Broadband rollout: Department of Telecommunications and Postal Services & Entities briefing

Meeting report

Department of Telecommunications and Postal Services (DTPS) and entities on Broadband rollout

Mr Tinyiko Ngobeni, Deputy Director General for ICT Infrastructure, Department of Telecommunications and Postal Services (DTPS) introduced himself and apologised that the Director General could not attend the meeting. Mr Marcus Raphela, Director of Broadband Services and Costing, DTPS and Mr Rendani Musetha, State-Owned Company (SOC) Oversight, DTPS, were then introduced.

Mr Ngobeni said that the presentation had been prepared with the assistance of the various entities. First the policy context would be looked at, followed by contextual issues, the global environment, collaboration with other stakeholders and finally a discussion on broadband initiatives.

In terms of policy context, the vision driving the country was the National Development Plan (NDP). The NDP objectives outlined the government’s commitment to ‘accelerate progress, deepen democracy and build a more inclusive society’ in order to eliminate poverty and reduce inequality in the country by 2030. The information communication technology (ICT) sector by 2030 would underpin the development of a dynamic and connected information society and a vibrant knowledge economy that was more economic and prosperous. The knowledge economy would be underpinned by access to high speed accessible broadband. The Strategic Integrated Project 15 aimed to expand access to communication technology which would ‘ensure universal service and access to reliable, affordable and secure broadband services by all South Africans… prioritising rural and under-serviced areas… stimulating economic growth.’ South Africa Connect policy objectives included that broadband reached the critical mass of South Africans, that the services were affordable, to avoid the duplication of infrastructure and to encourage competition.

In terms of contextual issues, there needed to be a consideration of supply-side and demand-side issues. Supply side considerations included that broadband was very capital intensive and required billions of rands. The recovery of investments must be secured – there must be a long payback period. South Africa also had geographical challenges and South Africa’s population was dispersed. It would be uneconomical to roll-out in certain areas and there may be a requirement of cross-subsidisation. Demand-side considerations included the affordability of services and devices, the affordability of local content, e-literacy and massification of e-skills and the availability of electricity. The SA broadband market considerations must take into account that the current market structure was dominated by two mobile operators with 83% of the market share between them, and one fixed operator with a market share of over 90%.  Telkom had the largest infrastructure rollout in the country (more than 147 000km) and Broadband Infraco had about 13 000km of fibre. The rest of the market included smaller players with niche footprints.

Mr Ngobeni then elaborated on the global environment. South Africa had dropped five places in the rankings, from 70 to 75, and a close analysis of this report showed that South Africa had made improvements but countries which had surpassed South Africa had improved at a quicker rate. In terms of the Environment sub-index, South Africa had improved from position 33 to 31. The Impact sub-index indicated that South Africa had stayed in the same at position, ranking 92. In terms of the Usage sub-index, South Africa had improved from 72 to 67. The Readiness sub-index indicated that South Africa had dropped from a ranking of 95 to a ranking of 102.

Leading countries were converging their government services, and different services were accessible on the same platform. As government, this was the direction that should be followed and government entities should be interconnected. Low maturity countries had a single-purpose governmental model, while leading countries had a unified government model.

From a policy point of view, three key policies were being focussed on. The National Spectrum Policy recognised that broadband spectrum would expedite the attainment of broadband targets as outlined in SA Connect. The Wholesale Open Access Policy would promote service competition and avoid unnecessary duplication of infrastructure. The Rapid Development Policy would expedite the rollout of electronic communications infrastructure by licensees. This included the implementation of effective timelines.

In terms of the broadband initiatives that were being coordinated and monitored, the Department would continue to coordinate and monitor various broadband projects nationally. There were various initiatives being run at national, provincial, local and private levels. At national level, phase one and phase two of broadband sought to meet the government’s demand. The provinces were continually finalising their plans to rollout broadband – Gauteng and the Western Cape had finalised their plans and were ready to rollout their infrastructure. The other provinces were still in the planning stages. At the municipal level, there were several municipal initiatives, including the rollout of fibre and providing wi-fi to citizens. In the private sector and public sector, the SOCs continue to roll out infrastructure.

