Department of Communications progress report

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Communications and Digital Technologies

17 February 2011
Chairperson: Mr S Kholwane (ANC)
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Meeting Summary

The purpose of the meeting was for the Department of Communications (DoC) to brief the Portfolio Committee on the progress it had made since it met with the Portfolio Committee on 13 October, 2011. At that stage the DoC was in disarray and was described by its Acting DG as a ‘sinking ship’. The morale of the staff was low and the general mood in the Department pessimistic.

The Acting Director General reported a turnaround in the Department. The mood was hopeful and optimistic. This had been achieved by addressing the four management areas it had been tasked with by the Committee. These were Strategic Alignment, Human Resource Management, Financial Management and Institutional Review.

In terms of Strategic Management, the DoC had to initiate a process of redefining its priorities, so that it was consistent with the Minister’s Performance and Service-delivery contract with the Presidency. It also had to reduce the number of its projects, in order to consolidate the most important ones and make them more effective.

On the matter of Human Resources Management, the progress in filling vacant posts was described. There were cases of irregular staff appointments and the Department was in the process of dealing with these. Also it was in the process of doing a department-wide skills audit.

Concerning Financial Management, the DoC had to increase the level of spending on core operational programs as well as institute proper financial controls in order to minimise irregular and fruitless expenditure. As far as the Institutional Review was concerned, the DoC had reviewed the contract of the company engaged in this, but it was too late to pull out as there would be legal implications. The DoC was considering the creation of a specialised unit which would be tasked with managing the relationship between itself and its entities.

Members asked what the reason was for the delay of the manufacturing of set-top boxes and what the new timelines where. Members asked how the filling of vacant post would impact on the DoC’s use of consultants, which it utilised to the tune of R 10 million during the 2009/10 financial year. Members from the DA and ANC differed from each other in terms of describing the condition of the DoC, before it underwent the turnaround process. Some Members suggested that asking its State Owned Entities (SOEs) to submit their board meeting minutes to the Minister would amount to intrusion and micro-management. They suggested regular reports would be a better option.

The contradiction about oversight was discussed, that is, the DoC had the responsibility to do oversight over the SOEs, but it could not do oversight, because the entities were independent. The Acting Director General said that the relationship between the DoC and the SOEs needed to be clarified, so that the DoC could know what information it was entitled to. Currently, the DoC got information too late, when the damage had been done, and it was too late to intervene. Yet, the DoC then had to answer to the Committee as to why things had gone wrong and why it did not intervene.

The Acting DG as well as the new Minister were congratulated on the amount of work they had done and the positive result they achieved in the DoC during the last five months.

Meeting report

The Chairperson explained that the purpose of the meeting was to get a progress report on issues raised by the Committee when the Department of Communication (DoC) presented its Annual Report on 13 October 2011. A letter had been circulated containing the resolutions of the Portfolio Committee and Members could use this list to ensure that the issues they had raised, were covered in the report-back. The Minister indicated that he had wanted to attend the current meeting, in order to gauge the progress of the DoC, but he was unable to do so because of other commitments.

Dr Harold Wesso, Acting Director General in the DoC, introduced his delegation. Mr Sam Vilakazi was Acting Deputy Director General for Finance and Enterprise Development, Ms Manthekeleng Monama was their Parliamentary Liaison Officer and Mr Kuben Govender was representing the Office of the Minister.

When the DoC and the Portfolio Committee had met on 13 October 2010, there was low morale in the department, no sense of belonging, fear, low motivation. Currently, things were different. There was a sense of excitement, the motivation to work hard had returned and the DoC understood its role in building an inclusive information society and knowledge economy. The Doc understood its role in providing the population with access to the latest technologies and the ability to use them, and in re-skilling the nation.

The DoC knew that there was a need to contribute to providing jobs and getting youth skilled for these jobs. It was important to be aware of the problems in the Department, but it was more important to be able to pinpoint problems in order to deal with outstanding issues.

