The Ad hoc Committee on Communications has examined the budget of the Department of Communications (Vote 27) for the 2004/05 financial year and the estimates for 2005/06 and 2006/07 included in the Estimates of National Expenditure 2004, and reports as follows:

The DoC's vision, mission, key performance areas (KPAs) and critical success factors The vision and mission of the DoC is to improve the lives of ordinary South Africans whilst contributing to economic growth, to make South Africa a knowledge-based society and to help create an information economy in order to enable ordinary people to have access to traditional media and the convenience of information technology (IT).

1. Develop ICT (information communication technology) policies and legislation for the enhanced economic development of South Africa's economy.

2. Evaluate the economic, social and political implementation, impact, outcomes and processes of its policies.

3. Exercise oversight on the SOEs (state-owned enterprises).

4. Fulfill South Africa's continental and international obligations in the ICT sector.

1. Bridging the digital divide.
2. Creating ICT awareness.
3. Developing ICT laws and policies.
4. Developing national infrastructure.
5. Economic growth
6. 6.Employment creation.
7. Enabling an infrastructure roll out
8. Evaluating and monitoring through shareholder compacts.
9. Growing the ICT sector.
10. In terms of convergence, to offer an appropriate policy for cost reduction and SMME (small, medium and micro enterprise) promotion.
11. In terms of e-commerce, to establish an enabling electronic environment, address research and development and security protocol
12. In terms of its postal mandate, to address the market structure, improved service delivery and oversight of SOEs.
13. Infrastructure development.
14. Providing a strategic direction for the rolling-out of universal services.
15. Providing affordable access to ICT service.
16. Skills development.
17. SMME development.
18. To create a world-class ICT sector.
19. To create a regulatory framework.

The DoC's Key Performance Areas (KPAs) focus on the following:

1. Analysing convergent technologies to enable universal access.
2. Analysing the financial performance of SOEs (state-owned enterprises) and undertaking benchmarking on the financial performance of SOEs.
3. Creating a policy framework to facilitate universal access.
4. Developing a network model for the provision of educational services.
5. Developing a policy framework for public broadcasting.
6. Developing an e-strategy framework and an ICT competition framework.
7. Developing mechanisms to support local content.
8. Ensuring compatibility and interoperability of ICT standards.
9. Evaluating the financial implications of universal obligations.
10. Facilitating the restructuring of SOEs and facilitating the appointment of Boards of Directors of SOEs.
11. Finalising the Convergence Bill.
12. Migrating policy to introduce new digital services.
13. Overseeing the delivery of Government policy targets.
14. Providing affordable and high-quality access of regional broadcasting.

Budget information on the DoC

Table 1: The DoC's Medium-term Expenditure Framework Estimates

Table 3: Transfer Payment Details

A Summary of the DoC's Budget

The 2004 Estimates of National Expenditure reports an uneven spending during

the past three financial years by the DoC, mainly as a result of the spending on

the Post Office subsidy. This subsidy was removed in 2000/01, but was

reintroduced in the 2001/02 and 2002/03 financial years.

The DoC budget appears to be in line with the Government's expenditure

priorities. It should be interpreted against the backdrop of the extension of key

public services, particularly in the social sector and in infrastructure delivery. The

budget prioritises services that target the poor and vulnerable groups, while

advancing programmes that provide greater impetus for economic growth and

broad-based development.l

In 2002/03, the department's revenue was R50,3 million, made up as follows:

1. Interest from the SABC: R1,8 million.

2. Licence fee paid by the Post Office: R25,4 million.

3. Recoveries of previous financial years' expenditure: R0,6 million.

4. Short-term interest received from the current bank account: R22,5 million.

In the current financial year, the department received R53,0 million, made up as

follows:

1. Interest received: R25,7 million.

2. Licence fee paid by the Post Office: R26,9 million.

DoC: Conclusion, points for consideration and challenges

1. A Coherent Framework. The DoC must provide communications access

within a coherent framework, involving all sectors of society.

2. Frequency Sharing'. National requirements on frequency sharing are to be

submitted by October 2004, followed by timeframes on migration.

3. ICTApplication: ICTs are to be applied in the delivery of social services, viz.

in education, health, agricultural production, crime prevention, etc.

4. A Intersectoral Approach: An intersectoral approach is favoured to migration

initiatives since the DoC cannot be the only role-player in such initiatives.

5. Migration of Broadcasting: Broadcasting must be migrated into the new

broadcasting arena, continentally and internationally.

6. Outreach across Government Departments: Various Government

Departments, such as Home Affairs, Minerals and Energy, Science and

' As auoted from the 2004 Budaet Review. D. 12C

Technology, and Trade and Industry, apply ICTs - the DoC, therefore, has

to play an interactive (and, perhaps steering) role in such initiatives.

7. A Policy Framework-. A policy framework for the public broadcaster is

currently required.

8. Public-private Partnerships: The private sector's research capacity should

be harnessed and should involve the DoC as a strategic partner.

9. Research-. Rapid progress in technology application necessitates applied

research in the field of IT and ICT applications, with a strong focus on

convergence technologies.

10. Restrictions-. Unnecessary restrictions on communications technology may

have to be removed.

11. Restructuring: The DoC envisages the restructuring of its economic cluster,

initiated by its parastatals. These will be implemented up to Cabinet level.

12. SMMEs: SMMEs should assist in lowering the cost of communications.

13. Universal Access: Since not all South Africans receive broadcasting, the

DoC must develop a policy framework for universal access.

B. Nemisa (National Electronic Media Institute of South Africa)

Established in 1998 and funded through the DoC, Nemisa's mandate is to

provide a bridge between academic training and work or employment, focusing

on traditional broadcasting such as radio and television production training.

Nemisa's board of directors is appointed by the Minister of Communications, with

a staff complement of 26 (including management). Attracting students from all

over South Africa, Nemisa's main focus is on administration.

It currently offers the following 3 tertiary qualifications: (a) the Radio Production

Diploma, which places the focus on introduction to radio, current affairs

programming for radio, research and programme development, post production

and packaging, writing for radio and a three-month internship; (b) the Television

Production Diploma focuses on writing for television, news gathering, processing

and presentation, camera and lighting, production and post productions, audio

and graphics and a three-month internship, and (c) Creative Multimedia

(animation design and information design).

