ICASA Spectrum Auction Process; Update on merger of state entities; ICASA Councillor Salaries

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Communications and Digital Technologies

02 June 2021
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Meeting Summary

Presidency Tabling Letter to Speaker from HE President tabled April 2021

Tabled Committee Reports

In a virtual meeting, the Committee was briefed by the Department of Communications and Digital Technologies (the DCDT) on updates in respect of its mergers of state entities, on the business case for the Regulatory Reform Bill and the Digital Development Challenge Fund. The second item on the agenda was for the Committee to consider and adopt its Report on the letter from the President of South Africa, requesting Parliament to consider the draft notice of his determination of the salaries and allowances of councillors of the Independent Communications Authority of South Africa (the ICASA). The last item on the agenda was for the Committee to consider and adopt its outstanding minutes.

Following the establishment of the merged Department in 2020, through the merger of the Department of Communications and the Department of Telecommunications and Postal Services, it was reported that the Department is in the process of finalising the development of a revised organisational structure.

Pertaining to the business case for the Regulatory Reform Bill, The Department would want to commence development of first draft regulatory reform business case (framework) by the end of June 2021. The intention is to finalise the business case for the Regulatory Reform Bill by the end of March 2022 and submit it to the Director-General for approval.

The Department is focusing on reorganising and repurposing identified state-owned entities into resilient, self-sustaining and effective agents for delivering services to communities. Key pieces of legislation will be prioritised, including the establishment of the State Digital Infrastructure Company (the SDIC) through the merger of Broadband Infraco (BBI) and Sentech SOC Ltd; the repurposing of the State Information Technology Agency (the SITA) into a State Digital Services Company (the SDSC); the regulatory reform through the merger of the regulatory entities; the dissolution of the Universal Service and Access Agency of South Africa (the USAASA) and conversion of Universities South Africa (the USAF) into a new Digital Development Challenge Fund. These reforms should aid in reducing the cost to the fiscus of administering these entities, by ensuring greater alignment of purpose and the realisation of synergies among them. This will allow the bringing in of new players in society, including the youth, women, and people with disabilities who have been disadvantaged.

Over and above the aforementioned reforms, the DCDT is in the process of implementing and monitoring the following turnaround strategies and amendments: the monitoring of the South African Broadcasting Commission’s (the SABC) turnaround strategy, appointing the team of experts to develop the turnaround strategy for the South African Post Office (the SAPO), and the facilitation of the Postbank Bill. In order to take these reforms forward, the Department decided to form the Joint Oversight Forum (the JOF) that would be used as a vehicle to guide the process of establishing and operationalisation of the business cases.

The Committee welcomed the briefing made by the Department and ordered that it help to expedite processes related to reforms at communication technology entities, especially the auction of spectrum. The Committee applauded the Department for the hard work it has done. Members noted that the young people in our country are mostly faced by the unemployment rate, and the Committee should ensure that youth development is promoted in the Department, not only by affording young people training, but young people must form part of participating in all economic activities.

Concerns were raised about the slow progress made and the lack of long-term timeframes, and Members asked for clarity on how the Department will ensure that the planned reforms stay contextually relevant to the changing markets A consistent point that has been raised before by the Committee is that there are disparities in terms of the budget that has been spent as appropriated versus the targets that would have been met. It is necessary that milestones be set so that the Committee can monitor the process of the rationalisation.

The Department confirmed that the business case has been developed and sent to National Treasury as required by the Companies Act. The target of 30 June 2021 is to ensure that the relevant Ministries exercise the necessary consent. The side of the Department has been completed. As soon as the consent is obtained, then the business case can be utilised, relating to the drafting of the relevant Bills. There are parallel processes to ensure that the business case then gets the back end in terms of the corporate strategy from the entities. All of these processes are being run in the long term. The intention is to ensure that the merger is fast-tracked to ensure that it is completed in time as outlined in the briefing.

