SIU on SABC investigations; ICASA Quarter 1 performance; with Minister

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Communications and Digital Technologies

10 September 2019
Chairperson: Mr B Maneli (ANC)
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Meeting Summary

The Committee welcomed progress made in the Special Investigating Unit (SIU) investigations into the South African Broadcasting Corporation (SABC) in line with two presidential proclamations, R29 of 2017 and R19 of 2018. Two contracts to the value of over R100 million were found to be irregular and set aside by the courts. Evidence had led to the institution of civil litigation by the SIU and SABC in ten court matters to the value of more than R560 million. There were 11 criminal case referrals to the National Prosecuting Authority (NPA) and evidence which supported 24 disciplinary cases at the SABC. Members said that the NPA needed to play a more cooperative role and resolved to invite the NPA as soon as possible for an update on the 11 referrals.

The Independent Communication Authority of South Africa (ICASA) presented its first quarter performance report for 2019/20. ICASA is engaging National Treasury to obtain an additional R 24.1 million in 2020/21:
• R10.7m is required for completion of the licensing process for high demand spectrum (HDS)
• R7m is required to complete the licensing process for the WOAN
• R3.4m for implementation of Radio Frequency Migration Plan 2019, International Mobile Telecommunications (IMT) Roadmap 2019 and Radio Frequency Assignment Plans
• R3m is required for successful completion of the Data Services Market Review.
Members were concerned that ICASA had spent a significant amount of its budget on litigation and raised ICASA's prior underspending.

Minister Ndabeni-Abrahams expressed great dissatisfaction about the deterioration in the relationship between the Department and ICASA. The lack of communication affected the finalization of spectrum and performance agreements. The Department had not been privy to the ICASA Quarter 1 report prior to this meeting.

The Committee said strengthening the relationship between ICASA, the Department and Parliament was required by law and spectrum release was an urgent matter. The Chairperson said that the meeting had highlighted a number of problematic areas – litigation, performance agreements and spectrum. This required urgent attention requiring another meeting.

Meeting report

Special Investigating Unit (SIU) on the SABC investigations
Adv Andy Mothibi, SIU Head, explained that the SIU adopted a phased approach as its investigation methodology due to the significant volume of matters to be investigated. Proclamation No R29 of 2017 was divided into Phase 1 and Phase 2.

Phase 1 Investigation Progress
SIU found evidence of irregularities in the awarding of the following contracts:
Vision View Productions CC,
SekelaXabiso CA Incorporated,
Lornavision (Pty) Ltd,
Lezaf Consulting,
Gekkonomix (Pty) Ltd (trading as Infonomix),
Asanta Sana (Pty) Ltd,
Foxton Communicating (Pty) Ltd and
Mott MacDonald (Pty) Ltd.

As a result of the SIU investigations, court ready evidence was gathered and compiled on 45 matters. Civil litigation was instituted in 10 matters (with some joined to existing actions/applications) to the value of R560 million against the following:

George Hlaudi Motsoeneng to the value of R21 744 002
SekelaXabiso to the value of R9 816 023
Vision View to the value of R52 000 000
Lornavision and James Aguma to the value of R62 733 556
Bessie Tugwana to the value of R42 303 000
Gekkonomix (Pty) Ltd trading as Infonomix to the value of R4 550 000
Audrey Raphela to the value of R20 106 969
TNA Media (Pty) Ltd to the value of R144 551 738
Mott Macdonald to the value of R7 033 464
Mjayeli Security to the value of R194 350 678

The investigation produced evidence to support 11 criminal referrals to the National Prosecuting Authority. The details of the one matter can be shared as the suspect, Sully Miranda Motsweni, a former SABC Executive, has been charged with fraud amounting to R18 290.12

The other 10 matters involve private companies who contracted with SABC and 8 former SABC Executives as well as former SABC Directors (executive and non-executive). The combined value of the cases is R267 million. The charges vary from theft, fraud, contravention of the Companies Act and the PFMA. The referrals were done in May, September, November 2018, May and July 2019. The SIU has arranged with the NPA for a dedicated prosecutor to deal with all the SABC prosecutions.

The investigation produced evidence to support 24 disciplinary referrals. Implicated individuals included:
Mr Kubendhran Padayachee in the Vision View matter
Sully Miranda Motsweni in the Vision View/Travel Fraud and SABC Foundation Bursary awards
Bessie Tugwana in the Vision View matter
Simon Molaudzi in the Vision View, SekelaXabiso and Gekkonomix matters
Audrey Raphela in the SekelaXabiso and Gekkonomix matters
Anand Moodliar in the Vision View matter.

The following matters are being investigated in Phase 2:
The New Age (TNA)
SABC security tender
Irregular appointments of 7 SABC Officials;
Irregular payment of bonuses;
13th cheques to Senior Managers; and   
R31 million paid for the R10 000 to 3124 staff
Irregular Expenditure;
R5 million SARS penalty;
Validity of a sample of Tax Clearance Certificates.
Conflicts of Interest.
Legends payments of R2.4 million paid to 53 artists;
SABC Heritage/Thank you Concert R27 million;
Rapid Blue: X-Factor Season 1;
Irregularities of the SABC Offices lease in Nelspruit;
Irregular payment of Mr Motsoeneng R1.2 million legal fees;
North West SABC Office allegations including Provincial General Manager and News Editor appointments, officials doing business with SABC, corruption, and abuse of SABC resources.

