PRESENTATION TO THE PORTFOLIO COMMITTEE DEPARTMENT OF TELECOMMUNICATIONS AND POSTAL SERVICES 2015/2016 ANNUAL REPORT 11 October 2015

INTRODUCTION Background The 2015/16 Annual Report covers the following reporting period: 01 April 2015 to 31 March 2016. During the reporting period, the Department functioned under the organisational structure of the former Department of Communications, which is not aligned to its newly assigned mandate and functions. Therefore, the Department is currently in the process of revising the organisational structure so as to put in place an organisational structure and related processes, functions and systems which are fully aligned to its mandate and strategy. Presentation Outline Auditor-General’s findings Performance against 2015/16 APP, with specific focus on targets not achieved 2015/16 Financial Performance Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

AUDITOR-GENERAL’S FINDINGS The Department has received an Unqualified Audit for the 4th year in a row. The Department has in place an Audit Action Plan to ensure that the AG’s findings are addressed. The implementation of the Audit Action Plan is monitored on a regular basis by the Internal Audit Unit. Progress against the Audit Action Plan is provided at management meetings as well as to the Audit Committee. Comparison of AG’s Findings 2014/15 vs 2015/16 AG’s Findings 2014/15 2015/16 Audit report 3 2 Management letter 27 15 Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

FINDINGS IN THE AUDIT REPORT Details Action Plan Expenditure management Irregular expenditure – 8% of virement exceeded Virement register maintained by budget office All virements including shifting of funds reported to National Treasury on a monthly basis Procurement and contract management Reasons and motivation for deviations from normal SCM process not reasonable as required by practice note Contract list has been developed Contracts monitored on a regular basis Additional capacity in the SCM unit – recently appointed Deputy Director as well as the Assistant Director Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

KEY FINDINGS IN THE MANAGEMENT LETTER Details Action Plan Pre-determined objectives Achievement incorrectly reported in the APR (1 target) Internal controls enhanced to confirm that performance information is supported by accurate, valid and complete evidence Expenditure management Payment to suppliers not made within 30 days Centralised the receipt of invoices and a template to track and monitor the payment of invoices is in place. Control measures have been put in place to ensure that the process of certification of invoices is smooth. Human resource management HR Plan not submitted to DPSA timeously The HR Plan implementation report for 2015/16 was submitted to DPSA on 08 June 2016 The HR Plan will be reviewed once the organisational structure is finalised Performance Agreements not concluded and submitted within the required timeframe Consequence management measures have been put in place with regards to performance agreements not being concluded and submitted within required timeframe Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

RESOLVED AUDIT FINDINGS FOR 2014/15 FY Status HR Management Adequate controls were put in place and disciplinary measures were taken for non-compliance of submission of Performance Agreements An intensive process was followed to advertise and fill vacant funded posts in 2015/16 FY. Only four funded positions are currently not filled. Control measures have been put in place to ensure compliance with leave policies and procedures. Relevant HR Policies due for review were reviewed and extensions were granted for those policies where the timeframe lapsed. Misstatement in financial statement Regular follow undertaken ups with SOC Branch as well as SAPO Guidance from National Treasury as sourced regarding the finalisation of the matter Payment of suppliers in 30 days (Partially Resolved) Receipt of invoices is now centralized and a template to track and monitor the payment of invoices is in place. The amount of invoices not paid within the 30 days has significantly gone down, invoices not paid are exceptions to the rule (for example suppliers who do not provide requested information in time) Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Programme 3: ICT Policy, Research and Capacity Development (1) Target Status Comments on non-achievement Rapid Deployment Policy Fully achieved n/a ICT Capacity building programmes Information Ethics Programme in NHI sites prioritizing schools and health centres Partially achieved The MoU with the African Centre of Excellence for Information Ethics was only concluded in beginning of the fourth quarter, hence the Programme was not implemented in Free State, Mpumalanga and Kwa-Zulu Natal as planned. However, the remaining Provinces are currently being prioritised by the African Centre of Excellence for Information Ethics. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Programme 3: ICT Policy, Research and Capacity Development (2) Target Status Comments on non-achievement ICT and Gender mainstreaming (Mobinet and Techno-Girl Projects) Fully achieved n/a ICT and Children mainstreaming (Child Online Protection Programmes) ICT and Youth Mainstreaming (e-Social Cohesion Programme) ICT and Disability Mainstreaming (ICT Accessibility Programme) Roaming Policy / Policy Direction Draft Local Loop Strategy Policy Direction on Data Cost Monitoring and evaluation framework - to assess implementation of interventions to reduce the cost to communicate Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Programme 3: ICT Policy, Research and Capacity Development (2) Target Status Comments on non-achievement White Paper on National Integrated ICT Policy Partially achieved Due to the requirement from ESEID Cabinet Committee for revisions to be made in the White Paper, it was not gazetted as planned. The Department has since revised the White Paper accordingly and has subsequently obtained Cabinet approval on 28 September 2016. Alternative Dispute Resolution Regulations Fully achieved n/a ICT B-BBEE Charter Council ICT B-BBEE Sector Code Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Programme 3: ICT Policy, Research and Capacity Development (3) Target Status Comments on non-achievement Annual ICT B-BBEE Sector Compliance Report Partially achieved Delays in the appointment of the Council required the Council to prioritize the alignment of the Sector Code ahead of the development of the Sector Compliance Report. Although the Annual ICT B-BBEE Compliance Report was finalized by 31 March 2016, the final approval by Minister and submission to the DTI was achieved after the reporting period on 13 April 2016. Digital Entrepreneurship Programme to enhance ICT adoption and usage by SMMEs Lack of HR capacity due to the extended absence of the project manager owing to ill health negatively impacted on the project However, Digital Entrepreneurship is being Implemented through the Digital Opportunities Programme which is currently under way. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Programme 3: ICT Policy, Research and Capacity Development (4) Target Status Comments on non-achievement ICT Research Framework focusing on competitiveness and innovation Partially achieved Progress was largely impacted by the resignation of the Project Manager which resulted in HR capacity constraints. However ICT Research is currently being prioritised in the 2016/17 FY in collaboration with DST. Annual South African ICT Statistical Compendium Fully achieved n/a National Address System Policy Philatelic Strategy and Annual and Commemorative Stamp Programme Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Programme 3: ICT Policy, Research and Capacity Development (5) Target Status Comments on non-achievement Policy directive on regulation of ETOEs and Re-mailing Fully achieved n/a National e-Strategy Partially achieved Due to a change in the approach there were delays in achieving the target. However the development of the e-Strategy has been identified as a priority project in the 2016/17 financial year and is well underway through consultation with relevant stakeholders. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

