The Budgetary Review and Recommendation Report (BRRR) of the Portfolio Committee on Communications on the Department of Communications, dated 20 October 2011


The Portfolio Committee on Communications (the Committee), having assessed the performance of the Department of Communications (the Department), reports as follows:


1.         Introduction


1.1.       Mandate of the Committee, including provision of Section 5 of the Money Bills Amendment Procedures and Related Matters Act, No. 9 of 2009.


According to Section 5 of the Money Bills Amendment Procedure and Related Matters Act, the National Assembly, through its Committees, must annually assess the performance of each national department. The Committee must submit an annual Budgetary Review and Recommendation Report (BRRR) for each department that falls under its oversight responsibilities for tabling in the National Assembly. These should be considered by the Committee on Appropriations when it is considering and reporting on the Medium Term Budget Policy Statement (MTBPS) to the House.


The Committee considered the Strategic Plan and Budget, 1st Quarter Expenditure Report 2011/12 and the Annual Report of the Department on 11 March 2011, 26 August 2011 and 12 October 2011.


2.         The Department of Communications


2.1.       Mandate, Vision and Mission



·         To create a vibrant ICT Sector that ensures that all South Africans have access to affordable and accessible ICT services in order to advance socio-economic development goals, support the African Agenda and contribute to building a better world.


·         South Africa as a global leader in the development and use of Information and Communication Technologies for socio-economic development.


·         Building an inclusive information society through a sustainable world-class information and communication technologies environment to enhance the knowledge economy.


The aim of the Department is to develop ICT policies and legislation that stimulate and improve the sustainable economic development of the South African first and second economies and positively impact on the social wellbeing of all South Africans. The Department also aims to oversee the performance of state-owned entities within its portfolio.







2.2.       Strategic Priorities and Measurable Objectives of the Department


The Department’s core functions are to:


·         Develop ICT policies and legislation that create conditions for an accelerated and shared growth of the South African economy, which positively impacts on the well being of all our people and is sustainable;

·         Ensure the development of robust, reliable and affordable ICT infrastructure that supports and enables the provision of a multiplicity of applications and services to meet the needs of the country and its people;

·         Strengthen the Independent Communications Authority of South Africa (ICASA), to enable it to regulate the sector in the public interest and to ensure growth and stability in the sector;

·         Enhance the capacity of, and exercise oversight over, state-owned-enterprises (SOE’s) as the delivery arms of government; and

·         Fulfil South Africa’s continental and international responsibilities in the ICT field.


2.3.       Measurable Objectives of the Department


  • Enable the maximisation of investment in the ICT sector;
  • Ensure that ICT infrastructure is robust, reliable, affordable and secured to meet the needs of the country and its people;
  • Accelerate the socio-economic development of South Africans by increasing access to, as well as the uptake and usage of, ICT’s through partnerships with business and civil society and the three spheres of government;
  • Build an effective information age organisation that contributes to the efficient functioning of the Forum of South African Directors-General (FOSAD) Cluster and the building of a Single Public Service;
  • Enhance the role of ICT state-owned enterprises as the delivery arms of Government; and
  • Contribute to the building of an inclusive Information Society globally, prioritising Africa’s development.


3.         Allocations and Expenditures for 2010-11, and Analysis of Annual Reports and Financial Statements of the Department


In the 2010-11 financial year, the Department was allocated R2.138 billion, made up of baseline allocation of R2.14 billion and adjusted estimates allocation of R24 million.


The adjustment estimate allocation includes a rollover of R19.8 million and R4.2 million for salary and housing allowance adjustment increase.


Spending for the 2010-11 financial year amounts to R1.427 billion and the under-.pending of R710.3 million which represents 33.2 per cent of the total budget is made up as follows:  


·         R18.7 million for compensation of employees due to the resignation of staff members and organisational review as well as the moratorium on staff appointment in the Department;

·         R161.5 million for goods and services which arise from the withholding of projects and instability in the Department as well as key internal controls that were put in place, resulting in the slow pace of spending ;

·         R529.9 million for transfers and subsidies for; Sentech-Digitisation (R259.9 million) and Universal Service and Access Agency for set-top-box subsidy (R180 million) due to the delay in the finalisation of Digital Terrestrial Television (DTT) standard; and

·         R150 million to Telkom for the 2010 FIFA World Cup for the effective execution of the 2010 FIFA World Cup projects.


