ATC121026: Budgetary Review and Recommendation Report of the Portfolio Committee on Communications on the Department of Communications, dated 23 October 2012
Communications and Digital Technologies
Budgetary Review and Recommendation Report of the
Portfolio Committee on Communications on the Department of Communications,
dated 23 October 2012
The Portfolio
Committee on Communications (the Committee), having assessed the performance of
the Department of Communications, reports as follows:
1.
Introduction
1.1.
Mandate of the Committee, including
provision of Section 5 of the Money Bills Amendment Procedure and Related
Matters Act, No. 9 of 2009.
According to
Section 5 of the Money Bills Amendment Procedure and Related Matters Act, the
National Assembly, through its Committees, must annually assess the performance
of each national department. The Committee must submit an annual Budgetary
Review and Recommendation Report (BRRR) for each department that falls under
its oversight responsibilities for tabling in the National Assembly. These
should be considered by the Committee on Appropriations when it is considering
and reporting on the Medium Term Budget Policy Statement (MTBPS) to the House.
The Portfolio Committee on
Communications considered the Budget of the Department of Communications on 13
and 24 April 2012.
The Committee
considered the Departments Annual Report 2011/12 on 11 and 16 October 2012.
2.
The
Department of Communications
2.1.
Mandate,
Vision and
Mandate
·
To create a vibrant ICT Sector
that ensures that all South Africans have access to affordable and accessible
ICT services in order to advance socio-economic development goals, support the
African Agenda and contribute to building a better world.
Vision
·
·
Build a better life for all
through an enabling and sustainable world-class Information Communications
Technologies.
The aim of the Department is to develop ICT policies and legislation
that stimulate and improve the sustainable economic development of the South
African first and second economies and positively impact on the social
wellbeing of all South Africans. The Department also aims to oversee the
performance of state-owned entities within its portfolio.
2.2.
Strategic
Priorities and Measurable Objectives of the Department
The
Departments core functions are to:
·
Develop ICT policies and legislation that
create conditions for an accelerated and shared growth of the South African
economy, which positively impacts on the well being of all our people and is
sustainable;
·
Ensure the development of robust,
reliable and affordable ICT infrastructure that supports and enables the
provision of a multiplicity of applications and services to meet the needs of
the country and its people;
·
Contribute to the development of an
inclusive information society which is aimed at establishing South Africa as an
advanced information-based society in which information and ICT tools are key
drivers of economic and societal development;
·
Contribute to e-
Skilling
the nation for equitable prosperity and global competitiveness;
·
Strengthen the
Independent Communications Authority of South Africa (ICASA), to enable it to
regulate the sector in the public interest and to ensure growth and stability
in the sector;
·
Enhance the
capacity of, and exercise oversight over, State-Owned Enterprises (
SOEs
) as the delivery arms of government; and
·
Fulfil
2.3.
Strategic
Outcome Oriented Goals of the Department
The strategic outcome oriented goals of the Department are to:
-
Enable the maximization of
investment in the ICT sector for socio-economic development;
-
Ensure that ICT infrastructure
is robust, reliable, affordable and secured to meet the needs of the
country and its people;
-
Create new competitive business
opportunities for the growth of the ICT industry;
-
Accelerate the socio-economic
development of South Africans by increasing access to, as well as the
uptake and usage of, ICTs through partnerships with business and civil
society and three (3) spheres of government;
-
Contribute towards building a
developmental state including improvement of public services and
strengthening democratic institutions;
-
Enhance the role of ICT
state-owned enterprises as the delivery arms of government and support the
regulator;
-
Contribute to the global ICT
agenda prioritizing
-
Facilitate the building of an
inclusive Information Society to improve the quality of life development.
3.
Departmental Allocations
and Expenditures 2011/12
During the 2011/12 financial year,
the Department was allocated R2
,002
billion, which is
made up of a baseline of R1,889 billion and adjusted estimates of R113,8 million.
The adjusted estimates include a rollover of R112 million (R109,9 million
for Sentech, roll-out of Digital Terrestrial Television infrastructure and R2,4
million for projects that were in progress) and a rollover of R1,5 million for
salary adjustments.
The total spending for the period
under review amounted to R1
,792
billion, representing
89, 5 % with the under-spending of R210,9 million (10, 5 %).
The under-spending is made up as follows: (i)
R21
,6
million for compensation of employees due to the
organisation review and staff resignation; and (ii) R187,6 million for
goods and services mainly for 112 Emergency Call Centre and Broadband, which
emanated from the delay by National Treasury in providing the department with
approvals on the project feasibility on 112 Emergency Call Centre and the delay
by the Departmental Bid Adjudication Committee in approving the tender for
Broadband.
The Department had appointed
technical advisors for feasibility study on 112 Emergency Call Centre project
during the 2011/12 financial year and tender was advertised towards the end of
March 2012 so that this project can be implemented as early as possible in the
2012/13 financial year. The Department has also engaged Sentech in the
implementation of the broadband project.
Furthermore, a request was made in
terms of chapter six of the Treasury Regulations to rollover R4
,250
million for completion of the Broadband Penetration,
Speed and Coverage Study project which is underway.
The
Departments programmes comprise: (1) Governance and Administration; (2) ICT
International Affairs and Trade; (3) ICT Policy Development; (4) Finance and
ICT Enterprise Development; (5) ICT Infrastructure Development and; (6)
Presidential National Commission. Over the period under review the Department
has not altered its programmes. However, the restructuring exercise that
started in the 2010/11 financial year once completed will result in a new
structure for the Department. This will see changes especially in the top
structure of the Department and, changes are geared towards ensuring that the
Department has the capacity to deliver.
3.1.
Programme
1: Governance and Administration
The purpose of this programme is to
provide strategic support to the Ministry and overall management of the
Department. It is divided into the following five sub-programmes: The Ministry;
Deputy Ministry; management; operations; and property management.
Out of the total programme budget
allocation of R168 million, R156 million or 92, 9 per cent was spent,
which leaves R12 million or 7, 1 per cent in unspent funds. The under-spending
is mainly under compensation of employees. This is due to the moratorium held
in the Department.
The Department only
started with the filling of the positions towards the end of the financial year
hence the under-spending in this programme.
3.2.
Programme
2: Information Communications Technology (ICT), International Affairs and Trade
The purpose of this programme is to
ensure alignment between
Out of the total programme budget of
R42 million, R41
,6
million or 99, 5 per cent was
spent, which leaves R210 000 in unspent funds.
3.3.
Programme
3: ICT Policy Development
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. It is divided into the following six sub-programmes: ICT
policy development; Economic analysis, market modelling and research; ICT
uptake and usage; Intergovernmental relations; SABC Community Radio Stations;
and SABC programme production.
Out of the total programme budget of
R88 million, R81 million or 92, 1 per cent was spent, which leaves R7 million
or 7, 9 per cent in unspent funds.
The
under-spending is on goods and services and due to the market study on
Broadcasting that was not conducted as planned, the finalisation of the
Electronic Communications Amendment Bill and a study on the alternative funding
model were delayed.
No projects were rolled
out in the update and usage due to the chief directorate not having warm
bodies.
3.4.
Programme 4: Finance and ICT
The purpose of this programme is to
oversee and manage governments
shareholding interest in public entities and to facilitate growth and
development of Small, Micro and Medium Enterprises (SMMEs) in the ICT sector.
It is divided into the following two sub-programmes: Public entity oversight;
and Small Medium and Micro Enterprises (SMMEs).
Out of the total programme budget
allocation of R1
,4
billion, R1,4 billion or 100 per
cent was spent.
3.5.
Programme
5:
ICT Infrastructure Development
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. It is divided into the following three sub-programmes:
applications and research; 112 Emergency Call Centre; and .za Domain Name
Authority.
Out of the total programme budget
allocation of R259 million, R67 million or 26, 2 per cent was spent, which
leaves R192 million or 73, 8 per cent in unspent funds.
The bulk of the under-spending is goods and
services as a result of the non-implementation of 112 Emergency Call Centre due
to the delay by National Treasury in providing approval on the project
feasibility and also on Broadband allocation due to the delay by the Department
Bid Adjudication Committee in approving the tender.
3.6.
