nomination from the Independent Communication Authority of South Africa (ICASA). The DoC staff supported the panel through a committee comprising senior management members with various skills. Most committee members had full-time jobs already so the research was mainly done by DoC members. Policy documents were circulated to all members. A consultant to MTN served on the committee. They did want to be represented and had made representation to the Minister, although the consultant could represent them. Broader representation was important. He would not support the view that the DoC had outsourced policy work. Participatory discussion was the national way. Disparate views were received and considered in the formulation of policy. In the White Paper process all these options had to be considered.

Mr Phiri was hoping that SABC would submit a senior nomination. It would be a problem if all the competitors were on the panel but not them. On set-top box manufacturing, the delay had been due to court action being taken. There had been recommendations made on the DoC's last visit to Parliament. There were weekly readiness meetings for the digital migration. Consultations on the eTV saga had not been concluded. The set-top box issue was critical to the delivery of the project. Once funding was obtained the process could advance. On the cost of communication, there was some collaboration with the council. The process relied heavily on ICASA exercising its regulatory functions. The DoC could not play this role. ICASA needed funding for this project, and the DoC was willing to help in this regard.
 
Mr Phiri said that ICASA had a legal requirement to keep data. A number of issues were being discussed, such as the impact of MTRs on small operators such as Cell C.

Mr Radebe said that broadband policy had gone to the Minister for consideration. DoC would work out a strategy based on the policy. Work had started on developing a strategy. Some key priorities, such as connecting schools and police stations, had been determined. Subsequent to the broadband target being set, there had been a study on the situation. A basket of measures had been devised. This was monitored on a quarterly basis.

The Chairperson said that the jump from 0 to 7% penetration was a huge one.

Ms Shinn said that the initial estimate came from the adjusted Estimate of National Expenditure (ENE) published in September 2012. The projection was 7%, but there was 0% achievement in September 2012. In the budget vote, the expectation was 7%. She wondered if this could be achieved in a week.

Mr Radebe said that the figures were based on the implementation of a broadband implementation plan. It was difficult to have a ball-park figure, and the market was divided into sectors. He did not think the total would be achieved.

Ms Shinn wanted clarity on the figures published in the ENE. She no longer knew what to believe.

Mr Phiri said his colleague was correct on the complexity of the matter. There were various forms of broadband. In 2010 there was already a 4% penetration. The global figure was 2%, increasing to 4% in 2011. There was a growth of 1 million subscribers annually, and this amounted to about 7%. The growth was faster than in previous years.

Ms Shinn said the figures were obviously unreliable.

Ms Muthambi said that it did not help connecting the schools if there were no computers available. No-fee schools could not afford computers, and needed to be given these. The Department of Higher Education had to be involved. On the ICT panel, people were nominated as individuals even though there was supposed to be broader representation. On MoUs there was a reference to some department. At local municipal level, she asked if there were any MoUs with municipalities. There might be unnecessary duplication. There could be more contradictions. Finally, she was concerned that the DoC did not really exist. Some assistance was needed. With the next meeting with the Minister, an explanation was needed on whether delays were due to executive approval.

Mr Radebe said that the concept of the connectivity project was that DoC would look after the connection and the Department of Basic Education (DBE) the infrastructure such as computers and internet access. DoC decided to provide computers in classrooms and internet connections for a two year period after which DBE would take over.

The Chairperson asked if the schools reported as connected all had computers. He knew of cases where they were not. A list of those with computers should then be given to the Committee. Members had seen schools which just had a connection point on their oversight visits.

Mr Radebe said that in terms of an agreement with Telkom, 1 650 schools were connected to the internet. The understanding was that DBE would provide the computers. This was not happening, so DoC had helped out some of the schools.

Ms Newhoudt-Druchen said that DoC had the partners to connect the schools fully.

Mr Radebe said that very few schools had been connected with the total solution.

The Chairperson asked that the full list be provided.

Mr Steyn requested that the global positioning system (GPS) co-ordinates be included to ease Members in oversight visits.

Ms Shinn said that the connectivity was not the total responsibility of DoC. She suggested that a meeting be held with DoC, Telkom and DBE in the following term to assess what was being done, and if the teachers had the necessary training.

Mr C Kekana (ANC) stressed the importance of having a maintenance contract in place. There had to be provisions for services, but also for upgrading of hardware and software as technology moved on. Things went wrong, and instant servicing was needed.

The Chairperson felt that the situation was a complete mess, not all due to the fault of DoC. A silo approach had been taken. Operators were becoming frustrated. Private companies were ready to help, but government had to provide leadership. This element was lacking at present.

Mr Vilakazi added that on the organisation performance assessment board, it was correct the board monitored the overall performance of the Department.

The Chairperson found it hard to distinguish between the roles of this board and internal audit.

Mr Vilakazi said that there were pre-determined areas in which the two bodies operated. The nature of internal audit was to assist management. The Board looked into quarterly reports. It sat after each report was presented, and managers had to explain their failure to achieve targets. The problem emanated from the overall make-up of the strategy. There had been a shift away from this concept at present. Only achievable targets would now be included in the strategic plan.

Mr Buthelezi said that one of the weak areas was the inability to take disciplinary measures against defaulting divisions. Managers would now be tied to delivery. The morale of those that were working hard was being undermined.

Mr Phiri said that in July 2012 a public call for nominations to this panel had been made. A committee was established at DoC involving the Deputy DGs and policy experts to short-list the nominees for the Minister. The criteria followed the terms of reference, which had been published at the same time. The set of skills considered included economics, broadcasting, engineers, business development, law and policy-making. The appointment of the panel was the Minister's responsibility. DoC had decided that, looking at global trends, where policies had been put out, and new laws were to be set, empirical evidence was needed on performance. Canada and Egypt were used as examples. It would have been subjective to say an area had performed well or not. The executive committee had been given a recommendation that a stand-alone report was needed. It was also recommended that although policy issues had been given to the Department, guidance was needed on policy issues. The tender for a service provider to do this had not yet been awarded. In the submissions received, it was clear that there was not a single entity that could give an across-the-board solution. There were local entities that could provide limited services.

Mr Phiri said that the policy review panel was expected to give recommendations on policy issues. The best approach for an integrated model was needed. These markets were converging. The policy outlook was supposed to follow the technological advancements being made. There were views around the systems approach. The question was on how best to use infrastructure in an integrated environment. The service provider would have to review each sector. Policy choices had to be made. It would be difficult to separate policy analysis and policy advice if those making the recommendations were not part of the process. The budget for meetings and professional services was included in the overall budget. Funding should come from this budget.

Mr Phiri said that there were difficulties in quantifying job creation across the sector. The private and public entities would report on their own sectors, but the total picture might not be provided. There were not sufficient funds and criteria to create data. Job surveys were done on a regular basis by Statistics South Africa. Questions had to be crafted carefully, and DoC did not have enough capacity to monitor job creation. A report had been submitted to the Cabinet lekgotla in January 2013.