The Committee then considered and adopted its Report on the letter from the President of South Africa, requesting Parliament to consider the draft notice of the determination of the salaries of councillors of the Independent Communications Authority of South Africa. The Committee adopted its Report on the 2019/20 Annual Reports and Financial Statements of the South African Broadcasting Corporation, the South African Post Office, the Universal Service and Access Agency of South Africa, and Universities South Africa.

Meeting report

Opening Remarks by the Chairperson

The Chairperson opened the virtual meeting, welcoming Members and the delegation from the Department of Communications and Digital Technologies (the DCDT). He noted that it is the start of Youth Month and commemorated the Soweto-uprising of 1976. The Committee must keep the challenges faced by the youth, women, and people with disabilities in mind when doing its work and fulfilling its mandate. When reflecting on how the young people tried to change the educational system in 1976 that was imposed on them, the Committee and Parliament should show the young people of today that the South African democratic government recognises the challenges and struggles of the youth in the modern era. The task at hand is to transform society for the better, for the current and future generations of young people, and it is necessary that Members contribute to the change that will benefit the youth in the future to ensure true transformation.

The purpose of the meeting was for the Committee to be briefed by the DCDT on updates in respect of its mergers of state entities, on the business case for the Regulatory Reform Bill and the Digital Development Challenge Fund. The second item on the agenda was for the Committee to consider and adopt its Report on the letter from the President of South Africa, requesting Parliament to consider the draft notice of his determination of the salaries and allowances of councillors of the Independent Communications Authority of South Africa (the ICASA). The last item was for the Committee to adopt its outstanding minutes.

The delegation from the DCDT consisted of Mr Nonkqubela Jordan-Dyani (the Director-General), Ms Tinyiko Ngobeni (a Deputy Director-General), Mr Jabu Radebe (the Acting Deputy Director-General), Mr Collin Mashile (the Chief Director: Broadcasting Policy), Mr Mashilo Boloka (the Public Entities Oversight Specialist), Mr Mlindi Mashologu (the Deputy Director-General: ICT & Capacity Development), and Ms Zaytoen Anthony (the Chief Director: SOC Oversight and Parliamentary Liaison Officer). Ms Carmenita Adonis-Dudley (Project Manager at Telkom), and Ms Cheryl Dinkelmann (Senior Manager: Special Regulations and Consumers at MTN) were also in attendance.

Briefing by the DCDT on updates in respect of its mergers of state entities

The next item on the agenda was for the Committee to be briefed by the DCDT on updates about its mergers of state entities, on the business case for the Regulatory Reform Bill, and the Digital Development Challenge Fund. Mr Nonkqubela Jordan-Dyani, the Director-General of the DCDT, presented the briefing.

Introduction and background

Following the establishment of the DCDT in 2020, through the merger of the Department of Communications (the DoC) and the Department of Telecommunications and Postal Services (the DTPS), it was reported that the DCDT is in the process of finalising the development of a revised organisational structure. The DCDT is focusing on reorganising and repurposing identified state-owned entities into resilient, self-sustaining and effective agents for delivering services to communities. Key pieces of legislation will be prioritised, including:

  • The establishment of the State Digital Infrastructure Company (the SDIC) through the merger of Broadband Infraco (BBI) and Sentech SOC Ltd;
  • The repurposing of the State Information Technology Agency (the SITA) into a State Digital Services Company (the SDSC);
  • The regulatory reform through the merger of the regulatory entities;
  • The dissolution of the Universal Service and Access Agency of South Africa (the USAASA) and conversion of Universal Service Access Fund (the USAF) into a Digital Development Challenge Fund.

These reforms should aid in reducing the cost to the fiscus of administering these entities, by ensuring greater alignment of purpose and the realisation of synergies among them. This will allow the bringing in of new players in society, including the youth, women, and people with disabilities who have been disadvantaged.