To sum up, when the Committee saw the DoC on 13 October 2010, there was an air of despair in the Department, but the DoC was proud of what it had achieved over the last five months, resulting in an atmosphere of excitement and positivity.

The progress report was compiled by grouping the resolutions into four categories: Strategic Alignment, Human Resource Management, Financial Management and Institutional Review.

Strategic Alignment
The resolution on Strategic Alignment stated that the DoC had to initiate a process of redefining its strategic priorities so that they were consistent with the Minister’s Performance and Service Delivery contract, signed with the Presidency. At that stage, in October 2010, it was already midway through the financial year, but management in the DoC had success in refocusing the Department and addressing these issues.

There were 12 desired outcomes. Through the implementation of its 2010-2013 Strategic Plan, the DoC contributed to four of them. Firstly, it contributed to the quality of basic education by providing schools with internet connectivity. Secondly, it contributed to safety and security in South Africa by overseeing cyber security. Thirdly, it provided broadband connectivity without which a modern economy could not run, and fourthly, it contributed to decent employment through set-top box manufacturing and SMME development.

Around these four outcomes that the Department contributed to, the Minister had signed a performance agreement with the Presidency as well as delivery agreements with related Departments. The DoC was aligning its Strategic Goals and objectives to various other government policy and strategic positions, including the Medium Term Strategic Framework, the New Growth Path and the State of the Nation Address. The Minister had contributed to a new focus in the Department through his 11 November Statement. This would be elaborated upon when the Department tabled its 2011-2014 Strategy. Before, the Department was involved in roughly 135 projects which proved to be unsustainable, as there was no clear focus.

HR Management
The DoC needed to fill its vacant posts with competent personnel, especially at senior management level. This was a knowledge-intensive department. There was a need to think ahead, about what the world will be like in 2025, and what kind of skills people would need in order to get a job in 2025. A lot of work, thinking and planning needed to be done in order to make sure that the DoC could contribute to the emerging knowledge economy and to ensure that young people were skilled and qualified in order to work within it.

The post of Director General had been advertised since 11 February 2011. The interview process would begin on Monday, 21 February. A selection Committee chaired by the Minister, including two other Ministers and a Director General would be assembled to do the selection and if everything went according to plan, the appointment would happen on 1 April 2011.

The DoC had also advertised 24 critical priority posts, out of the roughly 150 funded and unfunded vacant posts. The closing date for these were 18 February 2011. Appointments would be made from the 1 April and during the month of May 2011. The Department had decided on a phased process for practical reasons, such as the availability of senior personnel to conduct interviews, in order to ensure that there would be a solid foundation. This would create an environment for longer term stability. Throughout the process, the principles of non-racialism, non-sexism and non-favouritism would be maintained.

The other issue falling under HR Management was irregular appointments in the DoC. These were cases where there was non-compliance to the existing recruitment policies of the state. These included appointments without contracts, appointments of officials in posts of suspended staff, non-compliance with the head hunting policy of the state and one case of an official who was not interviewed for the post he was appointed to. The Department was obtaining legal opinions on these matters and the investigations were underway.

Where DoC staff made themselves guilty of negligence or breach of the code of conduct, disciplinary action would be taken. The DoC aimed to resolve these matters before the end of March so that the incoming DG would not inherit a legacy of problems.

The DoC was tasked with doing a comprehensive skills audit. It was in the process of developing a questionnaire in order to do a department wide skills audit during the month of March. This was necessary to determine which skills existed in the Department and which skills needed to be developed.

Financial Management
The DoC had to increase the level of spending on core operational programs. To this end, the Departmental Bid Adjudication Committee (DBAC) had been re-constituted and was fully functional. Alternate members had been appointed to ensure depth of expertise through training. Priority projects have been identified and the DBAC has processed various tender requests from operational units. Spending had improved, from 26% by the end of the second quarter, to 70% currently. Possible savings were being directed to critical job creation and other projects as per the approved DoC strategy.