Students are recruited at schools, technikons and universities, and, on

completion of their studies, are offered internships/apprentices at SABC Radio

and Television, M-Net, E-TV and independent broadcasters.

Table 1 : Nemisa's Medium-term expenditure allocation

Table 2: Nemisa's Sources of Funding

Table 3: Nemisa's 2003/04 expenditure

A Summary of Nemisa's Budget in terms of the Budget allocation to DoC

Nemisa's budget forms part of Programme 4, the Multi-media Service Policy, of

the DoC budget, which is made up of the Policy and Legal cluster, the Finance,

Budgeting and Shareholder cluster, the Community Services cluster, and the

New Services cluster. The budget allocated to these four clusters addresses the

formulation of policy and regulations with regard to convergence from an

analogue to a digital system, restructuring of the SABC, South African content

and local production, with a focus on funding for local content development, for

infrastructure roll-out, funding of the digitisation of infrastructure, and funding for

broadcasting services in South Africa's 11 languages. An interdepartmental focus

is placed on working relations with the Departments of Trade and Industry, Arts

and Culture, and the Government Communication and Information System

(GCIS). As part of the New Services cluster, the Finance, Budgeting and

Shareholder cluster is to place the emphasis on, amongst others, the

repositioning of Channel Africa, the restructuring of the SABC and Sentech, the

privatisation of Ciskei and Capital Radio and the repositioning of the Bop

Broadcasting and the Rhino Recording Studios.

The main expenditure items are: the Independent Communications Authority of

South Africa (ICASA), which received 49,33% of this programme allocation,

followed by the SABC (16,6%), Multi-media Policy (15,06%), and Channel Africa

(9,75%). Community Radio received 3,34% of the allocation, while Nemisa takes

up 5,9% of the allocation to this programme.

Nemisa's sources of revenue for the 2004/05 financial year is as follows:

Grants

Learnerships

R16,878 million

R500 000.

Other _____________________ R2,6 million

Nemisa is to utilise its 2004/05 funds as follows:

Lease Rental ______

Licence Fees ______

Operational expenses

Staff-related expenses

Student Costs

19%

8%

22%

34%

17%

Nemisa's current (2004) student statistics are as follows:

1. Creative Multimedia_______38 students.

2. Radio Production________15 students.

3. Television Production 21 students.

Nemisa: Conclusion, points for consideration and challenges

1. Channel Africa: At present, Channel Africa receives all its funds from the

State. If Channel Africa's position is to be sustained and strengthened, other

sources of funding should be explored.

2. Communications: The cost of communications is a point of particular

concern. Indications are that the creation of competition (for instance a third

cellular operator) either had a marginal impact on price reduction, or no

impact at all. Although competition in the communications sector does not

seem to have an immediate impact on the lowering of prices, over a period

of four to five years, the price of some communications facilities may come

down.

3. Convergence: The Convergence Bill will be tabled in national Parliament in

the third quarter of this year. Technology-specific legislation which could

hamper convergence may have to be removed. Drawn-out licencing

processes drains Nemisa's resources.

4. Economy. In the process of managing progress in the ICT and the

communications sector (with particular reference to a Second National

Operator) cognisance must be taken of South Africa's dual economy. The

State must play a role in serving all of its citizens; it must create

employment, bring down the price of communications, provide universal

access and close the digital divide which separate the haves from the have-

nots.

5. Multi-purpose Community Centres (MPCCs) are vitally important links to

communications technology, particularly in rural and deep rural areas.

Funding to MPCCs, therefore, is an ongoing challenge.

6. Skills shortage: Nemisa's role in identifying skills shortages in key areas

such as research, development and training has to be done in partnership

with, amongst others, the Department of Education; the institute is not in a

position to address these shortages alone.

7. Students: Nemisa currently places approximately 60% of its students in the

media industry. Addressing the skills shortage in the media sector is of

paramount importance, with particular reference to progress to the level of

full employment of Nemisa's students. In placing students, it should be

noted, though, that the media industry frequently uses the expertise of

freelance staff.

C. SAPO (South African Post Office)

A synopsis of the Post Office's operational environment:

SAPO sends approximately 8 million mail items to approximately 6,5 million

addresses (3,4 million street addresses and 3 million post boxes).

Speed services carriers move 37 tons of mail each night by means of 70 (50-

ton) container vehicles.

SAPO deliver to an area of approximately 1 200 km2.

SAPO has over 2 000 outlets and 5 500 service points.

SAPO's mission includes connectivity through the distribution of information,

goods and financial services. Its short-term objectives are to:

1. Curb postal crime.

2. Improve its delivery performance.

3. Reach a financial break-even point in the near future.

The following are some of the more prominent achievements since South Africa's

1994 democratic elections:

1. The incorporation of the former TBVC states' post office administrations into

SAPO in 1996.

2. The electronic signing into law by President Mbeki of the Electronic

Communication and Transaction Act, Act 25 of 2002, enabled the

application of SAPO's identification service.

SAPO's 2003/04 Financial overview

An overview of SAPO's 2003/04 financial position reveals the following:

Its reported operating loss of R170 000 000 was reversed into an operating profit

of R35,5 million, representing a profit of R205 000 000. According to SAPO, the

following contributed to its improved financial position:

1. A revenue growth of 6,3% (R261 000 000).

2. A 1% cost increase.

3. A partnership approach to creative management of capital expenditure.

4. A reduction of staff members of 1 042.

5. A vehicle fleet reduction.

6. An improvement in SAPO's working capital.

7. Generating approximately R270 million (in cash) from operators.

8. A 46% growth in Postbank's depositor's book.

9. The introduction of Thuso insurance.

10. A R38,6 million Miracle 2000 deposit.

11. New savings products introduction (such as term, bonus and group save).

12. A growth in SAPO's account of 28%.

Note: SAPO reported an amount of R1,4 billion negative retained earnings as at

March 2004, which could be resolved by means of a reduction of R2,3 billion in

post-retirement medial aid liability and the Postbank recapitalisation of R750

million (explained below).

1. Approximately 1 500 pensioners retired prior to October 1991 (the so-called

old dispensation).

2. Liability of approximately R2,3 billion impacts negatively on SAPO's balance

sheet.

3. SAPO invested approximately R138 million for reserve funding, which grew

to approximately R340 million.

