SA Post Office Soc Amendment Bill [B24-2013]deliberations; SA Postbank Ltd Amendment Bill adoption; Audit outcomes of Department of Communications and entities for 2013; GCIS & MDDA on their 2013 Annual Reports 2012/13 & First Quarter Expenditure Reports

Meeting report

South African Postbank Limited Amendment Bill
A-list of amendments
Mr Willie Vukela, Chief Director: ICT Postal Policy, Department of Communications, led the Committee through the ‘A’ list for the Postbank Limited Amendment Bill, which comprised amendments to the definition of ‘Minister' and the deletion of the definition of ‘Registrar of Banks’ in clause 1, the repeal of the words ‘and upon request from the Minister’ from clause 6, the addition of subsection 4(a) in clause 7 and amendments to clause 8.

Ms G Kilian (COPE) said she had been expecting feedback from the legal team

The Chairperson said that the legal feedback had been incorporated into the documents

South African Reserve Bank clarification on “fit and proper” requirement
Mr Michael Blackbeard, Legal Counsel for the South African Reserve Bank, was requested to give clarification on the assessment of the ‘fit and proper’ requirement, as it related to directors and executives of banks in the interests of good corporate governance.

Mr Blackbeard said corporate governance was an established local and international standard and covered ethical behaviour in business dealings. Improper dealings were a breach of contract. In the banking sector, ethical behaviour and good corporate governance promoted confidence and protected the depositors and creditors. The definition of “corporate governance” was broad under the Banks Act, but the regulations were more detailed. The Banks Act defined the scope of duties and the care and skill that needed to be applied by directors and executives. This was to address any uncertainties contained in common law. The Minister of Finance could enable guidelines via regulations, and all directors and managers of banks had to complete the D1020 Questionnaire. ‘Fit and proper’ in this context meant that directors and executive officers had to have honesty and integrity, competence and sound judgement and diligence to fulfil duties. The Registrar of Banks had to take into account previous conduct, convictions and competence.

He then turned to the process that was followed. The banks submitted names and CV’s to the Registrar. If the Registrar objected for some reason, the banks could either agree with the Registrar on the objection or declare a dispute which would be resolved by the Arbitration Foundation of South Africa which would be final and binding. Directors were appointed by shareholders and executives by a board. Banks had to give 30 days written notice prior to the appointment to the Registrar. The Registrar had 20 days to give a written objection to the appointment, if there was one.

Mr A Steyn (DA) asked if the completion of the D1020 Questionnaire was an annual requirement.

Mr Blackbeard replied that the registrar had the power to request its completion at any time.

Ms G Kilian (COPE) asked about the wording of clause 3

The Parliamentary Law Adviser confirmed that this office had checked that the correct wording had been used.

The A-list of amendments [B25A-2013] was adopted by the Committee.

The Committee then went through the Bill clause by clause, and adopted the B-version of the Bill, with the amendments.

South African Post Office SOC Limited Amendment Bill
A-list of amendments
Mr Vukela led the Committee through the ‘A’ list which dealt with the omission of definitions of a ‘child’, ‘Post Office Retirement Fund’ and ‘rules’ in clause 1. The Committee had decided to reject clause 5. The Long Title would be substituted by another paragraph. In the Schedule there was an insertion into section 10B, and section 10F was a new subsection.

The list of amendments B24A-2013 was adopted by the Committee.

The Chairperson said that legal opinion was still being finalised on whether the SA Post Office SOC Limited Amendment Bill should be tagged as section 75 or section 76 so the Bill [B24-B] itself would not be adopted at the present sitting. Should it be tagged as a section 76 bill, then it would also go to the National Council of Provinces.

SABC Annual Report concerns
Ms M Shinn (DA) said she had written to the Committee to propose an amendment to the draft Committee Programme, as there was little time to interrogate the SABC’s Annual Report. She suggested that legislative discussion on the Bills be moved to November, and that that the time set aside for these in October instead be used to discuss the Annual Report of the SABC.

