GCIS, Sentech, SA Post Office 1st Quarterly Reports 2011

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Communications and Digital Technologies

29 August 2011
Chairperson: Mr S Kholwane (ANC)
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Meeting Summary

Mr Jimmy Manyi, CEO of the Government Communication and Information System, reported that for the 1st Quarter, he was happy with the overall performance in the Administration programme, 88% percent of performance agreements had been signed, short of the 100% target, but on the whole targets were met. In the area of Communication and Content Management a delay in Cabinet approval for the National Communication Strategy had caused setbacks for targets for the printing and distribution of Vukuzenzele. Staff vacancies and leave were cited as reasons for variances on targets for Government and Stakeholder engagement. 24% of the targetted 25% of annual budget had been spent during the quarter.

The Committee complained that GCIS had not provided a detailed breakdown of its financial statements. Members asked for clarity on progress with its credit-bearing qualification course for government communicators and questioned delays in the printing of various editions of Vukuzenzele. Questions were asked about the environment, specific costs and the use of media footage. Members requested clarity on how the efficacy of work was tracked and if citizen satisfaction was monitored, and what was the nature of ‘communication interventions’. The Chairperson suggested that for the next quarter the Committee needed more information on the imbizos (public participation programme) and suggested that a breakdown of what particular ministers had been involved with would be useful. He highlighted the issue of community radio stations and ministerial availability as a particular priority to be revisited in the next quarter.

Sentech reported that due to the discontinuation of previously loss-making products, the company had seen an increase of 142% in operating profits since the previous year. Much work had been done to stabilise the internal structure of the organisation, and with the appointment of certain key senior management staff, its corporate plan was on track. The roll out of network infrastructure for migration to Digital Terrestrial Television was on target. The target for the year was 74% population coverage; this was still the target, though it was acknowledged that it might not be met (although more than 60% coverage would certainly be achieved). Targets for the National Wireless Broadband had been met, with extensive work done across Kwazulu-Natal. The Broadcast Network Coverage Master Plan had been extensively reviewed with particular focus to issues of community broadcasters and their connection tariff debt. Connection tariff fees were under review.

Members congratulated Sentech on its improvement and the level of work achieved. Questions were asked around Sentech’s role in job creation, human resources, legal issues, the tariff adjustments and the use of satellite technology.

The operating performance of the South African Post Office had seen a serious decline. The Logistics business had a net loss of R12.5 million, but the group as whole had made a profit of R42.5 million for the quarter. Rising expenses, particularly for staff and transport were particular challenges. Debt collection had been an area of focus over the quarter and R81 million had been recouped.

The planned target for the Address Expansion Project was only 56.6 % complete for this quarter; however the organisation was still committed to the annual target for the year. An average waiting time of seven minutes had been achieved in 96% of branches throughout the country. Several new stamp collections had been launched during the quarter. Targets for the new postal code system had been achieved. Postbank had made progress in the steps to applying for a banking licence with all preliminary steps were hopefully to be completed by October 2011. R6.8 million had been spent on training, with a particular focus on women and on management and leadership.

Members asked if surveys were conducted to establish customer satisfaction and asked for information on job creation and community engagement. The issue of adaptation in the face of declining mail volumes was raised as well as concerns about the disused Public Information Terminal system. Figures on the Address Expansion Programme were requested.

Meeting report

Government Communication and Information System (GCIS) First Quarterly Report
Mr Jimmy Manyi, CEO, explained that as far as possible the presentation was constructed in accordance with the SMART principles, but as the approach was new to government, he was not yet well practiced with it.

The first programme presented was Administration. The CEO was happy with the overall results. 88% of performance agreements had been signed by staff against a target of 100%. Since this report was written, this target had been achieved. 94.2% of the posts within the organisation were filled, above the stated target of 90%. All quarterly reports were submitted on time and they were ahead of target for processing 85% of payments and orders within 48 hours.

