SABC Interim Board briefing; ICASA & Sentech Annual Reports 2008/09

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Communications and Digital Technologies

02 November 2009
Chairperson: Mr Ismail Vadi (ANC)
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Meeting Summary

The South African Broadcasting Corporation reported that its Audited Financial Statements and Annual Report for 2008/2009 were not ready pending the finalisation of SABC as a 'going concern'. The Interim Board had submitted an application for a Government Guarantee to address the 'going concern issue'. The Minister of Communications and the Minister of Finance had supported an extension of the deadline for submitting the Annual Report for 2008/2009 to the end of November 2009. However, the Interim Board confidently reported significant progress in achieving its key objectives presented to Parliament on 21 July 2009. The wage dispute and impending strike had been resolved. The Interim Board had reconciled with the former group chief executive officer, instituted plans for payment of critical debts, established an audit committee and completed an external audit report. 2010 preparation progressed. The Interim Board had supported a forensic investigation by the Auditor-General, and submitted funding requirements to the National Treasury.

Members were appreciative of the Interim Board's efforts and progress, but wanted further information about the move to digital terrestrial television transmission, cost-cutting measures, and local content.

Sentech's board believed that Sentech remained a going concern despite current liquidity difficulties. It had sustained a R24 million net loss on account of major impairments on the retail broadband infrastructure. That aside, Sentech's core activity, distribution of television and radio broadcasting signals had remained profitable. Sentech had hoped to achieve pilot digital terrestrial television transmission to 40% of the country by March 2009 but could achieve only 33.3%. Sentech reported success in providing and operating the satellite communications infrastructure at four stadia hosting the 2009 FIFA Confederations Cup, and anticipated successful transmission of the 2010 FIFA World Cup.

In response to Members' questions, Sentech said that as soon as funding was available, it would extend broadband to Dinaledi schools, which would form the nucleus of information society hubs, health centres, and Government offices at local and provincial level, tribal offices, Thusong centres, and post offices. Because of withdrawal from retail broadband, Sentech had had therefore to write off its MyWireless assets. Sentech was also rapidly depreciating its analogue transmission assets prior to the analogue switch-off date of November 2011. The Committee was concerned that Sentech lacked an overall sense of direction.

The Independent Communications Authority of South Africa claimed to be a catalyst and credible regulator in the transformation of South Africa into a knowledge-based society, while creating a competitive environment. ICASA claimed to have created a level playing field and that it had universal service obligations. The Authority sought to broaden economic participation in the sector by SMMEs, and regarded competition as a necessity. The Authority as the regulator saw itself as a proxy for competition. However, it disclaimed responsibility for bringing prices down. It had published draft regulations for a code of conduct for broadcasters. The Authority had received a qualified opinion from the Auditor General, who had drawn attention to fruitless and wasteful expenditure on account of penalties incurred, and irregular expenditure on account of non-compliance with supply chain management processes. The Authority had failed to submit monthly management accounts to the Department of Communications, nor had it prepared and signed a performance contract with its Chief Executive Officer. The Authority failed to pay suppliers within 30 days.

Members questioned the Authority extensively, and were not satisfied with many responses, which they said were too brief. An African National Congress Member believed that it was important to maintain the independence of the authority as the regulator, and thought that although the Shareholder must intervene sometimes, the Authority should not be treated like the public broadcaster. The Authority felt that it could not please the Committee; however, Members considered that what the Authority perceived as an attack was rather a reflection of their increased sense of urgency of their oversight role and the need for accountability.

Meeting report

South African Broadcasting Corporation (SABC) Interim Board Second Briefing to Parliament
Ms Irene Charnley, Chairperson: SABC Interim Board, reported that a spirit of collaboration and commitment by all stakeholders, Parliament, the Ministry of Communications, the Interim Board, the Auditor-General, the SABC management, the unions, staff, and associations, had contributed to stabilising the SABC and providing an environment for the Interim Board to tackle core challenges. All bodies had played their statutory and support roles, with a short-term, parallel and intensive focus on policy, governance, implementation, and oversight. These had enabled focus and achievement of ‘quick wins’.