The implementation approach of SA Connect had two phases of roll-out. The first phase focused on the provision of broadband connectivity services in eight districts. The facilities which would be connected in phase one included sectors of health, schools, government buildings, police, Thusong and rural areas. This project would deliver the connectivity services via available technologies, in line with SA Connect policy objectives and targets. The second phase would focus on providing broadband connectivity services in the remaining 44 districts. The facilities that would be connected in phase two included health, schools, government buildings, police, Thusong and community centres. A business case had been submitted to Treasury outlining the funding requirements. The Department was awaiting Treasury’s response or allocation for the second phase of SA Connect.

The breakdown of phase one facilities fitted with infrastructure was indicated on the various maps on the slide.  Since the operative was coming from SA Connect, the Department was looking at the availability of the high speed fibre infrastructure. Some provinces and districts had a lot of infrastructure, which made it easy to connect the surrounding districts to that infrastructure.  A district such as OR Tambo had many facilities, including schools, but there was not much fibre availability in this area. The other complexity with OR Tambo was that the terrain was complex and different technology mechanisms were required. The facilities were sparsely populated which also meant that fitting the infrastructure took a long time.

A high level implementation plan had been devised for phase one which considered the infrastructure and the facilities. The further one moved afield of the facilities, the more complex it became. The Gauteng broadband network project had been a bit slow. Gauteng had a total of 5 440 provincial facilities, of which 400 facilities would be provided with broadband connectivity during the rollout. The remaining facilities would be covered in phase two of SA Connect. In terms of the project progress, 285 facilities had been connected and the total number of schools connected was 100, and seven of these were already on the e-learning portal. The Western Cape Broadband Network Initiative had 1 964 facilities, of which 864 had been completed. The project was 50% complete. The government was working with the provinces to deliver broadband.

There were also projects considering wi-fi connectivity. In the meeting of July 2015, the Cabinet lekgotla had announced that the DTPS should identify townships and city centres where free public wi-fi could be rolled out. R40 million had been reprioritised to the wi-fi rollout project and funds had been transferred to the following metros: City of Tshwane, Ekurhuleni, Nelson Mandela Bay, Manguang, City of Cape Town and City of Johannesburg. EThekwini and Buffalo City were not included in the initial wi-fi rollout programme. There were planned sites in six metros, with a special focus on under-served areas in those metros.

Telkom was designated as a lead agency, with the responsibility to coordinate ICT SOCs in order to leverage and efficiently use the state’s assets and investments to expedite broadband rollout in a cost effective manner. In the meeting of July 2015, the Cabinet lekgotla had affirmed its decision of February 2015 and given the go-ahead to the Minister of Telecommunications and Postal services to foster a partnership with Telkom. The lekgotla had requested that the Department determine the value for money and legal framework for the partnership. Value for money included policy, financial, technical and economic benefits. Cabinet had approved the partnership with the lead entity for broadband rollout. Due process to facilitate the appointment was under way. Engagements between the Department and stakeholders were currently under way to finalise the appointment of the lead agency.

The policy benefits were divided into strategic decisions and the value proposition. In terms of strategic decisions, government had taken a decision to intervene in the roll out of broadband to accelerate the bridging of the digital divide. The value proposition was that government would derive value from the partnership on different policy fronts, as outlined in South Africa Connect -- such as universal broadband rollout, expedited rollout to meet the aggressive targets and the minimisation of the duplication of infrastructure.

The agreed coordination framework across all spheres of government meant that the DTPS would coordinate the activities of the various departments, the private sector and SOCs with the provincial steering committees. The provincial steering committees would coordinate with the provincial sphere and the local sphere. The diagram on slide 21 of the presentation handout displayed the coordination system pictorially. Collaboration between the DTPS and other spheres of government required the DTPS to ensure that there was a rollout of ICT infrastructure to all government institutions, including schools. The DPTS would work with other line departments to ensure that there was uptake and usage of broadband services in the country, facilitating e-government, e-education and e-health.