ICT Infrastructure Support (1) Comments on non-achievement Programme 5: ICT Infrastructure Support (1) Target Status Comments on non-achievement Phase 1 of Digital Development plan - connectivity to 1296 identified government institutions Partially achieved Project was hampered largely by delays in the appointment of the connectivity service provider. However the appointment of the connectivity service provider is being addressed through the current tender process. Implementation plan for Phase 2 of Digital Development Fully achieved n/a Roadmap for the establishment of a wholesale open access network Policy direction on spectrum for broadband Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

ICT Infrastructure Support (2) Comments on non-achievement Programme 5: ICT Infrastructure Support (2) Target Status Comments on non-achievement Virtual Cybersecurity Hub Fully achieved n/a Cybersecurity Awareness Internet strategy SA Positions and proposals for WRC-15 Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Programme 4: ICT ENTERPRISE DEVELOPMENT AND SOC OVERSIGHT (1) Target Status Comments on non-achievement ICT SMME Support Programme Partially achieved The project was hindered by HR capacity constraints however, the project has been assigned to the ICT Policy and Strategy Branch who have already consulted relevant stakeholders and plan to finalise the draft Support Programme by October 2016. Licensing of Postbank (facilitation and monitoring) Fully achieved n/a Appointment of Postbank Board members Background checks of candidates took longer than anticipated to complete. Furthermore, delays in feedback from the SARB caused additional delays. However, on 04 July 2016 SARB granted SAPO authorisation to establish the Bank in terms of section 13 (1) of the Banks Act. SARB subsequently committed to prioritise completion of its feedback on the Postbank Board nominees. This feedback will facilitate the appointment of Postbank Board members Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Programme 4: ICT ENTERPRISE DEVELOPMENT AND SOC OVERSIGHT (1) Target Status Comments on non-achievement Establishment of the Postbank Holding Company Partially achieved Delays due to the need for extensive engagement with relevant stakeholders including SARB and National Treasury to clarify the conflicting requirements of the Postbank Act and the Banks Act with regard to the public company requirements. However, on 04 July 2016 SARB granted SAPO authorisation to establish the Bank in terms of section 13 (1) of the Banks Act. Priority will therefore be given to Bank Controlling Company requirements in the 2016/2017 financial year. Incorporation of the Postbank Company The project was hampered by delays in obtaining SARB’s decision on the request for authorization to establish the Bank and the Postbank Board appointments. However, on 04 July 2016 SARB granted SAPO authorisation to establish the Bank in terms of section 13 (1) of the Banks Act. Priority will therefore be given to Incorporation of the Postbank Company Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Programme 4: ICT ENTERPRISE DEVELOPMENT AND SOC OVERSIGHT (2) Target Status Comments on non-achievement Deployment of Post Offices / Points of Presence (PoPs) infrastructure (oversight & monitoring) Fully achieved n/a Review of the mandates and funding models for state owned companies Partially achieved Review of the mandates and funding models of Sentech and SITA were not finalised as planned. However the project has been incorporated into the SOC rationalisation process. In terms of the iNeSi Bill it was dependent on further engagements between the DTPS and the DHE&T, which is currently underway. The Departments have agreed in principle on the revised iNeSI Model. The iNeSI Business Case and iNeSI Bill are being revised in line with the revised iNeSI Model. The iNeSI Bill will be introduced to Parliament in 2017/18 financial year. Development of Oversight Model for the State Owned Companies Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Programme 2: ICT INTERNATIONAL AFFAIRS (1) Comments on non-achievement Target Status Comments on non-achievement Bilateral Exchange Programmes, focused on e-Government Fully achieved n/a Bilateral Agreement(s) with neighbouring countries and harmonization of frequency spectrum in the Region Collaboration with the ITU and UPU to develop models to improve connectivity and financial services in rural and underserviced areas through the postal network Partially achieved Delays were due to a revision in the approach proposed by the ITU to conduct a feasibility study because of transfer of funds from the previous completed SA-ITU UPU Cooperation Agreement UPU Quality of Service Fund projects to improve sub regional postal services Progress of the Postbus project was impacted by delays in the appointment of the service provider by SAPO. This process was however finalised in February 2016, hence new timelines have been developed towards finalising the project. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Programme 1: ADMINISTRATION Comments on non-achievement Target Status Comments on non-achievement Information Technology & Knowledge and Information Management Strategic Plan and Enterprise Architecture Fully achieved n/a Internal Control Framework Partially achieved The Department did not map, review and standardise all the Departmental processes largely due to the lack of specialised skills to undertake the mapping process. However the project is being prioritised in the 2016/17 APP. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

