1. PRESENTATION TO THE STANDING COMMITTEE ON APPROPRIATIONS
PRESENTATION TO THE STANDING COMMITTEE ON APPROPRIATIONS September 2016

2. 1. FOURTH QUARTER EXPENDITURE REPORT 2015/16

3. 2015/16 EXPENDITURE PER PROGRAMME
FINAL BUDGET R'000
BUDGET %
EXPENDITURE R'000
VARIANCE
R'000
% Spent
Administration
16%
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
35%
1 272
99.8%
Infrastructure Suppport
39%
77 797
85.9%
Total
100%
92.5%
Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development
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4. Expenditure per Economic Classification
Final Budget
Expenditure
Variance
% to be Spent
Compensation of employees
14 754
92%
Goods and services
87 768
72%
Transfers & Subsidies
765
99.9%
Payments for Capital Assets
7 350
5 481
1 869
75%
Payment for Financial Assets
447 -
100%
Total
92.5%
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5. TRANSFERS AND SUBSIDIES
Appropriation
Actual Transfer
Variance
% Spent
USAASA - DTT: Distribution and project management costs -
100%
USAASA - Operations
66 429
USAASA - DTT: Set top box, installation
Universal Service and Access Fund
52 380
SA POST OFFICE
NEMISA
36 601
Sentech: Dual Illuminnation
Foreign Government / International Organisation
25 394
24 629
765
97%
TOTAL
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6. The underspending is mainly due to:
The spending for the 2015/16 financial year amounted to R1.300 billion (92.5 per cent) from the adjusted budget of R1.405 billion and the underspending is R105.2 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 roll-out.
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7. The Broadband project funds were diverted to be utilised as follows:
Transfer of R100 million Sentech – Digital Terrestrial Television Migration Project Dual illumination.
2. Transfer of R50 million to SAPO – For the rollout of the National Address roll-out project.
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8. 2. FIRST QUARTER REPORT 2016/17

9. PROJECTED BUDGET TO 30 JUNE 2016 R'000
EXPENDITURE
PROGRAMME
BUDGET
R'000
BUDGET %
PROJECTED BUDGET TO JUNE R'000
EXPENDITURE R'000
VARIANCE R'000
AVAILABLE TO YEAR END R'000
% Spent
Administration 8%
48 407
52 126
(3 719)
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%
ICT Enterprise Develop and SOE Oversight
37%
58 816
74%
Infrastructure Suppport
49%
6 865
0.6%
Total
100%
31%
Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development
A global leader in the development and use of Information and Communication Technologies for socio-economic development

10. Expenditure per Economic Classification
Final Budget
Expenditure
Variance
% to be Spent
Compensation of employees
47 949
22%
Goods and services
38 343 8%
Transfers & Subsidies
103 0%
Payments for Capital Assets
4 968
2 882
2 086
58%
Payment for Financial Assets
(2)
100%
Total
31%
Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

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

13. Performance Information Inputs
Q4 APP Targets for 2015/16 Not Achieved
and
Q1 APP targets for 2016/17 Not Achieved

14. ICT ENTERPRISE DEVELOPMENT AND SOC OVERSIGHT Branch
APP Targets Not Achieved in Q /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)
Q4 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.
Q4 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.
Q4 TARGET: iNeSI 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.
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15. ICT Infrastructure Support Branch
APP Targets Not Achieved in Q /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
Q1 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.
Q1 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.
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16. Progress in resolving the challenges around the South African Post Office

17. Progress in resolving the challenges around the South African Post Office
Post the prolonged illegal strike, SAPO’s main challenges were:
Leadership Instability: Governance and leadership issues (inadequate internal control systems and accountability, high vacancy rate at senior management, inadequate leadership and management)
Progress
Appointment of the Board and Group CEO assisted to bring leadership stability & the filling of other critical senior positions (CFO, COO and Company Secretary) is being fast- tracked.
Governance structures put in place: SAPO maintains records of fruitless and wasteful expenditure, irregular expenditure, material losses and track progress of investigations and outcomes.
Financial misconduct committee maintains regular reviews on a monthly basis and report to the Board through the Audit & Risk Committee
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18. Progress in resolving the challenges around the South African Post Office
R650 mn 2016/2017 MTEF allocation, R50 million transferred for the National Address roll-out project & R3.7 billion long term borrowing (including existing R1 billion ) secured with the commercial banks by SAPO with the assistance of Treasury & DTPS. Borrowings supported by government guarantees issued by DTPS & Finance Ministers
Availability of the above funding is setting SAPO on the road to recovery as it assists to stabilise operations and labour environment by enabling settlements of long outstanding debts (unpaid creditors backlogs and historical labour agreements). It also assists with the implementation of the corporate plan (investing in some revenue generation initiatives) in subsequent quarters of 2016/17. SAPO also to finalise its strategy for its parcel and logistics subsidiary (CFG)
Complied with all SARB’s requirements for the application for authorization to establish the bank (s12 of Banks Act), authorisation was granted authorisation on 04 July Next steps towards obtaining the banking license to be completed by end of June 2017.
Funding & operational challenges:
Lack of funding & severe cash-flow shortfalls: Inability to invest in revenue generation initiatives, loss of customers’ confidence & inability to meet operational obligations (unpaid creditors backlogs, unmet long outstanding labour agreements etc)
Labour instability: Some threats of industrial actions and sporadic interruption of services by some of the Unions mainly due to labour becoming impatient with non-settlement of long outstanding agreements
Delays in the corporatisation of the Postbank
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