Mr Jim Paterson, Director: Multilateral, DoC, reacted to the opinion that there was too much focus on the international aspects. He did not feel that enough was being done, in fact. There were many international meetings shaping policy and sharing best practice. There had been enormous benefits to the country from involvement with the international community. The focus on digital migration came from the International Communications Union. He listed a number of projects undertaken with international partners. These covered a wide range of communications aspects. Significant investments were being made in broadband and measures were needed to reduce the amount of spam traffic.

Mr Paterson said that South Africa had some expertise to share with the continent and the world.

The Chairperson appreciated the report, but the question was why there was a lack of performance on the domestic scene.

Mr Moseamo Sebola, Chief Director: Bilateral, DoC, said that where there were bilateral issues, it was very different to multilateral forums. The Department of International Affairs and Co-Operation co-ordinated these meetings. If meetings were not held, the targets could not be achieved. It took a while to establish firm relationships with counterpart countries. There was a lack of capacity. The Chief Directorate was established in 1996. It was difficult to work with cooperation, and this led to delays. The unit was functioning, but there were problems in some areas.

The Chairperson felt that a number of reasons were being offered. He asked why things were being put forward which the DoC could not achieve. That bilateral meetings took time to set up was not a new story.

Mr Vilakazi said that the R1.2 billion reflected on the slide was what went to the entities. The rest was used in the Department. The full budget was R2.6 billion. The transfer to community radio had been affected since the presentation. The transfer to NEPAD had been suspended as it had limited value, and the money would be re-allocated.

Mr Vilakazi said that there was a long-standing commitment to filling vacancies. There was a process to review the organisation. Wide consultation was held. The new structure had been approved, and the next step was migration and filling positions. This was a weakness in DoC, which realised that it needed to move.

The Chairperson said that more headaches were being caused by the revelation that the lack of leadership was preventing decisions being made on filling vacancies.

Mr Vilakazi said the problems was around constituting interview and appointment panels. The leadership had since taken a collective view that the process should be expedited. Eleven key positions had been filled in 2013 already. The DG had wanted to sit on every committee, and her limited availability had delayed the process. The decision to fill positions lay firmly with the current leadership. At the current rate of progress capacity concerns should soon be alleviated.

Ms Muthambi asked for an explanation of expenditure.

Mr Steyn said that the HR issue had been addressed, but he had not had an answer on the question of unions.

Mr Vilakazi said that some of the programmes that had been planned could not be implemented, and funds had been redirected to other entities. DoC had had to find money for the African Cup of Nations projects from its own coffers for SABC and ICASA. Some critical programmes were also responsible for driving expenditure. About 70% of the budget went into transfers. There was a history of a lack of a relationship between unions and leadership. The unions were now on board in the migration process. This issue should be completed by the end of May 2013.

Mr Buthelezi thanked the Committee for the inputs made. Sixteen of 21 posts advertised would be filled by May 2013 at senior management level. No bonuses would be paid to senior management given the overall poor performance of the Department.

The Chairperson said that the public should be protected from rising costs. ICASA should deal with the intricacies. Departments could not run away from their responsibilities. Part of the problem of broadband integration was cost. He did not want to hear about discounts on cellular calls from ICASA, but wanted to know what the actual call costs were. The cost of communication had to be reduced. Discounted rates for calls after midnight did not help. The level of competency of DoC staff had to be addressed.

Auditor General on predetermined objectives of 2013/14 Annual Performance Plan
Ms Zanele Nkosi, Office of the AG, said that performance was evaluated against predetermined objectives. This was a regulatory obligation. Guiding legislation included the Public Finance Management Act (PFMA), NT and Public Service regulations. There were specific criteria. The three main criteria were compliance with regulatory requirements, usefulness and reliability. The approach was to understand the performance management system, and then test the design.

Mr Nkosini Mashagne, AGSA Acting Senior Manager, said that the findings were measured against the three criteria. A report was made if more than 20% of targets were not achieved. This might include the reasons. There might be an adjustment, and material details would be included.

Mr Mashagne presented an overview of what had been done. The final draft of the 2013/14 Annual Performance Plan (APP) was considered. In the DoC, 5% of indicators sampled were not clearly or unambiguously defined. There were no findings on the verifiability of the process and system. No findings were reported on the relevance of indicators to the mandate of the DoC. Six out of 26 targets were noted as not being specific enough. Six out of 26 targets (23%) were found not be measurable. No findings were reported on the time deadlines included.

Mr Mashagne said that issues raised had been discussed with the DoC.

Mr Mashagne continued that the Institute was a combination of National Electronic Media Institute of South Africa (NEMISA), ISSA and E-SKILLS. Five out of thirteen indicators (38%) were not well defined. Two out of thirteen indicators (15%) were not relevant to the mandate of the department. Six out of sixteen targets (37%) were not specific. Seven targets (44%) were not measurable. One (6%) was not time bound. Discussions were proceeding.

Mr Mashagne had received some feedback from KPMG on Sentech. Some targets were found to be not attainable, not describing the nature of performance and were not well defined. These issues were now being resolved.

Mr Mashagne said that technical indicator descriptions were needed for all performance indicators. They must be published on the entity's website. DoC and the Institute had not prepared nor published the technical indicators as prescribed, but this had been done after discussion between the parties.

Mr Mashagne recommended that planning documents should be reviewed independently within the Department, and should comply with the framework issued by NT. Oversight committees should be put in place. The entity should develop technical indicator descriptions.

Discussion
Mr Steyn asked for clarification on the lack of findings. Secondly, there had been discussion on the findings that were made. He noted that technical indicators has been done subsequent to the report being made. He asked what the time frame was. He would like to see a full report showing which indicator had been found to be not conforming.

Ms Newhoudt-Druchen said that if targets were not clear, there might be a link to the fact that the indicators were not achieved. When targets were not clearly identified, she asked if AG assisted in making the changes or simply set a deadline.

Ms Lesoma asked how non-performance was addressed. The Acting DG had reported that in the past there had been a subjective review of performance. She asked how AG assessed DoC. She understood that the audit committee was chaired by an outside person. The AG was independent. She asked what role inter-personal issues played.

Ms Muthambi noted that AG charged the DoC for its services. She asked what the AG's assessment was of the functionality of the audit committee. If it was good, then the issues raised by members would not have arisen.

The Chairperson reminded Members that only twenty indicators of the total of 105 had been sampled. The two numbers should not be confused. He did not know if the sample was chosen fairly.

Ms Morutoa said that the Committee had raised serious issues of capacity. She asked if internal controls were in place, and how effective these were.

Ms Nkosi replied that where no findings were reported, it meant that nothing was found untoward in the sample used. She did not have the report with her, but would forward it to Members. This was a review of 2013/14 Annual Performance Plan (APP), and would not necessarily connect with historical performance. Where indicators were vague it could lead to a lack of performance due to the difference in interpretation. The AG was active in most departments, normally using that department's accommodation. This did not compromise its independence. There was a service fee. The strategic plan for 2013/14 was smaller than that of 2012/13, and the size did influence the sample size.

Mr Mashagne said that the DoC audit committee had been investigated over time, and had been given the green light. This did not mean that everything was perfect. A workshop had been held recently and there had been agreement on the regulation of expenditure. The AG had highlighted the high vacancy rate, especially at senior management level. This contributed to non-achievement. A stable leadership was needed to address this issue. There was not a permanent presence at DoC, but there was an annual audit and this took some time. He hoped that their presence at DoC would encourage good governance. Internal controls were evaluated regularly. The vacancy rate was compromising internal controls and financial management.