The objective of the Communication and Content Management programme was to provide
strategic leadership in government communication. As targeted, post Cabinet meeting media briefings had been held every week. Cabinet approval of the National Communication Strategy had been slightly delayed but was given in June 2011. As a result of this delay only 1.7 million copies of Vukuzenzela (April edition) had been printed against a target of 5.1 million copies. These were distributed in June. For the same reason no Braille copies had been printed or distributed. The timetable was now back on track. The target of printing and distributing 45 000 copies of the South African Yearbook had been achieved and progress was underway for updated chapters for the following year. 27 photographic shoots and 28 video shoots were conducted for the Presidency and photographs of all shoots were sent to the print media.

In the area of Government and Stakeholder engagement, 784 of a targeted 810 provincial communication projects had been implemented. Disruptions due to local elections were sited as a reason for this variance. Due to staff vacancies and leave only about 70% of targets for communication interventions and distribution reports were met, including a Local Environmental Assessment Report (LEAR). This would be better organized in future.


All was considered on track in the implementation of the marketing and communication strategy. Delays had been experienced in the opening of two Thusong Centres due to delays in construction.

In closing, the CEO touched on the adequate induction and training of all communicators and co-ordination across departments as being areas that required particular focus in future.

Discussion
The Chairperson thanked GCIS and asked for further information on its financial records.

Mr Manyi responded that he had not brought the precise figures, but that GCIS had used 24% of the 25% budget allocated for the first quarter, and were therefore on track with their spending.

The Chairperson commented that without clear figures on spending in specific programmes, the Committee was unable to assess if funds were being spent as they should.
 
Ms T Ndabeni (ANC) commented that in a number of instances Mr Manyi had presented targets not achieved when the First Quarterly Report was written, but that progress had since been achieved. This presentation should refer only to what was done in the first quarter. Any subsequent progress should only be mentioned in the second quarter. She questioned the suggestion that the SMART concept was new in government, suggesting that GCIS skills were not up to date.

Ms T Ndabeni (ANC) asked for clarity how far progress was for the planned target to develop and implement a credit-bearing qualification for government communicators. The qualification had not yet been developed and implemented, but no percentage on progress had been given.

Mr Vusi Mona, GCIS Deputy CEO: Communication and Content Management, answered that the target for the first quarter, as set out in the Annual Performance Plan, had been to advertise for training specialists. These would be appointed in the second quarter and third quarter would be spent consulting with universities to develop a curriculum. A draft training curriculum would be developed in the fourth quarter.

Ms Ndabeni commented that it was important that what was written in the presentation represented the planned targets for the quarter.

Mr Mona agreed that this was misleading, but that the planned target had been achieved.

Ms Ndabeni asked if the information in the April edition of Vukuzenzele currently being printed in Braille, was still of any relevance to readers now?

 Ms A Muthambi (ANC) asked why the Braille edition of the newspaper was so much further delayed than the print edition, given that the reason for variance was the same for both.

Mr Mona responded that the document was not accurate and that 405 copies of the April edition had been distributed. 1 200 copies would have been distributed had GCIS been able to print an edition every month as had been planned.

Ms Newhoudt-Druchen asked that the names of staff and presenters be included in the presentation in future. And for clarity on the term ‘tabloid’ which she understood to be a gossip column.

Mr Mona clarified that the term ‘tabloid’ referred to the size of the newspaper and not the content.

Ms Newhoudt-Druchen asked how municipalities benefited from the
Local Government Turn Around Strategy (LGTAS) mentioned in the presentation.

The response was that LGTAS covered issues of financial management, Human Resource management, Audit Reports, and, critically, effective communications. In some instances protests and public frustration arose because the public were not aware of what municipalities and local governments were in fact planning and delivering because this had not been communicated

Mr N Van Den Berg (DA) commented that it was important to consider whether work done and achieved was effective. He asked if GCIS had a programme to assess how effectively government information was being communicated and whether the effectiveness of training courses had been evaluated.

Mr Manyi responded that both qualitative and quantitative surveys were conducted to check on the efficacy of government communications.