SABC Security Contract
Proclamation No R19 of 2018 (the amendment to the 2017 SABC Proclamation) was published on 6 July 2018. SIU was only then able to investigate the this contract valued at R185m and corruption allegations.
The SIU has found that:
• The contract was awarded irregularly,
• There was financial misconduct and contravention of the PFMA sections 38, 45 and 86(3) including for failing to act in the best interest of the SABC.
• SIU has finalised the investigation on the Security Contract.
• SIU finalised disciplinary referral (16 May 2019) and criminal referral for PFMA contravention (6 May 2019).
• SIU briefed counsel on 30 October 2018 to join the proceedings as second applicants (case no 47916/2017). SIU will request the court to set aside the Mafoko Security Patrols contract.
• SIU will request a just and equitable order seeking to recover monies lost.
• SIU Interim Report (30 November 2018) and Final Report (14 June 2019) submitted to President.

TNA Breakfasts Contract
This contract entitled TNA to exorbitant sponsorships by government departments and entities, which enabled TNA to stage a “breakfast show” which SABC was to broadcast. TNA initiated arbitration proceedings against SABC for R144m allegedly suffered due to SABC repudiation of a renewal agreement between SABC and TNA. As a result, SABC brought an application to have the contract reviewed and set aside. SIU has filed an application to join the proceedings to provide supporting evidence. The matter has been delayed as TNA has been liquidated and the liquidator who needs to decide which claims to pursue (if any) has still not been appointed by Master of the High Court. The investigation is ongoing to establish:
• Facts and circumstances of contract ostensibly skewed deliberately in favour of TNA, in that it deprived the SABC of sharing in the sponsorships and other income in excess of R200 million.
• Determine and establish what the unlawful benefit that TNA gained from the contract.
• The irregular sponsorships/payments to TNA by state institutions.
The SIU is in the process of applying for a proclamation to investigate the sponsorships given to TNA by other SOEs and government entities.

The role of the relevant SABC Boards and Executive Directors
As part of the overall SIU investigation, the evidence and findings of all the individual investigations are being collated and considered with a view to pursue potential actions and remedies against SABC Board Members and Executive Directors of the SABC. The actions considered include criminal action and having former SABC Board members declared delinquent directors. SIU is considering remedial action against individuals where governance failures occurred and reporting requirements were not complied with

Discussion
Ms P Faku (ANC) was thankful for the work conducted by the SIU. She asked how many of the seven cases investigated by the SIU had been set aside by the court and why.

Ms S Xego (ANC) appreciated the good work of the SIU. As she understood the mandate of the SIU was not to prosecute. Therefore, when it came to recovery of losses, she asked the procedure for when SIU tried to recover losses from an insolvent as money would have been spent on that exercise. The State Capture Commission had similar cases and the SIU should not investigate cases that were before the State Capture Inquiry as that duplication would be a waste of taxpayer money. She wanted more information on the Special Tribunal noted by Adv Mothibi – who was responsible for setting it up and what was its terms of reference?

Ms P van Damme (DA) thanked the SIU for their incredible work. Having served on the SABC Board Inquiry, she was glad to see the rot was being cleaned up and the serious matters raised were being addressed.

With reference to the security tender, she understood it was part of ongoing litigation against the Interim SABC board members before the courts. If the applicants were successful against the Interim SABC board members and the SIU report had found wrongdoing, which action would be instituted against the interim board members.

She felt that the SABC middle management structure was really bloated and asked if the overview of the SABC staff structure conducted by the SIU led to the same conclusion. Did they have the right number of staff  for what they needed for their mandate?

On the freezing of pensions, she was aware that Mr Motsoeneng’s pension had been frozen but asked if other top executives pensions had been frozen.

She asked for the names of the executives and board members that had been criminally referred to the NPA in terms of the Multichoice success fee. Had Multichoice been implicated for contravening the Broadcasting Act and encryption policies? Were both Multichoice and SABC wrong?

In terms of The New Age, she understood that the company was liquidated and given to Mr Mzwanele Manyi. She therefore asked against whom a civil claim would be instituted. Would it be Mr Manyi or the Gupta family as the company was owned by the Gupta family when the contract was signed and they could afford to pay back the money. Despite the liquidation she felt that SIU could still recover the money.

Ms Z Majozi (IFP) welcomed the report and thanked the SIU for the work they had conducted. The fundamental issue at heart was the lack of leadership at the SABC. In her view the problems exceeded budgetary shortfalls and were rooted in a lack of good leadership.

She asked what would happen to the people who had been implicated and did not have their expired contracts renewed. The pension fund of Motsoeneng and Aguma had been frozen pending the investigation outcome, after which the SIU would institute a civil claim or refer for criminal investigation. What would happen to those with expired contracts? It was urgent to write to the NPA to request a meeting so Members could get a full report on all the referred cases. It was a grave problem to have so many SABC directors and executives implicated.

Mr C Mackenzie (DA) appreciated the comprehensive presentation. He asked what the process was if SIU uncovered other forms of wrongdoing. Would they approach the Minister? What was the protocol? The Companies Act was passed by Parliament to hold directors accountable for their actions. The companies mentioned in the report had directors behind them and so much happened behind the shield of a company that not much was known about the individuals behind it. He asked who the individual were behind the companies listed in the report. It was good to see people investigated in a climate where corruption was excessive. He found it unfortunate however that the report detailed that people appeared before the courts for amounts as little as R18 000 and R45 000. This undoubtedly demonstrated that the justice system was effective for lower ranked employees but he wanted to see higher ranked executives being held accountable as well. He spoke about consequence management for all implicated individuals irrespective of their level of seniority.

Mr W Madisha (COPE) stated that the report was comprehensive and welcomed the steps taken thus far. He said the NPA had been continually invited to the Committee to give a progress report. Despite the multiple invitations they had not come. The Committee needed to once again communicate to the NPA that it was urgent for them to appear. He felt that the SIU report revealed that had the NPA taken the appropriate steps there would currently be far fewer problems to address. The NPA lack of appearance was a defiance of Parliament and the people of South Africa and he found it highly problematic.