Ms Nkosi said that the interactions and dashboards were in place to enhance the performance of DoC. Although the recommendations were not as specific as they could be, they were helping the Department to perform.

Mr Buthelezi said that the AG was doing what they needed to do in terms in performance. They were spending more time at the Department than planned as the internal audit function was found to be lacking in cases.

The Chairperson said that the AG was now camping at the department at some cost.

Mr Vilakazi said that the issue of internal audit had been discussed at the Audit Committee. Some measures had been taken. The new FY should see an improvement.

The Chairperson said that AG was still camping while there was a structure of incompetent people in the internal audit role.

Mr Buthelezi said that action would be taken. It would be discussed at the audit committee. The cost of the AG's services was about R2 million. Action would be taken on internal audit.

Ms Lesoma was worried about the Department's lack of concrete proposals. She was not comforted by what she had heard. There should be some separation, but she felt that Members were not hearing the full story. The technical issues of supply chain management and training were not being addressed.

Ms Tsebe asked what AG was doing. The AG had said that consultants must be done away with, as they were doing the work of people already employed the job. The AG was acting like a consultant in the lack of a proper internal audit function. If this committee was in place, they should clearly be fired.

Ms Muthambi said non-performers should be disciplined. Action was needed and the Acting DG must develop an appetite for this.

The Chairperson noted that DoC had expressed a commitment to turn the Department around. The problem was with people earning a salary but not doing their work. DoC had gone to the length of appointing a performance assessment board to do the work which should be done by internal audit. Perhaps these people should appear before the Committee, which now found its oversight role at a dead end. AG could not be a permanent component of DoC. Skills should be developed if needed. Without the skills, there would be continued non-performance.

Ms Nkosi said that AG was not a consultant. Their job was auditing, finding problems and making recommendations to remedy the situation.

Mr Mashagne said it was not the work of AG to manage entities. They would try to influence changes to better governance practices.

Afternoon session

Department of Communication: Strategic Plan 2013/14
Mr Gift Buthelezi, Acting Director-General, DoC, outlined the strategic alignment of DoC.

Ms Kilian noted that the document had been changed from the one presented the previous week. The dates on the cover had been updated.

The Chairperson said that the only changed would be in the market analysis section.

Ms Morutoa felt that the document had changed.

Mr Phiri said that one of the trends was the decreasing use of fixed lines. Cloud computing was a new concept. Small, medium and micro-enterprises (SMME) were making increasing use of ICT. The mobile sector continued to grow The penetration rate was estimated at 128%. The fixed line sector would continue to under-perform. Telkom would need to reconsider its position. Spending on ICT services would depend heavily on government programmes. Spending on consumer electronics would grow by about 11%. There was greater mobile and broadband penetration. There was continued growth in digital television. Consumers were more prepared to spend on ICT products. Most people in the country had personal computers.

Mr Phiri said that the four sectors of the ICT market accounted for 7% of the gross domestic product. Two large operators in the mobile sector continued to grow. Other services such as mobile television and banking had been introduced. There were an estimated 7 million internet users in 2011, about 14% of the population. The forecast for 2013 was that this number would increase to 8.25 million.

Mr Phiri said that in terms of broadband, new licences in the 2.6 GHz and 700 to 800 MHz bands would allow for more players to enter the market. SABC remained the biggest broadcaster and attracted the most advertising. Its growth rate, despite challenges, was about 9% year on year and they were servicing their debts. Top TV had been disappointing, struggling to survive against DSTV Multichoice. They had raised a number of policy issues, the relaxation of which would assist them.

Mr Phiri said that by 2010 there were 2.6 million DSTV subscribers, and this number was growing rapidly. Online services were growing. The revenue of the IT sector grew from R60 billion in 2008 to R61.8 billion in 2009. the postal sector continued to grow, with the SA Post Office still having the major share.

Mr Buthelezi said that there were five top priorities. These were broadband, broadcasting digital migration, e-skills, Postbank and the ICT Policy Review. There was still a lack of adequate broadband structure and penetration. Costs were high and competition limited. Rural areas were particularly under-served. The digital migration programme was part of a global trend. The current analogue systems hampered growth.

Mr Buthelezi gave a number of reasons for the ICT Policy Review. ICT market convergence needed to be modernised. Infrastructure had to be modernised. Increased accessibility was needed, particularly in the rural areas. Job and skill creation had to be addressed. Affordability was needed. Market structure challenges had to be addressed. Universal access to services was needed by 2020. The regulatory imbalance had to be addressed.

Mr Buthelezi said that the PostBank had to be better used to bring banking services to the unbanked section of the population. South Africa had slipped from 47th to 72nd place in terms of e-readiness globally. Skills had to be developed in the ICT sector. By 2020, ICT should be a part of Early Childhood Development programmes.

Mr Buthelezi said other priorities were public and community broadcasting. ICT research was needed. The radio frequency spectrum was also an issue, as was cybersecurity.

Mr Vilakazi said that three categories of risk had been identified. The first was digital migration, in that international deadlines might not be met. There might be delays in finalising ICT policy. The target of 100% broadband penetration by 2020 might be missed.

Mr Vilakazi gave an overview of the strategic plan. The structure of DoC had been revised to five programmes. These were Programme 1: Administration, Programme 2: International Affairs, Programme 3: Policy, Research and Capacity Development, Programme 4: Broadcasting and Communications Regulation and Support; and Programme 5: ICT Infrastructure Support.

Mr Osman presented the strategic goals. The first was enabling the maximisation of the ICT sector. Objectives included inclusive economic growth through the development of ICT policies. There were a number of targets regarding the development of legislation.

Mr Osman said that the second goal was ensuring that ICT infrastructure was accessible, robust, reliable, affordable and secure. Objectives included increased broadband coverage and accessibility, efficient management of the radio frequency spectrum and managing digital migration, The analogue transmitters in the Free State and Limpopo would be the first to be switched off.

Mr Osman said that strategic goal 3 was the acceleration of social economic development. Objectives included enhancing the e-skills capability through the establishment of a dedicated facility. Another objective was enhancing the ICT capability of SMMEs. The third objective was improving ICT research and development.

Mr Osman said that goal 4 was improving the performance of the ICT SOEs. Objectives included efficient and effective oversight, and enhanced departmental performance through institutional processes. The final strategic goal was contributing to the global ICT agenda. Objectives included active participating in international forums and exploring and exploiting trade opportunities.

Mr Vilakazi said that gaps had been identified in the HR capacity. There were other areas where DoC was struggling to meet challenges. A number of initiatives had been put in place, including bursaries and sourcing scarce skills. It was difficult to secure skills in the environment. Remuneration was a challenge in the face of the private sector competing for skills. Retention skills would be put in place, together with succession planning.

Mr Osman said that it was critical to evaluate the effect of the policies being put in place. There was planning to maintain internal capacity.