The Department of Communications budget is structured into six programmes:


3.1.             Programme 1: Governance and Administration


The purpose of this programme is to provide strategic support to the Ministry and overall management of the Department.


Out of the total programme budget allocation of R150 million, R146 million or 96.5 per cent was spent, which leaves R5.3 million or 3.5 per cent in unspent funds.  The lower spending is attributed to compensation of employees due to vacant positions as a result of the organisational review and the moratorium on filling of posts for the entire Department.


3.2.             Programme 2: Information Communications Technology (ICT), International Affairs and Trade


The purpose of this programme is to ensure alignment between South Africa’s international activities and agreements in the field of ICT with South Africa’s foreign policy.


Out of the total programmed budget allocation of R44.6 million, R35.2 million or 79 per cent was spent, which leaves R6.3 million or 21 per cent in unspent funds.  The lower spending is attributed to compensation of employees due to vacant positions, and goods and services due to international trips being suspended.


3.3.             Programme 3: ICT Policy Development


The purpose of this programme is to develop ICT policies, legislation and strategies that support the development of an ICT sector, which creates conditions for the accelerated and shared growth of the economy and to develop strategies that increase the uptake and usage of ICTs by the majority of the South African population, thus bridging the digital divide.


Out of the total programme budget of R110 million, R89.7 million or 82.4 per cent was spent, which leaves R20.5 million or 18.6 per cent in unspent funds.  The lower spending is mainly attributed to goods and services as a result of delays in the implementation of projects.


3.4.              Programme 4: Finance and ICT Enterprise Development


The purpose of this programme is to oversee and manage government’s      shareholding interest in public entities and to facilitate growth and development of Small, Micro and Medium Enterprises (SMMEs) in the ICT sector.


Out of the total programme budget allocation of R1.617 billion, about R1 billion or 67 per cent was spent, which leaves R534.3 million or 33 per cent in unspent funds.  The lower spending in mainly attributed to transfers of R150 million not effected to Sentech and R180 million for the subsidy of set-top-boxes and R119. 9 million for the DTT infrastructure rollout and dual illumination due to the review of the DTT standards.


3.5.             Programme 5:  ICT Infrastructure Development


The purpose of this programme is to promote investment in robust, reliable, secure and affordable ICT infrastructure that supports the provision of a multiplicity of applications and services.


Out of the total programme budget allocation of R180 million, R44.8 million or 24.9 per cent was spent, which leaves R135.2 million or 75.1 per cent in unspent funds.  The lower spending is mainly attributed to R109.7 million not transferred for the 112 Emergency Call Centre due to the former Director-General’s decision to suspend the programme.


3.6.             Programme 6:  Presidential National Commission (PNC)


The purpose of this programme is to facilitate development of an inclusive information society by promoting the uptake and usage of ICT for improved socio-economic development and research.


Out of the total programme budget allocation of R34 million, R27.4 million or 80.7 per cent was spent which leaves R6.5 million or 19.3 per cent in unspent funds.  The lower expenditure is attributed to vacant positions as a result of the organisational review.


During the presentation of the Strategic Plan on 11 March 2011, the Department reported that the name of the PNC will change in the next financial year (2012) to Information Society Programme (ISP). The Presidency has been consulted regarding the dissolution of the PNC.  In the past few years, it has functioned as a unit of the Department absorbed with its own budget.


4.         Virements and Shifting of Funds


Though section 43 of the Public Finance Management Act (No 1. of 1999) makes provision for virements and the shifting of funds from one programme to the other, as well as movement of funds within the programme, there are certain requirements that need to be met by an accounting officer. These conditions are as follows:


Section 43(2) of the Public Finance Management Act provides that “the amount of a saving under a main division of a vote that may be utilised in terms of (1) may not exceed 8 per cent of the amount appropriated under that main division.” Moreover section 43(4) does not authorise the utilisation of a saving in:


(a)        An amount is specifically and exclusively appropriated for a purpose mentioned under a main division within a vote;

(b)        An amount appropriated for transfers to another institution and; and

(c)        An amount appropriated for capital expenditure to defray current expenditure.   


Virement was effected from programme 1 to programme 2 on the compensation of employees to defray excess expenditure. The virement was in accordance with section 43(1) of the PFMA.



5.         The First Quarter Expenditure Report for Financial Year 2011-12


During the first quarter of the 2011-12 financial year, the Department of Communication’s total planned expenditure and projected cash flows amounted to R418.5 million. However, the Department managed to actually spend R334.5 million or 79.9 per cent which is equivalent to just 17.7 per cent of the total allocated budget of R1.9 billion.


