PRESENTATION TO THE STANDING COMMITTEE ON APPROPRIATIONS 16

PRESENTATION TO THE STANDING COMMITTEE ON APPROPRIATIONS 16 September 2016

1. FOURTH QUARTER EXPENDITURE REPORT 2015/16

2015/16 EXPENDITURE PER PROGRAMME Administration FINAL BUDGET R'000 BUDGET % EXPENDITURE VARIANCE R'000 % Spent 223 030 16% 221 864 1 166 99. 5% ICT International Affairs 43 310 3% 41 542 1 768 95. 9% Policy Research and Capacity Dev 97 132 7% 73 979 23 153 76. 2% ICT Enterprise Dev & SOC Oversight 490 231 35% 488 960 1 272 99. 8% Infrastructure Suppport 551 550 39% 473 753 77 797 85. 9% 1 405 253 100% 1 300 097 105 156 92. 5% Total A global leader in the Africa development and use of Information and Communication for socio-economic development Making South a Global Leader in Harnessing ICTs for. Technologies Socio-economic Development 3

Expenditure per Economic Classification Final Budget Expenditure Variance % to be Spent Compensation of employees 196 447 181 693 14 754 92% Goods and services 318 195 230 427 87 768 72% Transfers & Subsidies 882 814 882 049 765 99. 9% Payments for Capital Assets 7 350 5 481 1 869 75% 447 - 100% 1 405 253 1 300 097 105 156 92. 5% Payment for Financial Assets Total Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development 4

TRANSFERS AND SUBSIDIES Appropriation Actual Transfer Variance % Spent 196 000 - 100% 66 429 - 100% 181 160 - 100% 52 380 - 100% 115 092 - 100% 36 601 - 100% Sentech: Dual Illuminnation Foreign Government / International Organisation 209 000 - 100% 25 394 24 629 765 97% TOTAL 882 056 881 291 765 100% USAASA - DTT: Distribution and project management costs USAASA - Operations USAASA - DTT: Set top box, installation Universal Service and Access Fund SA POST OFFICE NEMISA Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development 5

The spending for the 2015/16 financial year amounted to R 1. 300 billion (92. 5 per cent) from the adjusted budget of R 1. 405 billion and the underspending is R 105. 2 million. The spending rate is 5% less than the 2014/15 financial year’s expenditure. The underspending is mainly due to: • The delay in filling vacant positions, and • The implementation of the South Africa Connect Broadband project. The implementation of the project was delayed as the Department was exploring various options to implement the decision made by Cabinet Lekgotla in February 2015 to designate Telkom as the Lead Agency for Broadband rollout. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development 6

The Broadband project funds were diverted to be utilised as follows: 1. Transfer of R 100 million Sentech – Digital Terrestrial Television Migration Project Dual illumination. 2. Transfer of R 50 million to SAPO – For the rollout of the National Address roll-out project. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development 7

2. FIRST QUARTER REPORT 2016/17

EXPENDITURE PROGRAMME BUDGET % PROJECTED BUDGET R'000 TO 30 JUNE 2016 R'000 Administration EXPENDITURE R'000 VARIANCE AVAILABLE TO% Spent R'000 YEAR END R'000 193 337 8% 48 407 52 126 (3 719) 141 211 27% ICT International Affairs 44 710 2% 5 119 4 071 1 048 40 639 9% Policy Researchand Capacity Dev 95 618 4% 23 660 17 797 5 863 77 821 19% 891 801 37% 717 236 658 420 58 816 233 381 74% 1 191 946 49% 171 098 6 865 164 233 1 185 081 0. 6% 2 417 412 100% 965 520 739 279 226 241 1 678 133 31% ICT Enterprise Develop and SOE Oversight Infrastructure Suppport Total A global leader in the Africa development and use of Information and Communication for socio-economic development Making South a Global Leader in Harnessing ICTs for. Technologies Socio-economic Development 9

Expenditure per Economic Classification Final Budget Expenditure Variance % to be Spent Compensation of employees 213 713 47 949 165 764 22% Goods and services 494 583 38 343 456 240 8% 1 054 148 103 1 054 045 0% 4 968 2 882 2 086 58% 650 000 650 002 (2) 100% 2 417 412 739 279 1 678 133 31% Transfers & Subsidies Payments for Capital Assets Payment for Financial Assets Total Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development 10