Mr Vilakazi presented historical figures on finances. For the 2013/14 FY, the budget was R2.0 billion, of which R1.1 billion would go out as transfers. A small amount of R132 million was allocated to ICASA and R138 million to the SABC. Broadband would have to be sponsored by Treasury.

Discussion
The Chairperson said that this was a sweeping statement.

Ms Shinn said that there seemed to be a disconnect between DoC and Treasury. In the budget speech, the Minister had said that there would be no funding for broadband as the strategy was not ready. Yet, DoC had said earlier in the day that the policy had gone to the Minister and would soon be presented. On the legislative programme, on the ENE, the Post Bank Limited Bill and various other pieces of legislation would be enacted during 2013. Different time-lines had been presented in another document. What was missing was the amendments to the Electronic Transmission Act, which would be crucial to the expansion of e-commerce. She did not believe that these Bills would come to light in 2013.

Ms Shinn said that a lot had been allocated to salary increases and consultants. One of these should be sacrificed in favour of the other approach. She highlighted figures from the document presented to Members. On set-top boxes, there had been a lengthy discussion on the 5 million subsidised sets. Only R240 million had been set aside in the budget. She was not sure if this was the total cost, or just the 70% subsidy. There was some doubt over how many boxes would be subsidised based on census figures. She did not think that the country could afford to pay this amount in subsidies given the other challenges facing the economy. Importing boxes might make more economic sense.

Ms Newhoudt-Druchen said that 600 schools were not connected. This would hamper the ambitions to do ICT training at early childhood level. A few market related issues had been mentioned. DoC had been unable to tell the Committee how many jobs would be created. Members needed a number. She had seen an advertisement in the newspaper regarding the digital migration. She asked what the cyberhubs entailed. At a school meeting there had been discussion on cyber bullying and pornography. There was no law to speak to this. She asked why bursaries for DoC staff had declined. There was an increase in business and consultancy services, and she wanted an explanation. She asked why the allocation for contractors had gone up. She queried the big increase for departmental agencies. There was now a big amount for foreign cooperation where there had been nothing in the past. There were a number of cases where there had been steep increases in consultancy services.

Ms Kilian was under the impression that only the six new slides on the market analysis had been inserted, but noted that there had been other changes. She noted that the sector and market analysis was useful, but what was needed was trend analysis. Some aspects such as cloud computing might be interesting but still insignificant. She asked why certain figures were given in US Dollars and the rest in Rand. There was a reference to the need to align broadband and spectrum policy. In some places, key areas under DoC's mandate were listed. It seemed that there was a move in the DoC to take over radio spectrum management. This was really a matter for ICASA to control. On the one hand DoC was telling the Committee that it wanted to achieve 100% broadband penetration, but on the other hand it was seen as a risk. The Department was growing, and salaries were growing, but DoC might run out of time. She asked if there would be cuts to other aspects of the Department's programme.

Ms Kilian said that the organisation was growing. She agreed that the number of objectives should be reduced. She asked if some functions of the entities were not being duplicated. DoC would be growing while the rest of the world was trying to shrink government. She asked about recruitment policies. Perhaps the wrong people were being employed, and they then needed to go for more training. Retention strategies should be in place. One of the major problems was the turnover of qualified staff. They should be retained for some time, or have to pay back their bursaries. She was concerned that the impact of the DoC would not match its size. Rural towns did not have the number of users and finances to attract major contractors.

Mr Steyn was wondering how many of those in the room would still be around in 2020. Smaller bites were needed to monitor the funding better. In terms of broadband, one of the concerns was the number of targets not being linked to budgets. In the third quarter, 72 % of the budget had been spent but only 42% of the targets had been met. There was a lack of strategic focus on public facilities. His visits to the provinces were not convincing him that targets on broadband would be met. In one case, there was a budgeted figure of R5 million but nothing had been allocated. The same targets were presented year after year, money was being spent but nothing was achieved.

Mr Steyn did not understand the huge increases either. In Programme 4, there had been a big increase in consultants and outsourced services. DoC was left with about R1 billion, but he could not see what it what was being spent on. The Department should become leaner and meaner, and concentrate more on policy. In Programme 3 there had been a reduction. The way it was phrased implied that the use of consultants in that case would save costs.

Ms Lesoma asked if the DoC thought it would meet its target. Ms Nkosi of the AG had highlighted the lack of proper technical indicators. She hoped that the use of consultants was in response to the needs of the Department, which needed the technical know-how to exercise its oversight role. She stressed the need to retain scarce skills. She would like to see the finances expressed in percentages. She hoped that the institution of scorecards and weighting would not compromise the DoC.

Ms Morutoa said that the role of the DoC should not become confused. She asked if the DoC could clarify its role in the radio frequency spectrum management.

Ms Muthambi wanted to know which companies were involved in the learning process. She asked if Telkom was involved. In the sector analysis, the source of the information was not quoted. On declining fixed line subscriptions, she asked what policy and regulations were being developed as a result. It might be time to reduce the regulatory requirements. More incentive might be needed to invest. She asked how much the increase was for SMMEs adopting ICT. On increased digital investment and cloud computing, she asked what the drivers were and what the investment was. On the future lower rates for broadband, she asked what government planned to do.

Ms Muthambi asked how social media such as Facebook and Skype influenced the communications environment given their lack of investment in infrastructure. She asked what Programme 4 actually entailed. None of the targets on ICT investment seemed clear. She asked what was being done to promote and protect investment and jobs. On the digital migration, she asked what the targeted national switch off date was. She asked what the implications the short-fall in funding for set-top boxes would have for the programme.

Mr Gift Buthelezi, Acting Director-General: Department of Communications (DoC), in answering the question on how the Independent Communications Authority of South Africa (ICASA) related to the DoC said that ICASA was accountable to DoC as an entity in the sense of its funding and performance. The DoC was responsible for determining how much revenue ICASA was making in relation to the market available. DoC was playing a number of roles that were not limited to policy making and interacting with the entity.

Mr ThembaPhiri, Deputy Director-General: ICT Policy, responding on the baseline for slide five of the presentation said that this could be obtained from the Analysis Report made by the DoC and sent to the Committee. On the DoC policies undertaken on underperformance and under-investment, the DoC undertook several study missions to Malaysia and Australia to gain an understanding of how these countries had dealt with the declining trend in subscription and how operators that had established mobile operators had come up with ideal strategies. This exercise had led the DoC to a workshop with Telkom that informed the strategic view on the currently existing regulatory burdens that Telkom faced. Persistent challenges needed a comprehensive review and ultimately a clear policy guide coming from the ICT review process.

Mr Phiri said other issues included whether or not to do local loop unbundling as one of the strategies in light of the competition. Telkom as a fixed infrastructure operator would be deemed to have a significant share of the infrastructure market. The concern was that the broadband policy had a very specific function expected of Telkom. Investment by Telkom would help the country to achieve broadband quicker given its fast network.

With regards to over-the-top, Mr Phiri said that this was an on-going international discussion that related to mechanisms for regulating Voice over IP (VoIP). Adoption for services like Skype was increasing but the point was how those that were operating these services were benefiting from them. This was something that the International Telecommunication Union (ITU) was handling in terms of telecommunications policy globally. There was fear that international regulations would affect the price of services which would ultimately affect the consumer. There was however a downward trend in the cost of mobile internet services.