This expenditure means that the Department has spent far less that the general expenditure benchmark of 25 per cent per quarter. It is also important to note that most of the economic classification categories have reported under expenditure in the first quarter with the over expenditure on programme 2. Lower than expected spending is mainly due to the following: non-submission of drawback schedules; broadband ICT tender process and delays in the implementation of projects awaiting approval by the Director-General.


The under spending by the Department emanated from the following programmes:


Programme 2: ICT International Affairs and Trade: Actual expenditure for the first quarter was three times the projections for the first quarter of 2011-12. Actual expenditure amounted to R14. 9 million or 36.6 per cent of the R40.9 million allocated funds as compared to projections of R4.4 million. Over expenditure under this programme is due to membership fees to international organisations which were paid earlier than projected. It was projected that the fees would only be paid late in the second quarter. However, the invoice was received in May and hence the payment was made to avoid penalties.


Programme 3: ICT Policy Development: Actual expenditure amounted to R12.3 million as compared to projected expenditure of R15.4 million, representing under expenditure of 20.2 per cent. By the end of the first quarter only R12. 3 million was spent from the total voted funds of R94.7 million. The Department cited internal administrative processes as the reason for under expenditure.


Programme 4: ICT Enterprise Development:  Projections for the first quarter of 2011-12 financial year were R307.2 million compared to the actual expenditure of R254.5 million. This means that only 19.7 per cent was spent. The reason for non-expenditure is due to non-submissions of drawdown schedules by the South African Post Office (SAPO) and Universal Service Access Fund (USAF).


Programme 5: ICT Infrastructure Development: The programme managed to spend only R8.5 million from the R45.2 million projected expenditure for the first quarter. The under expenditure of 81.3 per cent is mainly due to the delays in implementation of the 112 Emergency Call Centre projects and the broadband ICT tender as a result of tender processes.


Programme 6: Presidential National Commission: Out of the voted funds of R34.7 million, R6.1 million was spent or 14.5 per cent was spent, while the programme had anticipated spending R8.9 million for the first quarter. The main reason for this under expenditure is internal administrative processes.  


7.         Auditor-General’s Report


In expressing his opinion, the Auditor-General indicated that the financial statements of the Department present, in all aspects, a fair financial position of the Department as at 31 March 2011 and its financial performance and cash flows for the year ended, in accordance with the Departmental Financial Reporting Framework prescribed by the National Treasury and in line with the requirements of the PFMA. The Department has thus received an unqualified audit report with the following matters needing urgent attention:


7.1        Fruitless and Wasteful/ irregular expenditure


The Auditor-General has found that as disclosed in note 30, irregular expenditure was incurred as proper procurement procedures were not followed. An amount of R2.8 million was incurred in the current year and R1.5 million was incurred in the previous year but identified in the current year.


As disclosed in note 31, fruitless and wasteful expenditure to the amount of R1, 4 million was incurred due to interest on the late payment to American Express, the advertisement of vacant posts, and settlement agreements. An amount of R173 000 was incurred in the previous years but identified in the current year.


7.2        Material under spending of the budget


As disclosed in the appropriation statement, the Department has materially under spent the budget vote by R711 million. The implication of this is that it has not achieved its objectives of developing ICT policies and legislation that stimulate and improve the sustainable economic development of all South Africa.


7.3        Predetermined objectives


There were no material findings on the annual performance report concerning the presentation, usefulness and reliability of the information.


7.4        Compliance with laws and regulations


7.4.1     Procurement and contract management


The Auditor-General found that contrary to section 38(1)(g) of the PFMA the accounting officer did not immediately report the particulars of irregular expenditure to the National Treasury.  The Auditor-General noted that contrary to the requirements of Treasury Regulation 9.1.1, the accounting officer did not implement an effective, efficient and transparent process of financial and risk management to prevent and detect irregular expenditure. The Auditor-General also found that contrary to Practise Note 8 of 2007/8, three quotations were not sourced in some instances


7.4.2     Expenditure management


The Auditor-General found that contrary to section 38(1)(f) of the PFMA and Treasury Regulation 8.2.3, payments to creditors were not always settled within 30 days from receipt of an invoice.


7.4.3     Strategic planning and performance


The Auditor-General found that contrary to section 38(1)(a)(iv) of the PFMA the accounting officer did have a system of linking expenditure per projects.



