ANNUAL REPORT 2014/2015

STATE INFORMATION TECHNOLOGY AGENCY STATE INFORMATION TECHNOLOGY AGENCY (SITA)

ANNUAL REPORT

2014/2015 FINANCIAL YEAR

RP151/2015 ISBN: 978-0-621-43625-9 CONTENTS

List of Abbreviations/Acronyms ...... iv

Foreword by the Minister ...... v

Administrative Information ...... vi

PART A: STRATEGIC OVERVIEW ...... 1

Vision, Mission and Corporate Values ...... 2

Legislative Mandates ...... 3

Organisational Structure ...... 5

Foreword by the Chairperson ...... 6

Chief Executive Officer’s Overview ...... 9

Statement of Responsibility and Confirmation of Accuracy ...... 12

PART B: PERFORMANCE INFORMATION ...... 13

Auditor-General’s Report: Predetermined Objectives ...... 14

Situational Analysis ...... 14

Performance Information by Programme ...... 21

Revenue Collection ...... 28

PART C: GOVERNANCE ...... 35

The SITA Board of Directors ...... 37

Board Attendance ...... 47

Board Committees ...... 48

Risk Management ...... 52 Internal Control ...... 53

Compliance with Laws and Regulations ...... 54

Fraud and Corruption ...... 55

Minimising Conflict of Interest ...... 56

Code of Conduct ...... 57

Company Secretary ...... 58

PART D: HUMAN CAPITAL MANAGEMENT ...... 59

Human Resource Oversight Statistics ...... 65

Health Safety And Environmental Issues ...... 70

Social Responsibility ...... 70

PART E: ANNUAL FINANCIAL STATEMENTS ...... 71

Statement of Responsibility by the Board of Directors ...... 72

Report by the Chief Executive Officer ...... 73

Report of Social and Ethics Committee ...... 89

Report of the Audit, Risk and Compliance Committee ...... 91

Report of the Auditor-General to Parliament on the State Information Technology Agency Soc Limited . . 94

Certificate by the Company Secretary ...... 99

Directors’ Report ...... 100

Annual Financial Statements ...... 105

Notes ...... 146 LIST OF ABBREVIATIONS/ACRONYMS

AFS Annual Financial Statements IT Information Technology

APP Annual Performance Plan LAN Local Area Network

ARCC Audit, Risk and Compliance Committee MIOS Minimum Interoperability Standards

BEE Black Economic Empowerment MLP Management Letter Points

CAPEX Capital Expenditure MTSF Medium Term Strategic Framework

CEO Chief Executive Officer NGN New Generation Network

CMMI Capability Maturity Model Integration NDP National Development Plan

DBE Department of Basic Education NPA National Prosecuting Authority

DHET Department of Higher Education NT National Treasury

DoD Department of Defence OHI Operational Health Index

DoH Department of Health OSM Original Software Manufacturer

DHA Department of Home Affairs P-CMM People Capability Maturity Model

DPSA Department of Public Service and Administration PFMA Public Finance Management Act

DPW Department of Public Works PFSC Projects and Financial Sustainability Committee

DTPS Department of Telecommunications and Postal Services PTN Public Telecommunications Network

EAP Employee Assistance Programme PWC PricewaterhouseCoopers

ECM Enterprise Content Management RFQ Request for Quotation

EE Employment Equity SAPS South African Police Services

ERP Enterprise Resource Planning SARS South African Revenue Service

EVP Employee Value Proposition SASSA South African Social Security Agency

EXCO Executive Committee SCM Supply Chain Management

GIS Geographical Information System SCoPA Standing Committee on Public Accounts

GRAP Generally Recognised Accounting Practice SOC State Owned Company

HPO High Performance Organisation SITA State Information Technology Agency

HR Human Resources SLA Service Level Agreement

IAF Internal Audit Function SMME Small, Medium and Micro Enterprise

IASB International Accounting Standards Board TIS Technical Information Systems

ICT Information and Communications Technology VAN Value Added Networks

IFMS Integrated Financial Management System WAN Wide Area Network

IFRS International Financial Reporting Standards WSP Workplace Skills Plan

IPSAS International Public Sector Accounting Standards

iv SITA ANNUAL REPORT 2014/2015 FOREWORD BY THE MINISTER

Dr Siyabonga Cwele Minister of Telecommunications and Postal Services

In line with international trends, the availability and wide use of information and communications technologies (ICTs) is critical for South Africa’s socio-economic development and global competitiveness. Access to ICTs will ensure the radical socio-economic transformation of our society, thus allowing us to deal with the effects of persistent unemployment, inequality and poverty prolonged by the legacy of apartheid. SITA is a critical vehicle for delivering the complex and much needed ICT services to South Africa’s citizens, particularly in the areas of broadband, cybersecurity and e-Government.

In the National Development Plan (NDP), government committed to achieve 100% broadband penetration by 2020. Phase 1 of the broadband rollout, to eight rural districts, was announced by President Zuma in his State of Nation Address in February 2015. Broadband rollout is a huge but urgent project, which must not be delayed if we are to remain globally competitive, and SITA has to play a pivotal role in driving this initiative.

With the expansion of ICT systems and coverage, good cybersecurity is essential. South Africa has implemented a number of strategic and tactical interventions, including the approval of National Cybersecurity Policy Framework (NCPF) on 7 March 2012. The aim is, among others, to promote a cybersecurity culture, demand compliance with minimum security standards, and ensure adequate national capacity to develop and protect our cyberspace. In this regard, SITA has to be the go-to provider of end-to-end services for secure IT environments.

Government has mandated SITA to prioritise e-Government and to drive a programme of action that will ensure that, by 2019, at least 70% of public-facing services are accessible online to citizens. The focus is on frontline departments and those entities dealing with critical data and archives in a secured environment. Through smart partnerships with social partners and the private sector, SITA has the opportunity to enhance our connectivity efforts, skill our citizens and consolidate e-Government and related e-strategies.

SITA remains central to leveraging ICT as a strategic resource, strengthening public sector operations and providing citizen-centred, convenient e-Government services; and, ultimately, contributing to socio-economic transformation and global competitiveness.