Programme
6:
Presidential National Commission
(PNC)
The purpose of this programme is to
facilitate development of inclusive information society by promoting the uptake
and usage of ICT for improved socio-economic development and research. It is
divided into the following four sub-programmes: planning, coordination and
evaluation; information society and development cluster; e-applications; and
PNC operations.
Out of the total programme budget
allocation of R41,6 million, R41,3 million or 99, 3 per cent was spent
which leaves R307 000 or 0.
7 per cent in unspent funds.
During the presentation of the
Strategic Plan on 11 March 2011, the Department reported that the name of the
PNC will change in the 2011/12 financial year to Information Society Programme
(ISP). However, during the presentation of the 2011/12 annual report, nothing
was reported by the Department regarding this change.
4.
Virements and Shifting
of Funds
Though section 43 of the Public
Finance Management Act (No 1. of 1999) makes provision for virements and the
shifting of funds from one programme to another, as well as the movement of
funds within a programme, there are certain requirements that need to be met by
an accounting officer. These conditions are as follows:
Section 43(2) of the Public Finance
Management Act provides that the amount of a saving under a main division of a
vote that may be utilised in terms of (1) may not exceed 8 per cent of the
amount appropriated under that main division. Moreover section 43(4) states
that this section does not authorise the utilisation of a saving if: (i)
an amount is specifically and exclusively appropriated for
a purpose mentioned under a main division within a vote; (ii) an amount
appropriated for transfers to another institutions; and (iii) an amount
appropriated for capital expenditure to defray current expenditure.
Virement was
effected
from programmes 2 and 5 to programmes 1, 2, 4 and 6 on all items to defray
excess expenditure. Virements were in accordance with section 43(1) of the
PFMA.
5.
First Quarter
Expenditure Report for 2012/13 Financial Year
During the
first quarter of the 2012/13 financial year, the Departments total planned
expenditure and projected cash flows amounted to R350,8 million which is
equivalent to 20, 5 per cent of the total available budget. However, the Department
managed to actually spend R348 501 million which is equivalent to just 20, 35
per cent of the total allocated budget of R 1
,7
billion.
Although the
expenditure of the first quarter of 2012/13 is higher (20, 35 per cent)
compared to the previous financial year of 17, 7 per cent financial year, however,
this expenditure means that the Department has repeatedly spent far less than
the general expenditure benchmark of 25 per cent per quarter. It is also
important to note that most of the economic classification categories have
reported under-expenditure in the first quarter with the over-expenditure on
programmes 1 and 6 at 32, 7 per cent 35, 5 per cent respectively. Lower-than-expected
spending is mainly due to the following: non-submission of drawback schedules;
broadband ICT tender process and delays in the implementation of projects
awaiting approval by the Director-General.
The under-spending by the Department
emanated from the following programmes:
Programme
2: ICT International Affairs and Trade
: Actual
expenditure for the first quarter was three times the projections for the first
quarter of 2011/12. Actual expenditure amounted to R14
,9
million or 36, 6 per cent of the R40,9 million allocated funds as compared to
projections of R4.4 million. Over-expenditure under this programme is due to
membership fees to international organisations which were paid earlier than
projected. It was projected that the fees would only be paid late in the second
quarter. However, the invoice was received in May and hence the payment was
made to avoid penalties.
Programme
3: ICT Policy Development:
Actual expenditure amounted to R12
,3
million as compared to projected expenditure of R15,
4 million, representing under-expenditure of 20, 2 per cent. By the end of the
first quarter only R12
,3
million was spent from the
total voted funds of R94,7 million. The Department cites internal
administrative processes as the reason for under-expenditure.
Programme
4: ICT
Programme
5: ICT Infrastructure Development
: The programme managed to spend
only R8, 5 million from the R45
,2
million projected
expenditure for the first quarter. The under expenditure of 81, 3 per cent is
mainly due to the delays in implementation of 112 Emergency Call centre
projects and broadband ICT tender as a result of tender processes.
Programme
6: Presidential National Commission:
Out of the voted
funds of R34
,7
million, R6,1 million was spent or
14, 5 per cent, while the programme had anticipated spending R8,9 million for
the first quarter. The main reason for this under-expenditure is internal
administrative processes.
6.
Auditor-Generals Report of 2011/12
The Committee notes with concern the
general findings of the AGSA in relation to the regression of the Department
and its entities with the exception of Telkom. In expressing his opinion, the
Auditor-General indicated that the financial statements of the Department
present a fairly, in all aspects, financial position of the Department as at 31
March 2012 and its financial performance and its cash flows for the year then
ended, in accordance with the Departmental Financial Reporting Framework
prescribed by the National Treasury and in line with the requirements of the Public
Finance Management Act (PFMA). The Department obtained an unqualified opinion
with findings in the 2011/12 financial year with the following matters needing
urgent attention:
6.1
Fruitless, wasteful and
irregular expenditure
The Auditor-General has found that
as disclosed in note 30, irregular expenditure was incurred as proper
procurement procedures were not followed. An amount of R20 054 000 was incurred
in the current year and R 95 485 000 was incurred in the previous year but
identified in the current year.
As disclosed in note 31, fruitless
and wasteful expenditure to the amount of R764 000 was incurred due to
duplicate air tickets, damaged car rentals, and international calls by hackers.
An amount of R12
,7
million was incurred in the
previous financial year but identified in the current year.
In addition to irregular, fruitless
and wasteful expenditure, the Auditor-General has also emphasised other
recurring matters in his reports on the Department. These include:
(i)
non-compliance
with legislation the Department consistently failed to adhere to the
requirements of the PFMA, Treasury Regulations and Public Service Regulations;
(ii)
irregular
expenditure has been a result of the Departments failure to follow proper
procurement procedures. Despite the fact that the Auditor-General has
highlighted irregular expenditure as an issue of concern, the Department still
incurred irregular expenditure amounting to R115,5 million which was reported
in the 2011/12 Annual Report. This includes R95
,48
million that was incurred in the previous year but identified in the current
year, and R20 million incurred in the current year;
(iii)
fruitless
and wasteful expenditure has been a result of interest on late payments to
American Express (2010/11), cancellation of trips and duplicate payments to
service providers. Despite the fact that the Auditor-General has highlighted
fruitless and wasteful expenditure as an issue of concern, the 2011/12 Annual
Report indicates that the Department incurred fruitless and wasteful
expenditure amounting to R764 000 for duplicate air tickets, damaged car
rentals, and international calls by hackers. In addition, an amount of R12
,7
million was incurred in the previous financial year but
identified in the 2011/12 financial year;
(iv)
human
resource management and compensation procedures Overtime compensation of over
30 per cent of salaries and appointments made to posts that have not been
approved and funded. This was reported in both the 2010/11 and 2011/12 Annual
Reports;
(v)
senior
managers, including the Director-General, did not sign performance agreements
for the current financial period, which is in contravention of Public Service
Regulation iii A;
(vi)
appointments
were made to posts which are not approved and funded as per requirements of PSR
1/III/F(a) and F(d). This was raised for the second consecutive time by the Auditor-General
(2010/11 financial year); and
(vii)
funded
posts were not filled within 12
months as required by Public Service Regulation 1/VII/C.1A.2. As at September
2011, the Departments vacancy rate stood at 29, 7 per cent, with 40, 4 per
cent of these vacancies falling between salary levels 11 and 12, while the
vacancy rate within Senior Management Service was 33, 8 per cent.
In the 2010/11 financial year, the Auditor-General
found that funded vacant posts were not advertised within six months after
becoming vacant and were not filled within 12 months after becoming vacant as
per the requirements of PSR 1/VII/C. 1A.2.
During the Portfolio Committee on
Public Service and Administration meeting on 30 May 2012, the Public Service
Commission presentation, under priority area three (Use our people better
through improvements in Human Resource Management), revealed that the Department
of Communications has a vacancy rate of 38, 7 per cent in the professionally
qualified and experienced specialist and mid-management, as well as in the
Senior Management Service (SMS). In addition, the Department had a vacancy rate
of 36.2 per cent in the rest of the occupational bands and it was mentioned
that the Department had an average period of vacant posts of 31, 1
months
which is equal to 2 years and 6 months.
In
addition, the Auditor-General identified the following internal control
deficiencies:
i.
Leadership
-
decisive leadership
action was not taken in response to the risk of non-compliance with supply
chain management regulations highlighted by internal and external audit
findings over the period under review, by implementing controls to prevent the
occurrence of irregular expenditure;
ii.