The final section involved broadband initiatives by state-owned enterprises (SOEs). SOC players in the market, including Telkom, Broadband Infraco, Sentech, SITA and USAASA, were some of the entities considered. Broadband Infraco sought to expand availability and access to broadband infrastructure to enable regional connectivity, implement projects of national interest and develop strategic partnerships. Infraco had expanded their operations across the provinces, although they were constrained financially.

The next entity considered was SITA. SITA’s cost reduction programme should make it easier for government to upgrade. The campaign runs from 1 November 2015 to 31 March 2016, and is only for new services and upgrades to existing services. This campaign would be followed by the SITA tariffs approval for 2016/2017, and access line providers would be worked with to ensure that the installation targets were met in line with the improved service level promises. There was a growing need for flexibility and high performance, for which fibre was needed.

USAASA had aligned its projects with SA Connect. In the Vhembe District Municipality, five towers had been upgraded and were live. The towers provide 10Mb/s broadband access to facilities including clinics, a school and a police station. There had been similar progress in Chief Albert Luthuli, in Mpumalanga.

Mr Ngobeni explained that Nemisa had focussed on skills initiatives to empower communities. It was important that the end users could use products such as online content in order to improve their skills. The content of the training components include an introduction to various Microsoft programmes, the use of email and the internet, as well as a cyber security awareness programme.

Discussion

Ms N Ndongeni (ANC) thanked Mr Ngobeni for the presentation. She referred the Committee to slide 11 and asked if the figures took into account the work that had been done -- what had been budgeted, what had been spent and what the shortfalls were.

Ms Shinn thanked the Department for a thorough and information-laden presentation. Clarity concerning what the DTPS was involved in, and what the provincial governments were involved in, was requested, as well as which projects were being brought into the SA Connect umbrella which were not of the Department’s initiation. Concerns about budgeting and which budget would be paying for the various projects, were expressed. She said that she assumed that the R700 million which had been budgeted over the medium term last year had been rolled into the medium term starting in two weeks’ time. She asked whether any of the R200 million which had been budgeted to be spent last year on SA Connect had been spent and if so, what it was spent on. Concerns included that there was not enough funding for it. She wanted to understand that from the budget put forward for the upcoming year, broadband had been allocated R1.5 billion for three years. R647 million of that was being spent on consultants, whose fees were increasing over the three years. She asked the Department to explain why so much was being spent on consultants and why most of it was at the end, rather than at the beginning of the project.

Ms Shinn then asked about the lead agency issue, and what the process was in appointing the agency. She said that for the first time, the term ‘partnership’ had arisen and asked whether this had been put forward to Treasury as a public-private partnership between the Department and Telkom. Had future scenarios been taken into consideration, particularly the increasing urbanisation of South Africa’s population? She asked whether a vast amount of money was being spent on areas which would not be populated in ten years’ time. In terms of connecting the 39 000 government offices in three years, she asked what this would cost and what numbers had been put before Treasury, and whether there was room in this for private sector involvement.

Ms D Tsotetsi (ANC) referred the Committee to page 12 of the presentation, stating that there was ‘rural 1,’ ‘rural 2’ and ‘rural 0.’ She assumed that there would be no connectivity for ‘rural 0’, but asked what ‘rural 2’ meant. There was uncertainty over which Gauteng facilities had been referred to, and she asked Mr Ngobeni for clarity.

Ms L Maseko (ANC) said that on page 16, there were many connectivity projects listed. What mechanisms monitored the progress of the facilities? There was much information about the facilities and future plans but there were no timeframes and estimated times for the completion of these projects. The Department needed to indicate the timeframes for the work to be done. The last slide was referred to, and the number of sites for the city of Tshwane, and she asked the Department to clarify an apparent inconsistency.

Mr K Siwela (ANC) said that he was from a rural area and that people were accessing connectivity. Since the announcement of broadband in 2014, what had been done and where had the Department spent its allocation from the last three years? Was there a clearer picture of the roles of the various entities and the Department?