7.4.4     Human Resource management


From a sample of files tested, the Auditor-General, found that some employees were not provided with a written contract of employment upon appointment, as per the requirement of the Public Service Regulation (PSR) 1/VII/B1(g). Appointments were made to posts which were not approved and funded as per requirements of PSR1/iii/F(a) and F(d). A process was not followed for all appointments to verify the claims in their application for a post per the requirements of PSR 1/VII/D.8


The executive authority did not engage in HR planning with a view to meeting the human resource needs as per the requirements of PSR1/III/B.2(d).  Overtime paid exceeded 30 per cent of the basic salary in some instances contrary to the requirement of the PSR 1/V/D2(b).  Funded vacant posts were not advertised within six months after becoming vacant and were not filled within 12 months after becoming vacant as per the requirements of PSR 1/VII/C 1A.2


7.4.5     Leadership


Decisive action was not taken in response to the risk of non-compliance with supply chain management regulations highlighted by external audit findings, by implementing controls to prevent the occurrence of irregular expenditure.


7.4.6     Financial and performance management


Manual controls were not designed to ensure that all transactions and performance information were completely recorded and accurately classified.


7.4.7     Governance


The internal audit and audit committees did not function as required by the Treasury Regulations throughout the year under review. There was no audit committee chairperson’s report on the final AFS submitted for audit. The accounting officer did not take corrective action to prevent non-compliance in the human resource division by filling all critical vacancy positions during the year


7.4.8     Transfer Payment


Funds earmarked for community radio station and programme production projects were not used


7.4.9     Investigations


Investigations were being carried out into alleged financial misconduct by the Chief Operations Officer and the Chief Director: Finance


8.         Consideration of Reports of Committee on Public Accounts


The Department did not appear before the Committee on Public Accounts during 2010-11.



9.         Consideration of Reports of Standing Committee on Appropriations


The Standing Committee on Appropriations (the Committee) was established in terms of section 4 (3) of the Money Bills Amendment Procedure and Related Matters Act (No. 9 of 2009).  The Act requires the Committee to consider and report on spending issues and on actual expenditure published by the National Treasury.  The Committee has adopted a tradition of inviting both National Treasury and the affected departments to account on government spending. 


The Department was allocated a total budget of R2.1 billion in the 2010-11 financial year. The departmental budget comprised six programmes namely: Administration; Information and Communication Technology (ICT) International Affairs and Trade, ICT Policy development, ICT Enterprise Development, ICT Infrastructure Development and the PNC.  The highest share of the departmental adjusted budget was allocated to the ICT Enterprises Development programme.  This programme was allocated R1.6 billion.


The Department reported an expenditure of R965 million or 45.14 per cent at the end of the third quarter. The major under spending was on ICT Enterprises Development due to decision to close down the 112 Emergency Call Centre project which was allocated R111.9 million.  The project was however in the process of being revived. 


The Department indicated that the reasons for the slow spending was mainly due to the high vacancy rate which came about as a result of the organisational review and a moratorium on the filling of senior posts.  It was reported that there were delays in the implementation of projects due to instability, especially in the Department’s Bid Committee but that has since been addressed.  The point was made that the introduction of key internal controls also resulted in slow expenditure within the Department. 


The Department mentioned that six priority projects have been identified for the 2011-12 financial year and that the Strategic and Business Plans for that period have been finalised. It was also mentioned that all projects were now in line with the Department’s Strategic Plan.


The Department reported the following reasons for slow spending on transfers to entities:


  • Universal Service and Access Agency of South Africa (USAASA)


Funds were withheld due to the lack of spending by USAASA as a result of projects not being implemented on time.  The management of USAASA has been engaged by the Department to rectify the situation.


  • Universal Service Access Fund (USAF)


The under spending was mainly due to the delay in the finalisation of the Digital Terrestrial Television (DTT) standards.  This mater has been finalized and the standards were pronounced by the Minister.


  • South African Broadcasting Corporation (SABC)


The under spending was due to lengthy lead times on the procurement of DTT equipment and education content.  The SABC has been engaged to effect improvement on its spending.




  • Sentech


The under spending (capital expenditure and dual illumination) was caused by the delay in the DTT standard, which has now been corrected.