Honourable Dr Siyabonga Cwele MP Minister of Telecommunications and Postal Services Government of the Republic of South Africa 15 September 2015

FOREWORD BY THE MINISTER v ADMINISTRATIVE INFORMATION

REGISTERED NAME: State Information Technology Agency (SITA) SOC Limited

REGISTRATION NUMBER: 1999/001899/30

PHYSICAL ADDRESS: 459 Tsitsa Street Erasmuskloof Pretoria, South Africa

POSTAL ADDRESS: P O Box 26100 Monument Park 0105, South Africa

TELEPHONE NUMBER/S: +27 12 482 3000 FAX NUMBER: +27 12 367 5151 EMAIL ADDRESS: [email protected]

WEBSITE ADDRESS: http//www.sita.co.za

EXTERNAL AUDITORS: Auditor-General of South Africa

BANKERS: Standard Bank of South Africa

COMPANY SECRETARY Mashumi K Mzaidume

vi SITA ANNUAL REPORT 2014/2015 PART A: STRATEGIC OVERVIEW VISION, MMISSIONISSION AND CORPCORPORATEO VALUES

VISION

ToTo be the lead Information and Communications Technology (ICT) agency in public service delivery.

MISSIONMISSION

To render an efficient and value-added ICT service to the public sector in a secure, cost-effective and integrated manner, contributing to service delivery and citizen convenience.

VALUES

In the quest to achieve its mission and vision, SITA has adopted and seeks to promote the following values:

t
Service Excellence. We shall strive to attain internationally recognised standards of service quality, and maintain continuous improvement in service delivery.

t
Transparency. We shall always ensure transparency in everything we do in order to build trust and confidence with all our stakeholders.

t
Integrity. We shall conduct our business with integrity at all times to inculcate a culture of honesty, respect and accountability among all our employees.

t
Fairness. We shall treat all our partners, our suppliers and our employees with fairness at all times.

t
Prudence. We shall exercise prudence and economy in running the business of SITA and in pursuance of its goals and the objectives of government.

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Innovation. We shall pursue innovation by demonstrating thought leadership and proactive behaviour on the use of communication and information technology to enhance public service delivery.

2 SITA ANNUAL REPORT 2014/2015 LEGISLATIVE MANDATESNDATES

SITA is established in terms of thee SITA Act (No. 88 of 1998) as amended, and its mandate is informed by the recommendations of the Presidentialential Review Commission of 1998. In executing its role, SITA is also guided by the following legislation and regulations.ulations. t
SITA Regulations of 2005 t
Electronic Communication Actct ((No.No. 36 of 20052005)) t
Public Finance Management Act (PFMA) (No. 1 of 1999) t
Companies Act (No. 71 of 2008)08) t
Public Service Act (No. 103 off 1994), as amended by Public Service (Amendment) Act (No. 30 of 2007) t
Electronic Communication and Transactions Act (No. 21 of 2002) t
National Key Points Act (No. 102 of 1980), as amended by National Key Points Amendment Act (No. 47 of 1985) t
Preferential Procurement Policy Framework Act (No. 5 of 2000) t
Government IT House of Values, as contained in e-Government policy1 t
The Machinery of Government (May 2003)2 t
Minimum Interoperability Standards (MIOS) t
Minimum Information Security Standards

Constitution of the Republic of South Africa Act (No. 108 of 1996), as amended As a public enterprise, SITA is subject to the following mandates outlined in Chapter 10: Section 195: Basic values and principles governing public administration 1. Public administration must be governed by the democratic values and principles enshrined in the Constitution, including the following principles: a. A high standard of professional ethics must be promoted and maintained. b. Efficient, economic and effective use of resources must be promoted. c. Public administration must be development-oriented. d. Services must be provided impartially, fairly, equitably and without bias. e. People’s needs must be responded to, and the public must be encouraged to participate in policy-making. f. Public administration must be accountable.

1. DPSA (Department of Public Service and Administration.) 2001. Electronic Government - The digital future: A Public Service IT Policy Framework. Pretoria: DPSA.

2. DPSA. 2003. The Machinery of Government. Pretoria: DPSA.

LEGISLATIVE MANDATES 3 g. Transparency must be fostered by providing the public with timely, accessible and accurate information. h. Good human resource management and career-development practices, to maximise human potential, must be cultivated. i. Public administration must be broadly representative of the South African people, with employment and personnel management practices based on ability, objectivity, fairness, and the need to redress the imbalances of the past to achieve broad representation.

Section 217: Procurement 1. When an organ of state in the national, provincial or local sphere of government, or any other institution identified in the national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective. 2. Subsection (1) does not prevent the organs of state or institutions referred to in that subsection from implementing a procurement policy providing for the following: a. Categories of preference in the allocation of contracts. b. Protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination. 3. National legislation must prescribe a framework within which the policy referred to in subsection (2) must be implemented.

SITA Act (No. 88 of 1998), as amended by Act (No. 38 of 2002) According to the Act, the agency’s objects are: a. To improve service delivery to the public through the provision of information technology, information systems and related services in a maintained information system security environment to the departments and public bodies; and b. To promote the efficiency of departments and public bodies through the use of information technology.

SITA is listed as a Schedule 3A National Public Entity in terms of the PFMA. Government is the sole shareholder of SITA, and the Minister of Telecommunications and Postal Services exercises the custodian rights attached to the shareholder on behalf of the State. Although SITA, as a PFMA Schedule 3A entity, does not have to conclude a compact with the shareholder, a shareholder performance compact was concluded between SITA and the shareholder. The compact details the agreed key performance objectives and indicators for the organisation.

4 SITA ANNUAL REPORT 2014/2015 ORGANISATIONALAL STRUCTURE T ration S eg l E M C nce EMEN na ment & a TE G p io S ve Systems ve i en o Y ort l t ut ERVI imentation & SYSTEM S it S SERVICES tems Inttems in pl pp a st u ys MANAGEMENT MANA In S S Executive Systems Executive Execut Development & Development Institutional Integration Systems Deve . 1. Maintenance 2. & Implimentation Support 3. 1 M 2. Im 3. T AL RN IT IT TE INTERNAL IN s g n t o O S R ti a N s annin l CE emen O n ME tive mer o u O ervice i ty ag S to VINCIAL MANAGEMEN at s ST T pu O mer Rel icy & P ELATI Executive Exec C e R Rel Man Cu I to R RELATIONS ol CUSTOMER CU Customer Service ICT P D Deputy CEO 1. Relations 2. Management Customer Relations Customer Stakeholder & Planning Policy Strategy, Executive Support Executive 1. 2. ICT & PROVINCIAL MANAGEMENT DELIVERY Officer STRATEGIC Enterprise & Research Acadamy ICT EPMO Quality Norms, TECHNOLOGY MANAGEMENT Chief Technology 1. Architechture (EAB) Board 2. Development 3. 4. 5. Standards & CEO BOARD MINISTER Delivery SERVICES Infrastructure Security ICT 1. Services 2. Executive Service Executive INFRASTRUCTURE Officer FINANCE Financial Management Financial Chief Financial 1. Accounting 2. Accounting 3. Systems Processes & Internal Audit Internal Company Secretary Company RISK Risk Governance Compliance 1. Management 2. 3. & Regulation Ethics MANAGEMENT Chief Risk Officer Chief Officer Procurement Procurement Deputy CEO 1. PROCUREMENT SUPPORT & GOVERNANCE Services SERVICES CORPORATE HC Management HC Corporate Facilities ServicesLegal CPM 1. 2. Communications Marketing & 3. Management 4. 5. Executive Corporate Executive

