MEDIUM TERM BUDGET POLICY STATEMENT Lyndall Shope-Mafole Director-General 1 November 2005 the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

Table of content MTEF Adjustment Estimates Joint budget committee requested the department to present on issues impacting the department pursuant to the Minster of Finance tabling of MTPBS in Parliament with regard to: MTEF Adjustment Estimates Significant under spending in the last three years by the department the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

Policy Priorities requiring funding over the MTEF In pursuit of its strategic goal of positioning the ICTs to enable socio-economic development, especially addressing challenges of the second economy; the Department identified the following priorities as requiring above baseline funding : Sentech’s infrastructure investments in digitizing the signal distribution network, broadening its Wireless broadband and investment in the EASSy cable South African Post Office network expansion Roll out of Regional Television Broadcasting Services Strengthening ICASA Uncapping the Universal Services Fund (USF) Operationalising the Meraka Institute Department Restructuring the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

Recommendations over MTEF period MTEC recommended to Mincombud Initial funding for Sentech’s signal distribution Increased funding to Strengthen ICASA the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

Recommendations over MTEF period The department strategies on MTEC recommendations Regional Television Broadcasting services to be linked with digitisation programme of Sentech and its 2010 initiatives SAPO network expansion to be funded from its current subsidy Implementation of DOC Restructuring outcomes to be funded through internal reprioritization Sentech (Signal Distribution, Wireless broadband and EASSy) USF and Meraka Institute to follow up with Treasury and Mincombud

SENTECH Signal Distribution Mtec recommends 200 million out of 600 million required. This is grossly insufficient as: Sentech is the sole transmitter of radio and television programmes of SABC and some commercial and international broadcasters. The current analogue infrastructure is old and obsolete and therefore Sentech has no choice but to replace the transmission network Currently utilises outdated and inefficient analogue infrastructure Replacement of existing infrastructure with similar analogue will result in significant wastage as South Africa will be migrating onto the digital system as part of international coordinated migration strategy The following graph indicates that; More than 10% of the network is more than 25 years old More than 14% is between 20 and 25 years old. Taking the above into account more than 24% of the network is 20 and more years old. 26% of the network is fifteen years old and more. 28% of the network is between 10 and fifteen years old. the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

The 10 oldest high-powered transmitters cover about 26 million people. Transmitter Age Distribution The 10 oldest high-powered transmitters cover about 26 million people.

SENTECH Signal Distribution… Advantages of Digitization: Prioritizing the needs of the second economy Supporting local languages and local content, through the initiation of new channels that will broadcast in all South African languages. It is envisaged that, initially, up to 16 channels will be available once the network infrastructure of Sentech is digitised Sustainable Job creation Access to government and parliamentary information through technical support and connectivity to the Satellite Communications Network that links Parliament , the seat of Government and the Community Stations. Meeting 2010 guarantees Supporting efficient licence fee collection through the introduction of set top boxes which will enable effective license fee collection since it would be possible to disable reception on payment defaults the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

Wireless Broadband infrastructure Sentech currently supports governmental priorities and agenda in the following areas: Access to health services and health literacy Supporting implementation of the e-education policy Supporting delivery of Government services Security-Sentech is developing a highly secure communications package in collaboration with Grintek that will meet the requirements for secure communications required for 2010 World Cup. Sentech was appointed as SITA’s delivery partner for broadband services to the State- this will be the basis of vastly increased services delivery to and through State Departments, enabling them to improve efficiency in the provisions of Government services. Initial capital injection will enable Sentech to add shareholder value, both as a delivery partner of the State and as a business. the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

NEPAD and the East African Submarine Cable System (EASSy)-R130mil Sentech is active in the African continent, offering services and implementing projects related to broadcasting signal distribution. EASSy’s objective is to provide high quality and efficient communication services to the eastern half of the Saharan Africa at a more competitive price and provide competition to the West African submarine cable (WASC) EASSy will provide the affordable broadband access for the African continent to the rest of the world. the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