Decisive action was not taken to address
appointment of employees who are outside the HR structure;
iii.
Inadequate implementation by HR management
to ensure that adequate and sufficiently skilled resources are in place and
that performance is motivated; and
iv.
Financial and Performance Management - manual
controls are not designed to ensure that all transactions and performance
information are completely recorded and accurately classified.
6.2
Predetermined objectives
Although no material findings on the
usefulness and reliability of performance information were identified in the
annual performance report, the Auditor-General drew attention to the following
matters:
6.3
Achievements of Planned targets
Annual
Report 2011/12
-
of the total number
of planned targets, only 69 targets were achieved during the year under review.
As a result 70 per cent of the total targets were achieved during the year
under review. This was due to the vacancies at the Department.
6.4
Compliance with laws and
regulations
6.4.1
Procurement and contract
management
Goods and services with a
transactional value below R500 000 were procured without obtaining the required
price quotations, as required by the Treasury Regulation 16A6.1.
Goods and services with a
transactional value above R500 000 were procured without inviting competitive
bids as required by the Treasury Regulation 16A6.1.
6.4.2
Expenditure management
The Auditor-General found that
contrary to section 38(1
)(
f) of the PFMA and TR 8.2.3,
payments to creditors were not always settled within 30 days from receipt of an
invoice.
The accounting officer did not take
effective steps to prevent irregular and fruitless expenditure as required by
section 38(1
)(
c)(ii) of the PFMA.
7.
Consideration of Reports of Committee on Public Accounts
The Department did
not appear before the Committee on Public Accounts.
8.
Consideration
of Reports of Standing Committee on Appropriations
The Standing Committee on
Appropriations (SCOA) was established in terms of section 4(3) of the Money
Bills Amendment Procedure and Related Matters Act, No.9 of 2009. The Act
requires SCOA to consider and report on spending issues, and on actual
expenditure published by the National Treasury. SCOA has adopted a tradition of
inviting both the National Treasury and the affected departments to account on
government spending. This consultative approach gives SCOA an opportunity to
interrogate departments on their spending with a view to identify and
strengthen gaps in public spending. SCOA is established as a strategic centre
to flag issues which might impact negatively on service delivery through
scrutiny of government spending. As such, it agreed during its business
planning session to move swiftly towards balancing its expenditure monitoring
with actual performance
.
The Department
appeared twice before SCOA during 2011/12 to present its 2
nd
and 3
rd
quarter expenditure reports.
In the 4
th
quarter, an invitation to appear before SCOA was sent to the Department, but
the Department indicated that the date on which it was supposed to come before SCOA
fell on the same date as its pre-arranged meeting with entities.
The Department was allocated an
amount of R2 billion for the 2011/12 financial year.
The Departments third quarter expenditure projection for the 2011/12
financial year was R1
,6
billion and the actual
expenditure was R923,9 million. Based on its projection, the Department has
under-spent by R676
,1
million (or 42, 3 per cent).
This
slow spending occurred as result of a lack of spending on a number of
programmes which are discussed in the following section.
8.1
Expenditure
per programme
The
Departments budget comprised the following six programmes: Administration,
Information Communication Technology (ICT), International Affairs and Trade, ICT
Policy Development, ICT Enterprise Development, ICT Infrastructure Development,
and Presidential National Commission. Of these programmes, only two
Administration, and ICT International Affairs and Trade spent relatively well
at 76, 3 per cent and 73, 2 per cent, respectively.
The only
concern with Programme 2 was the recorded 0, 08 per cent transfer of its
allocated R3
,7
million to non-profit institutions such
as the New Partnership for
Programme 4
spent only 49, 05 per cent or R686
,4
million against
an available budget of R1,4 billion. This was a cause for concern given that
this was the first departmental priority programme accounting for 70 percent of
the Departments budget.
This Programme
spent below 50 per cent across all economic classification except for payments
for capital assets.
Transfers
and subsidies virtually accounted for the entire budget of the programme with
an allocation of R1
,386
billion or 99 per cent of the
programmes budget. However, only R680
,3
million or 49,
07 per cent was transferred. The reasons for the slow expenditure were as
follows: (i) the changes in the Digital Terrestrial Television (DTT) standards
which resulted to non-transfer to Sentech and Universal Service and Access Fund
(USAF); and (ii) the financial investigation that was underway at the USAF
which affected the transferral of funds to the entity.
Programme 5
was allocated an amount of R282 million for the 2011/12 financial year from
which only R32
,4
million or 11, 5 per cent has been
spent at the end of the third quarter. All these funds have been transferred.
Under
Compensation of Employees an amount of R19
,1
million
or 59, 1 per cent has been spent against a budget of R32,3 million. Under Goods
and Services only R11
,8
million or 5 per cent has
been spent against a budgetary allocation of R247,2 million.
The
challenges related to the implementation of the 112 Emergency Call Centre
projects and broad band ICT remained. The Department made an undertaking that
the 112 Emergency Call Centre project would be operational during the 2012/13
financial year. The main reason for the under expenditure under goods and
services and the programme as a whole were delays in the tender processes.
In the 2010/11 financial year, the
Department improved from a qualified to an unqualified audit report from the Auditor-General
with findings on compliance and predetermined objectives. The Department did,
however, not monitor its spending on projects. This resulted in a significant
under-expenditure (59 per cent) on its budget which in turn resulted in the
service delivery not being met. The other issues were as follows: (i) contravention
of supply chain management regulations which resulted in irregular expenditure;
(ii) high level of employees acting (leadership vacuum) mostly in the strategic
leadership positions; (iii) investigations related to fraud and other financial
misconduct; (iv) lack of compliance with legislation; (v) irregular expenditure
of R2,8 million (which was supply chain management related) excluding wasteful
or fruitless expenditure of R1,4 million; and (iv) lack of governance with
regard to risk management, internal audit and audit committee.
The
expenditure of 46, 13 per cent against an available budget of R2 billion, means
that the Department was the worst performing Department of all the 38 national
departments during the period under review. For three successive financial
years (2009/10, 2010/11, 2011/12) the Department has spent below 70 per cent of
its total adjusted budget in the third quarter. There was a declining trend
which began from 62, 5 per cent in 2009/10 to 45, 1 per cent in 2010/11 until
the recent 46,
1
per cent.
With
reference to the fact that transfers and subsidies were allocated the biggest
proportion of the Departments budget, the Committee expressed concern at the
ability of the Department to exercise oversight over the transferred payments
to entities. The Department recorded a slow expenditure with regard to this
economic classification under which 48, 4 per cent or R682
,4
million has been transferred at the end of the third quarter against an
available budget of R1,4 billion for the 2011/12 financial year.
The
performance of the Department would impact negatively on the ability of
9.
Consideration
of the 2012 State-of-the-Nation (
SoNA
)
In his State-of-the-Nation Address
in February 2012, President Zuma stated:
At the January Cabinet
lekgotla
, we decided to undertake a mid-term review,
looking at progress from 2009 till now instead of the usual annual review. The
mid-term review indicated steady progress in various areas such as health,
education, the fight against crime, human settlements, energy, water provision,
rural development and others. However, the triple challenge of unemployment,
poverty and inequality persists, despite the progress made. Africans, women and
the youth continue to suffer most from this challenge. For the year 2012 and
beyond, we invite the nation to join Government in a massive infrastructure
development drive.
During his fourth State-of-the-Nation
Address (2012), President Zuma pronounced an infrastructure development-led
economy as one of the priority areas
.
To
manage this priority, Government established a high-level Presidential
Infrastructure Coordinating Commission, (PICC), chaired by the President and assisted
by the Deputy President,
Kgalema
Motlanthe
.
The Department develops and
implements ICT policy interventions that create an enabling environment to
promote social and economic development within the country. In accordance with
the outcomes-based performance management framework adopted by Government, the
Department contributes to the development of an efficient, competitive, and
responsive economic infrastructure network (outcome 6) by developing ICT
policies and legislation as well as overseeing the operation of public entities
within the sector.