ORGANISATIONAL STRUCTURE 5 FOREWORD BY THE CHAIRPERSONCHAIRP

J S Vilakazi Chairman ooff the Board ooff Directors

The information and communications technology (ICT) sector is a critical contrcontributori to the country’s economic growth. SITA has a significant opportunity to expand its reach and impact, anand to play a much larger role in helpinghelping deliver South Africa’s ICT ambitions. For that, and to reach its full potential,p SITA needs to enable government departments to deliver efficient and effective services to citizens through ICT.

Government’s adoption of the National Development Plan (NDP) as a roadmap continues to be the point of departure for all state departments, including SITA, to deliver the key national strategic priorities of poverty eradication, improved economic growth and social development. ICT is central to making these endeavours a reality for citizens, through enabling service delivery and contributing to modernising the state.

As ICT continues to transform the global environment, SITA has an ever-increasing role to play in assisting the South African government to deliver relevant and accessible services to its citizens through the effective use of ICT goods and services. Therefore, following its transfer to the Department of Telecommunications and Postal Service (DTPS) in July 2014, SITA streamlined its focus towards achieving integrated e-Government services, government data security and IT procurement for government. Attaining these ICT priorities will not only modernise government in line with international standards but will also reclaim SITA’s vision of being a leading ICT Agency.

On 1 April 2015, Dr Mohapi joined as CEO to lead the execution of the Board-defined and approved strategy. SITA has honed its capabilities and competencies to support the strategic plan, which resulted in pleasing progress in implementing the strategic initiatives outlined in the strategy.

SITA’s goal is to continue to build and strengthen its innovation capability and to be recognised as government’s thought partner. We will continue to collaborate with our shareholder DTPS, to determine how best to implement the SA Connect policy, which is targeted at driving greater digital inclusion and lowering the costs- to-communicate for all citizens. SA Connect is aligned to SITA’s strategic initiatives to lower the cost of IT to government through operational excellence.

6 SITA ANNUAL REPORT 2014/2015 SITA will continue to support government in its efforts to reduce fragmentation and duplication in the ICT sector through the State Owned Companies (SOC) rationalisation programme. This programme is aimed at aligning SOCs in all spheres of government in order to achieve the country’s developmental objectives and aspirations.

SITA, the DTPS and the Department of Public Service and Administration are collaborating on prioritising the e-enablement of at least five services by 2019 to meet the Medium Term Strategic Framework, Outcome 12, Sub-outcome 4, Action number 6 “prioritised services e-enabled”: Information technology (IT) is an important tool for improving service delivery. For example, IT can be used to make services more accessible, reduce the cost of accessing services, streamline administrative processes and improve turnaround times, and strengthen accountability and responsiveness. To achieve these objectives it is important that IT systems are tailored to specific areas of service delivery. Government will therefore identify and prioritise those areas where IT has the greatest potential to improve access to services.

Our e-Government programme will enable government to work more efficiently, strengthen public service delivery and enhance communication channels with citizens. Our approved procurement strategic plan will result in effective and integrated ICT supply chain management and will improve SITA’s turnaround time from entry to exit. In partnership with the Department of Higher Education and Training and Umalusi, we are fully committed to ensuring that the certificate distribution backlog of National Certification Vocational (NCV) is reduced from 192 000 to zero by the end of 2015 and maintained as such going forward. The teams working on this project are addressing systems and processes to ensure that students’ job-seeking prospects are not further hampered by the absence or unavailability of their hard-earned certificates. SITA aspires to achieve a clean audit by 2016–2017 and to move from a risk management maturity level 4 to 4+ by 2016–2017.

Public expenditure on ICT in South Africa amounts billions of Rands. How this money is spent and the quality of services it provides is critically important to us all, as users of services and as taxpayers. Therefore, we all need the governance of our SOCs to be of a high standard: good governance leads to good management, good performance, good stewardship of public money, good public engagement and, ultimately, good outcomes. As the people responsible for SITA’s governance (its leadership, direction and control), the Board of Directors has sought to address the purpose and objectives of SITA and work in the public interest. It has strived to bring about positive outcomes for the citizens of this country, the ultimate beneficiaries of Government ICT expenditure and services, and to provide good value for the taxpayers who fund these services. It has endeavored to balance the public interest with its accountability to Government in an increasingly complex socio-political and regulatory environment, and to motivate front-line staff by making sure that good executive leadership is in place.

FOREWORD BY THE CHAIRPERSON 7 I would like to extend my appreciation to my fellow board members for their contribution and judicious oversight, and to thank our loyal customers and stakeholders for their support. My thanks also go to the staff for building an organisation that continues to maintain and support key state information systems, thereby propelling SITA to play a strategic role in the developmental agenda of our country.

Finally, I would like to take this opportunity to thank the shareholder representative, Minister of Telecommunications and Postal Services, Dr Siyabonga Cwele (MP), for his leadership and for entrusting us with the responsibility to preside over SITA as its Board of Directors, and the Deputy Minister, Prof Hlengiwe Mkhize (MP) for her guidance and stewardship. They both made the board’s performance of SITA’s tasks lighter. I also extend my gratitude to the Chairperson of the Portfolio Committee on Telecommunications and Postal Service, Honourable Ms Mmamoloko Kubayi (MP) and members of the Committee for their continued support and counsel. And of course, in welcoming Dr Mohapi, I also would like to thank the former CEO of SITA, Mr Freeman Nomvalo, for his services during his tenure that ended with the financial year.