He referred to governance failure mentioned in the report. The SIU for all these years had not been able to ensure that the referred cases were dealt with then. The SIU should propose what the Committee should do to ensure the SIU is equipped to resolve the problems of governance failures. The SIU needed the cooperation of other institutions to resolve cases and the same problems still existed after such a long time.

He referenced page 35 of the presentation where three SABC Boards were noted: one with Mr Motsoeneng, the Interim Board and the current board. It was common knowledge the problems concerned the first and second board. He asked if the report referred to the first and second board. The millions looted should still be recovered and referenced Mr Motsoeneng as someone who should pay back the millions he gained unlawfully. This was not fair to the ordinary workers in the institution who received R8000 per month. He asked how SIU proposed to deal with these horrendous matters. He wanted more details on the TNA liquidation so that the Committee could take a resolution.

Mr L Molala (ANC) appreciated the progress indicated in the report. He wanted the other arms of law enforcement to come before the Committee so Members had a holistic view of the issues at hand. TNA benefited R200 million and the report detailed how the process would be carried forward but he asked if SIU received the necessary support from other institutions like the NPA. Had they tried to find quicker ways for resolution as the report revealed that court processes were delayed. How can SIU and the justice system work together to prosecute cases faster as it was in the interest of citizens that the SABC stabilize?

He agreed with the principle that stolen money should be recovered but questioned if in some instances it was worth instituting proceedings where the cost of litigation would be greater than the money recovered. How could this be resolved as it did not make sense to spend one billion to recover one million? He asked that future reports indicate how much had been spent to recover monies lost. A balance needed to be struck between which cases were financially worth pursuing.

He called out the tendency in the public service where wrongdoers looted money and upon investigation resigned to escape liability. This needed to be addressed and new ways of dealing with that found.

Mr T Gumbu (ANC) asked if the two SABC executives who had resigned during the investigation would still be subject to a disciplinary process. He asked for specific names where the report simply referred to ‘a board member’.

Ms A Mthembu (ANC) asked if any paybacks were expected from the companies implicated.

Ms N Kubeka (ANC) welcomed the presentation and said it was unfortunate that the NPA was not present. There was a lot SIU had tried to do. Since most of the cases were sub judice, the Committee could not get all the answers they desired. SIU had submitted the reports as per the proclamation and stuck to the timeframes which showed they had managed well. She applauded SABC for doing their level best to stabilize in the midst of all the problems they faced. Consequence management was a good idea to help them stabilize.

SIU had not completed their phase two investigations and required assistance from the NPA. She asked if the NPA had given feedback on the cases handed over to them by SIU. Had any of them been resolved at all? It was a good idea to pursue recovery of public funds. It was difficult to engage further as it had been stated that cases were sub judice.

The Chairperson pointed out that the NPA had sent a letter saying they would cooperate therefore they should be given the benefit of the doubt.

The Chairperson clarified that there had been different SABC Boards and the SIU report was clear at all times about which board it was referring to. The current SABC Board chairperson was present and it was important to acknowledge that some of the clean-up activities were initiated by the current SABC Board.

Ms van Damme echoed the Chairperson

Adv Mothibi clarified that the scope of the investigations focused on the period of the first and second board. The security tender was concluded under the auspices of the Interim Board which was the accounting authority. The irregularities committed pointed to the Interim Board as accounting authority. The current SABC Board was not included.

On the contracts set aside, he revealed that two court cases had been decided and resulted in the setting aside of two contracts: Lornavision (Pty) Ltd and Vision View Productions CC. Where there was evidence of irregularities in a contract, it was taken before a court and two things were sought: set the contract aside and a just and equitable order. The latter entails the court weighing up all the evidence placed before it and the circumstances of the case and determining a fair amount for the defendant to pay. The Vision View contract of R23 million had been set aside and court had been asked for a just and equitable order in compelling Vision View to pay back the funds unlawfully obtained. The same approach was taken with Lornavision.

On recovery, Adv Mothibi explained that SIU had three main outcomes and the most important one was to recover the monies lost. That was done through civil litigation and was within SIU’s control from start to finish. The second outcome was where evidence of criminal action was found and those cases were referred to the criminal justice system as they fell beyond the scope of SIU. Legislation dictated that referrals received by the NPA had to be dealt with in a manner that served the public interest which means they have to do what is expected of them by looking at the evidence placed before them and deciding whether to prosecute. The SIU had been engaging with the NPA and stated, for the record, that renewed attention had been paid to cases placed before them by SIU. The NPA agreed to prioritize some of SABC cases. The other matters were referred to the SABC board for disciplinary action and those matters had gained traction.

Adv Mothibi replied about was happening with the Special Tribunal. The President had signed off and issued a proclamation for it. The Special Tribunal was initiated as a result of SIU cases being delayed in the ordinary courts. It was appropriate to set up the Special Tribunal as it was empowered to do so by legislation. It was the responsibility of the Department of Justice to set up the Special Tribunal and the process of setting it up was at an advanced stage. All logistics were in place and what was left to do was for the regulations to be signed by the Minister and the rules of the Tribunal to be signed by the Tribunal President. SIU had engaged on the draft rules and regulations and expected them to be signed off soon. The Minister answered this question in Parliament. There are cases to the value of R14.7 billion which had to be recovered which included SABC and other cases on the SIU books. The Special Tribunal would speed up the recovery of monies due to the SABC.

Adv Mothibi addressed the insolvency of a defendant. As this was a legal process, the SIU always had to weigh up the costs of litigation as a defendant could be declared insolvent. They always tried to avoid situations where a court made an order but the defendant was unable to pay due to insolvency. When a person is declared insolvent, SIU needs to satisfy itself that the defendant is unable to pay back any money.