Mr Phiri informed the Committee that in terms of the market view on licensing, it would be good if the finalisation and the allocation of radio frequency spectrum was finalised. The matter was sitting with the Minister in terms of the policy directive and once finalised would be issued to ICASA to effect the process. In terms of sharing of the database between DoC and ICASA, DoC initiated a project of establishing a data warehouse and there was a discussion on the extent to which DoC would store and what kind of data could be stored. There was a joint agreement with ICASA that the same database was to be installed at ICASA for which DoC had paid. The law enjoined ICASA to collect much more important information that DoC would not be able to collect because of the sensitivity of such information, competition and its safety. The agreement was that DoC would keep information important for the economic analysis of the sector and the policy impact. ICASA’s populated database would not be accessible by DoC.

In terms of the market incentives to encourage investment, South Africa had a huge potential for broadband growth. There were infrastructure limitations in terms of the desired speed but there was much market potential. One of the key drivers for this market would be the data market given the number of available internet service providers.

With regards to set-up-box and digital migration readiness, Mr Phiri said that the country was not ready for switch off and that the timeline of 2015 for digital migration would be hard to meet because of the need to update the project plan with most of the entities. The planning of the migration would not be less than three months with the new estimation of 2016 being the year to conclude digital migration. During migration broadcasters would lose a lot of money especially where they were broadcasting in both digital and analogue. Such challenges required extended discussion with the broadcasters so as to create certainty on the implementation of digital broadcasting. Added to this was the challenge of skills capacity in the digital migration office of DoC that had to be resolved in filling the positions in the structure.

Mr JabuRadebe, Acting DDG: ICT Infrastructure Development,  replied about the set-top-box, saying the DoC knew what to do and the numbers involved but due to a lack of resources, this could not be completed. The DoC could only subsidise 300,000 set-top-boxes – more subsidisation would be done if funds became available.

Mr Radebe said that the cyber security hub was meant for identifying cyber threats and addressing them. A centre would be established in South Africa to monitor attacks on critical networks and share information with other centres globally in a bid to get solutions. It would ensure the continuous monitoring of the network considering that the processing of basic necessities like water and electricity depended on ICT and so protecting the critical infrastructure was important. The National Cyber Inspectorate would be established to monitor illegal activities on the internet and have these reported to the police.

In terms of the broadband policy and what the National Treasury was reviewing, Mr Radebe said that there was only one broadband policy initiative led by DoC. Following the finalisation of the policy, DoC would come up with a strategy that would inform the implementation plan. The Minister would, upon the finalisation of the broadband plan, present it to the National Treasury for consideration for funding.

Mr Radebe replied that spectrum was critical to broadband. Broadband access could not be realised if spectrum access was not addressed.

Mr Phiri in response to a question on the reasons for the SAPO Bill amendment said that the Constitutional Court had made a judgment in relation to the South African Post office (SAPO) pension fund. A timeline had been imposed within which an amendment had to be made and so it was necessary for the legislature to attend to this amendment in accordance with the timeline.

In terms of the Digital Terrestrial Television (DTT) performance period (when to switch off and when to switch on), Mr Phiri said that ICASA had made regulations in December 2012 in which it was provided that the Minister would determine the performance period. DoC was currently at the consultation phase but the Minister would eventually issue a notice in the gazette on the performance period itself. He added that there were a number of factors to be considered such as: When would the set-top-boxes be available on the market? Whether the broadcasters were ready with the content? How far had Sentech gone with the signal distribution for DTT?

Dr Sam Vilakazi, Deputy Director-General: Administration, addressing the make-up of the DoC budget said that the budget was structured in a way that 76% of the allocation went to the entities. The DoC would be left with about 23% after the various transfers to the entities. In terms of salaries, the increase from 2012 to 2013 was not that significant. DoC developed a new structure as a result of the organisational review process and although the vacancies increased to a higher number, there was no funding available from National Treasury to attend to the new structure. The National Treasury advised DoC to use the current budget to fill in the new structure.

Dr Vilakazi replied on the use of consultants, saying the intention was not to rely on consultants but rather to fill positions and reduce their use. Of a total budget of R2 billion, R83 million had been spent on consultants, giving a true picture that there not much reliance on them.

In terms of accessibility and public awareness, Dr Vilakazi said that DoC had raised this matter and the agency working on public awareness was factoring in disability in the programming. With regards to DoC human resources, bursaries and recruitment of the right people, DoC was facing a number of challenges and that it had inherited a number of legacy issues such as persons appointed to positions they were not qualified for. The skills audit was looking at the gaps for purposes of addressing this challenge. The DoC had since taken an approach of not recruiting unqualified persons to the DoC. The bursary policy had been revised to cater for external students.

The Chairperson said that DoC had to make some tough decisions by identifying those occupying critical positions (that required function and skill) for which they were not qualified. This has to be done through the available internal policy mechanisms.

In terms of Progamme 4, Dr Vilakazi said that this dealt with oversight where the transfers to the entities were housed. On whether State-Owned Entities (SOEs) were clear about their responsibilities, he said that the lines were clear about what the SOEs were expected to do in terms of the Framework. Any non-compliance by the SOEs to the Framework was not because they did not know what to do. A Deputy Director-General would be appointed in this portfolio to strengthen the oversight function.

With regards to duplication of roles, Dr Vilakazi said that DoC had introduced planning sessions with entities to ensure that they adhere to the Framework put in place by the DoC.

Mr A Steyn (DA) asked for the difference between consultants, contractors and agency support outsource service.

The Acting Director-General said that the cross-sized nature of ICT required specialised skills for DoC to assist other Departments and hence the need for specialists in various areas to assist and train e-skills.

The Chairperson said that the broadcasting unit of DoC had to be dealt with because there was work at a standstill such as community radios.

NEMISA: 3^rd Quarter Report – 31 December 2012/13
Mr Takalani Nwedamutswu, Chief Operating Officer: National Electronic Media Institute of South Africa (NEMISA), informed the Committee that NEMISA had five strategic priorities. In terms of the first strategic objective on technology, research, training and development, Centre of Excellence in ICT, a lack of resource allocation hinder the growth of NEMISA into a fully-fledged Research and Development Centre. Out of the five programmes that NEMISA was registered for to deliver high quality training, only four had been accredited. The accreditation status for the fifth programme had not been confirmed due to the migration of the authority for accreditation from the Sector Education and Training Authority (CETA) to the Council for Higher Education (CHE). Pursuing accreditation was still in progress as well as looking for solutions for the warm bodies.

With regards to the summative assessment which includes verification and internal moderation, Mr Nwedamutswu said that the assessments had been finished and that NEMISA was only waiting for other processes that dealt with verification by the Education & Training Quality Assurance Bodies (ETQA) and SETA so that the outcomes would be endorsed. In terms of the functional library, this was not fully functional due to minimal resources. The current alternative was online access for students to supplement the referencing that they would need for their assignments in addition to subscription to newspapers. Benchmarking that was to be conducted for the Graphic Design programme was held back due to limited resources. There was not much progress on research reports because the Research Unit had not been set up due to resource restraints.