SAPO: Conclusion, points for consideration and challenges

1. Public Information Terminals (PITs): Although PIT activities are important to

SAPO in providing information and Internet training, SAPO could not

determine the trend of usage since such usage is not predictable.

2. Delivery: SAPO's current delivery of 6,5 million letters a day should not be

seen as a limit; SAPO hopes that the volume of letters for delivery will grow.

3. Mail delivery in informal settlements is a matter of serious consideration.

Some SAPO staff is currently trained for mail delivery in such areas. The

commercial banks share SAPO's concern that mail should be delivered to

such areas, bearing in mind that the majority of such areas do not have

water and sanitation. SAPO works together with the National Address

Database, the metro cities and the provincial and local governments in order

to deliver mail in informal settlements.

4. SAPO's pension liability relates to the life expectancy of its pensioners.

According to research done by SAPO, its pensioners generally have a life

expectancy of 20 years following their retirement, together with continued

membership of dependents.

5. Staff reduction is a matter of concern to SAPO. Since staff and transport

costs present SAPO's major items of expenditure, it had to find acceptable

ways to reduce its staff numbers. In doing so, SAPO sticks to voluntary

retrenchment.

6. Stamps: SAPO's expressed the wish that South African stamps produced

will motivate people to collect stamps. Indications are that the philately

industry is growing rapidly. This view is supported by the 1998 White Paper

on Postal Policy, which encouraged SAPO to develop a strategy to expand

the collector's market and to develop and improve philately services'

7. Universal access is just as important to SAPO as to the other

communications role-players. The delivery of mail, for instance, in some

areas and the non-delivery in other areas is changed to a non-discriminatory

approach. For that reason, the building of infrastructure in rural areas is

equally important to the maintenance of well-equipped centres in affluent

urban areas.

D. ICASA (Independent Communications

Authority of South Africa)

Established in July 2000, in terms of the ICASA Act, Act 13 of 2000, ICASA

regulates the telecommunications and the broadcasting sectors. In addition to

Act 13 of 2000, the authority derives its mandate from the Independent

Broadcasting Act of 1993, the Broadcasting Act of 1999 and the

Telecommunications Authority Act of 1996. It strives to be a strong, service-

orientated and responsive communications regulator in South Africa, to increase

access to communication services through the promotion of a competitive and

socially responsive communications industry, and to promote choice and

diversity in carriage as well as in content as an expression of the creativity of the

South African people.

ICASA's key functions include the following:

1. To make regulations and policies that govern broadcasting and

telecommunications.

2. Issue licenses to providers of telecommunication services and broadcasters.

3. Monitor the environment and enforce compliance with rules, regulations and

policies.

4. Hear and decide on disputes and complaints brought by industry or

members of the public against licensees.

5. Plan, control and manage the frequency spectrum.

2 Source: The White Paper on Postal Policy, 1998, published by the Department of

Communications.

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6. Protect consumers from unfair business practices, poor quality services and

harmful or inferior products.

Since ICASA operates in a very litigious environment, its decisions and rulings

are challenged in court by operators in the communications industry. Increased

funding would, therefore, enable the authority to defend its decisions more

effectively. As part of its consumer-protection mandate, ICASA intensified is

outreach programmes by means of road shows (in three provinces), addresses

at schools, the application of promotional material (translated into all official

languages), and public awareness programmes. In addition to the

aforementioned, a committee for disabled people was established to liaise with

representative bodies to stay abreast of the needs and challenges encountered

by the disabled sector of South African society.

ICASA's international outreach includes TRASA (the Telecommunications

Regulators of South Africa), the International Telecommunications Union (ITU),

the AUT, RIARC (Roseau de Partenaires des medias africains), SABA (the

South African Broadcasting Association) and other role-players in Africa.

ICASA's key 2004/05 outcomes are to -

1. Conduct more regular stakeholder meetings.

2. Establish a calls centre.

3. Minimise litigation risks.

4. Proceed with outreach (and road shows).

5. Procure a complaints management system.

ICASA's Telecommunicatons outputs for 2004/05 include:

1. A central-numbering database.

2. Number-portability regulations.

3. Reviewing the fixed-line tariff regime.

4. Telkom's PSTS licence.

5. The short-code strategy.

6. The SNO licence.

7. Under-serviced area licencing.

ICASA's broadcasting objectives include:

1. A review of community radio policy and signal distribution, of advertising and

sponsorship rules and programming requirements for disabled people and

the elderly.

2. In the 2004 elections, ICASA reported a total data capture error of 0,15%.

3. Regarding its licencing obligations, ICASA received 18 sound-broadcasting

service and 3 TV-broadcasting service licence applications; renewed 6

commercial radio broadcasting service licences (YFM, Jacaranda FM, Kaya

II

FM, P4 Cape Town and Classic FM), granted amendments to Radio

Oranje's applications and completed the four-year awarding process of

community broadcasting licences to South Africa's nine provinces.

ICASA's engineering and technology objectives include:

1. Contributing to further RFT measurements.

2. Implementing spectrum management tools.

3. Issuing Frequency Spectrum Licences to a total of 89 000 radio

communications operators.

4. Participating in and contributing to ITU conferences.

5. Publication of an Annual Terrestrial Broadcasting Frequency Plan.

Funding as a building block of ICASA's contribution to the function of the

Communications Environment:

Funding will -

1. Allow ICASA to respond to the Government's regulatory requirements.

2. Enable the authority to hire and retain requisite skills.

3. Prevent regulatory capture.

ICASA: Conclusion, points for consideration and challenges

1. Community Radio'. In terms of the Broadcasting Act of 1999, community

radio is currently reviewed to look at failures and successes by, amongst

others, senior international experts working with Telkorn. A cursory analysis

points to the fact that most community radio stations are currently located in

Cape Town, which points to an uneven spread of such stations.

2. Consumer protection offered by ICASA: In addition to a lot of work done

regarding road shows in educating the public in telecommunications,

broadcasting, licencing processes and improved service, ICASA studied

complaints by the public. The authority is now reconsidering its complains

procedure, with particular reference to less sophisticated users. ICASA

recently signed an agreement with Telkorn regarding turn-around time and

related matters.

3. Digital Broadcasting, throughout presentations to the ad-hoc portfolio

committee, poses a particular problem. ICASA reported that it cannot

address this challenge any further without a clear broadcasting policy.