Ms Kilian said she shared the concern.

The Chairperson pointed out that the legislation was also deadline bound.

Ms Shinn said she had also made a request for the Minister to be present when the SABC Annual Report was discussed. The SABC had a deal with Multichoice which would financially penalise the SABC. If it conformed to government policy, the contract would be contravened and would cost the SABC more than R500 million. The sale of the archive of the SABC for R350 million was “a virtual giveaway” and the contract made the archive exclusive to Multichoice. She said there were issues of concern over the digitising of the archive of the SABC. She said the Auditor-General’s report was damning and the Minister needed to be present to say what steps were being taken to put the SABC back on track again.

Ms A Muthambi (ANC) said the SABC would be appearing before the committee on the forthcoming Thursday so there was no need to arrange another meeting.

Ms Shinn said the Multichoice deal was not part of the Annual Report, as it was signed on 3 July 2013 and therefore the issues and implications needed to be discussed separately.

Ms Kilian said the Committee had an oversight function and had the right to question and probe in a Committee meeting. She said the Committee had been misled in the past by senior SABC officials.

Ms Shinn said she wanted the assurance that she would have the right to ask questions in the meeting the following Thursday meeting to ask questions that did not pertain to the Annual Report only, and asked that the SABC be given time to respond.

2012/13 Audit Outcomes for the Department of Communication and entities: Auditor-General South Africa briefing
Ms Alice Muller, Business Executive, Auditor-General South Africa (AGSA), gave a presentation on the overall outcomes for the Department of Communications (DoC or the Department)and its entities.  The Department still had compliance findings, as it had the previous year, and the majority of the findings were human-resource (HR) related. The Department had also regressed as far as performance against predetermined objectives were concerned. The National Electronic and Media Institute (Nemisa) had reached a stage where its liabilities exceeded its assets, and it was not in good financial health and needed attention.

AGSA had told Independent Communications Authority (ICASA) to standardise processes, which it had implemented at the financial year end, and which had been beneficial to the entity. It still had challenges, however,  with IT integration. The Universal Standards and Access Agency (USAASA) presentation of the attainment of its predetermined objectives was still a serious challenge. Universal Service Access Fund (USAF) experienced a deterioration of audit outcomes. Sentech had improved to a clean audit. The Post Office audit report remained financially unqualified, with other matters. However, it had huge irregular expenditure of over R1 billion, which had been identified by the Post Office itself. Telkom had maintained its clean audit.

Ms Muller continued that the SABC had received a qualified report for the previous two years. There was more non-compliance this year than in the previous year. 88% of targets had not been achieved, which was worse than the 70% of the previous year. She said there was a huge dependency on the Excel programme and the organisation was not using the SAPS software programme optimally. Irregular Supply Chain Management (SCM) expenditure was mainly seen in the area of sports management events. Most of the qualification findings could be traced to four root causes (see page 8 of Briefing Note for full details). She summarised that these causes were, firstly, a weak governance structure with little oversight and a board and audit committee that was dysfunctional. Secondly, the absence of leadership and accountability, especially the vacancy of the position of Chief Financial Officer, with the previous incumbent suspended for a year, and the fact that 13 out of 17 executive positions were filled in an acting capacity was a major problem.  Thirdly, there was a lack of skills and capacity in the organisation. She said the SABC had had to include license fees into a new accounting method on an accrual basis,  but SABC had been accounting for it on a cash basis. The new accounting method did require skilled personnel in the finance unit to implement. An action plan had been drawn up and the AGSA had held a full day workshop with the SABC. Fourthly, the structures and systems of the organisation were not unified. Units had been allowed to operate autonomous policies, method of work and systems and there was no central policy database. The organisation needed to have one set of rules and policies for all units.  