With regard to the key objectives presented to Parliament on 21 July 2009, the Interim Board had achieved significant progress. Many objectives had been attained, while others were on-going: The wage dispute and impending strike had been resolved, with a 10% increase for staff, 5% for senior management staff, and nothing for executive management staff. The impasse with the former group chief executive officer had been resolved. Plans for payment of critical debts had been instituted. An audit committee had been established and an external audit report completed. 2010 preparation remained on track. Impending business decisions that would impact immediate operations had been reviewed. The Interim Board had overseen and supported a forensic investigation by the Auditor-General, had addressed internal audit issues, including allegations by organised labour, and overseen the submission of funding requirements to the National Treasury.

The re-establishment of corporate governance and integrity were in progress, as were the filling of key executive positions, including the head of news. A principal decision had been to re-advertise, in order to ensure transparency. An external company was assisting the Interim Board in selecting candidates for the position of group chief executive officer. Short listed candidates were to be interviewed. In conformity with a court order, the previous board's recommendation for the position of chief operations officer had been submitted to the Shareholder for its decision. For the position of head of news, interviews had been held with short listed candidates.

To decrease costs, the Interim Board had supported the previous board’s decision to close three international bureaux and decided to close an additional five. It had been decided to retain the Nigeria, Zimbabwe, Kenya, London, and New York bureaux, which were considered of strategic importance, and re-deploy correspondents and staff. Leave encashment had been disallowed, and allowances for travel cut. Every contract of employment above three years was to be approved by the Board. A performance-based contract was to be developed and implemented.  R200 million was approved by the National Treasury to be paid to the SABC between November 2009 and March 2010 for unavoidable and unforeseen expenditure which had been identified. These funds were to be used for commissioned local content. The Interim Board had approved overdue payments to all producers under R200 000.

Progress was being made with complying with applicable legislation (the Public Finance Management Act (PFMA) and the Broadcasting Act), setting a date for the annual general meeting, completing the annual report for submission to Parliament, ensuring implementation of compliance with a delegated authority framework, and the management of liquidity issues.

Most issues raised previously in the annual financial statements had been resolved, but the Audited Financial Statements and Annual Report for 2008/2009 were not ready pending the finalisation of SABC as a 'going concern'. There had been a huge loss as of March 2009. Since then the SABC had been running on an overdraft, though costs were being controlled quite tightly. A governmental entity must be a going concern. Therefore the Interim Board had submitted an application for a Government Guarantee to address the 'going concern issue'. The Minister of Communications and the Minister of Finance had supported an extension of the deadline for submitting the Annual Report for 2008/2009 to the end of November 2009. The audited statements would be signed when the 'going concern' was agreed. A positive cash flow was expected by the end of 2014.
 
A Board Audit Committee had been constituted. This comprised four chartered accountants as external members, '2 remaining due to all outstanding issues in annual report being finalised', and four members of the Interim Board, including the SABC's Chief Financial Officer. The Board Audit Committee would assist the permanent board as part of the hand over process.

An update of the Auditor-General's report was provided in slides 15-22. The alleged misconduct was clearly outlined. Because of the complexity of the allegations, the disciplinary hearings would be chaired by senior counsel. There were a number of other issues regarding junior staff members. A final list of charges was being compiled, and a preliminary report on the charges sent to the commercial branch of the South African Police Service (SAPS).

The Interim Board was preparing a detailed report to shareholders on the handover to the new board. It was imperative that the permanent board hit the ground running. Because of Government’s guarantee, there would be financial covenants. All executives would be required to sign performance agreements to ensure their accountability and commitment. Monthly reports would be prepared.

The Interim Board, which by mid-November 2009 would have been established for four and a half months, was confident that it had laid the foundation for the permanent board, stabilised the SABC at all levels, resolved liquidity issues, addressed good corporate governance concerns, met 2010 FIFA World Cup obligations, begun the process of re-building a vibrant and sustainable public broadcaster which effectively met the needs of all South African citizens, and built confidence and restored integrity.

Discussion
Ms P de Lille (ID) asked about the SABC's funding model

Ms Charnley responded that the Interim Board had made some recommendations, had instituted performance agreements, and addressed profitability.

