USAASA / USAF 2015/16 Annual Performance Report Presentation to Portfolio Committee on Telecommunications & Postal Services 13 October 2016 “Universal Access and Service to ICT for All”

Vision, Mission & Values To facilitate the rollout of adequate Information and Communication Technology (ICT) infrastructure to enable universal access to under-serviced areas in South Africa. To facilitate ICT service to under-serviced areas and thereby contributing to the reduction of poverty and unemployment in South Africa. To promote and pursue the goal of Universal Access and Services and contribute to the sharing and preservation of information in order to build South Africa’s sustainable knowledge society. Values: Batho Pele – We believe in providing excellent, efficient and effective service to all customers and stakeholders. Integrity – We uphold high standards of trust; condemn bribery and corruption; and uphold honesty and respect in all interactions with stakeholders. Accountability – We foster employee ownership and responsibility in ensuring quality service. Innovation – We support employee creativity in delivering all our services. Transparency – We encourage openness in all our activities. Teamwork – We strive to create a harmonious work environment, where all employees and contributors are respected. Vision: “Universal Access and Service to ICT for All”.

Policy Drivers The Constitution: Enables equality in the rights, privileges and benefits of citizenship, including the guarantees of freedom of expression and association in the Bill of Rights in digital world SIP-15: Expanding Access to Communication Technology 100% access to digital ICTs for all South Africans by 2020 as a driver of new economic opportunities and digital equity New Growth Path Job creation drivers include developing a knowledge economy – an economy underpinned by access to affordable high speed broadband The National Development Plan: Elimination of poverty and the reduction of inequality. The ICT sector by 2030 will underpin the development of a dynamic and connected information society and a vibrant knowledge economy that is more inclusive and prosperous The Medium Term Strategic Framework is a 5-year implementation plan for the NDP: Connect all schools, public health and other government facilities through broadband by 2020. Emphasises improving service delivery South Africa Connect: Affordable broadband available nationally, to meet the diverse needs of public and private users, both formal and informal, consumers and citizens

Legislative Mandate: Electronic Communications Act (ECA) In terms of the ECA the Agency must (amongst others): - strive to promote the goal of universal access and universal service; -foster the adoption and use of new methods of attaining universal access and universal service; -make recommendations to enable the Minister to determine what constitutes universal access, universal service and under-serviced areas; -conduct research into and keep abreast of developments in the Republic and elsewhere on information communication technology, electronic communications services and electronic communications facilities; -make recommendations to the Minister in relation to policy on any matter relating to universal access and universal service; -advise the Authority (ICASA) on any matter relating to universal access and universal service; manage the Universal Service and Access Fund (USAF) in accordance with the provisions of the Act; -submit annual reports on its operations, budget and expenses to the Minister; -provide incentives for network licensees to construct, operate, and maintain networks in under-serviced areas.

Overview: 2015/16 Financial Year Focus Areas USAASA: Enhance Human Capital: Organisational Development Re-align IT systems & business processes: ERP Enhance Good Corporate Governance & Accountability: AG Audit Outcomes USAF: Broadband Rollout: Mutale and Albert Luthuli Schools Connectivity: Schools for Persons with Disability Broadcasting Digital Migration Annual Performance vs 2015/16 Planned Targets 12 of 24 Annual Performance Plan (APP) targets achieved = 50% 2 of 3 Annual Performance Plan (APP) targets achieved = 67% Filling of Key Positions Chairperson of the Board Resigned on 04 December 2015 Deputy Chairperson of the Board currently occupies this position in an acting capacity Chief Executive Officer (CEO) Contract ended 31 March 2015 New CEO commenced duty in May 2016 Company Secretary (CS) Resigned in March 2015 New CS commenced duty in July 2016 Chief Financial Officer (CFO) Resigned in October 2015 Recruitment processes for appointment of a new CFO at an advanced stage AG Audit Outcomes Unqualified AG Audit Opinion: Matters of Emphasis