In its infrastructure deployment to
expand access to ICT services throughout the country, the DoC facilitates
universal access to ICT networks and applications for schools, health and
government centres. Therefore
in
Communications, the President noted vital ICT projects that should benefit from
this investment, namely: (i) migrating to digital broadcasting; (ii) promoting
cooperation on ICT issues with Africa and the rest of the world; (iii) promoting
affordable and accessible financial services; (iv) creating opportunities within
the economy; (v) using ICT to advance cultural and heritage objectives; (vi) t
he rollout of National Wireless Broadband countrywide
as well
as in other areas in which the ICT sector can also play an indirect but
significant role; and (vii) the development of a broadband legislative
framework.
10.
Entities
Reporting to the Committee
The Portfolio
Committee on Communications has the following entities reporting to it:
10.1
South African Post Office
(SAPO)
The SAPO was established in
accordance with the Post Office Act (1958) as a government business enterprise
to provide postal and related services to the South African public. It was
granted a mandate to conduct postal services to
The Post Office Act (1958) will be
repealed and replaced by the Post Office Bill and the Postbank Bill, which have
enacted into law by March 2012.
With the
imminent corporatisation of Postbank into a separate entity, more previously
disadvantaged communities will have access to banking services.
The SAPO has a retail post office
infrastructure of 2 487 service points, which deliver postal, courier,
financial and
Postbank
services.
To increase access to its services, 129 new
service points were opened between 2008/9 and 2011/12, and the entity expects
to open an additional 150 new points of presence by the 2014/15 financial
year.
Between 2008/9 and 2011/12, the
South African Post Office rolled out more than 4,9 million new addresses.
Between 2008/9 and 2011/12, the Postbank depositors funds increased from R3
,2
million to at least R3,9 million.
The depositors book is expected to grow to
R5
,2
million by 2014/15.
The SAPO has been allocated an
amount of R180
,442
million in the 2011/12 financial
year.
The Committee noted that Minister
has appointed the Post Bank Board, and that the GCEO for SAPO has been
appointed and urged SAPO to finalise the appointments of Chief Financial
Officer and Chief Operational Officer.
10.1.1
Auditor-General findings
The Auditor-General made the
following findings:
10.1.1.1 Predetermined Objectives
Measurability:
(i) a
total of 40 per cent of the targets relevant were not specific in clearly
identifying the nature and the required level of performance; (ii) the
indicators or measures relevant to all targets were not well defined in that
clear, unambiguous data definitions were not available to allow for data to be
collected consistently.
These findings were similar to the
previous year and could not be addressed during the current year as the new
Shareholder Compact that rectified these issues was only submitted for approval
towards the end of the current financial year.
Achievement
of planned targets:
Out of the total 52 planned targets only 29
were achieved during the year under review. This represents 45 per cent of
total targets that were not achieved.
10.1.1.2 Internal control
Leadership:
There
were numerous acting positions in the current year in key leadership positions,
namely acting Chief Executive Officer, Chief Financial Officer, Chief
Information Officer, Chief Operating Officer, Managing Director: Postbank,
Group Executive: Supply Chain Management, Business Support Services and Head of
Properties. Although this had not negatively impacted on the audit process, the
above positions should be finalised as it may impact on the strategic future of
SAPO.
Investigations
:
An external
investigation is currently underway following complaints of alleged contract
and procurement irregularities at SAPO.
10.2
South African Broadcasting Corporation (SABC)
The SABCs mandate is set out in its
charter and in the Broadcasting Act (1999), which require it to: (i) provide
services to all South Africans in all the official languages; (ii) provide
programming that informs, educates and entertains and which reflects the
diversity of South Africans; (iii) and maintains freedom of expression and
journalistic, creative and programming independence.
The corporations service and
broadcasting activities are regulated through the licence conditions issued by
ICASA for each of its radio and television services.
It reports to the authority quarterly to
comply with licence conditions. The corporation is further bound to meet
licence conditions set for its individual radio stations and television
channels, and has to abide by regulations set by ICASA outlining minimum quotas
and standards in areas such as local content.
The corporation became a limited
liability company in 2004, with two operational divisions: public broadcasting
services and commercial broadcasting services. As a national public service
broadcaster, the corporation operates 18 radio stations and three television
stations, reaching about 24 million people daily.
The SABC continued preparations for the
migration to digital terrestrial television which will allow the corporation to
increase the number of channels it offers as well as enhance its public
broadcasting services by offering content in areas such as childrens
programming, news, sport, regional content, youth, women and education, as well
as more comprehensive services in all languages and to communities with
disabilities.
The corporation continues to promote
universal access to broadcasting services by switching on lower-power radio and
television transmitters. These low-power transmitters broadcast television and
radio signals at a very low cost to communities in historically marginalised
communities and rural areas. Between 2008/9 and 2011/12, the corporation has
switched on 1 216 low-power television transmitters and 557 low-power radio
transmitters. During the 2008/9 financial year, the SABC faced a severe
financial crisis alongside a serious corporate governance crisis. A guarantee
of R1 billion was granted to the SABC. A monitoring task team continues to
monitor performance of the SABC against the Government Guarantee targets.
In 2010, AGSA conducted a forensic
investigation. After is conclusion, recommendations were submitted to the SABC.
Some of the recommendations prompted further investigation by the Special
Investigating Unit (SIU) to pursue civil and criminal charges against involved
individuals.
Section 9(2) of the Broadcasting Act
4 of 1999 requires that the public and commercial services divisions must be
separately administered and a separate set of financial records and accounts
should be kept in respect of each such division.
The Committee noted that AGSA will
be the SABCs auditor for the 2012/13 financial year.
10.2.1
Independent Auditors
Report
The independent auditors report
raised the following critical issues:
10.2.1.1 Predetermined objectives
There were no material findings on
the performance of the SABC concerning the usefulness and reliability of
information.
Achievements
of planned objectives:
Of the total 66 planned key performance
indicators, only 20 were achieved during the year under review, which
represents 70 per cent of the planned key performance indicators not being
achieved.
Strategic
planning and performance management:
(i) In line with
section 5(1)9a
)(
i) of the PFMA, read with TR 27.2.1,
the SABC required to maintain an effective, efficient and transparent system of
risk management. The risk management strategy, policy framework and risk
register was approved by the accounting authority in February 2012; (ii) No
formal policies and procedures were approved by the accounting authority and
prepared in terms of section 51(1)(a)(i) of the PFMA, which describes how the
SABC processes of performance planning, monitoring, measurement, review and
reporting should be conducted, organised and managed; (iii) the shareholders
compact for 2011/2012 was only approved by the executive authority (Minister of
Communications) on 20 April 2012 which was not in line with TR 29.2.1.
The following areas of
non-compliance with the shareholders compact were identified: (i) no evidence
that quarterly reports on the SABCs compliance with the PFMA were prepared,
approved and submitted to the Shareholder; and (ii) the accounting authority is
required to assess, at least on a quarterly basis, the assumption that the SABC
is a going concern and to develop procedures and mechanisms to fulfil this
responsibility. This requirement enables the accounting authority to identify
issues which may cause it to re-examine the going concern assumption. There is
no evidence that this was assessed by the accounting authority on a quarterly
basis except by management through their preparation of monthly management
accounts.
Annual
financial statements
:
(i)
Section 55(1
)(
a) of the PFMA requires the accounting
authority to keep full records of the financial affairs of the company and the
annual financial statements should fairly present the state of affairs of the
company, its business, its financial results, its performance against
predetermined objectives, and its financial position as at the end of the
financial year concerned. Material misstatements were identified during the
audit, certain of these were corrected by management and those that were not
are included in the basis for qualified opinion paragraph, and (ii) section
55(1
)(
d) of the PFMA requires the accounting authority
to submit their Annual Report and Annual Financial Statements to National
Treasury within five months after their financial year end. The company
submitted its Annual Report and Annual Financial Statements for the year ended
31 March 2011 later than the prescribed dates, on 16 September 2011.
Audit
Committees:
Contrary to the requirements of Treasury Regulation
27.1.8 and the audit committee terms of reference, the audit committee did not
conclude on all of its responsibilities in the following areas: (i) Self
assessment questionnaires were circulated to the audit committee members but
consolidated responses and feedback were not formally tabled to the committee
for consideration; (ii) the effectiveness of internal controls was not
adequately monitored by the audit committee for the period April to August 2011
to consider the impact of the findings and corrective action; (iii) financial
and performance information upon which strategic decisions are based was not
consistently evaluated by the audit committee throughout the year to assess the
adequacy, reliability and accuracy of such information, as quarterly financial
and performance reports where not consistently presented for consideration. The
National Treasury pack was submitted without review by the audit committee; and
(iv) evidence could not be presented that: (a) the audit committee had reviewed
the processes and controls designed to ensure the communication of the codes of
conduct and ethics to all SABC personnel, as well as the processes and controls
designed to monitor compliance therewith, and (b) the controls designed to
ensure that assets are safeguarded were monitored and reviewed by the audit
committee.