The Committee felt that the Department needed to furnish it with an organogram for the period starting from the end of September to the end of December 2010 in order to enable it to analyse the recruitment of senior staff during that period.  It was also stated that the list of posts that were filled during the third term of the 2010-11 financial year needed to be provided to the Committee.  A list of the six priority projects needed to be forwarded to the Committee.


The Department undertook to furnish the Committee with a comprehensive report on the 122 Emergency Call Centre and the Federation of International Football Association (FIFA) legacy projects.


10.        Consideration of the 2011 State of the Nation Address


In his 2011 State-of-Nation-Address, President Zuma pronounced that the Small Medium and Micro Enterprises (SMMEs) are a critical component of the job-creation drive.  The President added the campaign to pay SMME’s on time, within 30 days.  To this end, the Department of Trade and Industry payment hotline received about 20 000 calls in the past financial year and the other departments have launched their own initiatives, for example the Re Ya Patala (We Pay) initiative of the Department of Public Works.


The President also pronounced that all funded vacant positions must be filled within six months.  As it stands, the Department of Communications has not filled three critical top positions of Acting Deputy Director-General.


Notwithstanding the President’s commitment of his administration, the Auditor-General found that contrary to section 38 (1)(f) of the PFMA and TR 8.2.3 payments to creditors were not always settled within 30 days from receipt of an invoice.  With regard to ensuring a 30 per cent spent on Black Economic Empowerment (BEE) owned companies, the Department, during the reporting period, far exceeded the target by spending approximately 70 per cent of its budget on BEE owned companies.  This is contrary to the Department’s claims that it had ensured that service providers were paid within 30 days and the Department continued to say that such payments were monitored through generating payment reports.


11.        Entities reporting to the Committee


The Portfolio Committee on Communications has the following entities reporting to it:


11.1      South African Post Office (SAPO)


The South African Post Office was established in accordance with the Post Office Act, 1958, as a government business enterprise to provide postal and related services to the South African public. It was granted a mandate to conduct postal services to South Africa by the Postal Services Act (1998). The Act makes provision for the regulation of postal services and the operational functions of the company, including its universal service obligations.


The Post Office is seen to be the core ICT public access network and should be used to achieve South Africa’s universal service goals in the sector. In this regard, post offices would be built, using Expanded Public Works Principles, in several communities each year.


The total retail outlets countrywide, as at 31 March 2011, were estimated at about 2.484.  This number includes the 26 new outlets and the upgrading and relocation of 27 others.  An additional 1.7 million addresses were rolled out against the target of 1.6 during the 12-month period which ended on 31 March 2011.  The South African Postbank Act (No. 9 of 2010) was promulgated on 3 December 2010.  SAPO was allocated an amount of R306.1 million for the 2010-11 financial year.


The Committee noted that the subsidy intended for universal access obligation would be discontinued between 2012 and 2013 and that this would have a negative impact on the rolling out of universal access and service.


11.2  South African Broadcasting Corporation (SABC)


The South African Broadcasting Corporation was established in terms of the Broadcasting Act, 1936 as a government enterprise to provide radio and television broadcasting services to South Africa. As provided for in the Broadcasting Amendment Act, 2002, the SABC has been incorporated into a limited liability company with two operational divisions: public broadcasting services and commercial broadcasting services.


The SABC is South Africa’s national public services broadcaster and operates 17 radio stations. Its operations are based on the broadcasting charter, which guarantees independence and freedom of expression in creative, journalistic and programming terms.  The charter also requires the SABC to encourage South African expression by providing a wide range of programming in all official languages. 


During the 2008-9 financial year, the SABC faced a severe financial crisis alongside a serious corporate governance crisis.  In addressing this crisis a guarantee of R1.4 billion was approved by Government.  A guarantee of R1 billion was granted to the SABC, with the remaining R473 million to be granted conditionally upon fulfilment of certain conditions. A monitoring task team was appointed to monitor the performance of the SABC against the Government guarantee targets.  The Corporation has also appointed a service provider, Delloite & Touche, to assist in the development of a concrete turnaround plan for the SABC. There has been some improvement in the financial performance of the SABC for the year ended 31 March 2011. The SABC was allocated an amount of R268.9 million for the period under review.


The Committee noted that many government departments (at all levels) are indebted to the SABC in terms of licence fees and services and also concerned about the high costs of consultancy fees paid by the corporation.


11.3  Sentech


Sentech Ltd was established in terms of the Sentech Act, 1996 as a common carrier to provide broadcasting signal distribution for broadcasting licensees. In 2002, Sentech was licensed through the Telecommunications Amendment Act, 2001 to provide international carrier-to-carrier voice services, as well as multimedia services.