J S Vilakazi Chairman of the Board of Directors State Information Technology Agency SOC Limited (SITA) 29 July 2015

8 SITA ANNUAL REPORT 2014/2015 CHIEF EXECUTIVE OFFICER’S OVERVIEW

Dr S J Mohapi Chief Executive Office

SITA’s strategic and operational initiativesnitiatives must be centred on improving the effectiveness and efficiency of the public sector to enable service deliveryelivery to the citizens. We are well on our journey of implementing our strategic plan, which aims to improve customertomer services and create a hihigh-performancegh-performance organisation,organisation, through:through: t
Becoming customer-led, served by highly motivated and skilled employees t
Radically improving and transforming procurement systems and processes t
Developing and implementing integrated e-Government services in partnership with our customers and in alignment with the Medium Term Strategic Framework (MTSF) t
Modernising and upgrading infrastructure, and improving the security of government data assets

Implementing Strategic Imperatives At 35%, customer satisfaction was at an all-time low, with complaints in SITA’s key areas of supply chain management (SCM), solution development and infrastructure services. We have recognised the urgent need to be more customer-led, and to understand and proactively manage customer requirements. This is why we are developing and implementing a customer engagement model, which will bring the customer and SITA closer to each other. The aim is on getting the basics right: strengthening communication to customers, delivering at the lowest cost possible and honouring commitments made.

The procurement function is another area that has experienced challenges over the year, and we recognised the need to tackle the root causes rather than the symptoms. Therefore, a comprehensive procurement strategic plan was developed as a roadmap and based on world-class procurement best practices. During 2014/15, no unsolicited bid proposals were concluded as part of the procurement of goods and services. We have begun improving our SCM processes and systems, and reviewed the old SCM Policy that was developed in 2011. The SCM Policy is now aligned to the SCM regulatory framework and better placed to guide the agency in becoming an ICT procurement best practices hub in South Africa. Various procurement adjudication structures are in place and are monitored actively, as control measures for procurement-related risks. SITA’s objective is to curb fraud and corruption in procurement-related activity. We are also committed to driving the transformation of the South Africa ICT industry, by empowering black suppliers, focusing specifically on small, medium and micro enterprises (SMMEs). In 2014/15, SITA spent just under R274-million (R273,863,037) on SMMEs.

CHIEF EXECUTIVE OFFICER’S OVERVIEW 9 Our commitment to deliver e-Services is formulated in the SITA Strategic Plan and e-Government Plan of Action. In 2014/15, we finished developing seven e-Services, two of which were successfully launched to the customer. t
The Tender Portal was launched on 1 April 2015, in collaboration with National Treasury. This central portal is where all government tenders are published. Its objective is to eliminate duplication and fragmentation of government tenders, as well as to establish a central supplier database that consolidates supplier information across all spheres of government. t
The Electronic Case (or e-Case) service was successfully piloted at the Benoni Court in January 2015. E-Case integrates processes of the South African Police Services (SAPS), the Departments of Justice and Correctional Services, and the National Prosecuting Authority (NPA).

For 2015/16, e-Services will be aligned to the outcomes defined in the MTSF 2014–2019 and will focus on the government’s socio-economic priorities.

To enable the delivery of e-Services, we are investing in modernising the government data centres and upgrading the next generation network capacity in line with SA Connect Targets. We are also investing in human capital because, as custodian of government’s data, we have to be at the forefront of defence against ICT security threats. This requires having sufficient highly capable and skilled personnel in the fields of information security and cyber security, to ensure the security of the government’s information systems.

Only with highly skilled, committed and motivated employees can we achieve our strategic imperatives. In March 2015, an Operational Health Index (OHI) survey was undertaken to evaluate the internal environment and had a response rate of 40%. Compared to the previous OHI survey (in 2014), SITA improved its health score by 10 points, whereas organisations typically aspire for a four-point improvement over a year. However, although significantly improved, the agency’s health remains weak compared to regional and industry peers. This means that we still have to do more if SITA is to become a high-performance agency for today and the future. We have addressed the matter of employees who were displaced during the organisational restructuring, and all employees are now able to focus on the crucial element of service delivery to our customers.

Bridging the Digital Divide SITA is passionate about improving the lives of citizens and bridging the digital divide. This year, 60 students (40 female and 20 male) were given the opportunity to further their ICT studies at recognised higher learning institutions, while 208 interns were employed across the agency (against the initial target of 200 interns).

A total of 347 learners benefited from SITA’s rural development skills programme, and 110 girls were taken through the “techno girl” programme at all SITA offices countrywide. This was less than the target of 150 girls, and in 2015/16, we plan to increase the intake of girls by approximately 50%. We installed ICT labs at 11 schools in six provinces and donated infrastructure worth about R5.5-million. This was in addition to training and empowering teachers and learners to use ICT optimally in daily teaching and learning. The agency also provides on-going technical support.

10 SITA ANNUAL REPORT 2014/2015 Improving Internal Controls

In 2013/14, the Auditor-General’s report highlighted a number of Management Letter Points (MLPs) that pointed towards deficiencies in SITA’s internal controls, in particular in relation to supply chain management, IT and business continuity arrangements, and capital expenditure management.

As part of SITA’s ongoing drive to improve the agency’s governance and internal controls, a number of initiatives were implemented during the year to address the MLPs and avoid a repeat of the findings. While further improvement is required, we are committed to achieving a clean audit report in the next financial year. The maturity level of risk management implementation in the agency is at 3+.

Looking to the Future SITA is an economically viable public entity that, for the 16 years of its existence, has been a growing concern funded through the rates and tariffs charged to its customers for services rendered. The funds collected provide SITA with the resources to meet its operational and capital expenditure requirements. For the year ended 31 March 2015, SITA has a net surplus after tax of R144.289-million, or 2.8% of the R5.090-billion total revenue generated. This equates to an 8.54% year-on-year growth. The net surplus of R144.289-million will enable SITA to further invest in infrastructure maintenance and upgrades in order to generate future identifiable streams of sustainable revenue, thereby enhancing our services. SITA’s operating costs increased by 16% year-on-year.

The time for defining strategies is behind us. We are all focused on coordination and execution, as these actions will ensure that SITA delivers value to Government and its citizens.

I would like to extend my sincerest appreciation to the SITA Board and the employees for their commitment and support in the time that I have been at the agency. I look forward to the journey ahead and am grateful and humbled by the opportunity to serve in such a critical and strategic entity.