FINANCIAL PERFORMANCE 2015/16 Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

STATEMENT OF FINANCIAL PERFORMANCE (1) 2015/16 2014/15 REVENUE R’000 Annual appropriation 1 405 253 2 236 657 Departmental revenue 26 804 435 1 672 004 Direct Exchequer receipts - Aid assistance TOTAL REVENUE 28 209 688 3 908 661 Current expenditure Compensation of employees 181 693 183 930 Goods and Services – operational exp. 230 427 234 385 Interest and rent on land Total current expenditure 412 120 418 315 Content – First level Second level Third level Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

STATEMENT OF FINANCIAL PERFORMANCE (2) 2015/16 2014/15 R’000 Transfers and subsidies * 882 049 1 752 580 Expenditure for capital assets Tangible capital assets 3 425 10 213 Software & other intangible assets 2 056 205 Total expenditure for capital assets 5 481 10 418 Financial transactions in assets & liabilities 447 363 TOTAL EXPENDITURE 1 300 097 2 181 676 Content – First level Second level Third level Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

STATEMENT OF FINANCIAL PERFORMANCE (3) 2015/16 2014/15 R’000 Voted funds surrendered 105 156 54 981 Departmental revenue 26 804 435 1 672 004 Direct Exchequer receipts - Transferred to National Treasury 26 909 591 1 726 985 Content – First level Second level Third level Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

APPROPRIATION STATEMENT Expendi-ture as % of final appro-priation 2015/16 2014/15 Programme Final Appro-priation Actual Expen-diture Variance Expendi-ture as % of final appro-priation 1. Administration 223 030 221 864 1 166 99.5% 237 525 226 641 2. ICT International Affairs and Trade 43 310 41 542 1 768 95.9% 45 667 45 431 3. ICT Policy Development 97 132 73 979 23 153 76.2% 111 347 78 183 4. CT Enterprise Development 490 231 488 959 1 272 99.7% 786 602 785 781 5. ICT Infrastructure Development 551 550 473 753 77 797 85.9% 1 055 516 1 045 640 TOTAL 1 405 253 1 300 097 105 156 92.5% 2 236 657 2 181 676 Content – First level Second level Third level Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Content – First level Second level SUMMARY OF ECONOMIC CLASSIFICATION 2014/15 2013/14 Economic Classifi-cation Final Approp-riation Actual Expen-diture Variance Variance as % against final allocation Final Appro-priation Actual Expenditure Current payments 514 642 412 120 102 522 80.1 463 686 418 315 Transfers and subsidies 882 814 882 049 765 99.9 1 762 189 1 752 580 Payments for capital assets 7 350 5 481 1 869 74.6 10 419 10 418 Payment for Financial assets 447 - 100 363 TOTAL 1 405 253 1 300 097 105 156 92.5 2 236 657 2 181 676 Content – First level Second level Third level Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

DETAILS OF TRANSFER PAYMENTS Adjusted Appropriation Act R’000 Actual Transfer R’000 Variance USAASA - DTT: Distribution and project management costs 196 000 - USAASA - Operations 66 429 USAASA - DTT: Set top box, installation 181 160 Universal Service and Access Fund 52 380 SA POST OFFICE 115 092 NEMISA 36 601 Sentech: Dual Illumination 209 000 Foreign Government / International Organisation 25 394 24 629 765 TOTAL 882 056 881 291 Content – First level Second level Third level Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

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