TRANSFERS AND SUBSIDIES Appropriation Foreign governments and international organisations National Electronic Media Institute of South Africa Universal Service and Access Agency of South Africa Universal Service and Access Fund South African Post Office: Broadcasting Digital Migration Universal Service and Access Fund: Broadcasting Digital Migration TOTALS Actual Transfer Available to Year End % Spent 23 363 - - 0% 77 200 - - 0% 69 045 - - 0% 55 156 - - 0% 240 000 - - 0% 589 384 - - 0% 1 054 148 Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development 11

Variances per Economic Classification Compensation of Employees : The variance is as a result of vacant positions that have not been filled. Goods and Services : The variance is as a result of the delay in the implementation of projects stemming from the appointment of service providers. Transfers and Subsidies : The variance is as a result of transfers to The Departmental entities not being effected as per the draw down schedule. These transfers were to NEMISA, USAASA and USAF for operations and Broadcasting Digital Migration. Capital Assets : The variance is as a result payments for IT Makingupgrade South Africa aproject Global Leader in Harnessing infrastructure with SITA. ICTs for Socio-economic Development 12

Performance Information Inputs Q 4 APP Targets for 2015/16 Not Achieved and Q 1 APP targets for 2016/17 Not Achieved

APP Targets Not Achieved in Q 4 - 2015/16 ICT ENTERPRISE DEVELOPMENT AND SOC OVERSIGHT Branch 2015/16 TARGET: Mandates and funding models for state owned companies reviewed (in line with the ICT Policy Review and SA Connect) Q 4 TARGET: Recommendations report on Sentech’s revised mandate and funding model submitted to Cabinet for approval No Progress Reason: Human Resource capacity constraints. Work in progress: Capacity challenges to be addressed in the new financial year. Q 4 TARGET: Recommendations report on SITA’s revised mandate submitted to Cabinet for approval No Progress Reason: Human Resource capacity constraints. Work in progress: Capacity challenges to be addressed in the new financial year. Q 4 TARGET: i. Ne. SI Bill submitted to Parliament for enactment No Progress Reason: There were concerns raised by Department of Higher Education and Training. Work in progress: DTPS-DHET Task Team was established to resolve DHET concerns. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development 14

APP Targets Not Achieved in Q 1 - 2016/17 ICT Infrastructure Support Branch 2016/17 TARGET: Project manage the roll-out of the Broadband connectivity Implementation Plan Phase 1 towards connecting 2700 sites Q 1 TARGET: Broadband Connectivity Implementation Plan finalised No Progress Reason: No progress due to pending tender process finalisation. Work in progress: The Department through SITA went out on tender to appoint a service provider for broadband connectivity. Q 1 TARGET: Connectivity to 675 identified site’s project managed and monitored No Progress Reason: No progress due to pending tender process finalisation. Work in progress: The Department through SITA went out on tender to appoint a service provider for broadband connectivity. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development 15

Progress in resolving the challenges around the South African Post Office

Progress in resolving the challenges around the South African Post Office Post the prolonged illegal strike, SAPO’s main challenges were: o Leadership Instability: Governance and Progress o Appointment of the Board and Group CEO leadership issues (inadequate internal control assisted to bring leadership stability & the filling of systems and accountability, high vacancy other critical senior positions (CFO, COO and Company Secretary) is being fast-tracked. rate at senior management, inadequate leadership and management) o Governance structures put in place: SAPO maintains records of fruitless and wasteful expenditure, irregular expenditure, material losses and track progress of investigations and outcomes. o Financial misconduct committee maintains regular reviews on a monthly basis and report to the Board through the Audit & Risk Committee Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development 17

Progress in resolving the challenges around the South African Post Office • Funding & operational o transferred for the National Address roll-out project & R 3. 7 challenges: o billion long term borrowing (including existing R 1 billion ) Lack of funding & severe cash-flow shortfalls: Inability to invest secured with the commercial banks by SAPO with the in assistance of Treasury & DTPS. Borrowings supported by revenue generation initiatives, loss of government guarantees issued by DTPS & Finance customers’ confidence & inability to Ministers meet operational obligations (unpaid creditors o backlogs, long o Availability of the above funding is setting SAPO on the outstanding labour agreements etc) road to recovery as it assists to stabilise operations and Labour instability: Some threats of labour environment by enabling settlements of long industrial outstanding debts (unpaid creditors backlogs and actions and sporadic interruption of services by some of the historical labour agreements). It also assists with the Unions implementation of the corporate plan (investing in some mainly due to labour becoming impatient with settlement of outstanding agreements • unmet R 650 mn 2016/2017 MTEF allocation, R 50 million long non- revenue generation initiatives) in subsequent quarters of 2016/17. SAPO also to finalise its strategy for its parcel and logistics subsidiary (CFG) Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development Delays in the corporatisation of the 18