The policy context and technical viability of the SDIC

The alignment and rationalisation of the ICT state-owned entities is necessary to achieve the developmental objectives and aspirations of South Africa. One of the primary objectives of South Africa Connect is to ensure that ICT state-owned entities achieve better coordination through the clear definition of roles, the integration of planning, monitoring and evaluation and the development of institutional capabilities. This will include the review of the market structure, an analysis of the benefits and cost of infrastructure duplication, as well as giving rise to the need for the common carrier network – with the possibilities of structural separation of vertically integrated incumbents. The Presidential Review Committee (the PRC) calls for continued in-depth micro assessment of state-owned entities to assist the merging of many entities, along with the National Development Plan (the NDP). This is in line with the DCDT’s mandate for building a better life for all through an enabling and sustainable world class information and communication technologies environment.

The BBI and Sentech merger forms part of the DCDT’s plans to reconfigure some of the entities in line with President Cyril Ramaphosa’s mandate to streamline government departments and entities. A lot of the economic activities of today require the participant to be connected to the rest of South Africa and to the rest of the world. That connectivity relies on sufficient and broadly available infrastructure that should reach into even the rural areas of South Africa. Part of the challenge of inclusive economic recovery requires addressing the availability of digital infrastructure on a universal basis throughout the country. The purpose is to create one state-owned infrastructure company to avoid duplication and have a co-ordinated approach.

Complementarity capabilities of the SDIC

On transmitter sites, it was reported that Sentech provides the base for site locations, while BBI provides mast co-location business enhanced by the sites from Sentech. Regarding fibre capacity, the Department said that very little fibre is available in Sentech’s network and there are significant fibre requirements to service high sites. In this regard, BBI provides the basis for high site connectivity. Regarding wireless broadband capabilities, Sentech provides for strong wireless capabilities that can be used for high-speed, high-capacity connections, particularly where fibre is not feasible in under-serviced areas. In this regard, BBI can enhance offerings to broadband clients. There will be a synergistic sharing of capabilities and infrastructure with BBI for a National Operating Centre (the NOC), as BBI has already developed plans for NOC-as-a-service. Business systems require a detailed due diligence but, conceptually, synergies should be possible in OSS and BSS systems. Sales also require a detailed due diligence and the market focus of the two companies is somewhat different but synergies and cross-selling should be possible.

Updates on the progress in the implementation of the SDIC

As part of the required consultations, the DCDT developed and submitted to the Office of the Chief State Law Advisor (OCSLA) a draft business case and bill for the merger of BBI and Sentech in order to get a legal opinion and certification. The legal opinion necessitated the legislative processes, which the DCDT then embarked on. This included that the DCDT enlisted the services of the Government Technical Advisory Centre (GTAC), which assisted in enhancing the relevant policy imperatives and principles for both the SDIC business cases. As part of section 31(1)(m) of the Public Finance Management Act (No. 29 of 1999), the DCDT submitted the enhanced business case to National Treasury and the Department of Public Services and Administration (the DPSA) for consent. The intention is to finalise the business case by the end of first quarter (30 June 2021). The drafting of the Bill will commence in the second quarter.

The received legal opinion further opined that it is legally permissible to merge Sentech and BBI invoking the provisions of section 113 of the Companies Act, as long as the solvency and liquidity requirements of these two entities are satisfied in accordance with section four of the Companies Act. In such circumstances, and where the provisions of section 113(1) are met, the proposed merger must also meet the requirements of section 113(2), requiring a written agreement to be concluded between the two entities, setting out the terms and means of effecting the merger. Section 113(4) also requires that the Board of Directors of each of the merging entities consider whether upon implementation of the agreement each proposed merged company would satisfy the liquidity and solvency test. If the Board of Directors reasonably believes that each proposed merged company would satisfy the solvency and liquidity test, it may submit the agreement for consideration at the shareholders meeting of the merging company, in accordance with section 115 of the Companies Act. The shareholder conversion for BBI has been key to ensuring the BBI meets the solvency and liquidity requirements of section 113 of the Companies Act. This has since been resolved, and the Minister of Digital Technologies and Communications is in a position to request the Boards to start with the cooperation agreement and take the process forward.