ICASA The Convergence Bill approved by Cabinet places additional duties and responsibilities on ICASA, for which they are not currently funded. Convergence legislation requires ICASA to redesign current regulations to address convergence, convert existing licenses, redesign license pricing schemes and training of staff to meet convergence challenges. the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

Funding Requirements over the MTEF Policy Priority 2006/07 R’000 2007/08 R’000 2008/09 R’000 Sentech 200,000 300,000 500,000 SAPO 63,250 Regional Television ICASA 177, 000 177,000 Universal Services Fund Meraka Institute 65,200 Restructuring 65,000 TOTAL MTEF REQUIREMENTS 1,810,450 1,242,450 1,505,450 Mtec Recommendations - Sentech - ICASA 95,000 40,000 50,000 60000 TOTAL RECOMENDATIONS 135,000 100,000 DEFICIT 1,675450 1,142,450 1,405,450 the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

Adjustment Estimates per Economic Classification Main Appropriation Roll-over Virement¹ Total additional appropriation Adjusted Appropriation Operations 247 141 4 105 27 355 31 460 278 601 Transfers and subsidies 763 882 10 075 -27 575 -17 500 746 382 Payments for capital assets 6 480 220 6 700 TOTAL 1 017 503 14 180 1 031 683 1. Consists mainly of Sapo extension of services, and other internal transfers. the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

Roll-Overs Not all funds appropriated in 2004/05 for the Community Radio Stations have been spent. Due to the inability to issue licenses to the Community Radio Stations, equipment was not purchased for these stations, as this would have resulted in additional expenditure for storage and insurance as the equipment can only be supplied to licensed radio stations. R10,075 million has been rolled over. As a recommendation from Treasury, the Department had to conduct a feasibility study on the possible ways of funding the Regional Television Channels. The feasibility study to develop a PPP has been completed and the option analysis is currently in progress. R4,105 million has been rolled over. the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

Reprioritisation The reprioritizing of funds is mainly due to the restructuring of the department. The programme structure changed and therefore the business objectives changed accordingly. Reprioritized funds for professional and special services to salaries. the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

Expenditure Trends as at end of September 2004 Economic Classification Adjusted Appro-priation April – September October – March Total Preliminary outcome Actual expendi-ture % of adjusted appropria-tion Current Payments 233 260 99 557 42,7% 116 366 49,9% 215 923 Transfers & subsidies 1 440 144 291 677 20,3% 1 139 167 79,1% 1 430 844 Payments for capital assets 6 513 1 810 27,8% 1 362 20,9% 3 172 TOTAL 1 679 917 393 044¹ 23,4%¹ 1 256 895 74,8%² 1 649 939 Discount the 750 million and the % spent increase to 30%. It is important to note that despite the once off allocation of 750 million the % spent in the current financial year is significantly higher than the previous years. 2 Discounting R750 amount to 506 million the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

Expenditure Trends as at end of September 2005 Economic Classification Adjusted Appro-priation April – September October – March Actual expendi-ture % of adjusted appropria-tion Projected expendi-ture Current Payments 278 601 116 646 41,9% 144 678 51,9% Transfers & subsidies 746 382 319 495 42,8% 444 386 59,5% Payments for capital assets 6 700 3 476 3 003 44,8% TOTAL 1 031 683 439 617 42,6% 592 067 57,4% the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

Expenditure Trends Significant improvement on the spending trends for the first six months of the financial year. 2004/05 – 23,4% ( Discounting conditional grants = 30%). 2005/06 – 42,6% the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

Spending Patterns 2000/01 R’000 2001/02 2002/03 2003/04 2004/05 Budget - Normal - Conditional 485 591 1 149 310 887 690 895 219 750 000 929 917 Spending 455 837 1 128 338 884 588 837 338 1 649 939 Roll-over 28 787 20 000 3 000 785 570 23 206 Approved Roll-over 758 329 14 180 Deficit/ Surplus 967 972 102 27 241 9 028 Savings % to budget 0,20% 0,08% 0,35% 0,3% Exc Cond 1.6% 1.8% the doc Making South Africa a Global Leader in harnessing ICT’s for Socio-Economic Development

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