Ms J Kilian (COPE) asked if Government's guarantee would be signed in the next week, and if Members could expect to receive copies of the Annual Report for 2008/09 as soon as possible. She asked if the SABC's shortfall would increase initially. She thanked the Interim Board for the steps that it had taken on the Auditor-General's report, in which all Members were interested.

Ms Charnley responded that there remained a great deal of hard work, and the market had obviously gone down. It was the same with audience ratings. Costs unfortunately had increased more than revenue. There had to be a lot of hard work.

Ms Kilian asked how other broadcasters, like eTV had fared in the economic meltdown.
 
Ms Charnley was confident that the SABC still had dedicated staff that cared about their work.

Ms L Mazibuko (DA) asked about the permanent board and the R200 million grant from the National Treasury.

Ms Libby Lloyd, Interim Board member, replied that the Interim Board was fulfilling its duty. More details could be provided.

Ms M Morutoa (ANC) asked about travel allowance, digital migration, and who was responsible for the use of petrol cards.

Ms Libby Lloyd replied that there were as yet no final regulations. Later a licensing process would begin. Currently there was a pilot process with Sentech for digital terrestrial television (DTT) transmission. The pilot project was definitely on track, but ICASA could answer in greater detail.

Ms W Newhoudt-Druchen (ANC) asked if there was funding set aside.

Ms Charnley replied that the Interim Board had not itself addressed the DTT plan; however, it was aware that there was a certain process involving the Government.

Ms Libby Lloyd said that it would not be possible to generate revenue from digital migration until at least five million people had equipped themselves with set top decoding boxes.

Mr N Van Den Berg (DA) asked about cost-cutting measures.

Ms Charnley replied that the costs still exceeded the revenue. The Interim Board had discussed local content for broadcasting with the local industry. Only 50% to 60% of content had been commissioned because of the cash shortage. This year, the cash that the Interim Board was securing would be used to commission the content. The object was always to fulfil the SABC mandate.

Ms Charlotte Mampane, Interim Board member and Acting Chief Operations Officer, SABC, said that the Interim Board had been working with other stakeholders regarding the 2010 World Cup.

Mr Van Den Berg asked if the Interim Board was satisfied with the skills level of SABC personnel.

Ms Charnley replied that there were very good and skilled people in the service of the SABC.

Mr S Kholwane (ANC) said that Members appreciated the work of the interim board, asked what the Interim Board's future plans were for transmission – would it use Sentech – and whether there were any restrictions on local content.

Mr Gab Mampone, Interim Board Member and Acting Chief Executive Officer, SABC, said that at no point had the public broadcaster intended to venture into the signal terrain. It was necessary with multiplexing to have a digital payout system. The SABC needed its own capacity for digital encoding, but the responsibility for transmission lay with Sentech.

Ms Charnley replied that programmes repeated on the third or subsequent occasion did not count towards making up local content.

The Chairperson asked what the chances existed of recouping the money, and whether the Interim Board had been consulted on the interim broadcasting bill published by the Minister.

The Interim Board was confident that money will be recovered as part of its recovery plan.

The Chairperson thanked the SABC Interim Board for its 'sterling' service, and said that the Committee might call it again before the Interim Board's dissolution.

Sentech presentation
Sentech was a state-owned, fully commercial national enterprise providing broadcasting signal distribution and telecommunications services. In the past few years it had reinvented itself, transforming itself from the technical and broadcasting arm of the SABC into a leader in converging communication technologies. While its core business remained broadcasting signal distribution, and despite the failure of MyWireless, the broadband business was envisaged as a major element of the product mix in the future.

Mr Colin Hickling, Chairperson, Sentech, said that MyWireless, the retail broadband offering was initially successful, but had lost ground, and had depleted the company's reserves.

Dr Sebiletso Mokone-Matabane, Chief Executive Officer, Sentech, said that Sentech had agreed to withdraw from the retail broadband market. However, it was still holding discussions on a national broadband network.

