REPORT OF THE PORTFOLIO COMMITTEE ON COMMUNICATIONS ON ITS
DELIBERATIONS ON THE BUDGET VOTE 27: (DEPARTMENT OF COMMUNICATIONS) AND ITS
ENTITIES, DATED 26 MAY 2011
The Portfolio Committee on Communications, having considered the
strategic plans of the Department of Communications and its public entities,
reports as follows:
1. Introduction
Section 55(2) of the Constitution of the Republic of South Africa
(Act 108 of 1996), states that the National Assembly must provide for
mechanisms (a) to ensure that all executive organs of state in the national
sphere of government are accountable to it; and (b) to maintain oversight of
(i) the exercise of national executive authority including the implementation
of legislation; and (ii) any organ of state.
The Portfolio Committee on Communications considered the Budget of
the Department of Communications on 9 March 2011, 15 April 2011 and 20 and 24
May 2011. The purpose of these meetings
was to outline the department’s budget for the 2011/12 financial year and its
strategic plan for 2011–2013.
The strategic plans of the department and its entities must take
into account the following six key areas:
·
Define concepts
·
Market analysis
·
Workforce
·
Risk and Opportunities
·
Investment and
Innovation
·
Monitoring and
Evaluation.
In performing its constitutional mandate, the Committee
scrutinised the alignment of strategic plans of the Department of
Communications and its entities with the following key government objectives:
·
2011 state-of-nation
address
·
Budget statement
·
Government’s five
priorities
·
Twelve deliverable
government outcomes
·
New Growth Path
·
The Minister’s signed
performance agreement with the President.
The Committee also took note that most of the policies within the
sector are due to be reviewed.
2. Department of Communications (DoC) - R1 889
112 000.00
The 2011-2014 Strategic Plan was prepared in terms of the
statutory requirements as defined in Chapter 5 of the Public Finance Management
Act (No. 1 of 1999) and Chapter 1, Part III b of the new Public Services
Regulations of 2001. The Medium Term
Strategy comprises eight Strategic Goals supported by seventeen Strategic
Objectives, which are to be realised through the achievement of numerous three-year
targets. It is fully aligned to the
relevant Government Outcomes.
Expenditure increased at a marginal rate from R1.9 billion in
2007/08 to R2.1 billion in 2010/11, at an average annual rate of 3,8 per
cent. This was due to the following
additional allocations: R500 million in 2007/08 to Sentech for the national
wholesale broadband network; R600 million in 2008/09, R450 million 2009/10 and
R150 million to Telkom for the implementation of the ICT access network; R200
million in 2008/09 and R100 million in 2009/10 to Sentech to fund the satellite
backup for the 2010 FIFA World Cup; and R100 million in 2009/10 and R110
million in 2010/11 to Sentech to cover the costs associated with the envisaged
increased operational expenditure during the dual illumination period.
Over the medium term, expenditure is expected to decrease
marginally at an average annual rate of 4.7 per cent, from R2.1 billion in
2010/11 to R1.8 billion in 2013/14, as the implementation of 2010 FIFA World
Cup infrastructure and other initiatives come to completion. In 2010/11, a
final allocation of R150 million is made to Telkom for the 2010 FIFA World
Cup. In 2011/12, R25 million is
allocated to the Universal Service and Access Agency of South Africa, and
Universal Service and Access Fund to: build capacity and procure necessary
supporting infrastructure to expand ICT access to South Africans in the
under-serviced areas; and also allocated R180 million in 2010/11 and R220
million in 2011/12 to subsidies poor households with purchasing of the
set-top-boxes as part of the migration from an analogue to a digital
broadcasting platform. The baseline
efficiency savings made by the Department of R314.7 million in 2011/12 and R479
million in 2012/13, mostly caused by reductions in the South African Post
Office subsidy allocations, also contribute to the decrease in expenditure over
the medium term.
The Expenditure in the ICT Enterprise Development programme is
expected to decrease over the medium term, from R2 billion to R1.1 billion, at
an average annual rate of 17.9 per cent due to final allocations to Sentech and
Telkom in 2010/11. The decrease in
transfers and subsidies over the medium term, from R2.1 billion to R1.1
billion, is due to discontinuation of South African Broadcasting Corporation:
Technology as a programme under SABC Public Broadcaster and the reduction of
the subsidy to the South African Post Office.