4. Disability and captioning by the SABC is a matter which will be considered

by the SABC, having been tabled before by ICASA. In this regard, ICASA

has published a draft code of practice, and in 2005 the authority will have a

public enquiry into access to programmes by people with disabilities.

5. Legal costs: The high cost of litigation is a cause of serious concern to

ICASA. In the nature of ICASA's work, it is a common occurrence for

licencees to take the authority on review.

12

6. Price cap: Co-cam regulation could solve this problem and will enable Icasa

to investigate the cost structure of Telkorn and the issue of high tariffs.

7. Price reduction: Although competition may have brought the price of

communications down, there is currently no proof of that.

8. Rural areas: Services in rural areas pose the challenge that the current

licences do not cover many rural areas in South Africa. ICASA considers a

new licencing process and strategies of addressing this challenge.

9. SNO: (Second National Operator): Icasa recommended to the Government

that the 51% stake in essence be kept by Government.

10. Staff turnover: During the review period, ICASA reported a staff turnover of

almost 11 %, a 43,33% resignation rate from its management level and a

management staff turnover of approximately 24%.

11. Youth Station for South Africa: ICASA decided not to licence any national

commercial youth radio station since the SABC is in the process of tabling

its own proposals on this topic.

E. The SABC (South African Broadcasting Corporation)

As South Africa's national public service broadcaster, the SABC's principal

activities comprise sound and video broadcast by means of 17 radio stations and

four television channels. The corporation is operationally regulated in terms of

licences granted by ICASA. The SABC's vision and mission is to be the pulse of

Africa's creative spirit and to deliver distinctive and compelling programming

through sound business practices.

According to the SABC, more than 85% of South Africans rely on the SABC as

their main news source, 52% on radio, approximately 34% on television and

approximately 14% on newspapers and other sources'

A synopsis of the goals of the current SABC board. These are to:

1. Ensure full statutory and regulatory compliance by all divisions of the

broadcaster.

2. Ensure promotion of democracy and nation-building.

3. Create a financially sound corporation.

4. Revitalise the corporation, built on a sustainable business model within a

specified timeframe which enables it to fulfil its mandate, with particular

reference to its news department.

5. Ensure appropriate employment equity and BEE policies.

" Source: SABC on www:sabc.co.za.

13

6. Create a corporation which enjoys the support and respect of its

shareholder, viewers, listeners and other stakeholders.

7. Ensure compelling, professional and authoritative news and current affairs

programming (reported accurately, fairly and in a balanced way while

reflecting the world, in particular Africa, to all South Africans, in line with the

SABC's editorial policies).

The SABC's longer-term objectives include the following:

1. Improved access to radio and television in all languages.

2. Modern/digital platforms (the application of modern technology for improved

service delivery to the SABC's audiences).

3. Funding (i.e. a sustainable funding model).

4. Local content (to increase the quality and capacity of the local content

industry across South Africa).

A synopsis of the SABC's television and radio delivery:

From March 2003 until January 2004, approximately 119000 minutes of

educational television programming was broadcasted across the corporation's

terrestrial channels.

The SABC's national radio networks remained unchanged at 150 000 minutes of

educational programmes, all of which were manufactured locally. The

aforementioned figures could be interpreted against the backdrop of 22 of South

Africa's 29 million adults listening to radio. The SABC has requested an amount

of R47 million to enable it to reach its radio broadcasting objectives.

Four focal areas identified by the SABC to deliver on its mandate:

1. A technology plan.

2. Regional television.

3. Education.4

4. SABC Africa.

The corporation reports that its technology division and, therefore, it

technological capacity, has been undercapitalised in recent years. It identified the

migration of digital technologies as a major challenge, reflected in its Technology

Unit's 2003/04 financial year results. The Technology Unit's technology strategy

- formulated in the previous financial year - placed the focus on the current

technological capacity of the SABC, with reference to rapid digitisation in the

communications industry worldwide. The SABC's strategic plan focuses on:

1. Employing a digital technological infrastructure.

" According to the SABC, its education mandate justifies the production of programmes in mainly

three genres, viz. a) early childhood, b) curriculum support, and c) adult and public education.

2. ERP (Enterprise Resource Planning), the redesigning of broadcast content

workfiows and middle-ware installation.

3. Finding digital content production solutions.

An amount of R340 million was requested to fund Capex in support of the

aforementioned goals. To this effect, the SABC Board is in the process of

providing a detailed funding plan. It is envisaged that the board will pursue this

matter on the occasion of its 7 July 2004 meeting.

Regional television as part of the SABC's broadcasting obligations:

1. In terms of the Broadcasting Amendment Act, Act 64 of 20025, the public

broadcaster must apply to the regulator for regional television services.

2. These services should place a strong emphasis on programming needs

other then English.

3. The SABC reports that, in terms of the aforementioned Act, Government

must fund such services.

4. The SABC submitted its application for regional television coverage in

December 2003, leaving the granting of licencing to ICASA.

5. According to the broadcaster, confirmed by the regulator, "these services

will not be commercially viable."

6. The SABC reports that "in anticipation of a favourable outcome of the

licencing process, the SABC would require R400 million from the

shareholder to fund the launching and running of the two channels."

SABC: Conclusion, points for consideration and challenges

1. Accessibility of radio and television broadcasting poses a particular

challenge to the SABC.

2. Advertising: Although advertising offers a viable source of income to the

SABC and advertising in English proves profitable, steps could be taken to

ensure that products are advertised in African languages as well.

3. Cultural sensitivity: In its broadcasting, the SABC should at all times display

cultural sensitivity. It is not clear whether the corporation has a policy in

place on this sensitive topic.

4. Disability and captioning is a point of serious consideration for the SABC.

Although there has been an increase in subtitling on television, the SABC

reports that currently it does not have a policy in place to address this

important matter. Although the SABC does offer sign language, the

corporation admits that this is not enough.

5. Editorial policy: Since the SABC is an important instrument for keeping

South Africa's democracy alive, its board must strengthen that, with

particular reference to the corporation's editorial policy. According to the

SABC, generally speaking its editorial policy makes provision for all SABC

editorial staff and requires from staff to fully understand and implement the

5 Act 64 of 2002 was preceded by Acts 50 and 24 of 1996 and 1997 respectively.

corporation's editorial policy. The policy places the emphasis on widening

democracy and to be inclusive of all cultures and realities in South Africa.

