Annual Report 2011/12 2011/12 Financial Year Presentation to Portfolio Committee on Communications Annual Report 2011/12 2011/12 Financial Year

Introducing the Team Ms. Pumla Radebe (Chairperson) Mr. Sam Ledwaba Board Members Ms. Pumla Radebe (Chairperson) Mr. Sam Ledwaba Ms. Seadimo Chaba Mr. Raj Lalbahadur Ms. Charlotte Mampane Mr. Kenosi Moroka Appointed as from 01 September 2012

Presentation Overview Team Introduction Performance on Key Targets Summary of Financial Targets Summary of Audit Matters Rollover Request & Other Q1 2012/13 Progress & Expenditure Report

Performance on Key Targets

Performance against key targets Corporate Strategy / Theme: Make ICTs available, accessible and affordable to all South Africans Strategically Linked Objectives Initiatives to enable measurement and tracking of progress: Poor TV-owning households with access to Digital Broadcasting Services STBs subsidised for poor TV-owning households Unit Sub-Objectives (in line with Target) April 2011 – March 2012 Milestones Actual Performance Against Business Plan Plan and design Broadcasting Digital Migration Programme Q1: Establish partnership with public and private sectors.   Design systems and processes for subsidies. Achieved. Q2: Implement a pilot for systems and processes for subsidy applications.  Not Achieved due to institution of forensic investigations Q3: Implementation of STB scheme-of-ownership model. Not Achieved: All projects were placed on hold pending the conclusion of the forensic Investigation. Q4: Project launch was moved by the Minister to the third quarter of 2012/2013. Work has focused on readying the transaction platform through which subsidies will be issued in using SAPO’s infrastructure.

Performance against key targets Corporate Strategy / Theme: Make ICTs available, accessible and affordable to all South Africans Strategically Linked Objectives Name of the Objective: Facilitate interventions in ensuring affordable and equitable access and usage 2011/12 Target: One Under-serviced areas with BB infrastructure KPI April 2011 – March 2012 Milestones Actual Performance Against Business Plan Limpopo: Meraka Institute (CSIR) – Greater Tzaneen Broadband network. Q1: Requirements gathering   Consolidation of business case Appointment of service provider for network design Achieved. Q2: Network design and specification Approval of subsidy model and funding Engagement with stakeholders and ICT players Not Achieved. Project placed on hold as a consequence of the institution of a forensic audit on the Agency. Q3: Tender process for appointment of operator. Implementation Not Achieved: All projects were placed on hold pending the conclusion of the forensic audit. Q4: Monitoring and Evaluation Recent 3G coverage has disqualified Tzaneen as an underserviced area.

Performance against key targets Corporate Strategy / Theme: Make ICTs available, accessible and affordable to all South Africans Strategically Linked Objectives Name of the Objective: Facilitate interventions in ensuring affordable and equitable access and usage   2011/12 Target: 44 Access Centres Sub-Objectives (in line with Target) April 2011 – March 2012 Milestones Actual Performance Against Business Plan Implementation of rapid deployment strategy:   Establishment of access centres Q1: Establishment of 20 Access Centres Not Achieved. Project placed on hold as a consequence of the institution of a forensic audit Q2: Establishment of 24 Access Centres Q3: Monitoring and evaluation Not Achieved: All projects were placed on hold pending conclusion of the forensic audit. Q4:

Performance against key targets Corporate Strategy / Theme: Monitor and evaluate the extent to which universal access and services have been achieved Strategically Linked Objectives Name of the Objective: Monitor and evaluate effective use and social appropriation   2011/12 Target: GIS Map of public access facilities Audit of all public access ICT centre Development of measurable ICT access and impact indicators Implementation of a monitoring and evaluation tool

Performance against key targets Corporate Strategy / Theme: Undertake continuous research to promote, encourage, facilitate and offer guidance regarding universal service and access Strategically Linked Objectives Name of the Objective: Offer guidance regarding universal service and access, in view to inform policy and regulatory processes 2011/12 Target: Feasibility Study on national Broadband Sub-Objectives (in line with Target) April 2011 – March 2012 Milestones Actual Performance Against Business Plan Feasibility study for National Broadband, (Orchestrating the Backbone infrastructure with current players) : Feasibility study for achieving 25% of universal access to broadband for the period 2011-2016 Q1: Different technologies, services, market drivers and market structure that should drive universal access Not Achieved. Project placed on hold as a consequence of the institution of a forensic audit. Department of Communications undertook same project therefore need negated. Q2: This feasibility study output   Reporting and Recommendation Presentation of recommendation to shareholders for approval    Q3: Consultation and implementation Not Achieved: All projects were placed on hold pending conclusion of forensic Investigation. Q4: Not achieved. All projects were placed on hold pending conclusion of forensic Investigation.

Summary of Financial Performance

Summary of financial performance USAASA The Agency had a budget of R83.2 m of which 92% was spent during the financial year. The budget was spent as follows: 43% was spent on compensation of employees 2% on Capital Expenditure 47% on operational expenditure 8% was not spent, i.e. approx. R7m The R7mil surplus was due to an unspent portion of the budget that was allocated to the Broadcasting Digital Migration project for capacity building. A roll over was requested in this regard. The Agency had net cash flows of R15.6 m in the bank.