The Chairperson thanked the Members for the questions, saying that the financial year was coming to an end and that it was important to understand what had been spent. Clarification about the information on the provinces and the metros was sought, as everything had been grouped together. The appropriated fund needed to be accounted for and the Department needed to tell the Committee what had been spent from the appropriated fund and where it had been spent. In terms of the sites which had been completed, it was not clear which sites had been completed and which sites had not. Slide 20 was referred to, and she asked who in the private sector was involved in the Department’s work. The focus was on the national sphere, but the provincial and local spheres needed this information too. In terms of provinces, Gauteng’s broadband rollout was driven by ‘e-government’ and entities had been established which had helped them – who were these entities?

The Chairperson then asked whether the structure of coordination had been implemented or not. She said that the figures had to be re-worked, as they were inconsistent. On slides 12 and 13, figures had been inserted which did not correlate. She also asked that the quarters be sorted out and that actual amounts were required. The Department had said they needed funds but that the estimated funds had not been provided and that where funds were allocated, they had been allocated to well-resourced areas. She said that this was a desktop analysis, and that she did not believe they had done a proper analysis. There was a prioritisation of areas high on infrastructure development, but areas which did not have infrastructure had not been prioritised. The potential of new metros, and the implications of this for the budget, had not been considered. She thanked the Department for the work they had done, but said that they would need to come back to explain things to the Committee.

Mr Ngobeni responded to the question about what had been budgeted and what had been achieved, agreeing that this information should be included and that it would be included at the next meeting. In terms of the allocation from Treasury for the first term, an amount of R740 million had been allocated for the first three years, although this did not cover all of the facilities. It covered about 50% of the facilities. He said that they had not started with the connectivity as planned and that they were still trying to finalise the appointment of a service provider. As a result, the money had not been spent.

Ms Shinn’s question was then addressed. Mr Ngobeni said that projects of SA Connect would be funded by the money from Treasury, pending the finalisation of the service provider. The comment was that the funding for broadband was insufficient and he said that the infrastructure was expensive, especially considering the demand. In terms of the budget allocated (R740 million) for the first three years, another R700 million for 2018/19 would be allocated following the Budget Vote. The amount that was required for phase one was R1.4 billion and Treasury had allocated R740 million, so plans were financially constrained. If the Department procured for connectivity in the first year, that connectivity could be expanded.

The issue of the consultants was the way the Treasury classified the spending as ‘consulting,’ because the facilitation process was under goods and services. On the issue of the Telkom partnership, since government was procuring services, someone needed to take the risk of investing in the infrastructure. The affordability of the services also had to be considered. Government also needed to satisfy some other policy goals which could be achieved through a partnership. In terms of the migration of people, expansion of infrastructure had been focussed on connecting schools. Each and every community had at least one school, so even if people were moving, the schools still needed access to that infrastructure.

Mr Ngobeni clarified the issue of ‘rural 1’ and ‘rural 2.’ When the planning was done, an analysis had been done concerning rural development. The number referred to the number of rural areas that would be impacted.

On the issue of Gauteng and the number of facilities, there were over 5 000 facilities in Gauteng and they needed to be connected. On the issue of wi-fi and what had been done after the Committee meeting, there were under-served areas -- even in places which had advanced infrastructure -- and there was a need to balance this. The usage was monitored and stakeholders were engaged with to determine the need in the community. In addition to this, the appointment of service providers depended on the area. Some of these providers had done a lot of planning and work. He added that a large amount had not been spent as they were first trying to finalise the appointment of the service provider.

Regarding the roles between the different government spheres, Mr Ngobeni said they had met and that they were striving for minimal duplication. The Department should be able to leverage on the existing programmes and structures. The other spheres should also interact to see how they could best implement their plans. They would provide additional financial information to the Committee. The plans were based on the three-year budget allocation. The committee that had been established had working groups, and had taken a long time to finalise. It had been operational for a short while and was assessing the sites so it would be easier to verify the information to see that it had been accurately reflected in the presentation. Slides 12 and 13 referred only to the current financial year. In terms of the privatisation of the metros which had infrastructure, one of the requirements was that the under-served areas needed to be focussed on. Schools which were not broadband connected were being considered.