Ms Muller told the Committee that the media had run a story around license fees to the value of R1.5 billion, and this figure, which was quoted in the audit report, represented journal entries, and supporting documents for the journal entries, not the payments, were a problem. The amount quoted was actually incorrect and double the real figure, because it was for both debit and credit entries. She said the SABC would not be able to deal with the qualifications, but could deal with the disclaimers. AGSA would be doing continuous interim audits throughout the year.

Government Communication Information Systems (GCIS) had received an unqualified audit report. The GCIS had introduced new targets to the predetermined objectives but had not put systems in place to assess reliability of the figures. Brand SA had non-compliance issues in SCM. The Media Development and Diversity Agency (MDDA) had a clean audit.

She pointed out that the SABC irregular expenditure had been one of the causes for qualification in the audit report, but in general, across all entities, irregular expenditure had decreased. AGSA  recommended that the Department had to be capacitated with qualified skilled staff, who must be held accountable.

Discussion
Ms L Van der Merwe (IFP) wanted clarity on the disappearance of license fees, because of a change from cash to accrual accounting.

Ms Kilian said many positions were filled in an acting capacity yet the HR block had not been ticked in the briefing note.

Mr Steyn wanted to know what amount was, or was not paid, of the irregular expenditure of R1.5 billion.

Ms W Newhoudt-Druchen (ANC) wanted clarity on the R200 million underspend, and on ICASA not achieving 70% of its transparency target.
 
Ms Muller said the HR issues were included in the management report, but the block was not checked because this was not one of the aspects that was regarded as non-compliance.

Ms Muller clarified that it was difficult to determine whether amounts were paid or not paid as journal entries happened after the payments had been done. This alone was an indicator for concern.

Ms R Morutoa (ANC) wanted to know what the AGSA findings were on whether the organisation was non-compliant on IT. She said the fact that there was a R200 million  underspend, although there was a claim that targets had been met, was cause for concern.

Government Communication Information System (GCIS) General briefing on Annual Report 2012/13 and  1^st quarter 2013 targets
Ms Phumla Williams, Acting Chief Executive Officer, GCIS, said that GCIS had developed its own strategic planning programme in addition to and separate from the Department’s programme. It was .centred around issues like infrastructure, which had been highlighted in the State of the Nation Address (SONA). This programme asked Ministers to explain and unpack SONA to communities at city halls.

GCIS had achieved 88% of its 109 strategic targets for the year. 20 campaigns were driven in a more coherent manner utilising social media, radio and print. It had developed 28 sets of key messages and flighted two GCIS radio programmes a day. It had established a unit to respond rapidly to monitored news stories. It had achieved 803 development communication projects, which involved, amongst others, “blitzing” taxi ranks or holding imbizos. The GCIS was now housed in a new building in Hatfield. 100% of invoices were paid within 30 days. A Deputy CEO and Director of Social Media had been appointed.

She said the Department of Performance Monitoring and Evaluation (DPME) had ranked the GCIS in the top eight government bodies.

Mr Harold Maloka, Acting Deputy CEO, GCIS, said the GCIS had seen an increase in the need for language services like translation. He said there had been an increased public demand for the SA Yearbook and pocket guide, which had resulted in an increased demand for translation and distribution. The target had been to produce three content products per quarter but it had produced 45. This was a reflection of the high demand for writing capacity by government departments. Similarly, one corporate marketing activity had been planned, but five were undertaken. There had been an increase in the number of products produced and distributed. It had not achieved its stated target of organising three public sector manager magazine forums as only two were held, due to the unavailability of speakers.

Ms Nebo Legoabe, Acting Deputy CEO, GCIS, said the Thusong campaign, which had been weak in the previous year, was now stronger because GCIS was leading the campaign for itself. Community and stakeholder events and Rapid Response Unit’s actual working days had been under-counted because some of the days fell on weekend days.

Mr Maloka spoke to the digitisation of old footage and said that GCIS had approached industry, which said that the technology was not available in South Africa. It had imported the technology but there were challenges and it had issued a request for a quotation (RFQ) to outsource the function.