Mr Mona added that citizen satisfaction was tracked through a research unit. A 365 day tracking study monitored citizen perception of government on issues such as service delivery. These reports were made available to Cabinet and to communicators and should in future be given to the Committee.

A GCIS representative woman added that there had been a focus on ensuring that training addressed the real skill-gaps of officials. A skills audit of all staff members had been conducted and in that way aligned all training with the specific needs of individual staff members. A competency test currently being conducted for all senior managers would also be used to ensure that training was correctly targeted.

Mr van den Berg asked for figures on the cost of the South African Yearbook, which was clearly a quality document.

Mr Mona answered that the South African Yearbook cost about R5 million to produce. Though this sounded like a large figure, information was expensive to both generate and distribute. The book had been distributed to embassies and missions around the world.

Mr van den Berg asked for clarity on what the community interventions entailed.

Ms Nebo Legoabe, GCIS Deputy CEO: Government and Stakeholder Engagement, responded that community interventions covered workshops, seminars, radio talk shows and door-to-doors that took place in various communities. The content of these interventions was informed by feedback gained from LEAR reports and other surveys on what people were interested in learning about. How to start a business or a community garden were examples of topics covered.

A question was asked about what the photographic and video footage taken was used for, given that it must have been an expensive exercise. Was it used by media?

Mr Manyi answered that the footage was widely used by media, particularly by those without funds for photographers.

Ms R Morutoa (ANC) commented that while the large volumes of the South African Yearbook had been expensive, information was essential about economic development and the content looked valuable. She asked what the strategy at GCIS was for making ministers more available to the media and supplying speedy and accurate responses to questions asked of them.

Mr Mona agreed that this was an important issue and answered that community radio stations were used in particular for this purpose. A weekly programme was in development which would see ministers brought in for interviews at the GCIS studios. These could then be distributed to community radio stations. GCIS did its best, through the Public Participation programme to make ministers available. Every minister must participate in at least ten public participation events annually. This was an issue the President took particularly seriously.

Ms Morutoa asked what the new strategy was to reach the community now that imbizos were no longer held.

Ms Legoabe responded that imbizo and public participation were interchangeable terms. Imbizos had not been eliminated.

Ms Newhoudt-Druchen asked what GCIS was doing to keep the environment clean, given that the use of paper and printing had a significant effect. How did GCIS encourage and ensure other departments use other forms of technology for communication?

Mr Manyi responded that GCIS communicated the work and input of the Department of Environmental Affairs and was not responsible for changing the approach of other departments. Where possible, print media was avoided with internet, radio and other avenues utilised. GCIS would move into a new building next year that was built using up-to-date environmentally friendly technology.

The Chairperson asked if the budget information had been obtained yet.

Mr Manyi responded that it had been obtained, but that it was not in a format the Committee could easily understand.

The Chairperson asked that this be reformatted and resubmitted.
 
Mr Manyi undertook to submit the budget by the end of the day.

The Chairperson suggested that for the next quarter the Committee needed more information on the imbizos and suggested that a breakdown of what particular ministers had been involved with would be useful. He highlighted the issue of community radio stations and ministerial availability as a particular priority to be revisited in the next quarter.

Mr Manyi thanked the Committee for their input.

Sentech 1st Quarterly Report: briefing
Dr Setumo Mohapi, Chief Executive Officer (CEO) at Sentech, began the presentation with a performance overview of the first quarter. Revenue had increased by 4.6% from the previous quarter and had increased by 6.3% from the same quarter in the previous financial year. Operating costs decreased by 18.5 % and operating profits increased by 142% from the previous financial year, from R28 million to R67 million, this was due to the discontinuation of previously loss-making products
.
Dr Mohapi presented a number of tables detailing the Key Performance Indicators (KPIs), detailing the targets and achievements for the quarter. Major objectives had been to achieve financial stability, improve customer satisfaction and retention, improve service uptime for all products, improve network roll-out, restructuring in line with service delivery, enhancing the skills base and the achievement of an effective partnership with key internal stakeholders. All targets had been met with only minor variances. The problematic human resources legacy of Sentech and certain ongoing legal issues were alluded to and the need for further improved controls and information systems addressed. These were being addressed by specific committees.