Sentech is viewed as a core provider of wireless broadband in South Africa. The Cabinet confirmed this policy statement and declared that Sentech shall remain as a strategic state-owned-enterprise.


Key achievements include, amongst others, operating and maintaining the terrestrial analogue television and radio transmission networks above customer service levels, at 99.9 per cent.  Subsequently to the switch-on of the DTT network in 2008, Sentech together with the SABC and Etv, has been conducting a pilot broadcasting service on the DTT platform involving about 3 000 households.  The DTT network of Sentech could potentially reach 33.3 per cent population coverage during the period under review.


In ensuring the universal access of television and radio, Sentech (in partnership with the SABC) has been rolling out lower power transmitters.  This will mainly assist a significant number of isolated and underserved rural communities to access radio and television broadcasts.  Sentech was allocated an amount of R270.9 million for the 2010-11 financial year for DTT and Dual Illumination. Only R71 million was transferred. An amount R199.9 million was not transferred due to the delay by the Department in finalising the DTT standards.


The Committee noted with serious concern that Sentech has not done much work to fulfil its public mandate to provide National Wireless Broadband Network (NBWN).


11.4  National Electronic Media Institute of South Africa (NEMISA)


NEMISA was established as a non-profit organisation in terms of the Companies Act, 1973. It provides much needed skills training at an advanced level for the broadcasting industry. It is accredited by the Council for Higher Education and offers diploma courses, short courses and internships in three subjects: TV production, radio production and creative multimedia.  The emphasis is on equipping students to be market-ready in a wide range of broadcasting disciplines and to have the ability to work effectively in constantly changing conditions.


During the 2010 academic year, NEMISA had trained about 103 full time students.  Out of the total students trained, 20 were trained in animation; 42 in graphic design; 19 inradio broadcasting and 22 in TV broadcasting.  In addition, the entity also trained 82 learners in radio short courses.  NEMISA has also received about 450 applications for the 2011 academic year from candidates who qualified for admission.  However, due to limited facilities at its campus some of the students could not be admitted.  An amount of R32.6 million was allocated to NEMISA for the 2011-12 financial year and has been transferred to the entity by the Department.


The Committee would like to urge the Department to fast track the repositioning of Nemisa.


11.5  Universal Services and Access Agency of South Africa (USAASA)


USAASA was established in terms of section 58 of the Telecommunications Act, 1996. The main role of the agency is to promote universal service and access to communications technologies and services for all South Africans. It also facilitates and offers guidance on evaluating, monitoring and implementing programmes, which propose to improve universal access and service.


The Agency is mandated to administer the Universal Service Access Fund (USAF) and the money in the USAF must be utilised in accordance with Chapter 14, section 88 of the Electronic Communications Act (ECA).


The key achievements at USAASA during the 2010/11 financial year were the rollout of broadband infrastructure at Msinga in KwaZulu-Natal and the establishment of the new public access facilities in 23 under serviced area sites.  There has been a delay in finalising the digital television standard in the country, and as a result of the USAF Broadcasting Digital Migration (BMD) set-top-box subsidy project could not take off. 


USAASA and USAF have been allocated amounts of R66.7 million and R218.6 million respectively for the period under review.  The entire amount of R66.7 million was transferred to USAASA and R38.6 million to USAF. An amount of R180 million was not transferred to USAF, which was specifically allocated for set-top-box subsidies due to the delay by the Department in finalising the DTT.


The Committee noted with great concern the failure of the agency to implement most of their projects which has a bearing to Universal Service Access.



11.6  Independent Communications Authority of South Africa (ICASA)


The Independent Communications Authority of South Africa Act, 2000 provided for the merger of the South African Telecommunications Regulatory Authority and the Independent Broadcasting Authority to form the Independent Communications Authority of South Africa.


ICASA is responsible for regulating the telecommunications and broadcasting sectors in the public interest to ensure affordable services of a high quality for all South Africans. In addition, ICASA also issues licences to telecommunications and broadcasting service providers; enforces compliance with rules and regulations; protects consumers from unfair business practices and poor quality services; hears and decides on disputes and complaints brought against licensees; and manages the effective use of radio frequency spectrum.