Internal
Audit:
Contrary to Treasury Regulation 27.2.10, the internal audit
plan for the 2012 financial year did not include planned work relating to
operations in the form of a review of performance against predetermined
objectives. As such the internal audit did not evaluate quarterly reports to
management on performance against predetermined objectives in terms of Treasury
Regulation 27.2.10(b).
Procurement
and contract management:
A group-wide procurement policy exists and
a content commissioning and acquisitions policy has been developed and approved
by the Board in terms of section 51(1
)(
a)(iii).
However, the following areas of non-compliance with the policy were identified:
(i) Instances of premature procurement (ordering taking place without the
appropriate legal contracts with suppliers) and (ii) instances where sport
acquisitions were broadcast before contracts could be signed.
10.2.1.2 Human Resource Management and Compensation
Vacancies
at senior management level
:
Key
management positions are vacant and filled by employees in an acting capacity
amongst others by 31 March 2012 including Chief Operation Officer, Company
Secretary, Group Executive: Content, Group Executive: Legal and Chief
Technology Officer.
Declaration
of interest:
The policies require employees to disclose any and all
business interests to the Group CEO. However, not all employees with business
interests have signed declarations of interest forms, and no centralised
register to track and monitor whether all employees have declared their
interests was maintained by the SABC.
Schedule
of outcomes of disciplinary hearings and criminal charges:
In
terms of section 85 of the PFMA and TR 33.3.1(a), (b) and (c), the accounting
authority must, on an annual basis, submit to the executive authority, the
National Treasury
and
AGSA
a schedule of the outcome of any disciplinary hearings
and/or criminal charges, the names and ranks of employees involved, and the
sanctions and any further actions taken against these employees. The SABC did
not submit such schedule.
Expenditure
Management:
The SABC currently has policies and procedures in
place which will assist the prevention of irregular, fruitless and wasteful
expenditure and losses. However, these policies and procedures were not always
complied with during the 2011/12 financial year, and as such were not always
effective. Financial statements containing fruitless and wasteful expenditure
to the value of R22 120 000 was incurred during the period under review. This
is in contravention of section 51(1
)(
b)(ii) of the
PFMA.
Asset
management and liability management:
The following
contraventions of section 51(1)(c) of the PFMA were identified: (i) No full
asset stock counts were completed for the year under review; (ii) the automated
programme, film and sports rights management system was not fully implemented.
The programme, film and sports rights lists are currently maintained manually.
Reconciliation between the manual listings and general ledger was only performed
at year-end, and was in progress at the date of this report; (iii) the
borrowing programme prepared and included in the corporate plan 2011/12 in
accordance with the requirements of section 52(a) of the PFMA and Treasury
Regulation 29.1.3 does not include all of the information required by Treasury
Regulation 29.1.6(a)-(j).
10.2.1.3 Internal control
The following internal controls were
highlighted: (i) Due to the poor ICT governance structure, the line managers
are allowed to operate at their own discretion and thus compromise the ability
to use the ICT systems to support accurate and reliable reporting; (ii) no
effective oversight responsibility was exercised during the year regarding
reporting on performance against predetermined objectives, compliance with laws
and regulations, and the related internal control as this information was not
always presented timeously to oversight bodies; (iii) human resource management
to ensure that adequate and sufficiently skilled resources were in place and
that performance was monitored was not always effective. Staff in various
divisions within the company lacked capacity to perform their assigned roles
and responsibilities, as monthly reconciliations were not performed timeously;
(
iv
) regular reconciliations of programme. Film and
sports rights to safeguard the assets of the SABC were not performed. This is
due to the lack of implementation of proper record keeping in a timely manner
to ensure that complete, relevant and accurate information is accessible and
available; (v) policies and procedures to enable and support the understanding
and execution of internal control objectives, processes and responsibilities
were not always established and communicated or reviewed and revised; and (vi)
although the compliance with certain legislation is currently managed in
various divisions throughout the organisation, the SABC did not have a
centralised compliance control or process in place during the year under
review. Accordingly, the SABC did not have effective process in place to review
and monitor its overall compliance with applicable laws and regulations as
required by section 51(1
)(
h) of the PFMA.
Other
reports:
The Special Investigating Unit (SIU) performed special
investigations into interest in contracts, revenue matters, procurement of
goods and services and the appointment of consultants.
The company is still in the process of
completing its evaluation of the outcomes and implementing the recommendations.
The SABC was allocated an amount of
R126
,137
million in the 2011/12 financial year.
10.3
Sentech
Sentech Ltd is a state-owned
enterprise established in terms of the Sentech Act (1996) and the Sentech
Amendment Act (1999) and is listed as a schedule 3B public entity in terms of
the Public Finance Management Act (1999). Its mandate is to provide
broadcasting signal distribution for broadcasting licensees. In 2002, Sentech
was awarded value-added network service licences for its multimedia and carrier
of licences, thus allowing for converged ICT solutions.
In 2009, these licences were converted to
individual electronic communications network services and individual electronic
communications service licences under the Electronic Communications Act (2005).
Sentech is responsible for migrating
signal distribution infrastructure from analogue to digital in line with
technological developments and agreements with the International
Telecommunications Union for worldwide migration to digital.
Sentechs activities will ensure that the
digital terrestrial television network is ready in time to meet the December
2013 analogue switch-off deadline. Sentechs national wholesale broadband
network develops innovative products, rolls out the national wholesale
broadband network and extends social value projects.
Sentech has continued to exceed
network performance (the quality of a signal product as seen by the customer)
targets set over the past three years and ensured that it was possible to
ensure overall network availability of the analogue terrestrial television
broadcast network.
This is despite
interruptions caused by mains power failures and inclement weather.
Sentech was allocated an amount of
R279 million in the 2011/12 financial year. An amount of R109
,9
million was rolled over from the 2010/11 financial year for roll-out of Digital
Terrestrial Television infrastructure and was transferred to Sentech during the
2011/12 financial year.
10.3.1
Auditor-General findings
The Auditor-General made the
following findings:
10.3.1.1 Predetermined objectives
Achievement of planned targets: Of the
total 39 planned targets only 19 targets were achieved during the year under
review.
This represents 51 per cent of
the total planned targets that were not achieved. The accounting authority
indicated the reasons for non-achievement of predetermined targets in their
predetermined objectives report for the year ended March 2012.
10.3.1.2 Compliance with laws and regulations
Strategic
planning and performance management:
(i) Section 51(1
)(
a)(i) of the PFMA, read with Treasury Regulation 27.1.2,
requires Sentech to maintain an effective, efficient and transparent system of
risk management.
The risk identification
and management process has not been completed; and (ii) formal approved
policies and procedures in terms of section 51(1)(a)(i) of the PFMA
which describe how the entitys process
performance planning, monitoring, measurements, review and reporting will be
conducted, organised and managed, have not been prepared.
This is in contravention of the National Treasury
Framework for Managing Programme Performance Information.
Internal
audit
: The internal audit plan presented to the audit committee
was not adequately linked to the entitys risks, as the risk identification
process is not yet complete.
This is in
contravention to Treasury Regulation 27.2.1, read with Treasury Regulation
27.2.6, which requires the internal audit function, in consultation with the
audit committee to prepare a three rolling internal audit plan.
The audit committee failed to
evaluate, on an annual basis, the effectiveness of internal auditors in terms
of Treasury Regulation 27.1.8(b).
Expenditure
management:
Section 51(1
)(
b)(ii) of the
PFMA requires the accounting authority to take appropriate steps to prevent
irregular expenditure which arises by not complying with the operational
policies of Sentech.
Although Sentech
has these policies in place, they were not always complied with during the
financial year and consequently were not effective in preventing instances of
irregular expenditure.
Human resource management and compensation:
Key positions at senior management level are vacant and filled by employees in
acting capacities.