Summary of financial performance, cont… USAF The fund was allocated a total budget of R260.9 m approximately 98% was unspent. The projects that were budgeted for during the financial year were: Broadband digital migration, 84% of the entire budget Rapid deployment Handover project Broadband infrastructure None of the projects could get off the ground due to instability that was experienced at senior management as well as at the board level. The cash reserves were a total of R255.3 m at year-end. The entire budget has been the subject of a roll over request that was presented to the National treasury.

Summary of Audit Matters

Summary of Audit Matters USAASA The Agency obtained an unqualified audit opinion with several emphasis of matters as reflected below:- Fruitless and wasteful expenditure - R1,032m (77% due to rental of offices not occupied; 20% due to penalties & interest for late payments to SARS; remainder due to an amount paid for utilization of venue for cancelled workshop). Irregular Expenditure - R42,161m (91% due to non-compliance with bidding processes as reported by forensic audit; 58% of total relates to incidents from 2010/11 but only reported in 2011/12). Other matters relating to the audit of performance information as a result of SMART criteria non-compliance i.e. targets not specific, not measurable, not achievable, not realistic, not timely.

Summary of Audit Matters… USAF The Fund also obtained an unqualified audit opinion with the following emphasis of matter:- Material under spending of grant - R220m Fruitless and wasteful expenditure - R3,712m (relates to amounts paid to Telkom & Sentech for internet connectivity while computers were not connected) Irregular expenditure - R19,458m (76% of total amount relates to procurement during 2010/11 but discovered during 2011/12; 24% due to unauthorised fund transfer from USAF to USAASA)

Rollover Request & Other

Rollover Requested Budget Rollover USAASA budget R 8,122, 000 USAF budget R 258,667,000 Total Rollover Request R 266,789,000 * The amount includes the R220 million that was set aside for set top boxes subsidy that is also unspent.

Challenges CEO Suspensions CEO resigned during March 2012 and there is no replacement as yet Suspensions 3 Executive managers are on suspension and one (Executive Manager: Business Development Services) has since resigned 1 Senior Manager: Supply Chain Manager 1 Senior Manager: ICT (resigned) Delivery on projects needs to be accelerated Please note annexure and changes made to the business plan as per previous recommendations

Update on Disciplinary Processes Disciplinary process began in December 2011 and has experienced legal delays. Process currently on recess (adjourned) due to unavailability of Chairman Will resume once more in November, 2012 Anticipated completion is year-end

Way Forward

Way forward Appoint Board Committees within the current quarter The newly appointed board intends to implement the following: Appoint Board Committees within the current quarter Appoint a CEO by November 2012 Appoint the Board Secretary Speed up the process of finalising the disciplinary hearings Enhance and tighten corporate governance measures Review the organisation - Audit skills - Review organogram - Re-align existing skills

Q1 2012/13 – Progress as at end of June 2012

Q1 Core Project Progress Projects Q1 Target Progress as at Q1 Expenditure R Rapid Deployment Preferred entities appointed. Achieved. Two entities to roll-out total of 65 sites. 564, 623 Fund Manual & Standard Operating Procedures Design and develop draft operating guidelines. Report on Standard Manual for accessing funding from the Fund. Achieved. Draft manual complete and undergoing internal consultation. - UA & S Strategy Service provider appointed. Not Achieved. Terms of reference reviewed. Scope totally revised to provide for ICT national strategy & organizational repositioning of Agency in support of strategy. DTT Customization & testing of SAPO processing & transacting platform Achieved. Partnership formalities complete. Technical collaboration underway. Final costing pending.

Q1 Core Project Progress Q1 Target Progress as at Q1 Expenditure Connectivity Upgrade Audit & agreements signed with identified sites. Not Achieved. Terms of reference approved. Centre audit took longer than anticipated.

USAF VARIANCE REPORT FOR FIRST QUARTER 2012-13 Q1 Expenditure Report USAF VARIANCE REPORT FOR FIRST QUARTER 2012-13   YEAR-TO-DATE Expenditure Item Annual Budget 2011/12 Q1 Budget Q1 Actuals % Variance Comments Income DOC Appropriated Income 273,977,000 4,486,000 0.00% Total Income Expenditure Project costs 2,053,000 513,250 303,174 40.93% Project costs are directly related to the level of activity in projects, they are expected to pick up once implementation begins in earnest in the next two quarters Strategy document and Usaf Manual 2,850,000 285,000 - 100.00% Tender advertised ,appointment has not happened yet, the process of evaluating and adjudicating will soon begin. STB Subsidies for BDM 230,000,000 Agreement to customise technical transacting platform in place with SAPO. Platform complete and undergoing testing. Rapid Deployment 31,285,000 1,240,000 261,450 78.92% Two entities awarded to roll out 65 centres. The 2nd invitation for subsidies to roll out the balance of 135 centres for the year . Connectivity 7,000,000 2,250,000 5,448 99.76% Audit of existing connectivity at the existing centres has been completed. A process of engaging Sentech to come up with the best solution is underway. Bank charges & Audit fees 789,000 197,250 195,542 0.87% Total expenditure 4,485,500 765,613 Surplus for the first quarter. 3,720,387 82.94% 

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