With regards to the second strategic objective of financial viability, in terms of the revenue that can be generated by NEMISA outside of the allocation received from National Treasury, Mr Nwedamutswu said that proposals had been made to a number of companies and entities such as MTN and Gauteng Film Commission although there was a setback due to a lack of a tax clearance certificate. There was content production for fundraising such as the community radio project that was into the second phase of mentorship, planning for the marketing of the National Digital Repository, signing of a memorandum of understanding with Sankambe for animation production. Talent management in terms of performance appraisal was ongoing.

On the third strategic objective for a secure, efficient and effective organisation, Mr Nwedamutswu said that a Workplace Skills Plan was drafted and implemented. In preparation for the next financial year, performance management had been reviewed.

With regards to the extensive student outreach strategy, Mr Nwedamutswu said that a media campaign with SABC for student recruitment had not been done due to the integration of the three entities forming the Institute. Due to resource constraints, learner exhibitions had been scaled down.

Ms Moira Malakalaka, Chief Financial Officer (CFO): NEMISA, addressed the Committee on the quarterly finance report for the period October 2012 to December 2012. At the time of the report, there was a surplus of R547 809 unlike the previous financial periods were losses had been made. NEMISA’s request for additional funding from National Treasury was rejected and so it was working with a limited budget.

The CFO informed the Committee that for the period April to December 2012, NEMISA had thus far received an appropriation amount of R25.6 million from the DoC out of the R34 million for the year. For the other income recognised, NEMISA had received from DoC R838 882 for the Community Radio Project; R1 722 373 for the National Digital Repository; R82 500 from other soft sourced projects. R 22 million had been spent for the financial year to date.

Discussion
Ms S Tsebe(ANC) said that she was concerned at the number of projects that were affected by a lack of resources. What plans did NEMISA have in dealing with this and what was the way forward in terms of the functionality of the library?

Ms W Newhoudt-Druchen (ANC) said that she hoped in terms of the non-fully functional library there was full connection to enable students carry out online research. In terms of research capacity, if there was currently a resource problem, then integration would mean a bigger problem. Why was the SABC media campaign withdrawn?

Mr ASteyn (DA) said the lack of resources was hindering the achievement of NEMISA’s targets. It seemed that DoC was not taking NEMISA seriously. What was the problem with getting tax clearance?

In response to the tax clearance question, the CFO said that NEMISA had a strategic plan with a financial sustainability and viability objective of getting additional funds from entities to supplement what it was receiving from DoC. The drawback for the strategic plan was that departments and other public entities required NEMISA to have a tax clearance certificate. An inquiry from the South African Revenue Service led to the conclusion that NEMISA had to reconstruct its books from the year 2000 to obtain a tax clearance certificate. That was completed between January and March 2013. The tax clearance certificate had since been resolved and that NEMISA would be getting it.

As to whether or not DoC was taking NEMISA seriously, the CFO said that e-Skills was a priority for the DoC for the year 2013 and so some additional funding was expected. Dr Wesso added that the other questions would be answered in the presentation on the integrated strategic plan. However, on whether  Nemisa being seriously taken by DoC, the e-Skills priority had changed the importance of NEMISA.

Ms R Lesoma (ANC) said that it seemed that some of the activities of NEMISA seemed to be overlapping with other departments and entities so she wanted clarity on the relationship.

Ms M Shinn (DA) sought clarity on how many students graduated each year at the Institute.

The COO said that, on average, 90 students graduated from the Institute annually and that the maximum number of students was 130.

Strategic Plan 2013-18: NEMISA; Institute for Space & Software Applications; e-Skills Institute
Dr Harold Wesso, Acting Chief Executive Officer: NEMISA, said that there was going to an integration of the three entities (NEMISA; Institute for Space and Software Applications; and e-Skills Institute) within the DoC to form a new Institute. This was in line with the DoC’s strategic objective of ICT as a strategic social and economic enabler for knowledge economy that included ICT policy (affordability and skills); national broadband network; and digital broadcasting migration policy. The vision and mandate of the Institute would be a national catalytic collaborator, facilitator, change agent and thought leader in the development of South Africa’s and Africa’s human resource capacity in the optimum utilisation of ICTs for the development and growth of an inclusive Information Society and Knowledge Economy.

In terms of the strategic planning process, Dr Wesso said that there had been wide consultation on the National e-Skills Plan of Action (NeSPA) and the first plan of action was delivered in 2010 and the second NeSPA would be delivered within the next few weeks. This second NeSPA included thoughts from some of the best leaders in e-Skills following a summit held in October on development of e-Skills and research.

Dr Wesso said that in terms of positioning, South Africa as an information society and knowledge economy, the big issue was how to leverage ICT capabilities and tools to address the country’s socio-economic needs and to improve the human resource base of the country for equitable prosperity and global competitiveness. This was against the backdrop of the gap between developed and developing countries and in terms of international bandwidth increasing. Building the information society and knowledge economy was not dependent solely on ICT infrastructure but on the services and institutions set up on such infrastructure.

The Committee was informed that there were three key measurements that were considered for ranking countries in the world as being vital for building the information society and knowledge economy: information society/knowledge economy technologies access, affordability and e-Skills. On the usage side, innovation was important.

Dr Wesso said that the challenges facing South Africa were: the ICT infrastructure across the country was varied, untargeted, unstructured and uncoordinated; the education system was not producing sufficient number of people to work in the ICT sector; the education system was not producing the required skills for advancing South Africa’s knowledge economy; and that there was absence of central coordination of demand and supply and aggregation of data for building e-skills capacity that made it difficult to make policy decisions. The overall result was a further drop in the country’s global development index.

With regards to the national response to these challenges, Dr Wesso said that there was a need to collaborate through a coordination of effort across all stakeholders such as academia, government departments and business with a serious focus on impact of skilling people on the economy. There was a need to adopt an integrated approach to business development, effective e-Governance and service delivery, socio-economic development and employment readiness through research, evaluation and monitoring. He added that there was a need for a national research network for e-Skills.

Speaking on the integration process of the three entities, Dr Wesso said that the Institute of Space and Software Applications (ISSA) was established in 2001 as a directorate in the DoC to deliver appropriately skilled software engineers for the space industry. Students were trained in collaboration with the University of Stellenbosch but the programme was officially terminated in 2005. Since then the remaining staff mainly focused on the development of software applications for Government. NEMISA on the other hand offeredfive MICT SETA accredited courses:National Certificate: 2D Animation (NQF Level 5); National Certificate: 3D Animation and Visual Effects (NQF Level 5); National Certificate: Radio Production (NQF Level 5); FET Certificate: Design Foundation (NQF Level 4); FET Certificate: Film, Television and Video Production Operations (NQF Level 4), while e-SI focused on six thematic areas:e-Inclusion and Social Innovation; creative New Media Industries; e-Enablement for Government Service Delivery; ICT for Rural Development; Knowledge-based economy and e-social astuteness and Connected Health.

e-SI continued to increase university and FET college intake in relevant e-Skills aligned to and accepted by industry, government and educational needs; it identified Creative Industries (including Broadcasting and ICT) as industries for sustainable employment; and through its proof of concepts had impacted on over 10 000 citizens across a wide spectrum of society, from PhD students to individuals in communities.