Expenditure in compensation of employees increased from R97.7
million in 2007/08 to R164.6 million in 2010/11, at an average annual rate of
19 per cent. This substantial growth is
the result of an increase in the number of staff, from 286 in 2007/08 to 428 in
2010/11, and due to inflation related salary adjustments. As at September 2010, the vacancy rate of the
Department was 29.07 per cent. This represented 125 positions that have not
been filled resulting from the organizational review. Over the MTEF period, spending is expected to
increase R171.7 million to R188 million, at an average annual rate of 4.5 per
cent due to inflation related adjustments.
The Department is composed of 428 staff members excluding the
Minister and the Deputy Minister, of which 343 positions are funded and 87 are
unfunded. Over the 428 staff members, 312 positions were filled as at 30
September 2010.
Revenue for the Department is mainly derived from dividends as a result
of its shareholding interest in Telkom and Vodacom, and from administration
fees. Administration fees comprise of all fees collected by the Independent
Communications Authority of South Africa from telecommunications operators and
the South African Post Office licence fees, which are paid directly into the
National Revenue Fund.
Total receipts increased from R4 billion in 2007/08 to R5.8
billion in 2009/10 due to the R3.9 billion from extra-ordinary proceeds
received from Telkom for the sale of Vodacom shares. Total receipts then
decreased to R899.3 million in 2010/11. The medium term receipts are expected
to stabilize at R913.4 million in 2011/12, R928 million in 2012/13 and R943.4
million in 2013/14.
3. Departmental Budget 2010/2011
The Department of Communications budget is structured into the
following six programmes
3.1 Programme 1: Governance and Administration – R148 505 000.00
The purpose of this programme is to provide strategic support to
the Ministry and overall management of the Department.
The Committee
noted the high vacancy rate at managerial level and that the department is in the
process of finalising its organogram and filling of the vacant posts.
3.2 Programme
2: ICT International Affairs and Trade – R 40 890 000.00
The purpose of this programme is to ensure alignment between
3.3 Programme 3: ICT Policy Development – R 94 699 000.00
The purpose of this programme is to develop ICT policies,
legislation and strategies that support the development of an ICT sector, which
creates conditions for the accelerated and shared growth of the economy and to
develop strategies that increase the uptake and usage of ICTs by the majority
of the South African population, thus bridging the digital divide.
3.4 Programme 4: Finance and ICT
The purpose of this programme is to oversee and manage
government’s shareholding interest
in public entities and to facilitate growth and development of Small, Micro and
Medium Enterprises (SMMEs) in the ICT sector.
The Committee noted that there is no integration of strategic plan
between the department and its entities and that resulted in the duplication of
roles and functions
3.5 Programme 5: ICT
Infrastructure Development – R280 911 000.00
The purpose of this programme is to promote investment in robust,
reliable, secure and affordable ICT infrastructure that supports the provision
of a multiplicity of applications and services.
The
3.6 Programme 6:
Presidential National Commission (PNC) – R34 691 000.00
The purpose of this programme is to facilitate the development of
an all inclusive information society by promoting the uptake and usage of ICTs
for improved socio-economic development and research.
The name of the PNC will change in the next financial year to
Information Society Programme (ISP). The
Presidency has been consulted regarding the dissolution of the PNC. In the past few years, it has functioned as a
unit of the department absorbed with its own budget.
The Committee recommends that the budget allocation of the
Department of Communications be approved.
4. Entities of the
Department of Communications
For the financial year under review, the Department has the
following entities and agencies reporting to the Minister of Communications and
the ICT regulatory authority:
4.1 South African Post Office (SAPO) - R180 442 000.00
The South
African Post Office has been granted the mandate to conduct postal and financial
services in
The strategic
overview of the SAPO includes success factors such as the review of the SAPO
government structure, the implementation of the new Companies Act, compliance
with the King III code, the implementation of the Postbank Act, the development
of an appropriate labour model, succession planning, change management,
performance management, employee development, employee wellness and improved
labour relations. Major projects include a review of the SAPO business and
operating model, strengthening the information technology platform, the diversification
of source of revenue, strengthening the procurement processes, developing a
funding plan for the SAPO group and synergies and consolidation of the various
business units.
SAPO has the following strategic programmes:
·
Develop
customer intelligence
·
Organisational
re-alignment around customer
·
Customer
experience improvement
·
Solution
development per customer segment
·
Profitability
and rationalisation
·
Product
and solution development per segment
·
Product
and solution delivery per profitable and preferred channel
·
Measuring
risk and profitability per segment and channel
The Committee
noted the concern raised by SAPO about the government subsidy that will be
phased out on the financial year 2013/14.