Annual Performance Against Predetermined Objectives Strategic Objective USAASA supports USAF project delivery through the provision of world class project management, supply chain management, human resources, and administrative support Key Performance Indicator (KPI) Annual Target Actual Achievement Status Deviation Reason for Deviation Mitigation Plan Percentage availability of business systems to support USAASA and USAF 98% availability of business systems 99.35% availability of business systems for 2015/2016 N/A Percentage of legal advice and resolution strategies in accordance with legislation and policy provided within 7 (seven) days Capacitate legal services through; Internal processes Knowledge sharing Contract management Legal services capacitated to provide legal opinions & draft contractual agreements Accurate financial statements which are GRAP and Treasury regulations compliant Produce accurate 2014/15 financial statements with the objective to get an unqualified audit opinion 2014/15 financial statements were produced and an unqualified audit opinion achieved Number of approved strategic plans and APP’s for USAASA and USAF Strategic Plans APPs developed, approved by the Board and submitted to the Minister of DTPS and to Parliament on time USAASA / USAF plans developed, approved and submitted on time 6

Annual Performance Against Predetermined Objectives Strategic Objective USAASA supports USAF project delivery through the provision of world class project management, supply chain management, human resources, and administrative support Key Performance Indicator (KPI) Annual Target Actual Achievement Status Deviation Reason for Deviation Mitigation Plan Number of executive management meetings conducted 12 executive management meetings conducted 12 EXCO meetings were conducted as planned N/A Percentage of procurement from BBBEE 80% of USAASA budget procurement from BBBEE 91% BBBEE spending for 2015/16 Number USAASA & USAF Quarterly Reports and Annual Performance Reports Quarterly reports developed, approved and submitted to DTPS within 30 days of the end of the quarter Monthly monitoring of organisational performance Organisational performance was tracked through monthly monitoring reports 7

Annual Performance Against Predetermined Objectives Strategic Objective USAASA supports USAF project delivery through the provision of world class project management, supply chain management, human resources, and administrative support Key Performance Indicator (KPI) Annual Target Actual Achievement Status Deviation Reason for Deviation Mitigation Plan Number of audited Annual Performance Reports for USAASA and USAF Audited USAASA and USAF Annual Reports submitted to DTPS and Parliament within the stipulated time frames Audited USAASA and USAF Annual Reports submitted to DTPS on the 31st August 2015 N/A Three year rolling strategic plan and annual audit plan Approved Three year rolling strategic plan and annual audit plan Updated top 10 corporate/strategic risk register Bi-annual (2) risk assessments workshops conducted Bi- annual risk workshops conducted as planned, to monitor and update the top 10 corporate risks register Updated operational risk registers Quarterly (4) operational risk assessment workshops conducted with all divisions Quarterly workshops conducted for all divisions within the Agency

Annual Performance Against Predetermined Objectives Strategic Objective USAASA supports USAF project delivery through the provision of world class project management, supply chain management, human resources, and administrative support Key Performance Indicator (KPI) Annual Target Actual Achievement Status Deviation Reason for Deviation Mitigation Plan Implementation of the organisational development (OD) Alignment of USAASA according to OD structure Employees were not migrated to OD structure OD structure not implemented OD project was put in abeyance for reviewing the OD processes OD will reach finalisation in 3rd quarter of 2016/17 Improvement of Business process automation ERP system rollout   Geographic Information System (GIS) upgrade Network Planning and Monitoring Targets not achieved ERP system not rolled out No GIS System upgrade No GIS Network Planning and Monitoring ERP rollout dependent on OD finalisation GIS system upgrade and network planning not conducted due to financial constrains ERP project to go - live in r 1st quarter of 2017/18 (dependent on finalisation of OD project) GIS remains unfunded Stock count and physical verification of procured BDM STB’s at warehouses 100% stock count of selected procured BDM Set-Top-Boxes in warehouses Stock counts were not carried out quarterly. Only year-end stock verifications were undertaken in 2015/16 Appointment of logistics officers and students for stock counts not achieved due to financial constraints Physical stock verifications of STB’s to continue in 2016/17 Managing the procurement of BDM Set Top Boxes (STB’s) Project Management of Set Top Boxes roll out subsidy scheme BDM Project management was done internally due to financial constraints No service provider appointed for BDM project management services BDM project managed internally due to financial constraints Utilisation of internal resources for BDM project management 9