The current board is of the opinion that its editorial policy adheres to the

principles of dignity of all South Africans in the corporation's programming.

Since South Africa has a new public broadcaster, it would not like to return

to what South Africans have been used to in the past. It would, therefore,

not like to be a mere organ for sectorat interest and would consequently like

to promote democracy, non-racialism and nationalism in an entertaining

fashion. The SABC reports that its current board framed that role.

6. Transformed technology base: An amount of approximately R1,2 billion is

required by the corporation for its transformed technology base.

F. The USA (Universal Service Agency)

Established in terms of the Telecommunications Act, Act 103 of 1996, the USA

seeks to promote the goals of universal services, a reliable connection to the

communications network that enables any form of communication to and from

any part of South Africa, universal access, the ability to use the communications

network at a reasonable distance and an affordable price which provides relevant

information and has the necessary capacity in under-serviced areas, where over

60% of the South African population resides.

The Agency is required to:

1. Create an enabling environment, to build capacity and to make necessary

interventions in under-serviced communities.

2. Implement the ICT projects for the DoC and other stakeholders.

3. Manage the Universal Services Fund (USF).

4. Monitor, evaluate the impact of the aforementioned activities in communities

and recommend on means to achieve the goals of universal service and

access in South Africa.

The USA's core programmes include:

1. Capacity-building.

2. E-schools cyberlabs.

3. Infrastructure Development and Deployment.

4. Promoting the ICT awareness programme.

5. Research and evaluation.

6. Telecentres.

The USA's and the USF's deliverables include

1. The deployment of 50 new e-school cyberlabs in the nodal points.

2. Addressing the connectivity and content of the existing 200 e-school

cyberlabs.

16

3. Rolling out 35 telecentres in MPCCs.

4. Rehabilitating the existing telecentres with regard to content and services.

5. Researching the provision of universal service and universal access to ICT

in South Africa.

6. Subsidising SMMEs and co-operatives.

7. Focusing on the 2004 Universal Access and Service National Conference.

The USA's capacity-building initiatives include:

1. Establishment of the Telecentre Association of South Africa (TASA)

2. Skills and competency of employers.

3. Staff training.

4. Training of 100 managers and operators of telecentres in ICT and business

management.

The USA presented the following budget for the current financial year:

USA: Conclusion, points for consideration and challenges

1. The USA has to place a strong focus on MPCCs. The Agency will work

closely with the (GCIS) Government Communication and Information

System in setting up telecentres and MPCCs.

2. If telecentres are put up, the USA advertises the services of such centres

and acts as a facilitator and a catalyst.

3. While some telecentres are currently functioning independently once they

have been taken over by the local communities, they offer Internet

connection 24 hours a day; other telecentres must, however, still be

subsidised.

4. The USA is currently faced with the financial sustainability of some

telecentres.

5. Many of the USA's telecentre initiatives will be in partnership with Sentech

(providing V-techs in schools), with the assistance of ICASA. These will be

supported by the provision of computers by the USA.

6. The relative brief lifespan of computer equipment (particularly for the

provision of Internet connectivity) is of concern to the USA. While various

service providers have provided computers to schools, they never revisited

the upgrading of such equipment.

7. The USA needs to liaise with South Africans on a grass-roots level in order

to determine the impact of its ICT initiatives.

17

8. Currently, the USA does not have enough contact centres; members of

Parliament could assist in reaching-out initiatives in order to determine areas

of critical need.

9. The USA's R1 million budgeted for its mass awareness of ICTs should

enable it to take the lead in working together with the cellular industry, the

Department of Education, local government structures, Telkorn and the

portfolio committee in achieving universal access.

G. Telkorn S.A. Ltd.

Telkom's operations should be interpreted against the following backdrop6:

The South African telecommunications market is currently the largest in Africa

based on customers and revenues. The market has grown substantially in the past

few years from R31,7 billion ($5,7 billion) in 1998 to R47,1 billion ($6,8 billion) in 2000

(Source: ITU, Yearbook of Statistics, Telecommunications 1991-2000, December

2001). As of 30 September 2002, fixed-line penetration based on population was

10,8%, while mobile penetration had risen to 26,6%.

The fixed-line telecommunications market in South Africa has grown by

approximately 28%, from R20,4 billion ($3,7 billion) in 1998 to R26,1 billion ($3,8

billion) in 2000 (Source: ITU, Yearbook of Statistics, Telecommunications 1991-2000,

December 2001).

South Africa is the largest Internet market in Africa with an estimated 2,4 million

Internet users resulting in a penetration rate of approximately 5,6% as of 30

November 2002, based on the estimated population as of mid-year 2002 by Statistics

South Africa. The number of Internet service providers increased rapidly from seven

in 1997 to 170 at the end of 2001 as the market structure evolved to accommodate

tier two Internet service providers.

GSM7 mobile services were launched in South Africa in 1994 and have

experienced rapid growth in the number of mobile users increasing from 1 million

users as of 31 March 1997 to 10,8 million users as of 31 March 2002 and 12,1 million

users as of 30 September 2002, resulting in mobile penetration increasing from 2,4%

to 26,6% during the same period. However, the overall penetration in South Africa

remains low compared to Western European or Asian levels, which provides the

potential for continued growth in the number of customers. South African mobile

revenues were R15,411 million in 2000, R21,052 million in 2001 and R25,493 million

in 2002. Revenues from mobile services grew with approximately 88%, from R11,2

a Source: Information retrieved form the Telkorn website on

http://www.telkom.co.za/IR/sub sahara.isp. ISJune 2004.

GSM (Global System for Mobile Communications) is a digital network which does not require a

modem between the user and the GSM network, although an audio modem is required inside the

GSM network as an interface between a conventional telephone service

(http://ccnga.uwaterloo.ca).

18

billion ($1,06 billion) in 1998 to R21,1 billion ($2,0 billion) in 2000 (Source: ITU,

Yearbook of Statistics, Telecommunications 1991-2000, December 2001).