Dr Mokone-Matabane said that pilot digital terrestrial television (DTT) transmissions had begun in October 2008. Sentech had hoped to achieve pilot DTT transmission to 40% of the country by March 2009 but could achieve only 33.3%. The SABC and eTV had provided set-top boxes to only a select audience as part of the pilot project. Sentech was waiting spectrum allocations to be completed. Work continued. The aim was to enable discontinuation of analogue transmission in November 2011.

However, Mr Hickling pointed out that if shortfalls were not corrected in time, it would be hard to achieve this target. Sentech had therefore ring-fenced funds.

Ms Beverley Ngwenya, Chief Operations Officer, Sentech, said that the pilot DTT network had achieved a national coverage of 33.3%, and hoped to catch up. Sentech had a shortfall, and was under-funded. It had had to add two additional phases. The delay threatened the November 2011 target for switching-off analogue transmissions, but if funding became available, Sentech would make every effort to meet it.

Sentech had been mandated to provide the back-up satellite infrastructure as part of the Government Telecommunications Guarantees. Sentech had successfully provided and operated the satellite infrastructure at four stadia hosting 2009 FIFA Confederations Cup for transmission of the matches both locally and internationally. This event had again showcased Sentech's position as a world class broadcast signal distributor. Sentech looked forward to a successful transmission of the 2010 FIFA World Cup

Dr Mokone-Matabane said that most of the preparatory work has been done. She said that Sentech had achieved what it had agreed with FIFA to do for the Confederations Cup.

Mr S Cassim, the Chief Financial Officer, reported that the financial statements had not improved very much. However, the balance sheet looked very stable. The issues about the going concern would come to the fore. Sentech had managed to cap its losses by spending only on necessities. Projects, however, took longer to come to fruition. The costs of co-operation had increased by 14% because Sentech had had to focus on cost control. Also Sentech had sustained impairment of assets because the Shareholder had instructed the company to withdraw MyWireless and the company had had therefore to write off MyWireless assets. Sentech was fast depreciating its analogue transmission assets prior to the switch-off date.

Sentech had achieved an operating profit of R154 million in 2008/20009. Interest received on the various Government allocations over the past 18 months had improved Sentech's cash position significantly, but major impairments on the retail broadband infrastructure contributed to a R24 million net loss for the year (Annual Report, page 19). Setting aside the performance of the retail broadband business revealed that the core activity, broadcasting signal distribution, remained profitable.

The Board believed that Sentech remained a going concern despite the concern over current liquidity difficulties (Annual Report, page 82).

Sentech's independent auditors expressed the opinion that the financial statements presented fairly, in all material respects, Sentech's financial position (Annual Report, page 79).

Discussion
Ms Newhoudt-Druchen asked what the main impairments of assets were. She had requested a digital set-top decoder for test purposes, but had been told that there was no digital signal available in Cape Town.

Mr Cassim responded that Sentech had been obliged to write off certain assets, hence a nil value on the balance sheet. The other nil value was the analogue transmission equipment, which represented fast depreciating assets.

Ms Morutoa asked if Sentech had really fulfilled its mandate, and if the funding model reflected its area of work.

Sentech responded that it had not failed in its mandate. Sentech had consistently argued that there had to be buyers for its services. The commercial sector did not to rural areas because they could not make money there. Sentech therefore needed finance to provide for the rural areas.

Mr Van Den Berg asked if Sentech had good relations with other entities. The SABC could not be self-sufficient. He asked if each of the state entities helped the other. He referred to a problem at Sutherland that caused a break in connection with other countries.

Ms Morutoa asked about the Dinaledi schools, litigation, and the licence problem with ICASA.

Mr Hickling replied that it was difficult to present a short briefing that encompassed all issues in the Annual Report, which was a much more detailed document. The summary just given was a starting point for discussion.

Dr Mokone-Matabane responded on the Dinaledi schools. As soon as the required funding became available, Sentech was ready to introduce broadband to Dinaledi schools, which would form the nucleus of information society hubs, health centres, Government offices at local and provincial level, tribal offices, Thusong centres, and post offices. Sentech was holding discussions with ICASA about its licence.

Mr Cassim responded on the court case, losses incurred allowances, the tax liability and special tax advisors.