Mr Raphela said the focus of the broadband committees was on the districts in the provinces. The committee worked with the Department. It incorporated the work done by provincial departments and at local level it addressed questions. The standing committee currently consisted of members of provincial departments and members of SOCs. Project managers had been appointed through the DTPS who liaised with the steering committee.

Ms Shinn wanted to confirm that Mr Ngobeni had said that the funding for the second phase would amount to R16 billion.

Ms Maseko said she thought the steering committee should deal with issues on a local and national level and that it should be responsible for the overall planning and coordination.

Ms Tsotetsi said that the presentation had been very summarised and congested. She got clarity only after hearing explanations, and asked if Mr Ngobeni could supply his document so that in his absence they could talk about the presentation.

Mr Ngobeni said that in terms of phase two, the analysis indicated that figures were constantly being modified. He would take Ms Maseko’s comment about strengthening the role of the steering committee seriously. He also said that he would address Ms Tsotetsi’s concerns about providing more information.

The Chairperson said that a follow up meeting was necessary to explain the timelines, what had been achieved and the status of the finances.

Committee programme: April to June

The Chairperson asked for comments on the Committee plan from April to June 2016 and confirmed that Members had received a revised Parliamentary programme. They were originally meant to have had a meeting the following week, but this had been converted to a constituency week. As a result, the meeting on the cost to communicate was not taking place as planned in that week. She said that they would try to find a place in the new programme.

 

It was highlighted that annual performance plans, together with strategic plans, must circulated by the end of the week. She noted the tablings and referrals, and said the Committee did not have any outstanding reports. Based on the processes in Parliament, an entity must account for the previous year in order to claim for the following year’s plan. The difficulty was that they had not received the financial report and the annual performance report. The Minister had been written to, to indicate the Committee’s difficulty.

The Chairperson then went through the programme with the Members. The Committee would start on 5 April 2016 with a briefing by the Auditor-General, which should not take more than two and a half hours. Then there would be a briefing by the Department on its strategic plan and annual performance plan (APP). On 7 April, there would be a briefing by the State Information Technology Agency (SITA) on its strategic plan and APP. On 12 April, there would be a briefing by the Universal Service and Access Agency of South Africa (USAASA) on its strategic plan and APP, followed by .zadna on its strategic plan and APP. On 14 April,  there would be a briefing by Sentech on its strategic plan and APP, followed by a briefing by the National Electronic Media Institute of SA (Nemisa) on its strategic plan and APP.  On 15 April, there would be a briefing by the South African Post Office (SAPO) on its strategic plan and APP.

On 26 April, there would be a presentation and adoption of the Committee Budget Vote Report and all internal matters. On 3 May, discussions would be held on ways to reduce costs to communicate, led by the Department. This was still being finalised, as an independent researcher may be invited to this meeting. On 10 May, discussions on plans by the Department and entities to support and grow small, medium and micro enterprise (SMME) development in the sector would be held. She requested that key members and role players be present. The constituency period was between 27 June and 22 July.

Ms M Shinn (DA) said that two of the dates and times were on caucus days. She asked if party caucuses had been suspended for this period. In addition to this, by the 10 May meeting it would have been almost a year since the Committee had failed to meet the transition through to digital broadcasting deadline, and the Committee had not had an update on the progress of that. She asked if it would not be timely to have a joint sitting with the Department of Communications to find out what was happening. If it was not done then, it would not be done until September.

The Chairperson replied that there were no caucuses in that period and that Wednesdays had been left, as some Members sat on Committees which met on Wednesdays. She noted Ms Shin’s request and said that they needed a discussion with their counterpart Committee. The programme discussion was postponed and the presentation by the Department was introduced. She said that she had not received an apology from the Director General (DG), and could not account for where he was.

Adoption of minutes

She then moved on to the suspended items on the agenda, specifically the Draft Minutes of the Portfolio Committee of Telecommunications and Postal Services of 25 November 2015. There were no corrections. Ms Tsotetsi moved to adopt the minutes, and Ms Maseko seconded the motion.

The Chairperson thanked the Members and adjourned the meeting.