A SIU representative explained that the SIU was never surprised by liquidation applications because investigations were geared towards recovering from the company as well as the directors behind the company through a process referred to as piercing the corporate veil to get to the perpetrators behind the company. That was a two-legged approach which involved liquidation compelled by the Insolvency Act to first recover the contractual value from the company. If that was unsuccessful, then the second leg was invoked which involved directly suing the individuals behind the company.

Adv Mothibi said ultimately SIU would satisfy itself that there was absolutely no money to be recovered from a person or a juristic person.

The security tender investigation had been finalized and submitted to the President and the outcomes were being pursued. Referral included civil litigation, criminal proceedings and disciplinary processes. As explained before, SIU had joined the civil litigation with the purpose of setting aside the contracts. The second leg would be invoked which asked what SABC needed to recover. That involved an enquiry as to who the accounting authority was. What was their responsibility? That was the governance aspect and thereafter due process would be followed. SIU was waiting for a court date to begin proceedings.

On irregular appointments, he stated in Mr Hlaudi Motsoeneng’s case it had been found that irregular appointments and salary increases had taken place and these were part of the recovery that had been instituted against him.

Replying to Ms van Damme, he said that an overview of the SABC staff structure was not within the SIU scope. They expected that the SABC would include that as part of their review of the Corporation. That was out of SIU's scope of investigations. It could be appropriately responded to by the Accounting Authority. Bloated staff related to governance failure. The SIU focused on the governance processes which indicated governance failure to make appropriate findings and recommendations.

He replied that focus will be placed on whether there was any wrongdoing on the part of Multichoice and the Board. Any irregularities found would be linked to the specific Board that was in place at the time and appropriate findings would be made.

Adv Mothibi explained that TNA was declared insolvent and purchased by Mr Manyi and that when a person takes over a company that involved taking on all assets and liabilities. The SIU would take this into account. Where the investigation revealed that monies had been taken out of the country to avoid repayment then the legal instrument called Mutual Legal Assistance would be invoked. Where the evidence revealed that monies had been moved outside of the country to avoid payment then the Mutual Legal Assistance agreement would be invoked with the country the monies had been moved to in an effort to recover the looted money.

Adv Mothibi indicated that the current SABC Board was willing to ensure that matters referred to it by SIU would be attended to.

Adv Mothibi noted that there were four names of people whose contracts had expired. As per the Labour Relations Act when a person resigned disciplinary action could not be taken against them because the termination of the employment relationship from which the disciplinary would have stemmed. However, those individuals would still be subject to civil and criminal litigation. There were four executives against whom civil litigation had been instituted.

Adv Mothibi explained about the scope of a Proclamation. Once it was signed by the President its schedule was the scope of the investigation. The SIU cannot exceed its scope according to legislation. If new allegations surface during investigations that do not fall within the scope of the Proclamation, draft amendments would be sent to the President to sign to broaden the scope of investigation. This would prevent SIU from investigating matters ultra vires.

The directors of companies identified as having been awarded irregular contracts would be sued to recover the unlawfully obtained funds.

On consequence management, he noted the Members point out that costs should be recovered from all implicated individual irrespective of their level of seniority in the companies. That was noted and when prioritising the case with NPA those were some of the factors taken into consideration.

Adv Mothibi referred to the questions about the NPA and commented that SIU had seen a renewed will by the NPA to attend to matters brought to them by SIU. They were in the in the process of drafting a Memorandum of Understanding with the NPA in order to fast track matters placed before them.

He replied about the security tender that was referred to them by either the interim or current Board. Upon investigation it was found that the contract was awarded irregularly. An appropriate finding had to made regardless of who was the Accounting Authority at the time. The overall investigation would be finalised after having looked at phase two and the report would be submitted to the President. He emphasised that the outcomes referred to did not wait until the report was submitted to the President as action needed to be taken immediately. This was clear in the report.

Adv Mothibi explained that the investigations into the TNA breakfast sessions held over the years revealed evidence that sponsorship monies were paid by departments and state owned entities (SOEs). SIU felt that required further investigation and was engaging with the State Capture Commission on this to prevent a duplication of efforts. He emphasized that any wrongdoing discovered would be linked to the specific board in place at the time and those individuals would be held accountable.

The SIU had full control over civil litigation and would ensure that monies lost would be recovered. The NPA as well as the SABC Board had been engaged to ensure that legal and disciplinary actions were instituted and carried out to their logical conclusion.

He declared that the economic factors were taken into account. When civil litigation was instituted the legal advisors first check if anything can be recovered and this was done by looking at assets to determine that information. This exercise took into account using public funds to litigate as well as the public interest in pursuing these matters. That is done to prevent spending more money than what would be recovered.

He referred to a phenomenon in SOEs where guilty parties would resign upon being subjected to disciplinary proceedings and return to the SOE after a number of years. This had been observed and the SOE board was approached and advised not to appoint individuals who had pending matters against them. The Department of Public Service and Administration had been engaged on the matter and as per the Public Service Act, SIU was empowered to ensure that where a person resigned from department A and was employed in department B that proceedings could still be instituted. That has happened in some cases.

The SIU was considering blacklisting individuals however they would have to ensure that action was constitutional. The hope was that a list could be drawn up to reflect wrongdoers.

Adv Mothibi replied that he could not reveal the names of the SABC board members where matters had not yet been made public. Once the matters were in court they could make the names public.

He confirmed that they expected the implicated parties to pay back the money according to a just and equitable order handed down by the court.

The Chairperson asked what principle was used to determine whether or not to attach a pension fund.

Mr Mackenzie said that when it came to SABC officials their information was in the public domain. That could also be said for some of the companies listed in the report. However it could not be said for the owners of those companies. He suggested that in future the names of the owners of the companies be listed as well. He praised SIU for the good work they were doing.