He then gave an organizational update. Governance was addressed with the board giving particular consideration to oversight and monitoring, and an internal audit. Focus was also put on headhunting for vacant positions. Overall the board and committees were stable. The executive committee doing particularly well with a new Chief Financial Officer, Mr Protas Pili, appointed on 16 August 2011, interviews had been conducted for the Chief Operational Officer and a candidate had been recommended to the board. The company was back on track with its corporate plan.

The first Strategic Project Update was given on Digital Terrestrial Television (DTT). For this project Sentech was responsible for providing the network infrastructure to enable broadcasters to migrate from analogue to digital television. The target for the year was 74% population coverage; this was still the target, though it was acknowledged that it might not be met. More than 60% coverage would certainly be achieved. Maps and tables were given to illustrate the sites to be covered in the rollout of 74% coverage (see slides). The eventual target would 100% using both DTT and satellite.

The second project update was on the National Wireless Broadband Network (NWBN). The primary focus was on offering access network services to schools, clinics and government entities in under-serviced areas. KwaZulu-Natal (KZN) had been identified by all stakeholders as a benchmark region for rollout in 5 000 schools. This would be done in partnership with the Department of Communications and other partners. Physical surveys had been completed for two districts providing coverage to 594 schools, 93 clinics, 18 post offices and 12 police stations. Surveys in other districts would continue over the following quarters. Though not presented on, details of the project funding were also given in the slides.

The Broadcast Network Coverage Master Plan was reviewed in the context of DTT. The plan for radio coverage had been reviewed in detail. Radio would be on DTT. The entire broadcast space, including public service radio, had been reviewed, noting that a lot of work had to be done in frequency planning. In partnership with ICASA, Radio Frequency Spectrum plans were reviewed for both television and radio, particularly public service radio. There could be challenges for public service radio which was regionalised, but it should be possible to make access universal. Dealing with community broadcasters had been a challenge. Ways of making content more easily distributed had been considered as well as funding and sponsorship to support these broadcasters. The process of reviewing tariffs had been started. Currently community broadcasters pay an average tariff of R10 000 to Sentech. Of the sponsored broadcasters, 27 were currently in debt to Sentech to the amount of R1.6 million. However there was funding available to provide relief to those in debt.
 
Discussion
Mr C Kekane (ANC) thanked Sentech, commenting that it was clear that issues were being taken seriously and that they were doing a good job.

Ms S Tsebe (ANC) complimented Sentech on the presentation. She asked if the Northern Cape, which thus far had only one percent coverage would have better coverage once over 60% national coverage was achieved by the end of the financial year. She asked if maps similar to that given for KZN could in future be given for the other eight provinces. When would these provinces be focused on?

Dr Mohapi answered that the Northern Cape would be covered within the next 18 months. Information on coverage could be found on the maps and tables between pages 26 to 38 (see presentation slides) and the intention was to keep all provinces balanced.

Ms Tsebe asked what Sentech was doing to contribute to job creation.

Dr Mohapi answered that job creation data would be compiled in the Second Quarter Report.

Ms Newhoudt-Druchen asked if Sentech was still working on a sustainable model for community broadcasting and whether fees for these broadcasters would increase once full digitalisation had been implemented. She asked for a simple explanation of the diagram presented on page 36 of the slides.

Dr Mohapi responded that the diagram illustrated two different methods for coverage, the second method being the more cost effective.

Ms Newhoudt-Druchen asked for clarity about the legal matters alluded to in the presentation and asked for a breakdown of these.

Mr Logan Naidoo, Sentech Board Chairperson, answered that there were three major legal issues. The first, referred to as the RentWorks matter, was a legacy issue. The matter was still sub judice and therefore more information could not be provided. The second related to an unnecessary order placed for decoders in June 2010. This led to the dismissal of the CFO and COO. The matter was still being litigated on. A matter regarding the former Chief Financial Officer was still being dealt with in the Labour Court.
 