Dr S J Mohapi Chief Executive Officer State Information Technology Agency SOC Limited (SITA) 29 July 2015

CHIEF EXECUTIVE OFFICER’S OVERVIEW 11 STATEMENTSTATEMENT OF RESPONSIBILITYRESPO AND CONFIRMATIONCONFIRMATION OF ACCURACYACC

We the undersigned do hereby confirm that: tt
The information and amounts disclosed in this ReportReport are consistentco with the Annual Financial Statements (AFS) as audited by the Auditor-General. tt
This Report is complete, accurate and free from any omissions. tt
The Report has been prepared in accordance with National Treasury’s guidelinesguid on annual reporting. tt
TheThe AFS (Part E) hhaveave bbeeneen preparepreparedd in accoraccordancedance witwithh tthehe GeneraGenerallylly RecRecognisedo Accounting Practice (GRAP) aapplicablepplicable to SITA. tt
SITA’s Board of Directors is the Accounting Authority of the entity and is responsibleres both for the preparation of the AFS and for the judgementsjudgements made based on the informinformationa contained in the AFS. tt
The Accounting Authority is responsible for establishing and implementinimplementingg a system of internal controls, which has been designed to provide reasonable assurance as to the integrity and reliability of the performance information, the human resources information and the AFS. t
The Auditor-General is engaged to express an independent opinion on SITA’s AFS.

In the opinion of the Accounting Authority, the Report fairly reflects the operations, the performance information, the human resources information and the financial affairs of SITA for the financial year ended 31 March 2015.

Yours faithfully

SJ Mohapi (Dr) J Vilakazi (Mr.) Chief Executive Officer Chairman of the Board of Directors 14 August 2015 14 August 2015

State Information Technology Agency SOC Ltd State Information Technology Agency SOC Ltd

12 SITA ANNUAL REPORT 2014/2015 PART B: PERFORMANCE INFORMATION AUDITOR-GENERAL’SAUDITOR-GENERAL’S REPORT:RE PREDETERMINED OBJECTIVESOBJECTIV

The Auditor-General has audited the performance informatioinformationn for usefulness and reliability, compliance with laws and reregulations,gulations, and internal control, but an oopinion is not expressed on the performance information. See Part E, pagepage 94 for the Auditor-General’s RepReport.o

SITUATIONAL ANALYSISANALYSIS

Service Delivery Environment

Following its transfer in July 2014 to the Department of Telecommunications and Postal Service (DTPS), SITA integrated the following eGovernment and cyber-security priorities into its ICT Service Delivery Portfolios: t
e-Government (including new IT service delivery model and solution integration) t
consolidation and modernisation of data centres t
upgrade of bandwidth and network t
design and implementation of security system

Table 1: Progress of initiatives introduced in 2014/15

PLANNED ACTIVITIES ACHIEVEMENTS AS @ MARCH 2015

Initiative 8: consolidation and modernisation of data centres. This is to provide the strong foundation required by e-Government.

Short-term: Address the challenges caused by t
Emergency power plant at the main data centre was stabilised. extended electrical power outages (load-shedding) that t
An additional interim disaster recovery centre was secured for the places prolonged strain on the emergency and standby Department of Home Affairs (DHA), to mitigate the risk of government electrical power plants of the critical data centres and mission-critical ICT systems being adversely affected by prolonged power network switching centres across the country. outages. (Intermittent downtimes negatively affected service delivery at Medium-term: Invest in modernising and expanding various DHA sites.) This is a short-term solution, but SITA is engaging the data centre facilities and data centre ICT infrastructure to DHA on a medium/long-term proposal meet government’s demand for a secure and world- t
The services of a registered electrical engineering company to assess the class data processing environment. emergency and stand-by power plants across the country in order to upgrade them to a world-class specification.

Initiative 9: Upgrade Bandwidth and Network. Higher bandwidth network and wider network coverage are required to meet the rise in demand for e-Government and enhanced network services.

Continued

14 SITA ANNUAL REPORT 2014/2015 PLANNED ACTIVITIES ACHIEVEMENTS AS @ MARCH 2015

Several projects are planned over the medium-term, t
Renewed service provider contracts with Telkom SA (last-mile) and with with the aim of: Broadband-Infraco (core network connectivity) to provide core network connectivity at increased bandwidth and reduced cost t
Expanding the secure government network coverage to underserviced areas. t
Established a new secure high-speed internet service for use by government at significantly reduced cost. t
Upgrading the network bandwidth to meet South Africa’s broadband policy targets. t
Commenced the upgrade of the critical core network at 24 switching centres (planned completion September 2015). t
Modernising the network service offering to government in a high-secure networking t
Implemented the new high speed internet service. environment. t
Facilitated the first major broadband roll-out contract for the Western Cape Provincial Government, to about 2000 government offices and public service outlets (including +/-1100 public schools and =/-300 Expanding network coverage to rural and underservices health facilities. With this expansion, the government secure network areas remains a challenge. covers approximately 9000 government offices and public service outlets across the country.

t
Implemented redundancy measures at critical public service outlets to mitigate the risks of network failures caused by power-shedding and copper theft.

Initiative 10: Design and Implement Security System. This is to protect against cyber-security threats, especially those directed at gaining access to or destroying sensitive government data assets.

Short-term projects include t
Maintained position as the entity with the second highest percentage of valid security clearance rating of personnel across all of government and t
Enhancing security measures at data centre facilities to parastatal entities (the highest is the State Security Agency). comply with the National Key Point Act. t
Enhanced several physical security measures in and around office t
Consolidating several security functions in SITA into buildings and data centres in line with the National Key Points Act a unified, highly skilled information-security business prescripts. unit capable of securing government’s critical ICT infrastructures. t
Raising security awareness through campaigns. t
Responding to high-risk areas that are particularly vulnerable to cyber-attack, such as government websites and interfaces to the internet and other non-government institutions. t
Reviewing processes to respond better to security incidents. Medium-term projects include: t
Consolidating different security monitoring units into an integrated Security Operations Centre. t
Implementing more comprehensive security counter measures. t
Establishing a complete high-secure environment for government data assets.

Continued

SITUATIONAL ANALYSIS 15 PLANNED ACTIVITIES ACHIEVEMENTS AS @ MARCH 2015

Initiative 11: e-Government. This is informed by the NDP and the MTSF 2014–2019, and aligned to international best practice.