Mr Dingane Dube, Executive, Legal and Regulatory, Sentech, said that the matter was under consideration and investigation by ICASA (slide 9).

Ms Morutoa said that these short responses were insufficient.

Mr Cassim replied that the balance of R26 million was a contingent liability.

Ms Kilian observed that Sentech was a capital project-based organisation (page 82, Annual Report). It was important to be application funded (page 8-9, Annual Report). Page 8 referred to DTT and capital expenditure. It seemed that there was a huge uncertainty bout the November 2011 deadline for the discontinuation of analogue television transmission. If money was not forthcoming, what would Sentech do? What was the real problem? Sentech relied on the SABC. She asked if there was a certain lack of commitment by the Department of Communications, and if Sentech was being saddled with unfunded mandates, such as broadband.

Ms De Lille asked about future salary and pension increases, and directors' incomes. She asked what percentage did Sentech budget for the executives.

Mr Van Den Berg asked for clarity on unused radio frequency spectrum.

Mr Kholwane observed that Sentech's energy level had decreased.

Mr Cassim replied that a petrol allowance was provided, but nothing towards the costs of maintaining a motor car.

The Chairperson said that the Committee was concerned with the overall direction of Sentech; it required closure and certainty, and observed that Sentech appeared to have a split personality: it must decide what it was.

Independent Communication Authority of South Africa (ICASA) Annual Report 2008/09 presentation
Mr Paris Mashile, Chairperson: ICASA, said that civilisation was advancing in the direction of a knowledge-based, information-oriented society. ICASA sought to be a credible regulator in the transformation of South Africa such a society and to create a competitive environment for delivering a wide range of high quality communication services at affordable prices to contribute to the overall economic growth and social development. It was important that people should be able to participate in the knowledge society at affordable prices. Therefore ICASA aimed to increase the availability and quality of access to information and communication technologies (ICTs) to domestic and business users through effective competition and transparent regulation.

ICASA sought to broaden economic participation in the sector by SMMEs. Competition was a necessity. ICASA as the regulator was a proxy for competition. ICASA was a catalyst. ICASA was not responsible for bringing prices down. It however sought to make sure that the previously disadvantaged had a stake in the system. Having achieved a strategy it was necessary to develop a structure. ICASA was succeeding in providing leadership. Licensing was a responsibility.

ICASA had achieved a major milestone in completing the license conversion process as required by Electronic Communications Act (ECA) and issuing over 600 class and individual licences. It had issued two trial licences for digital migration. It had registered 46 courier companies and aligned the South African Post Office (SAPO) licence with Postal Services Act (as amended), the Electronic Communications Act and the ICASA Act (as amended). It had published draft licence fee regulations and conducted public hearings.

ICASA had compiled 55 reports on broadcasting licensees' compliance with the ECA and licence terms and conditions. It had conducted 45 monitoring visits to assist licensees in complying with licence terms and conditions. It had received 76 broadcasting complaints. It had conducted 46 monitoring visits to postal outlets.

ICASA claimed to have created a level playing field and that it had universal service obligations. It had published draft regulations for a code of conduct for broadcasters, and the digital terrestrial television draft regulations. It had published the commissioning of independently produced South African programming discussion document, and the sports broadcasting rights discussion document. It had processed 36 interconnection agreements, analysed and approved Telkom’s 2008/9 tariff review, SAPO’s 2008/9 tariff review, and analysed and processed 57 ad-hoc tariff applications. ICASA felt pleased with itself.

ICASA had commissioned a study to develop a new radio spectrum licence fees framework; it had published draft radio frequency plan regulations, radio frequency identification systems regulations, conditions of exemption of certain radio frequencies from licensing, draft terrestrial broadcasting frequency plan, and findings documents for high demand frequency bands.

ICASA had confiscated 471 units of equipment due to non-compliance. It had closed down illegal broadcasters and confiscated their equipment, issued warnings and closed down unlicensed operators. It had returned 223 units of confiscated equipments to owners who complied. It had issued 6 089 frequency spectrum licences, and issued 1 826 type approval licences. It had conducted 649 maritime restricted radio telephone examinations, 77 high site inspections, and Identified 275 interference cases and cleared 267.