Annual Performance Against Predetermined Objectives Strategic Objective USAASA supports USAF project delivery through the provision of world class project management, supply chain management, human resources, and administrative support Key Performance Indicator (KPI) Annual Target Actual Achievement Status Deviation Reason for Deviation Mitigation Plan Number of main board and committee meetings conducted 4 USAASA Board, 4 USAF Board , 6 Audit & Risk (BARC), 4 BDS Committee, 4 HR & Remuneration (REMCO), 2 Social & Ethics meetings Board, BARC, BDS (Operations) Committee, REMCO meetings were held in accordance with APP targets. Only 1 Social & Ethics Committee was held Only one of the two planned Social & Ethics committee meetings was held A review of structural arrangements of Board Committees was initiated in Q4 Social and Ethics Committee meeting held in Q1 of 2016/17 Partnerships to the value of R1.5 billion raised in support of USAF Develop Partnership with various stakeholders to the value of R200 million in support of USAF projects A funding strategy was developed, however, implementation and reporting was not achieved R200 million not raised in support of USAF projects This initiative was overtaken by Operation Phakisa developments Target will not be pursued further in 2016/17 Number of audits completed 25 audits conducted as per approved annual audit plan 23 Audits conducted for the year Governance and HR audits not concluded Governance and HR audits not concluded due to capacity constraints Audits to be conducted as per approved annual audit plan in 2016/17 Improve visibility of brand USAASA and support USAF project in communities Public awareness campaigns to promote Brand USAASA and USAF Projects USAASA / USAF brands were promoted through exhibitions at various events Development of a Stakeholder Engagement Strategy for 2016 – 2019 USAASA did not initiate public awareness campaigns in accordance with a schedule of activities Capacity constraints Stakeholder engagements and public awareness will continue in 2016/17 10

Annual Performance Against Predetermined Objectives Strategic Objective USAASA established as a centre of excellence for universal access and services market information, knowledge and expertise Key Performance Indicator (KPI) Annual Target Actual Achievement Status Deviation Reason for Deviation Mitigation Plan Review and track RSA national policies and regulation Review and track RSA national policies and regulation impacting universal access and service A Consultation Paper on the Review of Universal Access, Universal Service, Under-Serviced Areas and Needy Persons was developed Formal internal approval process and submission to DTPS was not concluded No timely approval and submission of Consultation Paper Focus will be on impact assessments for USAF funded ICT infrastructural projects in 2016/17 Create a universal service and access framework to promote ICT Accessibility for ICT for people with disabilities Develop, maintain and implement a focused policy and regulatory framework for people with disabilities Discussion document on focused policy and regulatory framework for people with disabilities developed Policy and regulatory framework for people with disabilities was not published Framework and research finding not published due to the national review of legislation governing the ICTs by the ICT Policy Review Panel Initiation of Research, Policy and strategy monitoring and advice Develop industry consultation and research papers on all universal access and services related topics Consultative Document developed and finalised internally Research findings not published Develop and maintain a database of all underserved areas in terms of ICT coverage Evaluating the Impact of Universal Access Models, Strategies and Policies in ICT on Poor Communities A framework for definitions of needy persons was developed Database of underserviced areas not automated using GIS GIS system was unfunded in 2015/16 11

USAF Annual Performance Against Predetermined Objectives USAF Annual Performance for 2015/16 Key Performance Indicator (KPI) Annual Target Actual Achievement Status Deviation Reason for Deviation Mitigation Plan Uptake and usage of a number of sustainable broadband networks initiated 02 under-serviced local municipalities broadband projects initiated & completed Broadband projects initiated & completed in Albert Luthuli Local Municipality (Gert Sibande District) and Mutale Local Municipality (Vhembe District) N/A Increased percentage of schools of persons with disabilities (PWD) having ICT connectivity 3 schools for PWDs in under serviced municipalities connected to ICT services Schools for PWDs: (1) Phumulani Special School, Albert Luthuli - Mpumalanga; (2) Fhulufhelo Special School, Mutale – Limpopo; (3) Tsolo Special School, Mhlontlo - Eastern Cape  Additional schools connected: (4) Makgatho L. Mandela Primary – Eastern Cape (5) Mphemba High School - Kwazulu Natal (KZN) (6) Mdhlangathe High School - KZN Percentage of 5.2 million needy households subsidised / funded for connection to digital broadcast 0,03% of targeted 5.2 million households subsidised / funded for connection to digital broadcast 4,27% of targeted 5.2 million households subsidised / funded for connection to digital broadcast Slow uptake of the set-top boxes by needy households Awareness programmes are dependent on the Department of Communications 12

USAASA 2015/16 Performance - Revenue Description Budget Income (R’000) Actual Income (R‘000) Variances (R‘000) Variance % Reasons for variances Revenue Other Income -Interest, levies & tenders 8 872 Not Applicable Transfers received USAASA Operations 66 429 - 0% BDM Distribution & Logistics 146 000 Enterprise Resource Planning (ERP) 50 000 Total revenue 262 429 271 301 3%