In terms of the integrated distributed model, five Collaborative Laboratories (CoLabs) had been created in the provinces with each focusing on a specific theme. The Gauteng CoLab focused on creative new media industries; Northern Cape CoLab focused on knowledge based economy and e-social astuteness (e-literacy); Western Cape CoLab focused on e-Inclusion and social innovation; KwaZulu-Natal CoLab focused on enablement of effective service delivery and the Eastern Cape CoLab was focusing on ICT for rural development. Talks were on-going with regards to partnering with universities in the provinces of Free State, Mpumalanga, North West and Limpopo.

With regards to an earlier issue raised on working with other networks, Dr Wesso said that there was a national multi-stakeholder network model in place. The Institute was partnering with various national and international partners. For instance the Institute was working with the Departments of Higher Education, Basic Education, Rural Development, Trade and Industry in addition to engagement with provincial and local governments with purpose of having them including an e-Skills approach in their plans. There were international linkages with for the United Nations Development Programme and ITU.

Dr Wesso said that on the basis of e-literacy, it would be possible to deliver information/knowledge workers for the future and professionals in the sector. The skills required to get to that point were e-User skills, e-Practitioner skills and e-Business skills – something which was massive. In terms of research and innovation, there was localisation of application factories to support e-Skills Development.

Dr Wesso said that the CoLabs would be virtually connected for purposes of knowledge production and transfer – this would be supported by the ICT sector. Through the cloud programme, duplication would be avoided. He added that there was a move towards e-Inclusion through e-Centres (USAASA centres) that were currently not being fully utilised owing to programmes that were not appropriate or the technology being insufficient. Smart Knowledge Community Centres would be developed to ensure that there was more utilisation and access by people of the information that they need.

With regards to e-Skills targeted delivery for impact, Dr Wesso said that human resource development for an inclusive information society and vibrant economy (e-literate society by 2030) meant impacting 10 million people with basic e-literacy skills to understand how ICT could be used in organisations to increase productivity. With a small budget, NEMISA had impacted 13 000 people in various areas through collaboration with universities and overseas entities.

The Institute was to be driven by five strategic outcome oriented goals: the building of an institute that would be responsible to the needs and demands of a knowledge and learning organisation; formalised multi-stakeholder collaborative networks for e-skills delivery; creation of a strong human capital base for life opportunities in a knowledge driven economy; creation of a critical mass of students and researchers that would propel e-skills development for a Knowledge Economy; and ensuring that the e-skills, expertise, knowledge and resources impact the development strategies of Government.

A number of risks had been identified in the integration process but mitigation measures were addressing them. With regards to a failure to step up, commitments made by big international companies, donor agencies and leading universities, this would be mitigated by ensuring continuous support and commitment by the Minister and Deputy Minister of Communications through bilateral meetings. The inability to deliver on the recommendations of the NeSPA 2013 and the increase of uptake and usage at national scale would be addressed by ensuring that the Institute carried out the recommended actions made by the NeSPA 2013 and host a biennial e-Skills Summit involving thought-leaders in e-skills. The inability to address e-skills challenges with a limited budget allocation would be mitigated through the use of the establishment of an e-Readiness Fund to attract funding investments (this was boosted by the resolution of the tax clearance certificate obstacle). Lack of adequate physical infrastructure to carry out the mandate of the Institute at a national, provincial and community level would be mitigated by leveraging infrastructure space from partnering universities and contributions made to the e-Readiness Fund.

Discussion
Ms M Shinn (DA), in reference to the Institute and funding constraints, asked how much money was being looked at and what Treasury’s response was – if at all it had been contacted. What was NEMISA’s strategy for its graduates to payback to society the money spent on them of about R400,000 per student?

Dr Wesso, in response to the graduates and their paying back to society what was spent on them, said that the NEMISA would look into this but that the amount could not be as had been pointed out. In terms of getting more money, the current model allowed for secondments from other departments and other players such as International Telecommunication Union, the European Union and the World Bank.

Mr A Steyn (DA) asked that in terms of the budget allocations, there was nothing for NEMISA. Why were the successes not mentioned and in terms of the cost per student, were these students subsidised?

Dr Wesso replied that NEMISA had to continue with its current programs within the context of the allocated budget. A transfer of functions to the Institute would raise the allocation to R50 million. He added that R500 million would be sufficient to attend to all the many programs that the Institute would have to run on e-Skills. NEMISA provided bursaries to students plus accommodation in subsidising them.  NEMISA was working in collaboration with universities to the extent that some facilities such as lecture rooms, were offered free of charge. NEMISA was using a university curriculum that it had tweaked, considering that developing its own curriculum would take about five years.

Ms W Newhoudt-Druchen (ANC) said that the cloud did not belong to South Africa and so there was a concern that the information was elsewhere.

Dr Wesso replied that information in cloud would be secure, adding that these days work was being done with open education resources and open innovation. The cloud programme would go side by side with intellectual property for the protection of information.

Ms R Lesoma (ANC) said that with respect to the students that graduate, what happens to their contribution to the e-Skills capacity?

Dr Wesso replied that some of the graduands had developed into software developers.

The Chairperson said that there appeared to be duplication between the DoC and NEMISA.

Dr Wesso replied that in terms of duplication in e-Skills, DoC was the policy owner and the Institute was the responsible for the delivery. Mr Phiri added that the DoC would oversee the integration of the three entities into an Institute.

Ms AMuthambi (ANC) said that nothing had been said about the e-Skills Development Plan. In terms of the Basic Computer Literacy, what was the Institute’s role in primary school?

Dr Wesso replied that computer literacy was different from e-Skills as the former related to using the device. Universities were objectionable to e-Skilling students because they educated students as opposed to skilling them. He added that in terms of the e-Skills Development Plan, consultation with a number of groups in the world had been done as well as the research.

The Chairperson said that he expected a report from DoC in a fortnight on what amount was going to be transferred to the Institute so that the Committee could be able to make the relevant appropriation.

Sentech 3^rd Quarter Report 2012/13
Dr Setumo Mohapi, Chief Executive Officer (CEO): Sentech, informed the Committee that the presentation would focus on the Key Performance Indicators (KPIs) and the finances. The Report was in line with Sentech’s Corporate Plan which focused on universal access to communications network infrastructure services; enabling open access and inter-operable communications network infrastructure; and enabling diverse and affordable communications network infrastructure services.

In the 3^rd quarter, Sentech had made significant strides on the DTT network rollout programme in that by the end of the financial year, Sentech was expecting to reach 80% of the population target while continuing to operate within the policy and regulatory framework.

Mr Kgank iMatabane, Chief Operations Officer (COO): Sentech, looked at the key performance indicators not achieved and said that Sentech was currently sitting on 77.38% population coverage and that the 80% would be achieved by end of March 2013. The low power/low cost and self-help transmitter rollout to underserved areas was delayed but it was expected that this would be achieved by the end of the year.

Mr A Steyn (DA) pointed out that it was not enough to for Sentech to say that a particular strategic objective had been delayed – an indication had to be given as to why there was a delay.