Ms Newhoudt-Druchen asked if Sentech had a role in producing the set top boxes for DVB-T2 and how they were helping inform communities about these as there was a lack of information about them.

Dr Mohapi answered that Sentech was not involved in the manufacturing. As a technology partner in the system, Sentech did provide specifications. But the manufacturing was handled outside of the Department.

Mr van den Berg congratulated Sentech on their ‘monumental improvement’ and the considerable work that had been done. He commented that there appeared to be a new spirit in the organisation; in the financials and motivation of the personnel. He asked for more information about the sites that were listed as ‘ready for service’. Did this mean they were ready and waiting to switch on?

Dr Mohapi answered that 71 sites were currently ready for transmission.

Mr van den Berg asked if once the figure of 74% of population coverage had been achieved using DTT, the other 26% would have to wait for satellite coverage.

The CEO answered that in order to eventually achieve 100% coverage; satellite technology might have to be used in certain parts of the country.

Mr van den Berg also asked for clarity about Sentech’s involvement with other State-owned Entities (SoEs) such as ICASA.

Mr Kekane asked what was delaying the adjustment of connection tariffs. Was it a fear of reducing revenue?

Dr Mohapi responded that Sentech understood the costs facing community broadcasters. The total amount owed to Sentech was R1.6 million. There was a relief fund available from the DoC that amounted to approximately R13 million. This could be used to wipe out the debt and provide ongoing support to community broadcasters. He assured the Committee that tariffs would be reviewed.

The Chairperson asked if, in future, detailed maps could be given illustrating coverage across the entire country and giving figures on the cost to the country.

Dr Mohapi answered that this could be done.

Mr Naidoo added in conclusion that Sentech would like to explore the possibility presenting a socio-economic interpretation of the financials. One needed a sustainability report on the socio-economic impact. This would cover aspects such as job creation, ‘e’ skills transfer, clinics being connected and how this impacted communities.

The Chairperson thanked Sentech for their presentation.

South African Post Office 1st Quarterly Report: briefing
Mr Nick Buick, Chief Financial Officer at SAPO, presented the financial statements for the first quarter. There had been an operating loss of R316 000 and there was a significant decline in the operating performance of the company. This had been offset by the non-trading items and a net profit of R42.5 million had been achieved. This was a considerable improvement on the R4.2 million of the previous year.

The three main operating subsidiaries were the Post Office, Postbank and Logistics. Revenue for the Post Office had seen a net profit of R21 million, this was compared with a net loss from the previous year of R65 million. The revenue for Postbank had increased and costs had been kept low and it had made a net profit of R33 million. This was a reduction on the previous year’s R66 million. The Logistics business had been the most challenged in this first quarter. There was a net loss of R12.5 million down from a net profit the previous year of R4.5 million. Collectively the SAPO group had a net profit of R42.5 million for the first quarter.

Revenue had decreased in several areas, with expenses up 4% year on year. Staff costs and transport expenses had had particular impact. The combination of decreased revenue and increased costs was a clear reason for reduced profits. Debt collection had been a major focus and sound management had been achieved with R81 million brought in during the quarter.

Mr John Wentzel, Chief Operating Officer at SAPO, began with details of the Address Expansion Programme which had been a key initiative for the first quarter. 56.6% of the target had been achieved for the quarter but they remained confident that the full year target could be achieved. A programme for upgrading and increasing outlets was on target. An average waiting time of seven minutes had been achieved in 96% of branches across the country.

A commemorative stamp for the South African Constitution had been produced on 23 May and another set had been launched in June celebrating traditional instruments. Targets for a new postal code system were on track. This would be launched at the start of 2012.