The second resolution concerning financial management was for the DoC to install proper controls over departmental expenditure and to minimize irregular, fruitless and wasteful expenditure. The procurement function was centralised in the department. All tenders were evaluated in terms of the Preferential Procurement Policy Framework Act regulations. Evaluation Committees where formed when required and expertise was drawn from the different branches. Managers underwent training in Supply Chain Management and Public Finance Management Act requirements in order to become Responsibility Managers. The Internal Audit Unit in the Director General’s office was fully functional and had concluded an audit of critical areas such as Supply Chain Management. Delegations were in place. All finance policies have been reviewed. The Department had to report to National Treasury on procurement spend for R100 000 and above.

Institutional Review
There was a resolution to review the contract with the consultancy appointed to undertake an institutional review of the DoC. This could not be done due to legal and financial implications, one of which was that the drafting of the report was at an advanced stage. The DoC did intervene in the process, impacting on the outcome. It brought the consulting agency to the understanding that the structure of the organogram depended on the strategic plan and the functions that were needed to execute it. The report of the consultant, with structural design options, was discussed by the Steering Group and Unions. The report had been considered by the Minister. The final design structure would be submitted to the Minister of Department of Public Service and Administration (DPPS)A for concurrence by the end of February. The new structure would ensure that the DoC was well capacitated and could respond well to government policy and State Owned Enterprise (SOE) management challenges.

Another committee resolution advised the DoC to consider the creation of a specialised division to manage its relationships with its SOEs. This was a sensitive area, due to legal implications and personality differences that had to be managed. The DoC had a shareholder management division at the level of Chief Director. This division would be upgraded to the level of Deputy Director General in order to strengthen the oversight function.

The largest part of the budget of the DoC went to the SOEs and the SOEs were the delivery arm of the DoC. The oversight function would be further strengthened by introducing additional reporting requirements, including monthly financial reports, reporting on contracts supporting the governments job creation initiatives, departmental strategy, and compliance with corporate governance requirements. The minutes of board meetings had to be submitted to the Minister. These new oversight functions would be difficult to execute, because SOEs were entitled to a degree of independence and did not like interference. At the same time the DoC had the responsibility of oversight over them.

He said that the Minister and the DoC needed the minutes of the SOEs in order to detect problems early on, and ensure SOEs were functioning properly. Compliance with corporate governance prescripts were major problems with all SOEs.

If the DoC could build strong SOEs, there would be a positive impact in terms of service delivery.
Although there were still challenges concerning certain aspects of the sphere of influence of the DoC, there was currently an atmosphere of hope and optimism, and an enthusiasm to work towards its resolution.

Discussion
Ms Faith Muthambi (ANC) referred to page 4 of the presentation where Dr Wesso mentioned the set-top box manufacturing. She pointed out that this process had been delayed. According to page 18 of the Annual Report 2009/10, timelines had been submitted. Currently, it was the last quarter of the financial year, which meant that the process had been delayed for 11 months. Had a new plan been submitted to Cabinet? What was the new timeline?

Dr Wesso replied that there was a delay in the manufacturing of the set-top box, because the DoC was waiting for an announcement on the scanners. The DoC needed to come up with a manufacturing strategy in alignment with the New Growth Path. The new strategy was about to be submitted to Cabinet. It involved SMMEs in the manufacturing process. There was new technology available, DVBT2. New specifications had to be developed for the box.

Ms Muthambi came back to the timelines. She asked when the decision on the set-top box manufacturing was going to be concluded. She was concerned that it was the end of another financial year, and yet no final decision had been made.

Ms Muthambi referred to the filling of vacant positions on page 5 of the presentation, and said that she saw that the DoC had used consultants to the tune of R10 million. How was the filling of vacancies going to impact on the use of consultants?

Ms Muthambi said that on page 121 of the Annual Report, the report made mention of a contractor who had an initial contract of three months. The contract was then extended by another month, but during that last month the DoC spent triple the amount of money on this contractor that it spent during the first three-month contract. Was there an explanation? [This was the investigation into allegations levelled against the Chief Director HR. This consultant had an initial contract of three months, which was extended by another month. For the three months R298 965, was spent, and for the 1 month contract, R193 800.]