In the aforementioned context, Telkorn provides wire line and wireless services

throughout South Africa and has extended its wireless services to other African

countries. Its 50% shareholding of Vodacom makes Telkorn Africa's leading

provider of wireless services. Telkorn has strategic equity partnerships with SBC

of the USA and Telekorn Malaysia, which jointly hold 30% shareholding in the

Company. On 7 May 2002, Telkom's five-year period of exclusivity expired.

During the company's exclusivity period, it pursued a multi-faceted process of

business transformation in order to prepare itself for competition.

Tariff Adjustment

Telkorn reported that its 2004 adjustments meet Government's inflation targeting

range of 3 to 6%. Its adjustments represents an overall revenue increase to

Telkorn of 2,7%.

Telkom's Data Product Adjustments

Telkorn reported an average data products increase of 1%. These are broken

down into the following key data products:

Diginet _______

Diginet_______

Megaline _____

Megaline Plus __

ATM Express __

IPLC (cable) ___

IPLC (satellite) _

VIP Dial/VIP Link

Frame Express _

.increases by 5,3%

.Plus decreases by 3%

.increases by 4,8%

.no increase

.no increase

decreases by 9,3%

decreases by 7,8%

.increases by 5%

no increase

Telkom's annual results

1. The review period is Telkom's first as a listed company.

2. Headline earnings per share increased by 175% to R8,64.

3. Operating free cash flow increased from approximately R4 billion in 2003 to

R9 billion during the review period.

4. Telkom's group operating revenue increased by 8,8% to approximately

R40,8 million.

5. Telkom's cash from operating activities increased by 42% to approximately

R13,9 million.

Employment equity

19

With the implementation of affirmative action, Telkorn recorded the following staff

complement (1 October 1993):

Black__________46% (African 30%, Coloured 13%, Indian 3%).

Women _________ 19% of Telkom's total employees.

Telkom's current staff complement:

Black (operational) _

Female (operational)

Black (supervising) _

Female (supervising)

Black (management)

Disabled _________

62%

29%

41%

22%

35%

1%

BEE (Black Economic Empowerment)

Telkorn views BEE as an opportunity to address South Africa's socioeconomic

imbalances, and has a crucial strategic imperative in pursuing value creation.

Telkom's social responsibility

1. Telkorn reported that it was recently named by the JSE as one of its listed

companies which qualifies for inclusion in the Social Responsibility Index8

2. Telkorn currently operates its SHE (Safety, Health and Environment Policy).

This includes an integrated health profile in determining its risks and costs

associated with physical, psychological and socioeconomic health and well-

being. Although AIDS interventions are managed as part of the Health

Management Budget, R8 million was set aside for the 2005 budget year to

cover this initiative.

3. Telkom's social responsibility extends to skills development, which includes

competency development, targeted development initiatives, learnership and

graduate development schemes.

Telkom's skills development initiatives

Telkorn reported that during the financial year ending 31 March 2004, it has

spent R390 million on training and development. Its skills development includes

the completion of approximately 30 800 virtual courses.

Centres of excellence

" The JSE Socially Responsible Investment Index was launched on Wednesday 19 May 2004

and focuses on a developmental role, with particular concern for the poor and the environment.

(Source: MTN on http://www.mtn.co.za).

20

These include a collaborative initiative, involving Telkorn, the telecommunications

industry and the Department of Trade and Industry. Each centre of excellence

provides individual research focus areas.

Employment creation

In support of Government's initiatives, Telkorn undertook to investigate

opportunities for services to African operators through African-based partners. In

doing so, it supports Government policy relating to improved universal access to

telecommunications and ICT, BEE and the empowerment of women in the

communications sector.

Telkorn: Conclusion, points for consideration and challenges

1. In relation to South Africa's first and second economies, Telkom's services

are exorbitant. Although prepaid communications facilities are meant to

address the plight of the poor, currently R158 has to be paid for connection.

If such connection is not recharged within 50 days, the connection is

terminated. Over and above the aforementioned amount, R50,80 has to be

paid monthly. This tariff appears to exceed the international average.

2. Telkorn reports that profitability is the result of the following two elements:

revenue and cost, and the difference between revenue and cost. Telkom's

4,6% profit increase was the result of a successful drive and focus on

improving its efficiency, paying back debt, improving its management

systems and a R34 billion investment in its communications network.

Telkorn is subject to a price-control regime by means of ICASA regulation.

ICASA did start the process of reviewing Telkom's tariff regime, which is to

be based on what Telkorn called reasonable economic considerations.

Telkom's profitability is does not purely result from price increases.

3. Regulation of access by Telkorn to submarine cables is required since this is

still unregulated.

4. Telkom's retrenchment rate is a cause for concern. Telkorn reports that it is

involved in the following three tiers of employment creation: (a) a creative

plan focusing on training and re-training, (b) investment through broad-

based BEE, and (c) making a contribution to the industry and the

communications sector. Telkorn partly focuses on retraining its staff and

assisting them in becoming involved in related communications sectors. It

reported that since 1997, R24 billion was spent on this, with an 18%

investment in black-owned SMMEs.

5. Indications are that Telkom's substantial profit margin does not impact

positively on comparative tariffs.

6. Does the South African communications landscape offer sufficient room for

a SNO? Telkorn reports that the answer to the aforementioned question is to

be found in the market place. When mobile communications were

introduced in 1994, initially half a million potential customers were targeted.

21

This figure has now grown to between 15 and 19 million. In this context,

Telkorn forecasts a bright future for the SNO.

H. Sentech

Sentech began operations in 1992 under the auspices of the SABC as a signal

distributor for all transmissions related to the SABC. This mandate included

services provided to M-Net, Radio 702, Radio Ciskei, Transkei and the

Bophuthatswana Broadcasting Corporation. It currently operates as a

commercial state-owned enterprise with its own board of directors and as a

broadband network business accommodating narrowband functionality on a

common platform, supplying communication solutions and services to wholesale

and retail customers in chosen markets in South Africa and the rest of the

continent.

The main focus of Sentech's activities are:

1. Digitisation.

2. Access.

3. The lifting of specific restrictions in the communications environment.

Digital Terrestrial Television (DTT) forms the basis of a digitised South African

communications environment since digital communication relates to the way

programmes are processed and transmitted, and to multiple channeling with set-

top boxes or decoders.

Sentech reported the following advantages of DTT:

1. Increased efficiency in frequency spectrum usage (more broadcasters can

be licenced).