Adv Mothibi explained that the process of attaching a pension had been done only in one instance. It was akin to the process the Asset Forfeiture Unit (AFU) uses. If the SIU was aware of wrongdoing by an individual and civil litigation was instituted, the pension was attached to ensure that assets or monies were preserved. Part of the engagement with NPA include seeing the AFU institute similar actions. The attaching of pensions prevents SIU from pursuing cases that are not economically viable. This was done through a legal process similar to the AFU mechanism.

Adv Mothibi appreciated the encouraging comments and said he took into account the point about holding the directors behind the implicated companies accountable.

The Chairperson said that the SABC Board Chair was present and hoped he had been taking note. He thanked SIU for the presentation.

Independent Communications Authority of South Africa (ICASA) Quarter 1 Performance
Dr Keabetswe Modimoeng, Acting ICASA chairperson, said that there was a pressing need to review ICASA’s funding model which was evidenced by and led to multiple causal effects. It had to operate in an increasingly challenging and highly litigious environment. There were financial constraints due to budget cut which led to the following results:
• Inability to appoint expert consultants to executive projects (Engineering & Technology)
• Deferment of the procurement of necessary equipment and tools (outdated equipment & tools used )
• Organisational moratorium on recruitment for non-critical positions (no full staff complement)
• The high risk of projects not being successfully and timeously executed (stretched staff resources)
• High likelihood of not meeting targets and successfully implementing APP.

The Quarter 1 performance targets were discussed in detail (see document). Mitigation strategies were outlined: There has been the implementation of a mid-quarter performance report to Council to ensure adequate tracking of quarterly activities. The mid-term quarterly report serves as an internal early warning system and gives an update on timely completion of key activities to achieve APP quarterly targets.


The Quarter 2 mid-quarter report has been produced to enable Council to take appropriate measures to drive performance: 31 of the 33 key activities (including outstanding Q1 activities) were successfully completed half-way into Quarter 2 (as at 15 August 2019). Overall Q2 activities completion rate is at 93.9%
The two key activities which were not completed are:
• Completion of the process for the licensing of the Individual Electronic Communications Network Services (I-ECNS) for the wholesale open access network (WOAN): the Policy Directive, which is a pre-requisite for the drafting of the Invitation to Apply for an I-ECNS licence - was only issued on 26 July 2019. All activities to issue an ITA are being prioritised including preparation of a draft notice)
• Review of the Must Carry Regulations: Research on the drafting of the discussion document has been completed. Establishment of a Council Committee is in progress and the discussion document will be completed in the second half of Quarter 2.
With a 93.9% Quarter 2 mid-quarter success rate, all programmes are expected to achieve Q2 targets.

Mr Tebogo Matabane, ICASA CFO, went through the financials in the report. The Authority’s revenue as at 30 June 2019 was R105 153 580. Actual revenue for the quarter exceeded estimate by R9 396 986 (9.8%)

Underspending and savings were identified in these budget items: international travel, conferences and meetings, vacant positions were filled only where critical in line with the moratorium.

Overspending was identified on following budget items: Litigation and legal fees - there was a significant increase on legal expenditure mainly due to invoices accrued at year end and paid during Q1.

The Authority is experiencing severe financial constraints. There are ongoing engagements with DTPS/DOC as well as National Treasury on this to ensure that adequate funding is appropriated for the execution of critical projects which are of paramount national importance:
1. Licensing of High Demand Spectrum.
2. Licensing of an Individual Electronic Communications Network Service Licence for the provision of wholesale electronic communications network services (WOAN).
3. Completion of the Data Services Market Review (a critical project to address high cost to communicate, particularly data services).
4. Completion of the Radio Frequency Migration Plan 2019, IMT Roadmap 2019 and Radio Frequency Assignment Plans.

To mitigate the risk of not achieving projects as indicated, ICASA is engaging National Treasury and the Departments to obtain an additional R 24.1 million in the 2020/21 budget allocation allocated as follows:
• R10.7m is required for completion of the licensing process for high demand spectrum (HDS)
• R7m is required to complete the licensing process for the WOAN
• R3.4m for implementation of Radio Frequency Migration Plan 2019, International Mobile Telecommunications (IMT) Roadmap 2019 and Radio Frequency Assignment Plans
• R3m is required for successful completion of the Data Services Market Review.

Legislative Framework for performance agreement:
• Section 6A of the ICASA Act states that the Minister must, in consultation with the National Assembly establish a performance management system to monitor and evaluate the performance of the ICASA chairperson, councillors and the Council, individually and collectively
• Section 2 of the Act states that the performance management system must:
- Set appropriate key performance indicators as a yardstick for measuring performance
- Set measurable performance targets
- Set a procedure and review performance at least once a year
- Be reviewed at least once a year
• Section 3 the Act states that as soon as it is practicable after the appointment of the chairperson or any other councillor, a performance agreement must be concluded between the chairperson, other councillor, the Council, and the Minister.

Discussion
Ms Faku pointed to the performance agreement between ICASA councillors and the Ministry of Communications. She asked if it was ICASA’s position that the previous and current Minister had not given them a performance agreement. She asked the Minister to clarify this.

She was not happy with the money spent on litigation. She asked the reasons for the litigation.

She asked why ICASA said it did not have enough staff and yet they reduced the number of staff members. She noted that a lot of money was spent on human capital. She was confused as to why if there was a reduction of staff members when lots of money had been spent on human capital.

Ms Xego highlighted Dr Modimoeng's opening remarks about not bringing his female colleges to the briefing.

She said that when targets were not SMART there would always be a reason not to perform. Therefore the planning needed to be realistic and achievable. She referred to the issue raised that ICASA had no performance management system which left them unable to gauge performance progress or lack thereof. She understood that to mean that no performance contract had been signed nor where performance bonuses paid out. In her experience as a Committee Member, if the Committee did not exercise its oversight role then they would be implicated in Commissions of Inquiry as captured Members. Therefore she advised the Minister and Department to implement a performance management system. The Minister together with the National Assembly were mentioned in the ICASA legislative framework and that meant that all parties ought to play their roles. The system to measure performance must be put in place.