She was concerned about the contract management abilities of the DoC. There were three sessions of gathering legal opinions from consultants, of 5 days each. Why was the DoC not charged for the hours worked, instead of days, as she understood that attorneys charged by the hour.

Ms Muthambi noted that R304 309 was spent on a forensic investigation. She wanted to know what the outcome of the investigation was.

Ms Muthambi referred to page 10 of the presentation and pages 198 and 199 of the Annual Report. She asked what the outcomes were of the disciplinary procedures and criminal proceedings were, as referred to on page 199 of the Annual Report.

Ms Muthambi also asked that the outcomes of the disciplinary procedures relating to the ‘Interest Telkom’ and the ‘Duplicate payment for same service’ entries on page 200 of the Annual Report, be made known to the Portfolio Committee.

Mr Vilakazi replied that it was true that there were weaknesses in contract management in the DoC. The reason why there were irregularities in the handling of contracts was the absence of procedures in the previous era. The previous DG used her position to overrule the contract management body in the past. This conflict in the management of contracts had been corrected and all problems in this regard had been attended to. Instances of misconduct have been investigated, disciplinary action had been taken and warning letters issued. Measures have been put in place to prevent the recurrence of these breaches of codes of procedures and conduct.

All instances of irregular expenditure, dating back to 2004, have been investigated. As an example, the wasteful expenditure in the form of interest paid to Telkom was the result of a phone line being intercepted by criminals. The DoC compiled a detailed report on fruitless and wasteful expenditure. The report detailed the incident, the year it occurred, the steps taken and the corrective measures put in place to prevent it from happening again. It was confident that it had dealt with these issues and that key controls have been put in place to avoid them recurring.

The Chairperson expressed the hope that the detailed report included instances where the former DG was apparently responsible for causing the DoC to spend funds wastefully. If she was implicated in any way, she had to face the consequences. If this information was not in the detailed report, it needed to be followed up.

Mr Vilkazi said that the matters concerning the former DG and anyone implicated in any instance of wasteful expenditure was included in the report.

The Chairperson indicated that he did not want to interfere with the Department’s internal processes, but that justice had to be seen to be done.

Mr N van den Berg (DA) said that this was the first meeting between the Committee and the DoC where the atmosphere was positive and optimistic. He remembered the despair on 13 October when Dr Wesso had called the DoC a ‘sinking ship’. He congratulated Dr Wesso as well as the new Minister for what they have achieved to date. As part of the opposition in Parliament, it was not good to see the DoC in disarray, and he was thankful for the positive spirit displayed by the DoC. The DoC had a very important role in the development of the country, for example the importance of broadband and other technologies. He hoped that the positive outlook of the DoC would filter through to its SOEs. He acknowledged that the last two years had been very difficult. He asked the delegation to congratulate the Minister on his behalf and wish him the best of luck.

Ms M Magazi (ANC) said that Mr van den Berg’s assertion that the DoC was in disarray, was exaggeration and could mislead the media.

Mr van den Berg defended his assertion that the DoC was in disarray. He quoted Mr Ismael Vadi, previous Chairperson of this Committee, where he said in the Committee Budgetary Review and Recommendation Report on the DoC 209/10 Annual Report that: “The DoC is in disarray, if not wholly dysfunctional” He said that he was not misleading the media. It was stated by this Committee and the Committee had signed the report and agreed that it was true, so he had not fabricated it. He did not appreciate the slap on the wrist by Ms Magazi.

Mr C Kekana (ANC) said that outsiders did not feel the disarray claimed. He said that 2010 was a very important year for South Africa and for the DoC as well, because of the 2010 FIFA Soccer World Cup Tournament. Everybody praised the Government for the way in which it managed the transport, communications and other services essential to the success of the WC Tournament. If the DoC was totally dysfunctional, how did it manage to play its role so well that it contributed to a virtually flawless WC Tournament, keeping in mind the massive amount of media activity involved? In his opinion, there may have been problems, but nationally it went well and outsiders did not feel the disarray.