These positions
include the Chief Operations Officer; General Manager: Projects; Head of Supply
Chain Management, Supply Chain Management staff and Chief Risk Officer.
The Committee noted that in the
2012/13 financial year, Sentech had appointed the Chief Operations Officer.
Annual
financial statements:
The financial statements submitted for
auditing included material misstatements and were missing certain vital
information. This was in contravention of section 55(1) and (2) of the PFMA,
which requires the accounting authority to keep full and proper records of the
financial affairs of the company. These misstatements and omissions were
corrected during the audit.
10.3.1.3 Internal control
No effective oversight
responsibility was exercised during the year regarding compliance with laws and
regulations and related internal controls. Sentech did not have a centralised
compliance control process in place during the year.
Accordingly, Sentech did not have an
effective process in place to review and monitor its overall compliance with
applicable laws and regulations as required by section 51(1
)(
h)
of the PFMA and staff in various divisions within Sentech lacked capacity to
perform their assigned roles and responsibilities.
Investigations:
(i) The
accounting authority commissioned an investigation into an incident of
misconduct, fraud and corruption in the supply chain management process
specific to a single supplier.
The
investigation has been concluded and appropriate disciplinary action has been
taken against the implicated Sentech staff, while the supplier would no longer
be utilised by Sentech in future; and (ii) the accounting authority commissioned
various investigations into alleged misconduct relating to fraud and
misappropriation of company assets, alleged abuse of sick leave and overtime,
corruption and interference in the suppliers / contractors resulting in the
breach of company policy and procedures.
The investigations were completed and if the allegations were found to
be valid, disciplinary action was initiated. In some instances employees
resigned during the disciplinary action proceedings.
Investigations on progress as
advised by independent auditors: The accounting authority commissioned an
investigation into an employees alleged fraud and misconduct.
The investigation relating to the criminal
misconduct has not been concluded at the date of finalising this report and it
is expected that the investigation will be concluded in the following year.
10.4
National Electronic Media
Institute of
NEMISA was established as a
non-profit institute of education by the Department in terms of the Companies
Act (1973). Formed as part of a government initiative in 1998 in response to
the White Paper on Broadcasting Policy, the institutes main purpose is to
train previously disadvantaged individuals, particularly women, to equip themselves
with the necessary skills to play significant roles in the constantly changing
broadcasting environment.
The institute offers hands-on
training in electronic media, including content design and production,
technical operations and content transmission. The institute provides skills
training at an advanced level for the broadcasting industry.
It offers national certificates and short
courses. National certificates are offered in the areas of television
production, animation and radio production.
Between 2008/9 and 2011/12, the
institute trained 268 learners in strategic partnerships and special multimedia
projects.
The number of students trained
in electronic media increased from 118 in 2008/9 to 131 in 2011/12 and is expected
to increase further to 171 by 2014/15, driven by growth in demand for courses
in the areas of television production, radio production, design and
animation.
An amount of R33
,473
million was transferred to NEMISA during the 2011/12 financial year.
10.4.1
Auditor-General findings
The Auditor-General made the
following findings:
10.4.1.1
Predetermined objectives
Measurability:
A total of 45 per cent of the
targets relevant to the entitys selected strategic objectives were not
specific in clearly identifying the nature and the required level of
performance.
This was due to the fact
that information included in the Strategic Plan was not reviewed against the
requirements contained in the Framework for Managing Programme Performance and
Information (FMPPI).
Performance targets not
measurable:
The required performance could not
be measured for a total of 45 per cent of targets relevant to the entitys
selected strategic objectives.
This was due to
the fact that information included in the Strategic Plan was not reviewed
against the requirements contained in the FMPPI.
Performance indicators not well defined:
A total of 44 per cent of the indicators relevant to the entitys
selected strategic objectives were not well defined in that clear, unambiguous
data definitions were not available to allow for date to be collected
consistently.
This was due to the fact
that information included in the Strategic Plan was not reviewed against the
requirement contained in the FMPPI.
Achievement of planned targets
: Of the total
number of planned targets, only nineteen (19 of 45) were achieved during the
year under review. This represents 58 per cent of total planned targets
that were not achieved during the year under review.
10.4.1.2 Compliance with laws and regulations
Procurement:
The preference point system was not
applied in the procurement of goods and services above R30 000 as required by
the Preferential Procurement Policy Framework and Treasury Regulation
16A6.3(
b).
Strategic planning and performance management:
The accounting authority did not ensure that the entity had and
maintained an effective, efficient and transparent system of internal controls
regarding performance management as required by section 51(1)(a)(i) of the
PFMA.
10.4.1.3 Internal Control
Leadership:
Procedures for collecting,
collating, recording and reporting performance against predetermined objectives
were not formally developed and approved by the accounting authority for
implementation.
Financial and performance management:
Internal
controls developed and implemented by management did not adequately identify
and prevent non-compliance with applicable laws and regulations.
10.5
Universal
Service and Access Agency of
USAASA was established in terms of
section 50 of the Electronic Communications Act (1999) as a statutory
body.
Its sole mandate is to promote
universal service and universal access to electronic communications services,
electronic communications network services and broadcasting services. The
agency is responsible for managing the Universal Service and Access Fund.
In terms of the Act, the fund
receives contributions from licensed telecommunications providers and
broadcasters, which are used to fulfil universal access obligations in
under-serviced areas.
The agency plays a
key role in facilitating the achievement of 100 per cent ICT penetration by
2020. Between 2008/9 and 2011/12, 54 access centres were established. In
addition, 267 schools and 56 further education and training institutes were
provided with internet connectivity over the same period.
Over the medium term, the fund expects to
deploy 600 cyber labs to under-serviced areas by 2014/15.
USAASA/USAF was allocated an amount
of R344
,098
million for the 2011/12 financial year.
The Committee noted that a board has
been appointed, and accepted that the new board within a month must present its
turnaround strategy on how to achieve its predetermined objectives for
2012/2013 and the governance issues, and also to present a detailed report on
the payment of performance bonuses to its employees whilst it has not achieved
its predetermined objectives for 2011/12.
The Committee also
urged the board to conduct an audit on the operability of access centres and
develop a clear rehabilitation strategy, whilst rolling out new ones.
10.5.1 Auditor-General findings
The Auditor-General
made the followings findings:
Irregular, fruitless and wasteful
expenditure:
(i) As disclosed in Note 27 to the financial statements
of USAASA, fruitless and wasteful expenditure amounting to R1 032 000 was
incurred as a result of SARS penalties, offices not occupied while still paying
rent, and a venue not used even though it was already paid; and (ii) as
disclosed in Note 28 to the financial statements of USAASA, irregular
expenditure to the amount of R19 492 000 was incurred in the current year as a
result of non-compliance with supply chain management policies and R22 669 000
incurred in the previous year and discovered in the current year.
10.5.2 Predetermined Objectives
Reported targets
not consistent with planned targets:
A total of 67 per
cent of the reported objectives, indicators and targets are not consistent with
the objectives, indicators and targets as per the approved Strategic Plan.
This is
due to the fact that they did not have a system in place to accurately track
the planned targets against actual performance.
The above is in
contravention of Treasury Regulation 30.1.3(g) which requires that the
strategic plan should form the basis for the Annual Report, therefore
requiring
consistency
of objectives, indicators and targets between planning and reporting documents.
Changes to objectives / indicators /
targets not approved:
A total of 100 per cent objectives, indicators
and targets reported in the Annual Performance Report were inconsistent with
the objectives, indicators and targets as per the approved Strategic Plan.
This was due to significant policy or mandate
changes that were made but not included in the approved or adjusted budget
approved by the executive authority.
The above is in
contravention of Treasury Regulation 30.1.1 which requires that the Strategic
Plan must be approved by the executive authority. Therefore, if the Strategic
Plan is changed in-year due to significant policy or mandate changes, the
updated plan has to be approved by the executive authority.
Achievement of planned targets:
Of the
total number of planned targets, only 9 per cent of the targets were achieved
during the year under review. As a result 91 per cent of the total planned
targets were not achieved.
This was due
to the suspension of projects when the executive management of USAASA was
suspended.
10.5.3 Compliance with laws and regulations
Under-expenditure Management:
The
accounting officer did not take effective and appropriate steps to prevent
fruitless expenditure as per the requirements of section 51(1
)(
b)
of the PFMA.