The COO said that the delay in the low power/low cost and self-help transmitter rollout to underserved areas was because Sentech was working on this matter with SABC and ICASA and that there had been some licence issues that had not yet been settled.

In terms of the network performance at customer SLA, the Medium Wave (MW) target of 99.50% could not be achieved with only 99.35% achieved due to a failure of standby generators at three sites and Sentech only had seven transmitters for MW which meant that a failure on three would have a big impact.

The COO said that for the preferential procurement target where Sentech expected to complete the development of an audit-committee approved enterprise development support system by 31 March 2013, this was still in progress but it could not be completed on the set date. With regards to the implementation of a broadcasting signal distribution tariff in line with the current policy and regulatory regime, a DTT tariff model required customer engagements (SABC, eTV and Mnet) but there were delays by various sectors including the court case by eTV against ICASA.

Sentech had expected to finalise the pilot Mobile TV platform but only the Mobile TV strategy was finalised. However, work was still on-going to ensure completion. The pilot converged content distribution platform would be achieved in quarter four and that it was currently still in progress. With regards to ensuring that product/solutions portfolios achieved profitability targets and that all products achieved greater than 5%, profitability could not be achieved mainly because of Short Wave (SW). SW was reaching the end of its life and Sentech had lost a lot of customers because they had found alternative ways of distributing content through channels like the internet. Running the sites and maintenance was expensive for Sentech. Medium Wave had challenges but ICASA had issued an invitation for interested people to apply for licences.

Sentech had connected one school out of the targeted two in terms of broadband connectivity but the target would be achieved by the end of the financial year. There was a delay in the number of senior managers assessed (70% as opposed to a target of 100%).

Ms S Tsebe (ANC) said that Sentech was still not giving reasons for the delays in some of its strategic objectives. Ms R Morutoa (ANC) added that the Committee wanted a presentation and not mere reading of the content of the document column by column.

The COO said that the delay in the connectivity of the number of schools was due to the people that were supposed to carry out the connectivity work, were the same people working on DTT migration, requiring optimisation of human resources.

The CEO speaking on the delay in the assessment of the expected number of senior managers said that this was brought about by the absence of some of the managers to participate in the competence framework as they were participating in the corporate planning process that had experienced some delays as well as the legal case within e-TV. The development of a leadership programme including leadership plans and the number of critical positions with proper succession plans had been delayed to quarter four due to assessment.

The CEO said that achievement of approved revenue targets of 97% had not been achieved as only 93% was achieved. This was due to low power projects that were delayed, partly due to the assignment of frequencies by ICASA to SABC. This resulted in the delay in rolling out the low power stations subsequently impacting the revenue. The other reason was the FM expansion strategy that was presented to SABC that had never got approved.

On the review and monitoring of key company risks, the COO said that all departments were expected to report on risk assessment on a quarterly basis and this was achieved save for the finance department due to both the Chief Finance Officer and the General Manager of Finance leaving the company.

In terms of the financial plan, the CEO said that the variances in revenue in the third quarter were as a result of low power, FM expansion, Short Wave and the VSAT services that did not come through. Sentech continued to maintain its line in terms of earnings before interest and tax that gave the company a sense of the cash that could be retained with operations to maintain the company. Sentech was able to maintain the earnings after tax line which meant that the company was financially stable at the end of the third quarter. However, a number of items would have an effect in terms of projecting for the future. For instance, the actual spend on licences was R40 million against a budget of R11 million and this was because a contingent liability resulting from a dispute with ICASA whereby since 1997, Sentech had not been paying for its signal distribution licences that totalled R43 million with interest of about R41 million. A provision for R7 million had been made and the rest of it was a contingent liability. After discussion with ICASA, National Treasury and the DoC, the agreement was that the obligation had to be met and that Sentech had to pay the rest of the R43 million and so R35 million had been provided for in the third quarter.

The CEO said that following the acquisition of a Head of Supply Chain, the company was still behind schedule in dealing with operations maintenance. There was a deficit for the previous year but that the obligation was not to procure and fulfil maintenance obligations. There was initially no clarity on the issue of interest on grants especially with regards to the money that Sentech was getting in the form of grants from National Treasury. The clarification from National Treasury was that the interest on the R6 million of grants for community broadcasters could be retained and used for supporting community broadcasters and about R8 million of duo-elimination interest would be retained and used for the same purpose. The interest on the R500 million and R21 million for broadband had to be returned to National Treasury. The total amount of interest was over R170 million.

In terms of the balance sheet, the CEO said that the equity line for Sentech had improved by R82 million between 31 March to 31 December 2012 and cash flow was positive in that R114 million had been generated from operations. Cash flow from investment activities was significant following the rollout of the DTT program.

Discussion
Ms R Lesoma (ANC) said that the money that was to be paid to ICASA was a target in terms of the interest. What was the strategy for the outdated equipment? She asked for the effect on the company of the resignation of the CFO and the General Manager of Finance.

The CEO replied that there was no further dispute with ICASA and, with regards to the interest,Sentech had to apply to National Treasury until it gave clarity on what was to be done. In terms of the outdated equipment, the hope was in Medium Wave and ICASA was currently applying for a licence.

Mr A Steyn (DA) asked which targets had been revised and why? He asked for the percentage of the number of jobs profiled. He was concerned that Sentech had annual targets for internal control and record keeping – he preferred that this should be a quarterly target. He was not happy that the temporary staff used during the period the company had no CFO and General Manager of Finance had not reviewed the company risks.

In terms of the revised targets, the CEO said that there had been a change in priorities.

Ms Tsebe (ANC) said that for the DTT project planning and in particular its coverage, Sentech had to be specific about rural areas. She said that in terms of gender equity, Sentech had been singled out as the entity causing the delay.

The CEO said that the DTT roll-out was in the Strategic Plan pack and that it had not yet been presented. In terms of the rural and urban coverage, the approach had been changed to province-wise as opposed to population-wise. Gender equity had since been taken care of.

Ms Muthambi (ANC) said that according to the decision of the Gauteng High Court, Sentech had been found to be negligent in preventing the viewing of SABC content. This amounted to fruitless and wasteful expenditure. How much was spent on defending the matter and how far had the company gone with the implementation of the court order?

The CEO replied that the Sentech Board had agreed not to appeal the matter. R8 million had been included in the budget to pay for the damages as had been quoted in the court order. Sentech would get back to the Committee with regards to the cost of defending the case. The legal status was that Sentech was working on a settlement.

The Chairperson said that in terms of low power sites, out of 132 sites, ICASA had not approved 88 low power sites due to a dispute between ICASA and SABC. This meant that many South Africans had no access to either radio or TV. The DoC had to come into the picture because Universal Service Access was a policy matter and a political issue.

Mr Buthelezi, DoC Acting Director-General, said that ICASA had been reminded in a meeting of its role with regards to regulatory issues of State-Owned-Entities including the collection of licence fees. ICASA was at times acting arrogantly in its regulatory role.

Mr Thabo Mongake, Board Chairperson of Sentech, proposed a meeting between Sentech, ICASA and DoC to try and iron out the differences as a way forward.

The meeting was adjourned.