2014/15. Establishment of e-Service technology t
1 x e-Government platform that allows citizens to fill in forms platforms and development of six basic e-Services to electronically and submit to government departments. demonstrate the platform capability. Citizens and public service officials will be able to start doing business with t
2 x platforms that provide a technology environment where e-Services government online using these e-Services, such as apply can be developed and deployed in government. online for benefits, permits, grants or licences. t
2 x e-Services accepted by customers: (i) National Treasury’s electronic 2015/16. An enhanced transversal e-Service tender portal that provides a central place where all government tenders technology platform and 15 additional basic e-Services are published and a central supplier database. (ii) A pilot of the Electronic that enable data and workflow to be integrated vertically Case (e-Case) service that processes data and workflow between SAPS, into departmental systems. Department of Justice and National Prosecuting Authority.

2016/17. Data sharing across departments and five t
5 x e-Services are in process of customer acceptance: 3 x online complex e-Services that are able to integrate data and applications, for grants (City of Johannesburg), permits (Department of workflow across different departmental systems. Environmental Affairs) and housing subsidies (Department of Human Settlements); 1 x online enquiry for vacancies (SAPS); 1 x online 2017/18. Government data hub that enables registration as military veterans (Department of Military Veterans). government to establish a “single view of the citizen” across several departments.

Organisational Environment

Cabinet approved the appointment of Dr Setumo Mohapi as SITA’s new Chief Executive Officer (CEO) with effect from 1 April 2015 to 31 March 2019. The previous CEO (Mr Nomvalo) completed his contract on 31 March 2015, and the transition was smooth and swift, which is important for business continuity.

SITA has been plagued by low staff morale because of transformation fatigue that left many employees feeling disengaged and displaced. An organisational health survey carried out in 2013–2014 found SITA’s health to be extremely low, which may have contributed to poor performance across the agency. A year later, the 2014–2015 health survey revealed a 10-point improvement, but employees were still found to be un-motivated and lacking trust in leadership. Therefore, more work needs to be done to improve staff morale. A positive development is that 1116 of the 1127 employees that were in a pool have been placed, and the remaining 11 employees should be placed by end June 2015. In addition, the critical vacancies in the agency have been filled.

16 SITA ANNUAL REPORT 2014/2015 During 2014/15, no proven cases of corruption came to light, but SITA is alive to the threat of corruption and other unethical behaviour being perpetrated within and against the organisation. To this end, a number of anti- corruption initiatives have been implemented in order to deter and detect instances of unethical behaviour. Central to these initiatives is SITA’s independently operated Ethics Line, where employees can report allegations of unethical behaviour within the organisation. The Ethics Line is supported by appropriate internal and external resources, to ensure all reported allegations of unethical behaviour are fully investigated and resolved.

Key Policy Developments and Legislative Changes The 7 May 2014 elections resulted in a new mandate for Government and new priorities for SITA, involving a greater focus on the National Broadband Policy (SA Connect), accelerated expansion of e-Government services, the coordination and streamlining of public entities in the sector, and a reconfigured department that would ensure policy and regulatory certainty within the ICT sector. In July 2014, and in terms of Presidential Proclamation No. 47 of 2014 dated 15 July 2014, the Executive Authority of SITA was transferred from the Minister of Public Service Administration to the Minister of Telecommunications and Postal Services.

On 30 April 2014, the then Minister of Public Service and Administration and Executive Authority of SITA, Dr Lindiwe Sisulu, approved the agency’s 2014–2019 Corporate Strategy, 2014/2015 Annual Performance Plan (APP) and 2014/2015 Corporate Balanced Scorecard. Following the May 2014 elections, Minister Collins Chabane replaced Dr Sisulu as Minister of Public Service and Administration. Therefore, SITA’s approved Corporate Strategy, Annual Performance Plan and Corporate Balanced Scorecard were tabled before Parliament on 26 May 2014 under the auspices of Minister Collins Chabane.

Subsequently, the agency’s Corporate Strategy, APP and Corporate Balanced Scorecard were reviewed, to bring them in line with the new mandate of Government and the priorities of the new Executive Authority. The review also took advantage of the opportunity to rationalise the Scorecard, which has been approved by the SITA Board of Directors.

SITA’s Transformation Journey SITA’s value proposition is derived from the Government ICT House of Values. It is about: t
ensuring efficiency and cost-effectiveness in government service delivery. t
assisting Government to leverage economies of scale in the procurement of ICT goods and services. t
providing innovative ICT solutions.

To realise the value proposition, the strategic focus will be on transforming and excelling in the areas of procurement, e-Government and IT service delivery, and organisational health, supported by robust business enablers (Figure 1).

SITUATIONAL ANALYSIS 17 Figure 1: SITA’s transformation journey

SITA’s transformation journey will be implemented through 22 initiatives across 4 key categories

1 Implement contract tracking & management system 8 Consolidate & modernise datacentres 2 Implement new approach to technical specifications 9 Upgrade bandwidth & network 3 Launch new procurement process 10 Design and impliment security 4 Establish contact model system 11 New IT Service Delivery Model 5 Launch On-line BUying System Integrated & e0Gov

6 Introduce new organisation model 12 Build internal capabilities 7 Revise SITA’s procurement policies Procurement E Gov & 13 Design and implement retained IT Service organisation (contract exturnal assistance) A B Portfolio

SITA

C D 18 Create transparency on cost 14 Create a customer centric Business Organisational organisation 19 Integrate and automate finance Enablers Health and procurement process 15 Reward and recognise exeptional performance 20 Develop and implement new customer engagement model 16 Impliment HPO across organisation

21 Recruit top talent to SITA 17 Empower SITAzens to fully leverage their capabilities 22 PMO Strategy Institutionalization

Over the next 3–5 years, SITA will be implementing an aggressive transformation programme aimed at rapidly stabilising the organisation, building sustainability and enabling the agency to grow and excel through diversifying its client base and service offering. Table 2 depicts the five-year plan. The items in blue are initiatives that have already been delivered, items in orange are initiatives that are work in progress, while the items in red are initiatives that have not started.

18 SITA ANNUAL REPORT 2014/2015 Table 2: SITA’s five-year plan

2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 GOVT ESERVICE STABILISATION SUSTAINABILITY EXCELLENCE GOVT DATA HUB AGGREGATOR

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SITUATIONAL ANALYSIS 19 2.5 Strategic Outcome-Oriented Goals

SITA has six strategic programmes, each aligned to a strategic goal, as shown in Table 2.

Table 3: Strategic programmes and goals

STRATEGIC PROGRAMME GOALS

To address all issues relating to delayed procurement turnaround Programme 1: Procurement times, removing customer pain points, and transforming the procurement function.

To provide high-quality IT services to enable government to deliver Programme 2: Service Delivery efficient and convenient services through the use of ICT.