Mr Keitu Semakane, Acting Deputy CEO: Corporate Services, GCIS, said spending was on track, for the first quarter of the 2013 financial year, at 25%. There was overspending in the Administration Programme, but this was because of payments for the new building. National Treasury had approved the rollover of funds. The Content Processing and Dissemination Programme spending was slow because there were delays in the printing of the SA Yearbook and Vuk’uzenzele newspaper. There was slow spending in the Intergovernmental Coordination and Stakeholder management programme because of the ring fencing of the allocation for the African soccer club championship to be held in the last quarter. Under spending in the Communication Service Agency was because of distribution costs of the SA Yearbook and Vuk’uzenzele. The SONA costs would only be realised in the fourth quarter. All transfers to public entities (MDDA) were done.

Discussion
Ms Kilian said lack of capacity should not be the reason why digitisation of the footage had not been completed.

Mr A Steyn (DA) pointed out that in regard to digitisation, it was not stated whether the equipment purchased would be gathering dust or whether it would be outsourced. The SABC was facing a similar challenge. He asked if the purchase would be fruitless and wasteful expenditure.

Mr C Kekana (ANC) asked why students could not do Masters degree research in the area of transferring records. He felt it was a colonialist view to just accept that the solution could not be found in the country.

Mr Steyn asked how the GCIS reconciled the over-achievements with the Auditor General’s findings of mis-statements. He said that the inadequate performance management system needed to be addressed.

Ms S Tsebe (ANC) said overall, that 23% had not been achieved due to inadequate funding. She wanted more detail on the challenges and what were the HR challenges. She said the GCIS should indicate the cost of the equipment and the cost of the outsourcing.

Ms Newhoudt-Druchen asked whether sign language was also part of the language service requests. If not, then she asked what could be done to accommodate sign language. She wanted to enquire about the number of Braille copies distributed, and where were they distributed. On the matter of daily news updates on key government programmes and activities, (on page 12 of Q1 presentation), she asked whether sign language, interpretation and subtitles was accommodated on TV.

Ms Morutoa felt the figures given in the support to government campaign appeared to be very limited.

Ms Williams said the over or understating in target setting was a challenge and was determined by the environment. She said any achievement without supporting evidence was not reported. GCIS had entered into collaboration with other bodies and this had allowed the GCIS to over-achieve, yet remain within budget. It had also done a restructuring of the organisation. The GCIS was monitoring news but now also had the capability to respond. It was writing articles for local newspapers to use as well. Its key messages were the five priorities of government.

Mr Maloka answered on the question of braille copies, and said that the GCIS worked with BlindSA and other organisations who gave the GCIS indications of the quantities required, and addresses to post to. As to materials production, especially videos, the GCIS had started to explore the use of subtitles. This needed to be tried in a pilot project first, before it could be expanded.

Mr Maloka also expanded on the digitisation, and said over 1 500 hours of taped footage was available that had to be digitised. GCIS had gone to local industry, who had indicated it was unable to do this. It had then bought equipment from overseas. It had demanded a skills transfer to the GCIS as part of the package, and officials had been trained to use the equipment. However, given the backlog and the daily addition of footage, a dedicated person to do the 1 500 hours had been outsourced. The equipment cost R335000 and the outsourcing project would cost R200 000 for the 1 500 hours of tape. Another challenge was managing the storage of the video.

Ms Tsebe said it did not make sense to pay R200 000 to a consultant when the GCIS’ own equipment was being used.

Mr Maloka said the 1 500 hours of footage would require somebody to work for 25 hours for six months and the GCIS did not have additional personnel, so the best solution was outsourcing.

Ms Williams said she would highlight only a few issues from the Annual Report. There had been a lack of in-house capacity in doing media buying and this had been addressed. GCIS  had purchased R220 million worth and saved R30.6 million. A second issue was media transformation. Here, GCIS wanted to report that R30 million had been spent on the development of upcoming media. It had recorded an unqualified audit for the fifth consecutive year and had received a clean bill of health in governance, HR and in auditing. She said what was disseminated to the public was also being disseminated to public servants.