ICASA had conducted research on consumer experiences on mobile number portability and fixed mobile convergence – this was another consequence of the ECA. Fixed line was deteriorating as more and more people preferred mobile telephone connections. As the price of interconnection decreased, more and more people would prefer mobile and forget about fixed lines. This was a major fear of Telkom, hence its interest in mobile. This is what convergence was all about. Mr Mashile had witnessed cheap telecommunications abroad – as low as one cent per minute; it was like being in 'dreamland'.

ICASA had conducted a feasibility study on the establishment of the call centre. It had co-ordinated four mandatory Consumer Advisory Panel meetings, conducted 433 public education and awareness outreach programmes in all provinces, reached out to consumers through 124 radio interviews, conducted Consumer Rights road shows in all provinces, and resolved 64% of 2 155 consumer complaints received.

ICASA had partnered with other stakeholders and provided information at the following campaigns: World Telecommunications Day, Youth Day, World Post Day, and International Day of People with Disabilities. ICASA operated in a highly litigious environment as its decisions were frequently taken on review by aggrieved applicants. The Complaints and Compliance Committee (CCC) adjudicated nine licensees charged with non-compliance of their licence conditions.

Mr Karabo Motlana, Chief Executive Officer, ICASA, described stakeholder relations. ICASA had arranged staff meetings at head and regional Offices, and hosted internal functions and events, such as Wellness Day, Family Day, Sports Day and staff end of the year function. ICASA had published media releases and arranged interviews about regulatory activities. It had co-ordinated production and tabling of the Annual Report, and participated in exhibitions and road-shows to raise awareness about the Authority’s mandate.

ICASA had attended and made submissions to the Universal Postal Union, the International Telecommunications Union, and the SADC Ministers Roundtable on ICTs. It had arranged bilateral interaction with regulators from Brazil, Tanzania and Malawi, and subscribed to international regulatory organisations and associations.

Out of 59 vacancies, 58 vacancies were filled. 536 participants attended a range of training courses.
R2.7 million was spent on training which represented 3% of the total salary budget. A job competence profiling was conducted together with a skills audit. Integrated performance management had been introduced. ICASA's demographics were illustrated (slides 24-25).

The Auditor General had drawn attention to the following: fruitless and wasteful expenditure of R39 570 due to penalties incurred; irregular expenditure of R387 081 due to non-compliance with supply chain management processes. ICASA had not submitted monthly management accounts to the Department of Communications, nor had it prepared and signed a performance contract with its Chief Executive Officer. ICASA failed to pay suppliers within 30 days. The Auditor-General had given a qualified opinion. The Council Performance Management System (PMS) remained outstanding.

By way of corrective action an internal audit function had been established to co-ordinate operational and financial units. A performance contract has been signed by the Chief Executive Officer. A risk management    strategy has been developed. ICASA had been submitting monthly performance reports to the Department of Communications. Discussions towards a PMS had begun in 2007 and a draft had been submitted to the Department in October 2009. The statement of financial performance for the main account was illustrated (slide 28-29). The national revenue fund was illustrated (slides 30-31).

Discussion
Ms De Lille asked what ICASA meant by a manually based performance management framework introduced in 2007 (Annual Report, pages 16 and 48). She asked how many of the outstanding complaints had been dealt with since March 2009 (Annual Report, page 35). She asked how ICASA selected the participants for road shows (Annual Report, page 36). She asked about employee wellness week and financial wellness week (Annual Report, page 45). She asked about the difference between performance awards and periodic payments, and about the substantial amount of overtime payments – was this paid to councillors, or just to staff (Annual Report, page 131). She asked about the use of consultants (Annual Report, page 132). She asked how ICASA measured the results of its expenditure on employee wellness. She asked for an explanation of ICASA's time management system. She asked about performance bonuses to a number of senior managers and how their performance was measured individually, or if performance bonuses were given irrespective of whether managers had performed well or badly (Annual Report, page 144). The acting executive management had also received bonuses. Again she wanted to know how performance was measured to determine those bonuses. She asked about the organogram (slide 7), which was the same as the Committee had been shown previously. She asked for details of the staff numbers in each unit. She asked if money expended for training was for staff members or if it included councillors. An employee union had complained that ICASA had spent most of its training budget on councillors; these councillors then used ICASA as a training ground before moving on in the industry.