Ms Majozi found it problematic that the ICASA delegation consisted of three men lacking any female representation. It was unacceptable that ICASA was not observing gender equality regulations.

As she understood it, KPIs were aligned according to the budget but it seemed the KPIs exceeded the allocated budget making them over-ambitious. That was not a smart strategy. She asked how ICASA could take a decision not to execute a project because it was under-funded. There ought to be a better explanation why a KPI was unachieved as the budget was aligned with the KPIs.

She agreed with Members about costly litigation which she felt was a serious problem that needed to be speedily attended to. She advised that ICASA minimize litigation and strictly observe procedural protocol as a way of avoiding litigation that affected the budget.

She was impressed that ICASA took the initiative to minimize costs by limiting their travels and meetings outside the province. That displayed good leadership.

She was deeply concerned about the financial risk for the licensing of high demand spectrum. That communicated that the goals were completely unattainable and a thorough explanation was required detailing where the Committee could be of assistance to actually achieve the goals.

Lastly, on the ICASA performance agreements, if that was raised with the previous Minister in the Fifth Parliament, the current Minister could not be expected to answer for a problem that preceded
her in the Fifth Parliament. She asked for the report detailing that first.

The Chairperson reminded everyone that the presentation was clear that the performance agreement problem emanated from the Fifth Parliament and was not a problem caused in the Sixth Parliament.

Mr Mackenzie said the Committee was to blame for the lack of gender representation as the Committee recommended the appointment of ICASA senior leadership. He appreciated the delegation size was small.

On the funding constraints, the burning question was when they would begin auctioning the spectrum. Since they had a lot of leeway in which to work within that directive then the allocation would not stop the releasing of the spectrum generally. He found the comment about the amount of money spent on litigation interesting given the fact that ICASA was embroiled in litigation and he admired their intention to unblock the industry in that way. He assumed they did some homework before announcing the auction and money must have been invested into preparing the auction. That demonstrated that there was an element of work that had already been done on that. He asked how much of that work could be brought across to the process currently unfolding. When would it be completed? If money was a factor how much money was still required?

He felt their target setting needed to be smarter.

He brought to the Minister’s attention the fact that the SABC was not present in the ICASA presentation.

Mr Molala found it difficult to engage with ICASA because – absent the performance agreement – there were no tools to evaluate them. It meant that the Committee had to evaluate ICASA based on what they presented which he felt could be biased information. The money ICASA sought was based on what they deemed they needed which he felt lacked a credible basis.

Focusing on the Quarter 1 report, there was 15.7% expenditure which revealed ICASA had not spent as planned as they were meant to spend 25%. He was perplexed that ICASA sought a bigger budget when they were presently underspending their current budget.

He asked more about the data services market review as the President had already pronounced that the cost of communication needed to be reduced. ICASA’s overall presentation was that they needed more money to achieve their goals but he felt that it was in the general public’s interest that a quick solution was needed on that particular matter. He felt it was immaterial to talk about ‘spectrum’ and ‘communication’ when people did not have access. In his view access was a burning issue. What were the examples from other countries? Had a research unit been established to investigate this? There was a lot of research available worldwide on data costs.

He requested more detail on the commitments mentioned by the CFO. What portion of the 15.7% spent went to commitments? That information was vital for the Committee to exercise their oversight role. His overall impression of the report was ICASA was not financially sustainable. According to the report there was a R45 million rollover and a R15 million accrual and he wanted an explanation why such huge amounts were being rolled over. It made little sense that ICASA sought more money while their rollover amounted to R45 million. He found that worrying as the R45 million could have been utilised for data services market review.

He agreed with the concerns raised on the spectrum.

He said that the main reason presented for the underperformance was being underfunded and he found this reasoning unjustifiable. It reflected that the targets ICASA set did not accord with the budgetary allocation. He emphasised this point and asked for an explanation.

Lastly, he emphasized the concerns about the performance agreements. Although the Committee appointed the ICASA Council, it had to report to the Minister. It needed to be clear who was responsible for monitoring ICASA’s performance. If the Minister was meant to monitor ICASA on behalf of the Committee then that needed to be made clear to avoid further confusion. Did ICASA initiate engagement with the Minister or the Committee to clarify this? ICASA needed to take the initative on instituting their performance monitoring.

Ms Kubeka echoed Mr Mackenzie and Mr Molala’s points on the performance agreements.

On the financial risk, Ms Kubeka asked about the feasibility of the key critical targets listed. Where they just dreams? Did they not have a way of achieving those four key targets? She reiterated the need to reduce litigation to reduce unnecessary expenditure, but she acknowledged the efforts made to cut expenditure. Ultimately, ICASA needed to communicate to the Committee how it could be of assistance as spectrum was a priority for their communities. She could not let down the communities of South Africa.

On the budget, she could not understand how ICASA wanted to overspend when they had a limited budget.

The Chairperson asked ICASA to respond first and for the Minister to address them afterwards.