2. Lower transmission cost.

3. Local receiver manufacturing will contribute to industry growth.

4. DTT offers multiple channel capability (in serving South Africa's diverse

cultures).

5. Improved reception, and simpler installation and operation.

6. DTT is portable as well as mobile compatible.

7. DTT offers services such as e-government, adult education and access to

health services.

8. Transmitter power operation per television service is lower.

9. Foreign control by satellite operators will be eliminated.

10. DTT will enable the public broadcaster to meet its universal service targets.

Sentech proposes the following three-phase roll-out of DTT to South Africa's

approximately 9 million households of which approximately 7 million has

television

22

1. Since Johannesburg has an existing test site, DTT should first be made

available in that city, together with 50% of non-metropolitan areas.

2. The remaining 50% of non-metropolitan areas.

3. South Africa's metropoles.

Note: Metropoles cover approximately 20 million viewers, while non-metropolitan

areas cover an estimated 24 million viewers.

Sentech anticipates the cost structure of DTT roll-out and the cost of a regional

network to be as follows:

1. 7 million set-top boxes to be acquired at a cost of R468 per box.

2. 7 million antennae at R100 per antennae (taking into consideration that

viewers may opt to use their existing antennae) - at a total cost of R3,98

billion.

3. A national transmitter network at a total cost of R268 million.

4. Transmitters at a cost of R153 million.

5. Decoders/antennae at a cost of R2,27 billion.

Sentech reports that radio is accessible in South Africa, which is covered by a

national radio network. Although not all stations are currently received, every

citizen can listen to radio.g

The MvWireless Service

This service offers the advantages of being always available on access, offering

three options of 128, 256 or 512 kb/s and no cap on data transfer. In addition, it

is portable at no extra charge, self-installed and includes an e-mail account in its

monthly price.

Existing restrictions in South Africa's communications environment

Sentech reports the following three challenges in South Africa's communications

environment:

1. Increased competitiveness.

2. Reduced prices for communications customers.

3. Leveling the communications playing field.

" This statement should be interpreted against the backdrop of points raised during the hearings

relating to listeners and/or users from various language groups not being able to listen to

programmes of their language choice.

23

Sentech's proposal on the lifting of the aforementioned restrictions cuts across

the communications spectrum and ranges from current restrictions on the Carrier

of Carriers and multimedia to legislative amendments:

1. Sentech should be entitled to terminate the international services to end-

users.

2. The definition of "Carrier of Carriers".

3. Access to a submarine cable.

In multimedia communications, Sentech should be entitled to carry voice

since this will be to the benefit of its customers.

For this reason the definition of "multimedia" in terms of the

Telecommunications Act should be amended and, consequentially, sections

32C(8) and 36A(h)(vi) be deleted.

VANs facilities must be provided.

In order to enable Sentech access to the 1800 Mhz and the 3G spectrum,

sections 30A and B and 36A and B of the Telecommunications Act should

be amended.

Sentech's funding requirements for capital infrastructure:

The amount in respect of capital infrastructure requirements can be summarised

as follows:

After investigating various financing models, Sentech proposes that the most

viable option available to meet its urgent financial requirements is that of an

additional equity injection by Government as the only shareholder in Sentech, for

the following reasons:

24

1. An equity capital injection by Government would enable Sentech to make

the necessary strategic investments that are required to provide South

Africa with an ongoing analogue broadcast transmission environment, while

simultaneously developing the new digital broadcast transmission

environment.

2. Government would be able to increase its share capital in Sentech and

retain control over a strategic national communication asset.

3. The equity capital injection could be phased in over the two-year period in

accordance with the timing requirements of the Government of South Africa.

Sentech: Conclusion, points for consideration and challenges

1. In terms of broadcasting, in many parts of our country there is either no sign

or a weak sign. The Karoo is one of those regions. It should be noted that

such viewers and listeners pay there television licence fees. At the same

time, it should be noted that while Sentech may be responsible for installing

transmitters in bad reception areas, ICASA must approve the licence

application for such an installation. This again places the emphasis on the

dire need for a policy framework regarding digitisation.

2. Digital and employment creation pose a particular challenge to Sentech. In

order to fulfil its mandate, Sentech needs to be able to tap its local skills

base. As part of Sentech's social responsibility, training in all South Africa's

centres must be prioritised, especially because of the apparent migration of

skills between Cape Town, Durban and Johannesburg.

3. Corporations such as Sentech and Telkorn should consider a partnership

approach to retain the migration of skills to develop the local provincial

economies.

4. The manufacturing of decoders in South Africa will be done jointly with a

Korean company, which represents significant progress in the local

manufacturing industry, together with much-needed expertise.

5. Sentech is becoming increasingly involved in provincial and local

government broadcasting challenges. It now talks to members of that tier of

government about programmes and their mandate on a local level. Although

gains were made in that field, Sentech reports that it has not yet achieved its

desired goals in local and provincial government broadcasting matters.

6. In support of the aforementioned, digitisation is fast becoming one of

Sentech's major challenges. Sentech has been active in this field for some

time. A task team advised the Minister. Cabinet adopted its

recommendations, which was followed by a further analysis. Digital

migration should be finalised by 2006, at an estimated cost of R45 billion

spread over a period of 20 years. Despite digitisation, analogue and digital

broadcasting have to co-exist until the whole of South Africa becomes

digital. In the meantime, both analogue and digital platforms must be

accommodated, which, at this point, doubles the cost during the cross-over

process. The cost implication is, therefore, that the price of broadcasting is

not lowered since broadcasters offer two services. The 20-year period is

2;

seen as a process of gradual migration in order to allow particularly the

African continent to digitise. At the same time, a balance must be struck

between the needs of rural and urban areas. Clients in rural areas cannot be

left with analogue platforms only.

7. Some of the SABC's transmitters are becoming so outdated that they can no

longer be repaired since parts for those are not available, which means that

they have to be manufactured locally.

Conclusion: A synopsis of challenges in South Africa's communications

environment emanating from the Ad hoc committee's deliberations

A. South Africa's current communications sector operates within the country's

first, second and, perhaps, third economies. The cost of connecting all

South Africans is increasingly becoming the communications sector's greatest

challenge. All role-players in the communications sector and industry must

take cognisance, therefore, of providing connectivity to middle-class, working

class, and poor South Africans.