Ms Magazi said, on institutional realignment, the presentation proposed that the SOEs had to submit the minutes of their board meetings to the Minister. She wanted to check in terms of the principles of corporative governance, whether it gave the DG that authority?  To her, it sounded as if the DoC was monitoring the discussions that were going on in the meetings which amounted to some form of control, while she believed that SOEs had to be given leeway. She also asked about the skills audit.

Dr Wesso replied that there was sensitivity around oversight. He asked Mr Vilakazi to talk about this. He stated the contradiction: the DoC had the responsibility to do oversight over the SOEs, but it could not do oversight, because the entities were independent. The relationship between the DoC and the SOEs needed to be clarified, so that the DoC could know what information it was entitled to. Currently, the DoC got information too late, when the damage had been done, and it was too late to intervene. On the other hand, the DoC had to answer to the Committee as to why things went wrong and why it did not intervene. Overseeing ICASA, posed the same contradiction. The DoC had to oversee ICASA, but ICASA was independent and therefore not accountable to the DoC. These issues were sensitive, but they had to be dealt with constructively.

Mr Vilakazi, replied that the challenges around oversight were quite massive. As a department, the DoC had to decide whether to keep at arm’s-length and only intervene when things had gone wrong, or to apply the activism approach to the role of oversight. One way of keeping track of how well the SOEs were performing was to strengthen reports from SOEs. Normally the DoC would get quarterly reports, but this did not give enough information. Regarding issues of governance, things tended to fall apart in the background, without being mentioned in these reports. For example, the DoC only learnt about verbal contracts being entered into after the fact. By then, legal processes had been instituted.

The Department had looked at the principles which explained governance practices and their repercussions. It came to the conclusion that it had to strengthen oversight, but remain within the prescripts of the corporate governance framework. This would put the DoC in a position to respond pro-actively to problems emanating from the SOEs, and not wait for things to fall apart, leaving the DoC to explain and do damage control. Strengthening reporting by the SOEs was a strategy to put the Minister in the position to intervene before matters become critical, while remaining within the parameters of good governance.

Ms R Morutoa (ANC) said that asking that SOE board meeting minutes be submitted to the Minister was quite problematic because it indicated micro-managing. She expected that a report to the Minister would suffice.

 Ms S Ndabeni (ANC) agreed that asking for the minutes to be submitted to the Minister would amount to micro-managing. In other departments, the Minister met twice a month with parastatals, and through these meetings, was able to track performance. She said that when government established entities, it was important to give them the independence they deserved. There were clearly articulated frames of reference in place for SOEs, and when they stopped fulfilling their mandate, the Minister had to step in.

The Chairperson said that if the boards of the SOEs knew that the minutes of their meetings would be submitted to the Minister, everyone would perhaps not feel free to speak their minds. No one argued with the fact that there needed to be monitoring and oversight. A report would also capture the discussion; it did not need to be minutes.

Mr Vilakazi replied that it was a matter of how it was captured. As long as the Minister could get a sense of whether the decisions that the board made, were aligned with the broader objectives of Government to which the DoC was aligned. It could be a report instead of minutes.

Dr Wesso added that the DoC was in dialogue with SOEs on how best to go about doing the oversight. This was one of many different ways to get information from the SOEs. As Mr Vilakazi had explained, getting the information would put the DoC in the position to respond proactively instead of re-actively to problems. There were now regular meetings between the officials of SOEs and Government. There were also bilateral meetings between the boards of SOEs and the Minister in order to keep everybody informed. The DoC had started to put in place a positive environment in order to facilitate an easy flow of information.

Ms Morutoa said that the Portfolio Committee knew how oversight was done, because it had an oversight function itself. All she required was that the wording where it said that minutes had to be submitted to the Minister, be rephrased, to say that the Minister had to get reports from the SOEs.