Response
Dr Modimoeng replied that the ICASA Council was very mindful of the significance of capping their litigation costs. There was an inherent risk in stating that on a public platform accessible to industry. He warned that if ICASA failed to defend its public interest mandate through litigation it may as well close the organisation. The reality was that the environment was a highly litigious one. For example, the previous day they had fined a licensee and had been served with court papers before the end of the day. It was unclear as to the extent the court case would go. ICASA did not have anybody that could litigate on its behalf. If ICASA did not litigate in fulfilment of its public interest mandate then that would be at the expense of the public interest. It was global practice in countries, like the United States of America and the United Kingdom, for regulatory bodies to be embroiled in litigation. That being said, it was highly likely that the spectrum process could be litigated by industry. The same did not apply to a policy directive issued by the Minister as that was not open to litigation. However when ICASA moved to implement the policy, it would be challenged in court. That was the reality of the current environment where industry, consumer and the public knew their rights. Nonetheless, that reality did not demobilise the organisation as decisions could not be made with a fear of possible litigation. That would render the regulatory body ineffective which was not in the public interest. Therefore a failure to award money for litigation capabilities would render ICASA redundant.

On spectrum, ICASA had received a policy directive from the Minister five weeks ago and were busy considering it in three phases. This included a technical analysis, an economic analysis and a legal analysis. They needed to satisfy those three components as subsequent to the issuing of the policy directive, it fell squarely within ICASA’s responsibility. That responsibility needed to be carried out reasonably an in a manner that could be justified to the Minister. That process needed to be thorough otherwise it could form the basis for litigation against ICASA.

On timelines, Dr Modimoeng announced that in the third quarter of 2019/20 an information memorandum would be issued which was a document that gave industry and stakeholders an idea of the envisioned approach ICASA would undertake for the licensing of spectrum. That information memorandum solicits inputs. That was not a requirement of any legislation but being mindful of the highly litigious environment they were in, the ICASA Council opted to go the information memorandum route in the spirit of transparency. Therefore no one would be able to claim ignorance about the outcomes of the licensing process. The information memorandum would contain all the important information.

On the reduction of ICASA employees, he explained that the bulk of their monies went to paying staff members. The organisation relied heavily on the intellectual capital of their employees and the trend over the years was that ICASA was a training ground for industry. Employees would often get poached by industry after receiving training in the organisation and that would happen because ICASA was unable to keep up with competitive offers. Budget constraints restricted employees’ ability to fulfil their potential and career development. Thus staff reduction was unavoidable.

On the performance management system, he replied that it was clear in the Act how it ought to be developed. Multiple letters had been written to previous Ministers as well as Minister Ndabeni-Abrahams. No response had been received. He made it clear that even if ICASA had acted delinquently over the past three or four years they would never be held accountable, absent a performance management system. He felt glad that despite the lack of performance management ICASA had grown from 29% to above 90% annual performance target achievement. That demonstrated the work ethic and the determination of ICASA Council members in serving the people of South Africa.

Mr Willington Ngwepe, ICASA CEO, further emphasized that the lack of performance management negatively impacted Council. There was an approved performance management policy implemented from the CEO downwards to monitor the performance of all executives and employees and this policy informed the payment of bonuses to staff members.

Commenting on the smartness of the targets, he took the point and explained that they had been working with a five-year strategic plan and were in the final year of that plan. The Auditor General had flagged a number of areas related to the smartness of their targets. Over the years they had improved but they could not drop targets halfway through the five-year strategic plan. When they came up with the new five-year strategic plan, the targets would be SMART.

On the data services market enquiry he said that ICASA presented research they had conducted which was benchmarking between South Africa and other countries. Before they could compel operators to drop data prices, they had to conduct a market review that detailed the cost structures of what was currently being charged. They could not do exactly what was being done in other countries as the circumstances and factors were different. The market review analysis detailed the process of obtaining the costing information from operators and that had been completed. In the next quarter a discussion document outlining the next step would be issued and ultimately they would end with a price regulation as was done with voice. They were working with the Competition Commission which was finalizing its report on the data services market inquiry.

On Mr Mackenzie's question about work done on the spectrum in 2016, he explained that the work was being used as a base for the information memorandum. They had to revisit that work in light of the policy directive issued by the Minister.

Mr Matabane, CFO, provided background to help Members understand what had transpired over the years. The R300 million ICASA had closed its books with had included an amount of R124 million that was retracted by National Treasury. When it was explained that the money was needed, Treasury further subtracted the interest gained on that amount. After returning the R124 million to Treasury, it caused big problems with achieving the targets. Pointing to the spectrum, he explained that they had an initial amount of R36 million earmarked in 2016 for the project but after Treasury retracted a portion of the allocated budget they could not complete the target. Included in the amount Treasury took away was R8 million that would have been used to implement phase one of the spectrum target. They did not have the retention of funds document that they needed to submit to Treasury for the spectrum project. That amount included the money set aside for the office relocation. The R45 million mentioned by Members was not committed in that financial year and in the process of finalising their office relocation Treasury retracted the funds because a lease agreement had not been signed. Despite promises that there would be no budget cuts in that year, Mr Matabane was surprised to receive a letter in December informing him of an additional budget cut of R52 million over and above the R124 million that had already been taken. That meant they could not carry out the organisational plans. That led to a re-prioritising of projects.

In the following financial year ICASA received further budget cuts despite having entered and signed contracts which then had to be financed from their own allocation. R10.2 million had to be returned to National Treasury by the end of November. That meant that when the books were closed those contracts had to be prioritized over upcoming projects from the following financial year. When the books were closed,  only R45 million out of the R90 million had been requested. This linked to the KPIs that were not aligned to the budget and he was glad that was raised. The following day he was having a workshop with National Treasury where that issue would be raised. He agreed that it did not make sense to start the budgeting process before the APP and Strategic Plan process. Treasury was faced with financial constraints and often reduced ICASA funding. That being said they had a draft on ways of reducing the critical targets of the APPs. They would use the fourth quarter to begin aligning their budget to KPAs they intended to execute in the following financial year. That allowed them to complete a cost benefit analysis where an amount budgeted was sufficient to cover their KPAs.