To optimise the provision of SITA’s IT infrastructure services in order Programme 3: Infrastructure and Cybersecurity to increase availability, flexibility, scalability, predictability and security.

To ensure an effective and efficient financial management, and Programme 4: Financial Sustainability financial growth and sustainability.

To build and maintain organisational capability to enable SITA to Programme 5: Organisation achieve its strategic imperatives and become an employer of choice within the ICT industry.

To provide leadership, strategic management, governance, risk and Programme 6: Governance and Administration resource management in line with government-accepted norms and standards.

20 SITA ANNUAL REPORT 2014/2015 PERFORMANCE INFORMATIONNFORMATION BY PROGRAMME

Programme 1: Procurementement

The purpose of this programme is to address all issues relating to delayed procurement turnaround times, removing customer pain points, and transformingorming the procurement function. The increased customer-led focus is reflected in the results of key performance measures. A dedicated SMME development strategic plan has been put in placeplace to increase ICT spend through SMMEs.MMEs.

AACTUALCTUAL PERFORMANCEPERFORMANCE DEVIATIDEVIATIONON AACTUALCTUAL AGAINST TARGET 20142014/2015/2015 FROMFROM PERFORMANCE OBJECTIVE ACHIEVEMENTHIEVEMENT PLANNEDPLANNED REASON FOR VARIANCE INDICATOR 2013/14 PLANNED ACTUAL TARGET FOR TARGET STATUS 2014/2015

Due to efficiencies implemented in 90 days from terms of management proactive M8.1: Improved SCM the day the Achieved 108.94 days 5 days monitoring and supervision of turnaround times bid is 85 days transaction through regular published meetings

a) Due to streamlined processes M8.2: Number of and the allocation of dedicated 120 days for days taken to Achieved resources transversal 31 days complete transversal bids 89 Days b) Improved collaborative working bid relationship with the designated department

Development process not yet M8.3: Number of 30 days on Not streamlined resulting to lack of days taken to finalise 29.94 days contract achieved 10 days collaborative approach from various contract finalisation 40 days stakeholders in the process

Due to efficiencies implemented in M8.4: Number of 80 days on Achieved terms of management proactive

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Due to efficiencies implemented in M8.5: Number of 20 days ad Achieved terms of management proactive days taken on ad hoc 14.55 days 5 days hoc RFQ monitoring and supervision of RFQ 15 Days transaction through regular meetings

Continued

PERFORMANCE INFORMATION BY PROGRAMME 21 ACTUAL PERFORMANCE DEVIATION ACTUAL AGAINST TARGET 2014/2015 FROM PERFORMANCE OBJECTIVE ACHIEVEMENT PLANNED REASON FOR VARIANCE INDICATOR 2013/14 PLANNED ACTUAL TARGET FOR TARGET STATUS 2014/2015

12% Savings M9: % Savings on on acquisition Achieved Due to Microsoft License acquisition of ICT 18% 4% of ICT goods transactions goods and services 16% and services HPPET
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Due to lack of dedicated SMME 7% of development strategic plan with acquisition clear objective on how various M10: % of ICT Not spend developmental opportunities will acquisition spend 0% achieved 1% through be leveraged. SMME awareness through SMME SMME 6% campaigns were conducted but (cumulative) had limited impact in terms of spend contribution

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BHFOEB through 41% who have B-BBEE accreditation through BEE BBBEE 71% within level 1-4 Compliant Entities Compliant Entities

Strategies to overcome procurement underperformance A new approved SITA procurement policy and strategy is expected to improve the processes and provide the necessary education to employees. Standardised and easy to use SCM contract templates are to be developed. With regard to SMME spend, the underperformance was related to low capex spending.

22 SITA ANNUAL REPORT 2014/2015 Programme 2: Service Delivery

The purpose of the programme is to provide high-quality IT services to enable Government to deliver efficient and convenient services through the use of ICT.

ACTUAL PERFORMANCE AGAINST DEVIATION TARGET 2014/2015 FROM ACTUAL PERFORMANCE PLANNED OBJECTIVE ACHIEVEMENT REASON FOR VARIANCE INDICATOR TARGET 2013/14 ACTUAL PLANNED TARGET FOR STATUS 2014/2015

a) Executive oversight and weekly progress reviews by the CTO have ensured that the project M5.1: % teams pull all stops to deliver 50 forms 90% as per Achieved implementation of 7% b) Because this was a strategic developed approved plan 97% e-Government project with visibility up to Parliamentary level, the most experienced resources were assigned to the project

90% of the targets a) The technical expertise assigned achieved to pilot to the project surpassed the M5.2: % at the following normal assignment levels and implementation of departments Achieved the Executive Management 5% assisted on all risks escalated e-Cabinet lead site – (Presidency/ 95% implementation State Security/ b) The CEO, DCEO and CTO DPSA/ /Treasury/ attended each Executive DTPS) Steering Committee

M5.3: Approval of No roll-out Award the award Achieved
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M6: % Level of 95% performance against implementation Achieved 97% None No variance signed SLA metrics against contracted 95% contracted SLA metrics

95% of security plans implemented M7: % of ICT (vetted employees; Due to intensified efforts by the controls Achieved ICT security, 2% fieldworkers to complete the implemented physical security, 97% vetting forms according to plan Subsidiary security
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PERFORMANCE INFORMATION BY PROGRAMME 23 Programme 3: Infrastructure and Cybersecurity

The purpose of this programme is to optimise the provision of SITA’s IT infrastructure services in order to increase availability, flexibility, scalability, predictability and security to protect government data assets.

ACTUAL PERFORMANCE AGAINST DEVIATION TARGET 2014/2015 FROM ACTUAL PERFORMANCE PLANNED OBJECTIVE ACHIEVEMENT REASON FOR VARIANCE INDICATOR TARGET 2013/14 ACTUAL FOR PLANNED TARGET STATUS 2014/2015

M5.4.1: The supplier contract was 90% Achieved finalised earlier than anticipated implementation of 10% 100% and the installation process was data centre fast tracked upgrades

Due to proactive bandwidth M5.4: % capacity management on the Implementation of M5.4.2: network core and trend analysis, infrastructure Achieved Below 75% 60% all necessary bandwidth upgrades and utilisation of 15% upgrades were effected modernisation plan bandwidth timeously resulting in consistently low utilisation

M5.4.3 Achieved 100% coverage of None No variance Centurion data 100% centre
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M5.5 % 90% 39% of mapped Implementation of implementation as Achieved Additional resources were processes has 1% process automation per the approved recruited in quarter 4 been automated 91% and integration project charters

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24 SITA ANNUAL REPORT 2014/2015 Programme 4: Financial Sustainability

The purpose of this programme is to ensure an effective and efficient financial management, and financial growth and sustainability .