The entities are expected to start with this process by the beginning of the second quarter. The DCDT and both the entities have also started with the enhancement of the back section of the business case, which encompasses the formation of the implementation strategy and corporatisation of the new entity. The SITA today is standing on the cusp of a new dawn, faced with an opportunity to move with confidence into the future defined by a confluence of digital technologies, which are intrinsic to the Fourth Industrial Revolution (4IR). Thus, the intention is to place the SITA in a journey of evolving from traditionally focusing mainly on procurement of ICT goods, into a Digital Transformation partner for government. Years of leadership instabilities led to the agency’s inability to attract and retain leadership, management and critical skills. The average tenure of CEOs at the SITA is 1.5 years, since the establishment of the agency, with the longest serving CEO lasting only four years and more than 50% of senior management positions being vacant. This has brought instability to the entity, with turn-around strategies that are not fully implemented but are constantly changed creating uncertainty and lack of strategic direction. Procurement delays, irregularities and corruption led to operational inefficiencies, long procurement cycles and susceptibility to fraud and corruption, combined with a lack of market intelligence to decisive drive industry transformation.

As a result, the SITA could not implement automated procurement solutions with built-in controls for process integrity, transparency and business intelligence to assist decision-making and forecasting. The SITA has experienced reputational damage through poor service delivery and corruption flowing from procurement activities. Over the years, organs of state have continued to express dissatisfaction with the services provided by the SITA, which has led to some organs of state requesting to be exempted from procuring ICT goods and services through the SITA and, in particular, network provisioning services. Having noted the above challenges, the DCDT developed a SOC rationalisation framework, which was submitted to Cabinet in 2017. Pursuant to the approval of the SOC rationalisation framework by Cabinet for the repurposing of SITA, as with the SDIC, the GTAC assisted in enhancing the relevant policy imperatives and principles for the repurposing of SITA, for the purposes of concluding the business case.

The SDSC business case had to undergo an extensive internal consultations process and the draft has since been concluded. As with the SDIC, the intension is to have it concluded by the end of the first quarter, following the consultation with Ministries of Finance and that of the DPSA. However, it is critical to note that the creation of the SDSC is a contentious matter, particularly considering the reputational damage and the service delivery challenges as mentioned above. To mitigate this, the DCDT intends on embarking on extensive external stakeholder engagements. These will entail the development of the customer survey exercise with government departments, a roadshow with key SITA clients (National and Provincial GITOCs). In conjunction with the SITA, the DCDT will perform an analysis of the legacy systems across various government departments. This will assist in determining possible systems integration across government.

Parallel to the legislative process, the executive team of the SITA has developed a corporate strategy, which also details major progress that starts to respond to most of the challenges that have been identified. This can also be attested by the day-to-day performance of the SITA against its APP targets, which get monitored on a quarterly basis wherein the SITA now is achieving above 80%, as opposed to the previous years where it averaged around 40%. The SDSC business case finalisation is lagging behind the one for SDIC due to internal Departmental consultations that needed be concluded. The business case had to undergo an extensive internal consultations process and the draft has since been concluded.

The business case for the Regulatory Reform Bill

The DCDT would want to commence development of first draft regulatory reform business case (framework) by the end of June 2021. Having finalised the Terms of Reference (ToRs) to appoint a service provider, the internal process of publishing the ToRs for bidding has commenced to finally appointment the service provider. By end of September 2021, the intention is to finalise the second draft regulatory business case developed. By end of December 2021, the plan is to finalise and develop the draft regulatory business case. By the end of March 2022, the intention is to finalise the business case for the Regulatory Reform Bill and submit it to the Director-General of the DCDT for approval.