B. An SNO in South Africa could play a pivotal role in creating healthy and

meaningful competition in the communications sector, with particular

emphasis on affordability.

C. Price-structuring in the telecommunications sector could assist in meeting

the Government's mandate of providing affordable communications to all

South Africans and bridging the digital divide, not only within the borders of

South Africa, but also throughout the continent of Africa and the world.

D. The transformation of South Africa's communications sector may result in

the lifting of unrealistic restrictions. This, in turn, may result in either legislative

amendments or removing restrictive legislation from the Statute Book.

E. The redrafting of South Africa's Convergence Bill is a matter of urgency. It is

envisaged that this legislation will be presented to Cabinet in the last quarter

of this year and subsequently to the Ad-hoc Portfolio Committee on

Communications.

F. Multi-purpose Community Centres and Public Information Terminals

are integral parts of South Africa's ICT roll-out and infrastructure.

G. Radio reception (with particular reference to our country's language groups)

and television reception is an ongoing challenge to South Africa's

communications sector.

H. Digital broadcasting and universal access are fast becoming South

Africa's main challenges in providing access to communications for all its

citizens. Since South Africa's current broadcasting infrastructure is ageing,

digitisation is seen as the only solution to 21 St-century broadcasting

challenges. For this reason a clear broadcasting policy - which addresses

specifically digitisation is required.

1. Presentations to the Ad-hoc Portfolio Committee were characterised by a

commitment by the eight entities to financial discipline and sound

management principles, an awareness of their social responsibilities while

at the same time balancing the communication needs of South Africa's first

and second economies.

2(

[presentation friday DoC]

27

oVdao~~- 'c~r:~ \~ o~ G'4,e ~c e e4--

WHAT INTER RELATIONS THAT WILL BE DEVELOPED IN THE US TO DEAL WITH AWAITING TRIAL

DETAINEES?

Some notes for possible utilization for preparation of replies to questions asked hy thp Ar< Hoc

Committee :14 June 2004

(From draft White Paper)

The DCS operates in the environment of integrated governance, requiring that policy processes in the Department be

aligned with overall Government Strategy and specifically with the policies of the departments in the Justice, Peace and

Security Cluster, the Social Sector and the Governance and Administration Clusters, as well as in partnership with the

community.

The new Integrated Governance framework requires a high level of synergy of policies of Government Departments,

particularly those in (he JCPS structure.

The Department's core business is rehabilitation through correction and human development in secure, safe and

humane detention or in community-based correctional supervision. This has an impact on the role that DCS plays in the

Justice, Crime Prevention and Security (JCPS) Cluster and the Social Sector Cluster of Integrated Governance. It also

impacts on the role that these cluster departments play in relation to support of the Department of Correctional Services'

mandate. Within the JCPS, the Department must take its place as a key component of the integrated justice system, and

correct the practice, which has been to treat Correctional Services as the other side of the fence in the criminal justice

system.

The Department regards overcrowding as one of its most important challenges. It does not only have significant

negative implications on the ability of the Department to deliver on its new core business, but constitutional provisions

also oblige Government to act urgently on the matter. Although the Department, together with its partners in the JCPS,

has introduced measures to address this issue, this White Paper stresses the need for a more effective and systematic

long-term management ofawaiting-trial detainees. In its long-term view, the Department motivates that Constitutional

provisions and international practice support a position in which the management and care ofawaiting-trial detainees

should not be the responsibility of the Department of Correctional Services, but should fall under Ministry of Justice.

The US has developed a overcrowding checklist of measures aimed at reducing the number of ATDs in DCS facilities.

The list also provides various mechanisms for monitoring the levels of ATDs and feeding this information into the relevant

departments that can unblock the causes, These include:

• the awaiting-trial offender project aimed at reducing the detention cycle time of awaiting-trial detainees;

• involvement in the Saturday courts project, which was introduced in ninety-nine courts countrywide;

• the establishment of a Departmental Task Team to liaise with a task team working on overcrowding

within the Security cluster at implementation level;

• the utilization of sections 62[f] and 63[a] of the Criminal Procedure Act by the Heads of Prison in court

applications which resulted in the release of prisoners; and

• the use of the amendment of Section 81 of the Correctional Services Act to allow the release, under

specific conditions, of awaiting-trial prisoners who have been allowed bail but could not afford to pay due

to the prisoner's personal social conditions.

The monitoring of levels of children in DCS detention is taken forward by the InterSectoral Child Justice Committee, with

DCs providing monthly reports to the committee. Mechanisms have been established at provincial/regional level to

ensure that cases involving children are fast tracked through the criminal justice system, that secure care facilities are

utilised where they exist, and that children destined for reform schools are transferred there speedily.

Overcrowding is addressed through both these initiatives in the US and through the social crime prevention work taken

forward through the Social Sector in both the work on social cohesion & social justice, and the urban renewal and

integrated sustainable rural development programmes. The long term solution to overcrowding lies in the reduction of the

levels of crime in South Africa and hence the reduction of the rate at which we incarcerate our citizens.

The under performance of some of the Court Centres is a concern. The provincial project managers from BAG and the national

project team have assisted most of these courts during the later part of 2003. Data integrity audits, feedback on performance and

guidelines on conducting local performance analysis was focused on during the visits. A statistical analysis report on improvement

and performance related to the mentioned courts were discussed.

Guidelines to conduct a local performance analysis and to develop corrective measures were also made available to local

management. As corrective measures normally take time before the expected outcome is achieved, the performances at these

courts will however be monitored

Not withstanding the fact that the Case Roll Management System has reduced case related query time by 99% (from 8 minutes to 5

seconds) and between 2,5 and 5 hours are gained daily, it is also clear from the statistics that the Court Centre concept is not only

enhancing the management of cases, it has also had a positive impact on the productivity at various courts. Furthermore, the

comprehensive analysis of the statistics produced by the project identifies weaknesses and areas for improvement that place court

managers in a position to institute corrective actions in those areas. The National Implementation Team should however during

2004 focus on guiding local management in interpreting the statistics and to institute corrective measures.

Cabinet has approved a Criminal Justice Review process, the terms of reference of which have not yet been finalised, which it is

envisaged would provide the US with a platform for addressing issues related to alignment of policy and procedures across the

criminal justice system.