The Chairperson summed up the discussion by telling the DoC not to micro-manage.

Dr Wesso said that the skills audit depended on the approach and the direction in which the Department was going. The purpose of the skills assessment was to relate the existing skills with skills of the future and how to up-skill and re-skill people in order to respond to a new environment. The idea was not to get rid of people.

The Chairperson asked if the DG had the report and whether it could be made available to the Members.

Dr Wesso said that if a report was a public document, it could be made available. The DoC was still trying to work towards the deadline at the end of March, as the DoC wanted to start the era of the new DG with a clean slate.

The Chairperson asked when the wasteful expenditure report would be available.

Dr Wesso asked in reply whether Friday 25 February 2011 would be in order.

Ms Magazi wanted to check whether that report has been presented to the Minister already. If the Minister had not yet seen it, it would be premature to make it available.

Ms Morutoa said that the DoC needed to specify exactly when the report could be expected. She could not foresee a situation whereby a report be made public before being presented to the Minister, but Parliament, the Portfolio Committee, needed the report.

Ms Muthambi said that there was a report about the action taken against the people who caused wasteful expenditure, and there was another report which would be available at the end of March.

The Chairperson said that the 25 February report, which dealt with wasteful expenditure, and the report for the end of March were two different matters.

Dr Wesso said that the report he referred to was the report that would be presented by the Minister on Wednesday 23 February 2011 to the Public Service and Administration Portfolio Committee, after which it would become a public document.

Ms Muthambi asked when the issues of irregular appointments would be dealt with. Were there no disciplinary codes and procedures in place? Turnaround time was meant to be 3 months in cases like those. Sometimes contract management issues took time. Lawyers liked to postpone, and they charged to do so. There was a need to treat disciplinary procedures like projects, with timelines.

The Chairperson asked how many people were involved in the irregular appointments, at which levels in the hierarchy and to what extent was this a problem in the DoC.

Dr Wesso replied that there were four or five cases of staff appointed without contracts. There were three cases of officials being appointed in posts of suspended staff. Two of these cases had been resolved. These two were DDG post and the remaining one was a Chief Director post. The DoC had sought a legal opinion on this issue and the process to resolve it, was underway. There were two or three cases where people have been appointed to positions that were not on the approved structure. There was one case of an official that had never been interviewed for the position that he was appointed to. All of the investigations have been finalised and action could be taken.

Ms Muthambi felt that the end of March 2011 was an unrealistic target to resolve all issues related to the irregular appointments. She asked what the legal implications of reversing those appointments would be.

Dr Wesso said that the DoC had done a lot of work and had arrived at a point where action could be taken. It was working hard to resolve all outstanding issues by the end of March 2011. It there were issues still unresolved by then, there would be a clear report about to what degree the issue had been resolved and what was still outstanding, but the DoC hoped to resolve everything and start the new financial year with a clean slate.

The Chairperson noted, regarding the finances of the DoC, that it stood at only 70% spending of its budget with only one month left in the current financial year. He expressed the hope that the DoC would not indulge in fiscal dumping by spending the money on trivial items like unnecessary new furniture and catering.

Ms Ndabeni said that the Acting DG had to take cognisance of the fact that if the remaining amount was not spent, it would go back to Treasury and the allocation to the DoC for the next financial year would be a lesser amount.

Dr Wesso replied that the remaining funds would be used for job creation programmes and that fiscal dumping would not happen. There was a delay in program implementation and the Department was working hard to implement these programs and spend the money within this financial year.

The Chairperson said that when the Portfolio Committee met the DoC on 13 Oct 2011, it was in a very bad state. There had been tremendous improvement and the Department was stabilising. The DoC still had to present its Strategic Plan on the 8 March 2011 when this stability would be more evident. He expected that the Members of the Committee would be satisfied that there was progress. He thanked Dr Wesso and the good work the DoC had been doing thus far.

The meeting was adjourned.






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