Mr Maloka said the GCIS was now conducting research to allow it to align its content and improve its communication. Its key achievements in communication and content management were outlined on  page 10 of the Annual Report presentation. The SAnews website had been revamped. The target of producing an annual report assessing the media landscape had not been achieved, due to capacity constraints brought about by the realignments within the organisation. Only six out of 20 media assessment reports had been produced. The unit that did the assessments had been converted into a government monitoring unit. This was the same reason why 20 out of a targeted 72 Cluster communication reports had not been produced.

Ms Legoabe said GCIS had done pre and post SONA events and coordinated 2 000 imbizos. All provinces had held BRICS workshops to unpack what the BRICS conference in Durban was about. Thusong had been a challenge, with 30 centres becoming non-operational, and they had achieved only 519 of the targeted 680 reports in this regard. One internal communications forum had not been held because of the BRICS conference event but it had been rescheduled. Non achievements in the Communications Service Agency were because of a lack of equipment and financial and human resources.

Mr Semakane said the GCIS had completed the move to its new headquarters and the office was 82% equipped. It had introduced an e-recruitment system. Seven of nine corporate services units had been inducted into project management methodology. The variance was due to government communication campaigns taking precedence because of capacity constraints. In total, 88% of the R460.9 million budget was spent. The variance had to do with the payments for the new building. There was no irregular, fruitless and wasteful or unauthorised expenditure.

Discussion
Ms Muthambi said that page 98 of the Annual Report indicated that ‘proper process’ had not been followed in HR case. She wanted more information as it appeared to be a misconduct case. Investigations were ‘still being interrogated’ and she wanted to know the status quo of the investigations.

Ms Muthambi was worried about the capacity and skills challenges, which still appeared to be an issue.  

Ms Kilian said it was unacceptable that the digitisation of footage had not been resolved, as it had been carried over from the previous year into the new financial year. She said the financial statements carried statements similar to the previous year’s report, and it appeared that there was no progress made. She asked on what basis performance bonuses could be given when there were inefficient evaluation systems.

Mr Steyn asked whether the Thusong marketing was done according to a generic marketing plan or whether it was targeted to the specific area the centre was located in. He felt that it was a very weak performance if the GCIS was not able to put out all its e-newsletters, having done only six out of 12.

Mr Kekana asked how the GCIS measured the impact of their services.

Ms Williams said the GCIS did have an impact as it wanted government news to be not only in the Star newspaper but also in the community media. It was investing in these platforms and in face-to-face communication direct to the community and was producing material in the languages of the people. It was also targeting the disabled. All campaigns were followed up with research.

On the issues of governance, she begged to differ from comments made by Members. She said the issues raised in the financial statements were different, even though the wording appeared the same as the Auditor-General made use of a standard reporting template and terminology. The issue in this year’s financial statements was that the method of accounting had changed from a modified cash basis to the accrual system, so as to separate between services rendered and those that had not yet been done.

In relation to the performance bonuses, she said staff felt very aggrieved because of management’s hard line on who was eligible. She said there were capacity constraints and that would always be an issue, and the GCIS simply had to make do with what it had, and had recognised that budget cuts were more likely. She acknowledged that the GCIS might have to scale down its operations, based on the capacity that they had.

Mr Semakane said the GCIS had learnt the hard way that it should verify the qualifications of all applicants who applied for a post. It had accepted a person without waiting for the verification process to be completed, but this would not be done again in the future. The performance management assessment was of a post and not of a person, and had arisen because a number of people had felt that, with the reorganisation, their areas of responsibility had increased and they wanted their posts evaluated. These evaluations were thus done at the request of staff. The figures for sick and annual leave were generated by the system for evaluation purposes. Annual leave had to be used within an 18 month cycle.