USAASA 2015/16 Performance - Expenditure Description Annual Budget (R’000) Actual Spending (R‘000) Variances (R‘000) YTD % Spent Reasons for variances Expenditure Compensation of employees 41 838 38 735 3 103 93% Savings of 7% due to vacant positions Goods and services 23 539 23 213 326 99% Depreciation - 3 228 -3 228 Non-cash item not budgeted Capex 1 052 900 152 86% Amounts earmarked for Head Office relocation remained unspent Total expenditure 66 429 66 076 353 99.5% Enterprise Resource Planning (ERP) 50 000 24 937 25 063 49,9% This forms part of Capex BDM Distribution & Logistics 146 000 14 811 131 189 10% Less spending as the BMD project was launched late in Dec 2015 Total 262 429 105 824 156 605 40% Attributable to unspent ERP (R25m) and BDM Distribution and Logistics funds (R131m)

USAASA 2015/16 Performance – Expenditure (‘R000’)

USAASA 2015/16 Performance - Expenditure

USAF 2015/16 Performance – Revenue Description Annual Budget Actuals YTD (R ‘000) Actuals as % of Annual Budget Reasons for variances Other Income (Interest) 98 452 - Not applicable Transfers received 233 540 Total revenue 331 992

USAF 2015/16 Performance - Expenditure Description Annual Budget Annual Spending (R ‘000) YTD % Spent Reasons for variances Broadband Infrastructure 30 937 26 560 86% Project savings on Mutale District and Albert Luthuli network completed STB Subsidies for BDM 181 160 172 693 95% Due to delays in launching the project, the allocated funds could not be fully spent during 2015/16 Rapid Deployment & Connectivity 17 862 14 258 80% Deployment of equipment in schools as well as connectivity of sites connected in prior years Bank Charges & audit Fees 870 1 080 124% Audit fees were higher than anticipated: additional work was done on the BDM project Project Costs 2 711 1 641 61% Costs fluctuate based on project and verification requirements and the 2015/16 verifications were affected by the delayed BDM project Total Spending 233 540 216 232 93% Total spending affected by the delayed BDM project implementation Broadband Rollover 18 290 14 142 77% Ratlou and Joe Morolong equipment /devices for clinics, schools and maintenance costs in relation to those sites BDM Tender Facilitation 676 - Tender facilitation amount spent in Q2 of the financial year. Total including rollovers 251 830 231 050 92% Unspent Funds 20 780 Mainly attributable to unspent BDM funds

USAF 2015/16 Performance - Expenditure

Audit Findings Summary USAASA 2011/12 2012/13 2013/14 2014/15 2015/16 # of audit findings 34 25 27 17 21 Audit Report Unqualified Supply Chain Management matters 15 9 5 USAF 2011/12 2012/13 2013/14 2014/15 2015/16 # of audit findings 16 8 12 Audit Report Unqualified Qualified Clean Supply Chain Management matters 4 3

Key Audit Findings Key USAASA / USAF 2015/16 AG audit findings included the following:  Strategic Planning and Performance Management Indicators not well defined Targets not specific and measurable Budget not linked to the planned objectives Not all 2015/16 APP targets reported on in Annual Performance Report Financial Management No controls in place to prevent irregular expenditure and fruitless and wasteful expenditure Lack of consequence management Deviations not in line with SCM Policy Incomplete non-compliance register Incorrect allocations Lack of Policy or Procedure to identify subsequent events Incomplete Inventory listing – Set Top Boxes

Focus Areas Tracking implementation of 2015/16 AG audit action plan Consequence management for non-compliance and poor performance Increased connectivity to underserviced and un-served areas Connectivity of Educational, Health and Government Institutions Optimise funding opportunities: alternate funding models giving effect to USAASA’s mandate Developing USAASA’s technical and project management capacity Improving organisational efficiency Create a Research Centre of Excellence: USAASA as an information hub on universal service and access Create a high performance culture Conclusion of delayed projects: ERP and OD Achievement of BDM project deliverables Creation of Smart Villages Stimulating user demand for digital economy 

Ndiyabulela Ke a leboha Ke a leboga Ngiyabonga Ngiyathokoza Ngiyabonga Inkomu Ndikhoulivhuh Dankie Thank you