Minister's remarks
Minister Stella Ndabeni-Abrahams stated for the record that the Department had not seen ICASA’s presentation as it was sent straight to Parliament. She believed this was done because ICASA said they accounted to Parliament despite the fact that they had many issues such a need for extra funding that the Department could assist with. Perhaps they did not want the Department to see how much they had spent and how far they had gone. She felt that must have been the reason ICASA had not shown the Department its Quarterly Report after receiving their budget allocation. That put the Department in a difficult position as they had to report to Treasury that ICASA spent the money accordingly but that was not possible as the Department had not been updated by ICASA on how the funds had been spent. That was the present reality.

She stated that the Committee as the appointing authority and oversight body needed to question the independence given to entities established by Parliament through the recommendations of government and evaluate if they met the priorities of the country. Independent entities established by government and Parliament through law did not exempt those bodies from the normal accountability processes. She felt it important to raise the issue because in the previous two weeks ICASA had requested additional funding for spectrum yet the Department was yet had not received any information on how that would be carried out and were hearing the detailed Quarterly Report for the first time with Members.

She was adamant that the Department would not be funding ICASA when they had received no communication from them. She explained that the Department was accountable to Treasury to justify what they did with the money they received. Thus, they could not give ICASA funds without being told what those funds would be used for. ICASA needed to timeously inform the Department when they needed money and in addition to that ICASA had to provide detailed reports on what the money would be used for.

Secondly, she was in agreement with the Acting Chair that the performance management system was required by law. She cited section 6(a) of the ICASA Act. The Minister took over in November and in February ICASA sent a letter to the Minister requesting salary increases. The Minister highlighted in her response that she needed to see the performance agreement first. She received a report from the staff saying that there was no performance agreement. There was a framework established in 2014 but as the Acting Chair correctly put it, the performance agreements were based on government priorities, the MTSF and APP. Therefore in her view it was not difficult to comply with the law while waiting for the new Minister to set the new MTSF framework. Despite the fact that the new Minister had a lot of things to catch up on she still took initiative. That was evident in the fact that shareholder met with the entities and there was a review of the process for reconfiguration so that by the time they sign they need to be certain as to what would be expected. This was a standard process all the key players were aware of.

On the litigation costs, she agreed with the Acting Chair that it was a highly litigious environment which required a strict observance of process and the law. However she emphasized the importance of communication between ICASA and the Department because it is detrimental to the public interest to litigate and to lose all or the majority of the cases. That simply demonstrated an error in how procedures were carried out which could compromise the mandate to protect the public interest. She detailed a case that ICASA had litigated when Minister Ndabeni Abrahams was still deputy to Minister Carrim and ICASA was advised to follow due process and ICASA Council was told to apply their minds to ensure they did not lose the case but unfortunately they lost the case. As the new administration, those were some of the things – including consequence management – that needed to be addressed. If ICASA did something against a policy directive that resulted in litigation then the rationale of ICASA needs to be questioned and examined. Whenever a decision to litigate arises, it should be thoroughly considered because that was taxpayer money. They delayed on the allocation of spectrum because they were continually litigated against due to missing the basic processes that ought to have been followed. She felt that after 25 years, past mistakes should have been improved upon.

Spectrum had last been issued in 1993. The new spectrum needed to align with government priorities which were set by the Minister with a Cabinet that Parliament approved. Therefore it seemed ICASA did not recognize the importance of engaging with the Minister. The engagement needed to be thorough and meaningful which went beyond the letters sent requesting salary increases. When ICASA asked to meet with the Minister they were informed to send a draft as ICASA knew it was based on the APP which was still being finalized yet they still took the Minister to court over the matter. Those were the things that tainted the image of government and gave parastatals a bad name. The failure to engage constructively irrespective of who was in office undermined the public interest ICASA was mandate to protect. The Minister requested that the Committee find ways of ensuring that the Department and ICASA worked together productively.

She was concerned about the costs paid towards employees. During her last appearance before the Committee she mentioned the reconfiguration of the portfolio to respond to the Fourth Industrial Revolution and the need to build a capable state. That spoke to the kind of regulator that was required to be responsive in this space. There were government resolutions and frameworks that were being worked on. Therefore there will be proposed changes that Parliament would have to approve.

She questioned if it was necessary to have nine full time Councillors at ICASA as that was an added budgetary requirement on an already strained budget. Such matters needed to be interrogated when using the public purse as every cent needed to be spent effectively. The 75% mentioned was frightening and pointed to the fact that something needed to be done without compromising the quality of the work. Government priorities could be achieved by 20 people in an effective manner. These facts needed to be borne in mind when it came to the appointment of the new Councillors. The entire ecosystem needed to be analysed.

The Chairperson said that the replies would be given at a later date as there was a plenary sitting in the National Assembly at 2pm. He agreed that the submission was important so it would be best to set a meeting date so that Members could thoroughly engage with ICASA’s responses to the Minister's remarks.

The Chairperson wanted to be clear that the Committee did not say that ICASA should not do anything. He was satisfied that the gaps had been identified – part of which was the relationship between ICASA, the Department and Parliament, and that could now be addressed.

It was clear that all avenues should be exhausted before resorting to litigation to reduce costs. The Committee was clear that the spectrum release was an urgent matter. This was a priority in the Sixth Term. The sooner the matters causing the delay were addressed, the better.

Ms Kubeka said a further meeting with ICASA was required as she was extremely concerned about the relationship between ICASA, the Department and Parliament. She wanted to go in depth about litigation, performance agreements and the spectrum. She said a bad precedent would be set if the Committee accepted ICASA’s quarterly report when ICASA had not consulted with the Minister.

The Chairperson was happy that the discussion had taken place. Key challenges had been identified which would be addressed in another meeting.

The Chairperson said resolutions had been made and they needed to be in an action form from which progress reports would be made.

The minutes of the 21, 22, 23 August meetings were adopted.

The meeting was adjourned.

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