The Chairperson observed that this was just the first round of questions, and for every answer, ICASA must expect four follow-ups. There was no doubt that Ms De Lille had read the Annual Report.

ICASA replied that ICASA had for some time been expanding the ambit of performance management and improving the security of performance management records by moving to an electronic system, and gave details.

ICASA explained its mechanism for arranging road shows. ICASA had made great efforts to resolve complaints; road shows were prioritised for the rural areas and places where there were most complaints. ICASA saw road shows as a good platform. It was on this basis that it selected participants.

Ms M Mopeli, General Manager, Human Resources, ICASA, replied that ICASA used the services of Alexander Forbes. Wellness week was an ongoing process. ICASA had an independent service provider. There was great interest in the services provided, and there had been an increase in the rate of usage to 46% in 2008/2009. ICASA had a remuneration framework to attract candidates with rare skills, but did not make counter-offers. Human Resources ensured that overtime was limited to the needs of the organisation. Time in lieu was given for extra work. Much time was spent in the field, for example, for the monitoring of radio spectrum interference. ICASA also had hired many temporary staff, for example, 50 people to monitor the elections.

ICASA responded on financial wellness. Councillors did not receive overtime or performance awards, despite its high use of councillors. ICASA was still growing its timber. ICASA admitted that it was expensive to hire the services of consultants. Buildings had been inherited.

The Chairperson asked ICASA not to give too many details. It appeared that ICASA had lost the chance to buy a suitable building. He had received a letter from the Minister. It was the aim of the Committee to see outstanding matters resolved and things put in place. The Chairperson said that he would circulate the Minister's letter.

The Chairperson said that Members were concerned that the deadline for the end of November 2009 would be missed. It was long overdue.

Ms Mohlala said that the Department would request some guidance if a more consultative process was required.

The Chairperson asked about performance indicators. It was not a negotiated process. The primary responsibility rested upon the Shareholder. Parliament would rise for the end of year recess on 12 November 2009. That document, even if it arrived on 30 November 2009 would be too late to be tabled. That gave rise for concern. He sought another process to expedite matters.

Ms Mohlala assured the Chairperson that she would ensure that the 30 November 2009 deadline was met.

Ms De Lille said that the Department of Communications must present a draft after consultation with councillors.

Ms Kilian said that a very careful scrutiny was required of the individual contracts. It was necessary to refer to the Act.

Mr Kholwane objected that it was not possible to use the Department of Communications as a legislator, and that the Committee had met to consider the Annual Report.

The Chairperson ruled that the deadline remained 30 November 2009, and the Department of Communications must prepare the document in time.

Ms Mazibuko asked if the Committee would hold the document until February 2010.

The Chairperson said that the matter would be considered separately.

Ms Kilian asked how a recurrence of such delay could be avoided. She asked if ICASA would try to ensure that it acquired the necessary level of expertise in terms of the Public Finance Management Act (PFMA), since the provisions of the PFMA were not being fully implemented. As a constitutional body ICASA was a Schedule 1 institution. Such institutions had certain duties under the PFMA with regard to the internal audit function. She said that Ms De Lille had covered most of her questions. The Committee had previously asked for an organisational structure and information about the delegation of authority. The issue of structure was crucial. Why was the organisation so top heavy? ICASA actually needed an external person for very effective performance management. Much time was consumed in meetings, but it was doubtful if these meetings were profitable as there seemed to be much duplication of effort.

Mr Mashile said that work was in progress. The engineering system had not talked to the financial system, whereas both systems should be harmonised. The parameters of the first system had been determined by engineers alone.

The Chairperson asked why ICASA was not submitting. The Committee had faced the same problem with the SABC.