Digital Development Challenge Fund

There was a dissolution of the USAASA and conversion of the USAF into a new Digital Development Challenge Fund. These reforms should aid in reducing the cost to the fiscus of administering these entities, by ensuring greater alignment of purpose and the realisation of synergies among them. This will allow the bringing in of new players in society, including the youth, women, and people with disabilities, who have been disadvantaged. The business case for the Digital Development Challenge Fund has been concluded. The Minister of Public Service and Administration and the Minister of Finance provided concurrence. On 17 March 2021, the Cabinet Committee noted the progress made on the Electronic Communications Amendment Bill of 2021, as it was presented and directed that it be strengthened in line with the discussions.

Conclusion

Over and above the aforementioned reforms, the DCDT is in the process of implementing and monitoring the following turnaround strategies and amendments: the monitoring of the South African Broadcasting Commission’s (the SABC) turnaround strategy, appointing the team of experts to develop the turnaround strategy for the South African Post Office (the SAPO), and the facilitation of the Postbank Bill. In order to take these reforms forward, the Department decided to form the Joint Oversight Forum (the JOF) that would be used as a vehicle to guide the process of establishing and operationalisation of the business cases.

Discussion

Ms P Faku (ANC) thanked the delegation from the DCDT for the briefing made to the Committee. She thanked Chairperson Maneli for reminding the Committee of the significance of the month of June. The generation of 1976 fought very hard against the Bantu education policies. The young people in our country are mostly faced by the unemployment rate, and the Committee should ensure that youth development is promoted in the DCDT not only by affording young people training, but young people must form part of participating in all economic activities.

She stated that the Committee must applaud ourselves for the good work in its oversight role that Members have played in making sure that these entities are merged, and the work of the DCDT must also be applauded. She appreciated the deadlines and timeframes set by the DCDT. She asked for more information on the Department’s processes and its progress regarding the ICASA. She appreciated the information relating to the new Digital Development Challenge Fund.

Mr C Mackenzie (DA) stated that the presentation has a definite absence of long-term timeframes. It would have been more useful to break down all the entities and indicate timeframes. Other than the Digital Development Challenge Fund, none of the other entities seem to be well on their way towards finalisation. There needs to be some sort of coordination that these merged processes are all moving at the same pace or where one starts to accelerate like the Digital Development Fund, that one then holds on and one waits for the others to catch up. He noted that it must be very demoralising, demotivating for the people involved, because, to them, there must be an element of uncertainty as to the roles as well as their future roles and their responsibilities. However, more concrete, and realistic timeframes are needed.

He asked whether the business case has been developed or finalised. Will it be finalised and submitted to National Treasury by 30 June 2021, as indicated in the presentation? It was the regulator that had the business case set for completion by March 2022, and the DCDT were going to appoint an external service provider to develop this business case. Who is that external service provider? Is it going to be kept in-house with government? The process is moving very slowly, and clarity on the timeframes are required.

Mr Z Mbhele (DA) noted the importance of the risk of being outpaced in the reform processes that its outcomes might no longer reflect the needs of the markets when it is finalised. He agreed with Mr Mackenzie’s sentiments regarding the need for more definite long-term timeframes to ensure that progress is made. He asked what kind of risks are being looked at and accounted for in the consultation processes. How will the DCDT and the entities mitigate those risks and ensure that what they are planning does not lag behind how reality develops and unfolds? How will the DCDT ensure that the reforms stay contextually relevant?

Ms N Kubheka (ANC) appreciated the briefing and its relevance to the youth in the month of June. She asked for clarity on the timeframes set in the presentation and asked whether the DCDT would be able to adhere to its own deadlines. She appreciated that the DCDT has managed to form the structures and will monitor the progress that are made; she also appreciated the progress made in that the SITA is now achieving above 80%, as opposed to the previous years where it averaged around 40%. She also asked for more information on the processes and its progress regarding the ICASA and the USAASA.

Responses

Mr Luvuyo Keyise, the Executive Caretaker of the SITA, responded that one of the key aspects of the restructuring of the SITA is to ensure that the entity stays relevant in the future. The SITA is mindful of the fact of the changing markets and industry, and considerations have been given to ensure that future technologies are also included in its planning aspects alongside an increase of youth in the SITA and the sector. The SITA is also aware that there is a need for stability in the entity to ensure full implementation of the plans outlined. The SITA is collaborating with stakeholders to assist the DCDT with the new Bills that have to be prepared.