The Postbank was now able to participate in the National Payment System and make settlements independent of the country’s four commercial banks, as had previously been the case. The Post Office had been granted Visa membership and had applied for membership to the Payments Association of South Africa, which managed the inter-bank payments of South Africa. This would hopefully be completed by the end of October and Postbank would be able to apply for a banking licence.

There had been a strong focus on training. R6.8 million was spent in this area, with women receiving particular focus. The Management and Leadership Programme saw 104 people graduate, 55% of whom were women. Training covered areas such as health and safety and financial management.

The SAPO group were ahead of all targets for Employment Equity except on disabilities. Progress had made on targets to reduce its carbon footprint, fossil fuel consumption and electricity consumption. Five electric scooters were currently being trialled to replace petrol scooters. Carbon emissions had been reduced by five kilotons.

Revenue generation in the face of declining mail volumes continued to be a major concern for SAPO. Predicted interest rate reductions were also a concern for the Postbank, in particular, and rising fuel costs also presented a significant challenge.

Discussion
Ms Tsebe asked if surveys had been conducted to determine the improvement in customer services.

Mr Maphuta Diaz, Director: Human Capital Management, responded that a customer satisfaction survey was currently being done internally and that an external survey was being sought.

Ms Tsebe asked how long SAPO had shared a sponsorship relationship with KhumbuleKhaya [an SABC 1 television show].

Mr Lungile Lose, Group Executive of Corporate Affairs, responded that the sponsorship started in May 2010. The sponsorship cost R2.3 million per season and SAPO derived three times that value in advertising from the relationship.

Ms Tsebe asked what was being done about job creation and development for the rural poor, who were important customers for the post office.

Mr Diaz responded that he did not have the specific figures on job creation; however SAPO had supplied the Ministry with the number of indirect as well as direct jobs they hoped to create this year. These numbers could be given to the Committee after the meeting.

Ms Tsebe asked how community queries were dealt with by SAPO.

Mr Diaz answered that SAPO had not been able to interact directly with communities in rural areas and would aim to do this in future

Ms Newhoudt- Druchen thanked SAPO for the presentation and requested that in future a hardcopy of the presentation be given to the Committee. She asked how the Post Office was adapting, given the decline in physical post due to the popularity of email.

Mr Wentzel assured the Committee that a hard copy would be supplied in future. He acknowledged that the challenge presented by email and resultant declining mail volumes was the greatest challenge to the organisation in its history. Diversification of revenues was the strongest part of the response strategy. The introduction of new products and services such as motor vehicle licence renewal was an example of this. A particular challenge was to ensure that operating systems for small volumes of mail could be done without consistent losses. Consolidation of transport was one response to this. This was a challenge that would not disappear and was crucially significant.

Ms Newhoudt-Druchen asked what was going to be done with the Public Information Terminals (PITs) which have been in Post Offices for some time, but were not being used.

The Chairperson added to this a query about how the decision to buy this system had come about.

The response was that the project was one aimed at bridging the digital and knowledge divide. This was instigated by the Department of Communication. The project was now being reassessed.

In response to Ms Newhoudt-Druchen asking for the address of the virtual post office, Mr Wentzel said it was www.postoffice.co.za

Ms Morutoa asked how many households had now been provided with physical addresses.

Mr Janras Serame Kotsi, Director of Mail Business at SAPO, answered that between 1999 and 2003 4.2 million address were provided, from 2004 – 2008 5.7 million had been provided and that between 2008 to March of 2011 3.3 million more addresses had been added. 66.2% were physical addresses and over 60% were in the rural areas. Nonetheless, many villages still needed to be covered.

Ms Muthambi asked what was being done about branches that were not able to meet the targeted queuing time of seven minutes. She asked about employee changes, making reference to a documented figure of 49 appointments in the first quarter. 177 still existed. Did the 49 appointments made the target for the quarter? She asked if the capacity building training on grievance hearings had brought value to the organisation.

Mr Diaz answered that it had added value as there were now a variety of people capable of chairing these hearings and dealing with grievances.

The Chairperson thanked SAPO for their presentation.

The meeting was adjourned.




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