Procurement:
Contracts and
quotations were awarded to suppliers whose tax matters had not been declared by
SARS to be in order as required by Treasury Regulation
16A9.1(
d)
and the Preferential Procurement Regulations.
Goods and services
with a transaction value below R500 000 were procured without obtaining the
required price quotation as required by Treasury Regulation 16A6.1. Goods and
services of a transaction value above R500 000 were procured without inviting
competitive bids, as required by the Treasury Regulation 16A6.1
Annual financial statements, performance
and annual reports:
The accounting officer did not submit a report
on performance information for auditing within two months after the end of the
financial year as required by section 55(1
)(
c)(i) of
the PFMA.
Strategic planning and performance
management:
The accounting officer did not ensure that the public
entity has and maintains an effective, efficient and transparent system of
internal control, regarding performance management, which described and
represented how the entitys processes of performance planning, monitoring,
measurement, review and reporting were conducted, organised and managed as
required by section 51(1
)(
a)(i) of the PFMA.
10.5.4 Internal control
Leadership:
(i) The accounting
authority did not have controls in place to prevent non-compliance with
procurement and contract management; and (ii) the accounting authority did not
ensure that a performance management system and processes are in place before
and during the Strategic Plan session to ensure that targets, objectives and
measures are consistent with the Annual Performance Report.
Investigations:
An investigation
into alleged financial misconduct pertaining to various officials of the entity
was carried out during the year under review and at the date of this report the
investigation was still in progress.
10.6
Independent
Communications Authority of
ICASA was established in terms of
the ICASA Act (2000). ICASA makes regulations and issues communications
licences in terms of the Electronic Communications Act (2005) and Postal
Service Act (1998). In addition, ICASA enforces compliance with rules and
regulations, protects consumers from unfair business practices and poor quality
services, hears and decides on disputes or complaints brought against licensees
and also controls and manages the frequency spectrum.
ICASA completed the conversion of
licenses issued under repealed legislation to licences that comply with the
prescripts of the Electronic Communications Act (2005). In the first year of
this conversion, ICASA issued 189 licenses. Between 2008/9 and 2011/12, ICASA
completed 4 538 inspections of distribution and sealing of electronic
equipment. Over the same period, ICASA
received,
analysed and closed 11 464 spectrum licensing applications.
ICASA was allocated an amount of
R313
,378
million for the 2011/12 financial year.
For three financial years in a row
ICASA received a qualified audit for 2011/2012. It has managed to achieve only
32 targets as a result 56 per cent of the total planned targets were not
achieved during the year under review. However, despite this performance
general managers received performance bonuses.
The AGSA report clearly illustrates
the lack of leadership at the level of management, Chief Executive Officer and
the Council on the following:
10.6.1 Usefulness of information
Presentation:
All
major variances between planned and actual achievements were not explained in
the annual performance report for the year under review as per the National
Treasury annual report preparation guide. This was due to documented and
approved internal policies and procedures being inadequate to address reporting
processes and events pertaining to performance management and reporting.
Measurability:
Performance target not specific and not measurable:
Management chose not to apply the principles contained in the National Treasury
Framework for Managing Programme Performance Information (FMPPI), and as a result
a total of 31 per cent of the targets relevant to selected objectives were not
specific in clearly identifying the nature and required level of performance.
10.6.2
Compliance with laws and
regulations
Strategic
planning and performance management:
The accounting
officer did not establish adequate procedures for quarterly reporting
performance to the executive authority to facilitate effective performance
monitoring, evaluation and correction as required by TR 3.2 and section
38(1)(a)(i) of the PFMA.
Annual
financial statements:
The financial statements submitted for
auditing did not comply with section 40(1
)(
a) and (b)
of the PFMA.
Expenditure
management:
The accounting officer did not take effective steps to
prevent irregular, fruitless and wasteful expenditure, as required by section
38(1
)(
c)(ii) of the PFMA and Treasury Regulation
9.1.1.
Leadership:
The
accounting officer did not: (i) exercise adequate oversight responsibility
regarding financial and performance reporting and compliance and related
internal controls; (ii) implement effective HR management to ensure that
adequate and sufficiently skilled resources are in place and that performance
is monitored; and (iii) establish an adequate IT governance framework that
supports and enables the business, delivers value and improves performance.
The institution did not adequately
establish and communicate policies and procedures to enable and support understanding
and execution of internal control objectives, processes and responsibilities on
predetermined objectives.
Financial
performance:
The institution did not: (i) implement proper record
keeping in a timely manner to ensure that complete, relevant and accurate
information is accessible and available to support financial and performance
reporting; (ii) implement controls over daily and monthly processing and
reconciling of transactions; (iii) prepare regular, accurate and complete
financial and performance reports that are supported and evidenced by reliable
information; and (iv) design and implement adequate formal controls over IT
systems to ensure the reliability of the system and the availability, accuracy
and protection of information.
Management did not adequately review
and monitor compliance with applicable laws and regulations.
10.7
.za
Domain Name Authority (.zaDNA)
.za Domain Name Authority was
established in terms of chapter 10 of the Electronic Communications and
Transactions Act of 2002 to take responsibility for the .za Domain Name Space.
The Department has been funding the .za Domain Name Authority since its
inception.
.za Domain Name Authority was
allocated an amount of R1.5 million for the 2011/12 financial year.
11.
Other
Sources of Information
11.1
Industrial Policy Action Plan (IPAP
II)
11.1.1
Set-Top Boxes and
Digital TVs
The Department envisaged to
create over 151 000 jobs in the SMME ICT sector over the medium term through
the Digital Terrestrial Television (DTT) in particular on set-top box (STB)
manufacturing, distribution and installation. Furthermore, the telecommunications
sector has committed to create over 1 million jobs in the sector by 2020.
According
to the 2012 report published by the Department of Trade and Industry; progress
report on implementation of the Industrial Policy Action Plan (IPAP) for the
2011/12 financial year. Progress has been registered with regards to other
aspects of
STBs
and Digital Terrestrial Television. A
standard for the manufacture of
STBs
was launched and
a rebate on television monitors was approved by the Minister. However, the
process of identifying the localisation requirement for the roll-out of
STBs
for low-income households met with delays during the
period under review. Even though the Request for Proposals (RFP) was issued in
July 2012 after long delays, there were no specifications for local content
levels in the procurement of the
STBs
. This had the
potential of undermining the process of leveraging public procurement for
industrial development in the electronic sector. However, remedial
interventions are in place.
The high
cost of calls amongst other factors has been attributed to the high
interconnection rates that operators charge to terminate calls on mobile and
fixed line networks. Government has over the years made several attempts to
liberalise
the ICT market by introducing the Second
National Operator,
Neotel
, another mobile operator,
Virgin (other than Cell C, MTN, 8ta and
Vodacom
) and
number portability. Furthermore, the problem with high communication costs is
that they act as a tax on businesses, especially, small, medium and micro enterprises
(SMMEs) and are an impediment to potential economic growth. Under such
conditions the need to regulate the telecommunications industry is imperative
if the country wants to attract investors and create 5 million jobs through the
New Growth Path as an adopted government programme.
Significant strides have
been made in this regard. Dominant mobile operators have agreed to reduce their
interconnection prices from R1
,25
per minute to 89
cents per minute.
The
termination rate is set to fall further from the current R0
,56
at peak time to R0,40 in March 2013
when both the Department and the authority complete the process of
regulating sector prices in line with the requirements of chapter 10 of the Electronic
Commutations Act, No. 36 of 2005.
However,
the
reduction
in the
call termination rate alone will not result in lower costs to communicate. The
regulator will have to introduce other levers in order to ensure fair
competition between new entrants and the dominant incumbents in the sector. To
this end the Committee will hold public hearings late this year.
12.
Committee
Oversight Reports
During 2012, the
Committee undertook oversight
visits to the following provinces: Northern
Cape and Western Cape (Springbok, West Coast and the City of Cape Town) from 17
20 January 2012; Limpopo from 5 8 February 2012; Mpumalanga from 18 23
March 2012; North West from 6 8 June 2012; and Gauteng from 18 22 June
2012, to execute its Constitutional mandate.
The oversight included visits to
regional offices of the SABC, ICASA and
Sentech,
,SAPO
outlets, MDDA projects, and USAASA projects.