Mr Maloka said the media environment was dynamic so it had prioritised the SAnews website.

Ms Legoabe said some Thusong centres had been targeted for closure, and thus the Thusong targets had not been met. She said Thusong centres targeted the community through locally based promotions.

Media Development and Diversity Agency (MDDA) Annual Report 2012/13 presentation
Because of time constraints, Mr Lumko Mtimde, Chief Executive Officer, Media Development and Diversity Agency (MDDA), gave a very brief presentation. He noted that more than 27 of the projects MDDA supported in 2012/13 were new. Community radio listenership had increased by 26.3%. It had provided bursaries to media managers and collaborated with the GCIS to improve the operational environment of community and small commercial media.

Mr Nkopane Mapiri, Programme Manager, MDDA, said contracts had been signed to train 85 people in the media and it had a partnership agreement with the University of the Free State to provide access to media training. It had reviewed its Memorandum of Understanding with the Advertising Media Association of SA and developed a joint activity programme to build its capacity.

Mr Mshiyeni Qungisa, Chief Financial Officer, summarised briefly that the total income of the MDDA was R56.6 million. There was a net deficit of R3.55 million and a net accumulated surplus of R73.6 million. These monies were already committed and were reflected because of accrual-based accounting practices (see note 8 on page 160 of Annual Report). There were a few posts that were not funded.

Discussion
Ms Morutoa said the demographics of the staff complement was not noted on page 27 and 28 of the presentation.

Ms Morutoa asked if the MDDA followed up on the recommendations after the Committee’s oversight visit.

Ms R Lesoma (ANC) asked for how long MDDA had unfunded posts, and why they were still listed, if they were unfunded.

Ms Kilian asked for the list of commercial radio stations beneficiaries, and wondered how this list compared with those from previous years, and what was the maximum period for which they had qualified.

Ms Kilian referred to page 161 of the Annual Report, which noted that there were allegations of SCM and HR processes investigations. She asked about the progress and when these would be finalised. She also asked whether these investigations related to substantive issues.

Mr Steyn asked about the five small community print projects. He asked why the MDDA was funding commercial radio stations, when one could get more out of community projects.

Ms Newhoudt-Druchen asked for clarification of the over expenditure of R220 million and the deficit of R3.55 million.

Mr Mtimde said there had been adjustments to the demographics since the report had been printed and there was now one white member on the staff. MDDA was still recruiting for a disabled person, as the person previously occupying a post had had left. The organisation did do follow up of oversight recommendations and it had assisted radio stations that had needed assistance. Stations partnered with ICASA for an integrated response to those radio stations needing it.

Mr Mtimde noted that the draft Bill was being discussed, while looking at MDDA’s challenges and achievements. When complete it would be brought before the Committee

Mr Mtimde answered that the HR needs had been identified but the reason for unfunded posts was that only 10% of private funding could be used for administrative use. MDDA was seeing an increase in the annual turnover of broadcasters. If the trend in the growth of the industry continued, MDDA would fill all its vacancies.

Mr Mtimde answered Ms Kilian's question on allocations to commercial radio stations by saying the allocation was for a period of between one and three years

Mr Mapiri said private contributors stipulated that their funds should not be used for the print media.

Mr Qungisa said the R3.55 million deficit was because of a rollover of funds. Grants had been approved by the board. The surplus was because tranches that had not been paid would reflect as accruals under the accounting system.

Mr Mtimde added that MDDA had received an additional allocation of funds. It had been carried over into this year and therefore there was extra expenditure of R3.55 million.

Mr Qungisa said that the MDDA investigations were complete. Management had written up the report and the board was studying the report and looking at corrective measures which could be implemented.

Ms Muthambi said more detail was needed on the matter.

Ms Phelisa Nkomo, Chairperson, MMDA Board, said that the investigation was ongoing and a governance committee was looking at corrective measures. The Portfolio Committee would be briefed once that had been finalised.

The meeting was adjourned