Mr Jordan-Dyani responded that the main questions centred around the need for more concrete long-term timeframes. He confirmed that the business case has been developed and sent to the National Treasury, as required by the Companies Act. The target of 30 June 2021 is to ensure that the relevant Ministries exercise the necessary consent. The side of the DCDT has been completed. As soon as the consent is obtained, the business case can be utilised relating to the drafting of the relevant Bills. There are parallel processes to ensure that the business case then gets the back end in terms of the corporate strategy from the entities. All of these processes are being run in the long term. The intention is to ensure that the merger is fast-tracked to ensure that it is completed in time.

Mr Jabu Radebe, the Acting Deputy Director-General of the DCDT, added that the DCDT will be going out on a procurement process for the relevant service provider and will follow the relevant procurement prescriptions to do so. It is the DCDT’s commitment to have the business case finalised by the end of March 2022. From a practical point of view, as the DCDT is developing the business case, the legal issues will also be identified. However, the finalisation of a legal framework can only be done once the business case is done. The DCDT will go to the Cabinet for permission to consult on the draft Bills and to get a legal opinion from the OCSLA. The issues of ICASA’s independence are issues to grapple with when looking at the possible models that can be implemented with its legal imperatives in the context of the business case.

Mr Mlindi Mashologu, Deputy Director-General: ICT & Capacity Development, DCDT, added that the DCDT is looking at all aspects, including the development of the service catalogue of what the FDIC is going to be doing. These companies cannot operate in the same way they have been operating because the landscape has changed. This will ensure that it can operate like any other entity and address the needs.

Follow-up discussion

Mr L Molala (ANC) asked for clarity on the implications of the monies that are owed, related to the rationalisation. He asked for details from the entities in indicating that they have inputted fully into this entire process of restructuring and rationalisation. It looks like they are just submitting the information.

The Chairperson asked for clarity on what the implications are of the rationalisation process relating to the workers and the possibilities of economic growth (including employees’ job security). A consistent point that has been raised before by the Committee is that there are disparities in terms of the budget that has been spent as appropriated versus the targets that would have been met. One would find out that things would said to have been achieved, but there would have been some work done towards that, which would probably then justify the funds that would have been spent towards such a target, even though it is not fully achieved. It is necessary that milestones be set so that the Committee can monitor the process of the rationalisation.

Responses from the DCDT

Mr Jordan-Dyani confirmed that governmental departments are now paying back the money that they owe, and the DCDT is doing relatively well in the recovery of debts. There are no job losses, but there will be additional jobs that are being put up, of about 300 excess jobs that are more skilled and focusing on the recruitment of the youth to ensure economic growth.

Report of the Portfolio Committee on Communications on the draft notice determining the remuneration of councillors of the Independent Communications Authority of South Africa (ICASA)

The second item on the agenda was for the Committee to consider and adopt its Report on the letter from the President of South Africa, requesting Parliament to consider the draft notice of the determination of the salaries and allowances of councillors of the ICASA.

Report of the Portfolio Committee on Communications on the 2019/20 Annual Reports and Financial Statements of the South African Broadcasting Corporation (SABC), the South African Post Office (SAPO), the Universal Access Agency of South Africa (USAASA) and the Universal Service Access Fund (USAF)

The Committee duly adopted its Report on the 2019/20 Annual Reports and Financial Statements of the SABC, the SAPO, the USAASA, and the USAF

Consideration and adoption of outstanding minutes

The last item on the agenda was for the Committee to adopt its outstanding minutes. The Committee duly adopted its outstanding minutes for its meetings held on 16 March, 07 May, 11 May (both the morning and evening sessions), 12 May (both the morning and evening sessions), 14 May, 25 May, and 26 May 2021.

The Chairperson thanked the Members, support staff and guest delegates for attending the meeting.

The meeting was adjourned.

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