The purpose of the visits served as the measurement indicator against the
service delivery commitments by the executive and enabled the Committee to
conduct on-site visits to services delivered by public entities under the
Department.
12.1
Committee
Observations
12.1.1
South
African Post Office
During the oversight
visit to various Post Offices, the Committee noted the following: (i) In almost
all branches visited, the
Public Internet Terminals (
PITs
) were
not operational, (ii)
slow IT network
response which contributes towards poor customer service and long queues on
pension days, (iii) certain buildings are without compliance and occupational
health certificates; (iv) increase in crime, armed robberies and burglaries;
(v) retail postal agencies without a
strongroom
;
(vi) security on pension days posed a
challenge
; and (vii) poor relations with key stakeholders in certain
provinces and local government level.
12.1.2
Sentech
During the
oversight visit to Sentechs regional offices, the Committee noted the
following:
(i) unavailability of land (to
install low-power transmitters and refusal by property owners to allow Sentech
into their properties) to erect transmitters; (ii) bureaucracy or red tape
involved in approval stages of the municipality are slowing the deployment of low-power
transmitters; (iii) some municipalities view the low-power transmitter project
from a commercial point rather than a public service mandate; and (iv) Sentech
must have a national plan on DTT.
12.1.3
Independent
Communications Authority of
During the
oversight visit to
ICASAs
regional Offices, the Committee
noted the following: (i)
ICASAs
offices
and services are inaccessible to the general public, in particular in previously
disadvantaged areas, and there is no effort to utilise Thusong Service Centres,
(ii) the postal sector is not adequately monitored as per its mandate, (iii)
ICASA does not perform regulatory impact assessments (
RIAs
)
when embarking on regulatory processes, and (iv) no adequate monitoring
equipment or resources.
12.1.4
Universal Service and
Access Agency of
During the
oversight visit to USAASA projects, the Committee noted the following:
(i) Most
of
USAASAs
sponsored projects throughout
the country were not functional; (ii) the
mandate of the agency, which had been relevant at the period of voice telephony
needed to be reviewed in line with the modern broadband and data services;
(iii) USAASA was paying Sentech and Telkom Internet connectivity fees despite
telecentres
not being connected on the network; (iv) staff
morale at USAASA was at its lowest; and (v) some of the computer literacy
training provided at
Telecentres
is not accredited.
13.
Findings
of the Committee
The
Committee analyzed the Departments 2011-2014 Strategic
Plan
;
the 2011/12 Annual Report of the Department of Communications and its entities;
the 2011/12 Estimates of National Expenditure Reports; the Report of the
Standing Committee on Appropriations; the Industrial Policy Action Plan, and
Committee oversight reports.
The
Committee noted with concern that:
(i)
most
of the issues that have been raised in the Auditor-Generals
report during 2011/12 were raised by the Committee during the Departments
Annual Report presentation in 2009/10 and 2010/11;
(ii)
many
of the 2012/13 Strategic Plan and Budgets submitted
before it, did not take into consideration the Committees oversight
recommendations;
(iii)
all
entities audit committees were chaired by an
independent person with the exception of the SABC and NEMISA;
(iv)
the
Department and its
entities were not adequately following supply chain management processes when
procuring goods and services as required by the Treasury Regulations;
(v)
in spite of the Department and its entities being unable to achieve its
set targets for the year under review, performance bonuses were nonetheless
paid to senior managers and staff;
(vi)
the
ICT
Enterprise Development branch is not adequately resourced to deal
with public entity oversight;
(vii)
the
ICT Infrastructure Development programme has
consistently under-performed;
(viii)
the
process to
change the
Presidential National Commission to Information Society and Development is
still pending;
(ix)
the
assurance by the Department to fill critical funded vacant positions has not
been achieved;
(x)
the
Department and its entities, with the exception of SAPO, do not have a Green
Policy and supporting programmes to contribute towards lowering the nations
carbon footprint conserving resources and lowering costs;
(xi)
the
Department did not appear before SCOA to present its fourth term quarterly
report;
(xii)
the Department does not
have evidence-based progress reports on the discussion which it was supposed to
have initiated with National Treasury regarding the South African Post Offices
universal service obligation subsidy which is coming to an end in 2012/13;
(
xiii
)
section
9(2) of the Broadcasting Act, No 4 of 1999, requires that the public and
commercial services divisions be separately administered and a separate set of
financial records and accounts are to be kept in respect of each division;
(xiv)
the
SABC does not seem to be ready for DTT implementation
due to capacity constraints, a non-established technology division, and
non-qualified staff to handle the transition;
(xv)
there
is a disregard for corporate governance at the SABC and ICASA;
(xvi)
the
SABC is still not meeting the
Government Guarantee conditions;
(xvii)
the
poor performance of the SABC Audit Committee and internal audit contributes
towards the non-compliance with laws and regulations;
(xviii)
the
current funding model of the SABC contributes to its inability to
fulfil
its public mandate;
(xix)
there
was a high vacancy rate at executive management level across all the entities;
(xx)
ICASA has a 0, 8 per cent employment rate on people living with
disabilities;
(xxi)
there
was a lack of leadership at all levels at ICASA as well as the alleged mistrust
between the Council and the Executive and between the Executive and the staff;
(xxii)
ICASA organogram is not in line with section 14 of the ICASA Act
of 2006;
(xxiii)
the
process to review the mandate of USAASA as per the Committees recommendation
during 2010/11 has not been undertaken;
(xxiv)
the findings of the
Auditor-General which refer to the ongoing investigations at USAASA, the SABC
and Sentech as well as the independent auditors
investigations regarding the matter of Eco
Park Post Office Building;
(xxv)
the
Auditor-General has raised a number of issues in the 2011/12 financial year as
compared to 2010/11 regarding Sentech.
14.
Recommendations
of the Committee in respect of the Department
The Committee recommends that the Minister should:
(
i
)
establish a
Ministerial Task Team to address issues raised by the Auditor-General, in
particular the recurring issues that have been raised in the past three
financial years;
(ii)
ensure that corrective and remedial
measures are taken against the accounting officers and other senior managers
for failing to comply with sections 38, 39, 40, 41 and 12 of the PFMA;
(iii)
expedite
corrective measures to ensure that issues raised during Committee meetings or
oversight visits are adequately addressed;
(iv)
urge
stateowned entities to ensure that Audit Committees are chaired by independent
people to enhance transparency, good governance and uniformity;
(v)
ensure the filling of all vacancies with
people that have requisite skills, including compliance with the 2 per
cent
representation of people living
with disabilities and ensure that all financial controls are in place and are
adhered to;
(vi)
furnish the Committee with a detailed
report on the process that was followed which led to the payment of performance
bonuses to senior management and staff at the Department, USAASA and ICASA;
(vii)
urgently
capacitate the ICT Enterprise Development and ICT Infrastructure Development
branches to ensure maximum achievement on service delivery;
(viii)
expedite
the
finalisation of the process to change the PNC into Information Society and
Development which has been underway since 2009/10, 2010/11 and 2011/12;
(ix)
ensure
that the
Green Policy is embedded in the Strategic Plan of the Department and its entities;
(x)
expedite
the
process of engaging with National Treasury regarding the possibility of
extending the Universal Service Obligation subsidy of SAPO;
(xi)
ensure
that the
SABC has the required capacity and financial resources to implement
DTT;
(xii)
investigate
leadership challenges in the accounting authority of ICASA and the SABC;
(xiii)
ensure
that
shareholder compacts are finalised timeously as per Treasury Regulations;
(xiv)
ensure
that the
Performance Management System to monitor performance of the ICASA Chairperson
and Councillors is implemented as prescribed by section 6Aof the ICASA Act;
(xv)
institute
a
process with a possibility to review the funding model of ICASA and the SABC as
well as reviewing the mandate of USAASA;
(xvi)
ensure
implementation of the recommendations of the investigations currently underway;
(xvii)
ensure
that the
business model of the South African Post Office is reviewed; and
(xviii)
upon
receipt of the letter from the Speaker of the National
Assembly communicating the Committees recommendations in this report, provide
the Committee with timeframes linked to her responses thereto.
Furthermore, the
Minister must ensure that:
(i)
the
SABC complies
with section 9(2) of
the Broadcasting Act of 1999; and
(ii)
the
ICASA
organorgram
is in line with the provision of section 14 of
ICASA Act.
Report to be
considered.
Documents
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