SAPO will face difficulties in complying with their obligation to
rollout universal services and in building more infrastructure.
The Committee
urges DoC and SAPO to further engage on the issue of the government subsidy.
The Committee
also noted that the 1998 White Paper has not been reviewed.
The Committee
was satisfied with SAPO’s pro-active planning of diversifying the various
business units and that there was sound strategic leadership.
The Committee
recommends that the budget allocation of SAPO be approved.
4.2 Sentech - R
279 000 000.00
Sentech is
a schedule 3b State Owned Enterprise (SOE) operating in the broadcasting signal
distribution and telecommunications sector. In terms of the Electronic
Communications Act 36 of 2005, the main objective of Sentech is to provide
electronic communications services and electronic communications network
services in accordance with the Electronic Communications Act.
As a State
Owned enabler in the ICT sector, Sentech’s Medium Term Expenditure Framework
(MTEF) strategy for 2011/12 is informed and driven by the DoC’s Strategic
objectives as adopted by Cabinet as key imperatives for the current MTEF
period. Sentech’s strategic plan is aligned with the 2011 State of the Nation
Address (Government priorities), the New Growth Path, the Medium Term
Expenditure Framework Budget allocation and the Department of Communications
Strategic Plan.
Sentech’s
strategy for the MTEF period focused on consolidating the broadcasting signal
distribution products and services, termination of unsustainable services,
implementing the National Wireless Broadband Network (NWBN) strategy, preparing
for the launch of commercial Digital Terrestrial Television and evaluating
business models for new managed network services. These pillars present the
organisational turnaround strategy that would ensure long term sustainability.
In order to deliver on its strategy, Sentech would invest in resources and
expertise to develop a deeper understanding of its current and future customer
needs.
The rollout of the Digital
Terrestrial Television network is one single project that Sentech would focus
on over the next three years. With effect from 1 April 2011, Sentech would
implement a new management approach to DTT based on the project status, network
rollout, funding and accounting and reporting. As per the Broadcasting Digital
Migration Policy, the policy make mention of both terrestrial as well as
satellite standard for the migration from analogue to digital and all citizens
currently receiving analogue terrestrial services must still receive television
services after the switch-off of analogue.
Sentech has the following four key
strategic objectives:
·
Stabilising
the organisation
·
Sustain
profitability
·
Customer
satisfaction and retention
·
Network
performance
The Sentech strategy for ensuring
sustainability of the proposed National Wireless Broadband Network (NWBN) is
based on building a strong foundation for creating Universal Access to
Broadband services, spearheaded by government intervention where market forces
were or may be reluctant to invest in building these networks. The projected
growth figures for the NWBN are primarily driven by the e-Learning and e-Health
services that require connectivity for schools and clinics respectively. According
to Sentech about 27 578 schools are not connected in the country due to
financial challenges.
The Committee recommends that the budget allocation for Sentech be
approved.
4.3 Universal Service and Access Agency of
The Universal Service and Access Agency of
South Africa (USAASA) was established under the Electronic Communications Act
No. 36 of 2005. The role of the agency is to promote the goals of universal
access and universal service in the under serviced areas of
USAASA has the following strategic objectives:
·
Provide
universal service and access strategy, policy and leadership
·
Facilitate
interventions in ensuring affordable and equitable access and usage
·
Monitor
and evaluate effective use and social appropriation
·
Efficient
and effective management of the Universal Service and Access Fund
·
Achieve
project based organisational excellence
·
Facilitate
multi sectoral networks towards improving the public profile of the universal
access and service
The Committee notes USAASA’s commitment to achieve Universal Access by
2020.
The Committee recommends that the budget allocation for USAASA be
approved.
The Committee
noted the transfer of R260 930 000.00 from the Universal Service Access Fund
(USAF) to USAASA allocated as follows:
·
Programme 1: Handover
of existing access centres – R 7 913 000.00
·
Programme 2: Rapid
deployment of access centres – R 19 800 000.00
·
Programme 3: Broadband
infrastructure in Under-Serviced Areas – R 9 000 000.00
·
Programme 4:
Broadcasting digital migration (subsidisation of set-top-boxes) – R220 000
000.00
The Committee noted that there has been no fund allocated to
address specific needs for people living with disabilities.