ICASA’s key achievements during the 2010-11 financial year include the release of the call termination regulation; final facilities leasing regulation; and numbering plan regulations.  These regulations will assist in the liberalisation and promotion of competition in the ICT sector. In fulfilling its mandate and in ensuring that there is an effective and efficient service delivery, statistics on spectrum and type approval licences were issued and the spare community broadcasting frequencies and spectrum usage for the mostly used bands were compiled and published on ICASA’s website.  ICASA was allocated an amount of R290.9 million for 2010-11 financial year.


11.7  .za Domain Name Authority (.zaDNA)


The .za Domain Name Authority was established to assume responsibility for the .za Domain Name Space.  The .za DNA was established in terms of Chapter 10 of the Electronic Communications and Transactions Act, 2002. The Department currently provides funding for the .za DNA until the Authority is fully operational. Funding will then be sourced through a funding model developed in accordance with section 66(3) of the Act. The .za DNA will also oversee the implementation of an alternative dispute resolution mechanism. 


The Department is actively involved in the .za DNA and will continue its participation until the Authority is fully operational and sustainable.


The Committee recommends that .za DNA appear before it and the Department must provide a report on their operation prior to the Authority appearing before the Committee.

12       Other Sources of Information

12.1  Delivery Agreements, Industrial Policy Action Plan (IPAP II) and the New

Growth Path


Work on the developmental growth path is being led by the Department of Economic Development. The Department has since 2010 released a policy framework that identifies the job drivers, that is where jobs can be created,  key policy tools available to support employment across the economy, as well as identify trade-offs and choices that have to be considered. The New Growth Path identifies the knowledge economy as a key job driver. The Department will work on the development and assessment of interventions in support of the knowledge economy. To this end, the Department will implement interventions to increase the uptake and usage of ICT’s in the economy to improve efficiencies and support inclusive growth to create.  With regards to the IPAP II, the department will investigate the possibility of introducing the telecommunications developmental pricing to support the growth of the business process service.


The high cost of calls has been attributed to the high interconnection rates that operators charge to terminate calls on mobile and fixed line networks. Government has over the years made several attempts to liberalise the ICT market by introducing the Second National Operator, Neotel, another mobile operator, Virgin (other than Cell C, MTN, 8ta and Vodacom) and number portability. Furthermore, the problem with high communication costs is that they act as a tax on businesses especially Small, Medium and Micro Enterprises (SMMEs) and are an impediment to potential economic growth. Under such conditions the need to regulate the telecommunications industry is imperative if the county wants to attractive to investors and create five million jobs through the New Growth Path as an adopted government Programme.


Significant strides have been made in this regard. Dominant mobile operators have agreed to reduce their interconnection prices from R1.25 per minute to 89 cents per minute. More reductions are expected to be finalised towards the second quarter of the next financial year when both the Department and the Authority complete the process of regulating sector prices in line with the requirements of Chapter 10 of the ECA. Through the intervention of Parliament, ICASA has pressured the dominant sector players to come up with ways of reducing communication costs as follows:


  • The current interconnection or mobile call termination rates (MTR) in South Africa set at 89 cents from R1.25 per minute during peak times are exorbitant and a further reduction is expected once ICASA has finalised regulating the telecommunications sector.


12.2      Interventions to support appropriate cost structure


As part of its work, the regulator should complete the Local Loop Unbundling process and the Minister should issue a policy directive to achieve this. The Committee has noted the lapse of time between the gazetting of Local Loop Unbundling and the implementation by ICASA. 


The Committee recommends that:

  • due to the lapse of time, the Ministry review the policy directive and come out with clear timeframes; and
  • the regulatory impact assessment be conducted before ICASA embarks on the process.


12.3      Support for exports and import competing sectors.


The Department will soon finalise the Set-Top Box (STB) Manufacturing Sector Development Strategy to ensure maximum benefits flow to local manufactures and that the procurement stimulates local industrial development in the electronics sector. The Committee held public hearing on the digital migration process wherein a second option approach to set-top boxes was presented. 


The Committee recommends that an information meeting with engineers be convened. 


13.        Committee Oversight Reports


The Committee undertook an oversight visit to the Eastern Cape and KwaZulu-Natal from 28 March to 1 April 2011 and to the  Northern Cape and Free State from 26 June to 1 July 2011 to execute its Constitutional mandate. The purpose of the visit served as the measurement indicator against the service delivery commitments by the executive and to enable the Committee to conduct on-site visits to service delivered by public entities under the Departments.