Mr T Mosta, Chief Financial Officer, ICASA said that ICASA had two sets of financial statements. The audit report had been unqualified. The audit team had wanted ICASA to change its accounting framework. ICASA had independent auditors. It had written to the National Treasury to ask for confirmation of the proper framework for the financial statements. The financial system was on an approval basis. On the issue of irregular and fruitless expenditure, examples were late registration of vehicles on account of their being used outside the region in which they had been registered originally. Another aspect was late payment to suppliers. This had revealed certain weaknesses in ICASA's internal processes. There had been a challenge as to the format of ICASA's invoices.

Mr Mashile said that ICASA had tried to mitigate the effects. The radio frequency spectrum was very limited in extent and in high demand. There were dangers of litigation. It was important to find a system that would not drag ICASA into the courts. As an independent regulator ICASA could not afford to be seen as too close to other entities, especially operators that were owned by Government. ICASA was required to treat all parties as equal. It was important to conduct matters according to procedure.

The Chairperson asked if there was a contract for the Chief Executive Officer.

Mr Mashile said that a contract had been signed. Today's worker was a knowledge worker; such employees did not take kindly to over-management. ICASA had moved towards a flat organisational structure. He asked Members to take careful note of the revision of the organogram.

Mr Van Den Berg said that there needed to be an established structure. It would be a lengthy process. There was increasing demand for space in the radio frequency spectrum. He asked the same question as he asked Sentech, about working relations with other entities in the Department of Communications. It was important that there should be one big team. He was especially concerned to know about progress with the emergency centres and the national emergency number.

An ICASA councillor responded that documents were submitted to ICASA's legal department for vetting. There were mitigating factors.

Ms Newhoudt-Druchen asked how many of ICASA's staff were persons with disabilities. On page 70 there was no mention of persons with disabilities in ICASA's strategic objectives. The SA Deaf Federation had been sending letters to ICASA but had failed to receive any response.

Ms Mopeli replied that the issue of persons with disabilities was being addressed. ICASA had six persons in its employ with disabilities; however, ICASA's working environment presented its own challenges.

The Chairperson asked Ms Mohlala about the frequency of international travel to conferences by ICASA councillors. Some of them seemed to be outside South Africa more often than they were home. This involved heavy cost implications. It was not known how valuable such attendances were. He asked if it would be possible to devise another system that would be fair and justifiable, whereby councillors would apply to the Shareholder for permission for expenses-paid travel. There needed to be some selectivity. The Committee was not satisfied with the present system.

Ms Mohlala asked if the Department could return with a specific proposal, having taken up the matter with the Chief Executive Officer.

The Chairperson asked for a report on both items.

Mr Kholwane believed that it was important to maintain the independence of ICASA as the regulator. Though the Shareholder must interfere to some extent, ICASA should not be treated like the SABC

The Chairperson said that it was important to maintain a regulatory framework. As Mr Kholwane had said, it was not feasible to call ICASA to appear before the Committee every week. The Committee sought to raise the standards of efficiency in ICASA, and would ask it for ongoing reports.

Ms Mazibuko said that she agreed with Mr Kholwane: it amounted to micro-managing.

The Chairperson said that in real life there were some for whom it might be useful to have a weak regulator. However, the Committee's job was to ensure that ICASA was effective, especially to protect the interests of ordinary people rather than business.

Ms Mohlala understood that there were two different messages.

The Chairperson said that these two messages were not mutually exclusive.

Mr Mashile replied that international trips were made only in connection with conferences of organisations to which ICASA was affiliated. He presented a humble plea to the Committee that it allow ICASA an opportunity to present ICASA's travel plan.

The Chairperson said that the Committee would have no problem in engaging with the Department of Communications. However, it did not want to engage with councillors on the matter of travel plans. Moreover, it did not object to travel consequent on obligations to bodies to which ICASA was affiliated. He said that the Committee would return to this issue.

Ms Kilian asked that that the deficiencies recorded by the Auditor-General be addressed by the Minister.

Mr Mashile complained that ICASA could not satisfy the Committee.

The Chairperson replied that what ICASA perceived as an attack was actually a reflection of the Committee's greater emphasis on accountability. ICASA and the Committee in reality had a common purpose.

The meeting was adjourned.


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