4.4 South African Broadcasting Corporation (SABC) - R 126 137
000.00
The South African Broadcasting Corporation was established in
terms of the Broadcasting Act (1936) as a government enterprise to provide
radio and television broadcasting services to
The SABC has
the following strategic objectives:
·
Putting broadcasting
and broadcasters back in the forefront of what the organisation is about and
editorial integrity back into the platforms and programmes of the SABC in
particular News
·
Build brands that
reflect excellence and the South African identity in every way
·
Building the digital
SABC and integrating the digital future into all plans and actions
·
Having an operating
model that is simple and easily understood supported by an organisational
design that assigns accountability directly to those charged with execution of
the
·
Building an
organisation that is economical, efficient and effective
·
Focusing on the
performance of the
·
Managing and reporting
on strategy development and implementation, operational performance and risk
management
The Committee has noted that SABC is in the process of finalising
its proposed structure. The Board is
meeting on 06 June 2011 to approve the structure.
The issue of the repayment of the government guarantee, funded
through Nedbank was deferred to a separate discussion between the Committee, National
Treasury, SABC and the Department.
The Committee commended SABC for a job well done on its election
coverage in particular to the provision of the sign language interpreters and
subtitles. The SABC must continue to provide such services post-elections.
The Committee further notes the stability within the Board and the
Executive and the progress made in the development of the turnaround strategy.
The Committee noted that SABC intends to rollout 300 low power
transmitters in the next three years to improve its footprint for coverage.
The Committee
recommends that the budget allocation for SABC be approved.
4.5 National Electronic Media Institute of
NEMISA was established as a non-profit organization in terms of
the Companies Act (1973). It provides much needed skills training at an
advanced level for the broadcasting industry. It is accredited by the Council
for Higher Education and offers diploma courses, short courses and internships
in three subjects: TV production, radio production and creative multimedia.
NEMISA has the following strategic focus areas:
·
To transform NEMISA
into a technology, Research and Development driven organisation
·
To enhance financial
viability and institutional sustainability
·
To improve the
organisational efficiency, security and effectiveness
·
To improve and align
stakeholder and strategic partner relations both internally and externally
·
Expanded the
accessibility and reach of the NEMISA product offerings
The Committee notes that NEMISA is in the process of reviewing its
mandate and its operational requirements.
The Committee
recommends that the budget allocation for NEMISA be approved.
4.6 Independent Communications Authority of
ICASA is responsible for regulating the telecommunications and
broadcasting sectors in the public interest so as to ensure affordable services
of a high quality for all South Africans. In addition to developing
regulations, ICASA also issues licenses to telecommunications and broadcasting
service providers; enforces compliance with rules and regulations; protects
consumers from unfair business practices and poor quality services; hears and
decides on disputes and complaints brought against licensees; and manage the
effective use of radio frequency spectrum.
ICASA presented
the following strategic focus areas:
·
Ensure effective
participation by HDIs in the industry
·
Ensure the provision
of broadband services
·
Optimise the use of
the radio frequency spectrum to support the widest variety of services
·
Promote the protection
of consumers and accessibility for persons with disabilities
·
Promote the
development of public, community and commercial broadcasting services in the
context of digital migration
·
Ensure compliance with
legislation and regulation
·
Strengthen and
modernise ICASA
·
Promote competition
The Committee requested that ICASA reprioritise its strategic
focus areas in line with the allocated budget.
ICASA presented
the following reprioritised strategic focus areas:
·
Local loop unbundling
·
Broadband
·
Spectrum monitoring
and assignment equipment and related software
·
A review of the
existing regulatory framework for broadcasting services to support the introduction
of digital terrestrial television
·
Universal Service
·
Auctioning of Spectrum
·
System Automation –
online application data.
The Committee notes and appreciate ICASA’s effort of holding a
The Committee has noted that ICASA headquarters will still be
based in Sandton until its lease expires in October. It is of the view that after the lease has
expired, ICASA must move to a place that will also be accessible to the general
public.
The Committee recommends that the budget allocation for ICASA be
approved.
4.7 .za Name Domain
The Committee considered the allocated
budget for .za Name Domain although it could not appear before the Committee to
make presentation.
The Committee recommends that the budget allocation for .za Domain be
approved.
5.
Recommendations
The Committee, having considered and examined the Business Plans
(Budgets and Strategic Plans) of the Department of Communications and the entities accountable to it,
recommends that:
Report to be considered.