13.1      Committee Observations


13.2.1   South African Broadcasting Corporation (SABC)


·         There was no interaction between the management and the employees; and

·         Most of the SABC buildings are in a state of decay

·         There was no National Plan for Universal Service and Access of footprint coverage

·         There was lack of gender representativity in managerial position

·         There was no policy framework for freelancers working at the SABC

·         Strategic positions were not filled

·         There was poor corporate governance.


13.2.2   South African Post Office (SAPO)


  • The Public Internet Terminal (PIT) machines had not been working for some time
  • Security at the Post Office on pension days posed a challenge. However, management was working towards having more security personnel on duty during peak days
  • There was poor corporate governance.


13.2.3 Sentech


·         There was a failure to realign the signal distribution tariffs with the provisions of the Electronic Communication Act

·         There were allegations that the salary structure was still racially based and not competitive with other industry players

·         The centralisation of supply chain management resulted in unintended consequences of failure to acquire services within required time

·         There were still communities who were providing for their own signal distribution.


13.2.4   Independent Communications Authority of South Africa (ICASA)


·         There was no synergy between ICASA head office and its regional offices

·         There was a problem with stakeholders (Sentech and SABC) trying to solve issues without consulting the regulator (ICASA)

·         ICASA had neglected its postal services mandate

·         There was no strategic leadership

·         There were no prescribed timelines to issue licences to potential licencees.


13.2.5   Universal Service and Access Agency of South Africa (USAASA)


·         There was a lack of a clear maintenance plan on all their projects

·         The agency was dismally failing to meet its statutory obligations.


14.        Findings of the Committee


The Committee analysed the Department’s 2010-2014 Strategic Plan, the 2010-11 Annual Report of the Department, the 1st Quarter Expenditure Report, the 2010-11 Estimates of National Expenditure reports, the Report of the Standing Committee on Appropriations, the Stete-of-the-Nation Address, the revised Industrial Policy Action Plan, the New Growth Path, and the Committee’s oversight reports.


The Committee is gravely concerned that most of the issues that have been raised in the Auditor-General’s report were considered by the Committee during the Department’s annual report presentation on 13 October 2010 and on 18 February 2011. The Committee notes with regret that not much progress has been made in addressing the weaknesses identified by the Auditor-General. 


The Committee expressed its disappointment:


  • that there has been no work done by the Department on recommendations made in 2010, reportedly due to capacity problems in the Department. However, the Committee notes Sentech’s improvement from previous years.  Unfortunately, some of the public entities have regressed, such as ICASA and the SABC;


  • with government departments (at all levels) that were not paying the SABC television licence fees and for services provided; and


  • on the ICASA’s performance for the 2010-11 financial year especially on financial management issues and oversight by its Councillors.


The Committee noted with concern:


  • the increase in the number of public entities reporting under the Department who were facing or experiencing corporate governance challenges and a lack of financial sustainability


  • the regression in the SABC’s financial results and is of the view that the situation needs to be turned around as a matter of urgency


  • the gender inequalities in managerial positions of the SABC throughout the organisation.


  • the inherent lack of leadership and continuous failure to exercise fiduciary duties by Board members that led to USAASA’s failure to execute its mandate.


The committee has not expressed any view to the additional funding request as there was no motivation by the Department.


15.        Recommendations of the Committee in respect of the Department and its entities


The Committee recommends that the Department must:


  • urgently fill vacant posts with suitably qualified and competent personnel, particularly at senior management level (as per the 2009-10 annual report recommendation) and that underperforming managers be duly sanctioned in terms of the PFMA;
  • prudently increase the level of spending on core operational programmes (as per the 2009-10 annual report recommendation), and that underperforming managers be duly sanctioned in terms of the PFMA;
  • consider the creation of a specialised division, adequately staffed with personnel with requisite skills, to manage its relationships with public entities (as per the 2009-10 annual report recommendation);
  • take urgent steps to institute proper financial controls over departmental expenditure and to minimise risks relating to irregular, fruitless and wasteful expenditure (as per the 2009-10 annual report recommendation);
  • report on how it proposes to resolve the issue of irregular staff appointments (as per the 2009-10 annual report recommendation); and
  • report on measures instituted by it in respect of public entities that have flouted good corporate governance rules (as per the 2009-10 annual report recommendation).


The Committee further recommends that:


  • the Minister must disband/dissolve the current Board of USAASA; and
  • the framework concept of USAASA must be revisited.


Report to be considered