ACTUAL PERFORMANCE AGAINST TARGET 2014/2015 DEVIATION ACTUAL FROM PERFORMANCE OBJECTIVE ACHIEVEMENT PLANNED REASON FOR VARIANCE INDICATOR 2013/14 TARGET FOR PLANNED ACTUAL 2014/2015 TARGET STATUS

This is because the National M1: % increase R5.1 Billion Not 9.5% below Network Upgrade Projects, from the in revenue (10% of achieved 1.4% target SAPS which were discontinued (year-on-year) baseline) 8.6% during the year '
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Not 3% Profitability This is mainly due to lower than M2: % Profitability Net Surplus Achieved 0.7% expected revenue and higher than 2.3% expected operational expenditure

Achieved M3: Liquidity Ratio 2.8:1 L≥1.2:1 1.9 Due to underspending on CAPEX 3.1:1

80% M4: Expenditure Expenditure Not Mainly due to cancellations of major against approved 16.8% against achieved 63.5% tenders for Infrastructure equipment Capex budget approved and late delivery of NGN equipment '
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PERFORMANCE INFORMATION BY PROGRAMME 25 Programme 5: Organisation

The purpose of this programme is to build and maintain organisational capability to enable SITA to achieve its strategic imperatives and become an employer of choice within the ICT industry.

ACTUAL PERFORMANCE AGAINST DEVIATION ACTUAL TARGET 2014/2015 FROM PERFORMANCE OBJECTIVE ACHIEVEMENT PLANNED REASON FOR VARIANCE INDICATOR 2013/14 TARGET FOR PLANNED TARGET ACTUAL STATUS 2014/2015

M14: Increase OHI Increase OHI Achieved baseline points from baseline points from None No variance
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Strategies to improve organisational efficiency and stability The CEO has a four-year contract, which contributes to the agency’s perceived stability. The health of the organisation improved last year (OHI up by 10 points) and, with the clearing of the staffing pool, this trend is expected to continue. SITA had committed to an objective of achieving a Maturity Level 3 against certain processes and practices for financial year 2015/16. At an EXCO meeting dated 26 January 2015 during the CMMI awareness briefing, a decision was made not to focus only on maturity levels but rather to identify the weaknesses of processes and practices against Maturity Level 3 for Capability Maturity Model Integration (CMMI) and Maturity Level 2 for People Capability Maturity Model (P-CMM). The Standard CMMI Appraisal Method for Process Improvement (SCMAPI) undertaken during April and May 2015 assessed the organisation against Maturity Level 3 for CMMI constellation and Maturity Level for P-CMM. SITA processes were assessed against best international practice framework for process improvement (CMMI from the CMMI Institute). This assessment identified strengths and weaknesses in all practices applied by SITA to deliver services to its customers. The assessment placed SITA at Maturity Level 1. A comprehensive process improvement plan is being implemented to improve the maturity of service delivery within SITA.

26 SITA ANNUAL REPORT 2014/2015 Programme 6: Governance and Administration

The purpose of this programme is to provide leadership, strategic management, governance, risk and resource management in line with government-accepted norms and standards.

ACTUAL PERFORMANCE AGAINST TARGET 2014/2015 DEVIATION ACTUAL FROM PERFORMANCE OBJECTIVE ACHIEVEMENT PLANNED REASON FOR VARIANCE INDICATOR 2013/14 TARGET FOR PLANNED ACTUAL 2014/2015 TARGET STATUS

Clean Audit for M12: Compliance FY2013/2014 Unqualified with internal control with no Achieved None No variance Audit report framework matters of &TUBCMJTI
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The fundamental contributor is the Maturity Level 3 lack of or often fragmented end to M13: Organisation Not Achieved CMMI CL2 for selected end processes and effective product practice maturity Maturity 2 *NQSPWF

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PERFORMANCE INFORMATION BY PROGRAMME 27 REVENUEREVENUE COLLECTIOCOLLECTIONN

Table 4: Summary of Revenue Collection

2014/20152014/2015 2013/2014

ACTUALACTUAL ACTUALACTUA (OVER)/ (OVER)/ ESTIMATE AMOUNTAMOUNT AMOUNTAMOUNT OVER/UNDEROVER/UNDER ESTIMATEESTIMATE AMOUNTAMOUN UNDER UNDER COLLECTIONCOLLECTION AMOUNTAMOUNT COLLECTION R'000R'000 COLLECTEDCOLLECTED R'000R'000 R'000R'000 COLLECTEDCOLLECT COLLECTION R'000R'000 R'000R'000 R'000 R’000

Products and Service Rendered to Government

BPO Service Desk - - - - 34 -34

Commercial Printing 17 419 8 073 9 346 30 468 47 558 (17 090)

Contract Management 12 800 - 12 800 - - -

ICT Advisory Services 62 742 34 504 28 238 44 473 50 760 (6 287)

Information Management 36 570 41 940 (5 370) 37 300 34 253 3 047

Managed Applications 783 293 535 588 247 705 735 899 521 638 214 261

Managed Desktop 679 412 397 211 282 201 622 813 393 551 229 262

Managed Infrastructure 2 085 889 2 077 342 8 547 1 665 748 1 528 786 136 962

Project Management 63 645 50 050 13 595 294 330 226 296 68 034

Requisition and Fulfilment 1 056 714 1 563 705 (506 991) 1 632 063 1 603 339 28 724

Security Management 43 333 24 068 19 265 15 987 11 593 4 394

Service Management 123 606 179 968 (56 362) 170 423 127 623 42 800 Centre

Training 40 484 28 649 11 835 37 603 28 800 8 803

Solution Development 176 566 148 580 27 986 347 893 117 783 230 110

Total 5 182 473 5 089 678 92 795 5 635 000 4 692 014 942 986

28 SITA ANNUAL REPORT 2014/2015 In 2014/15, the main reason for the underperformance was because a project to upgrade a customer’s network programme did not materialise.

Strategies to Overcome Revenue Underperformance SITA is improving its customer engagement process, to ensure that better service offerings are delivered to customers. The agency’s internal service delivery processes are being optimised, which will entail a new service delivery model including pricing and innovative product lifecycle management. SITA is in the process of submitting revised tariffs to the Ministry for approval. A renewed drive has begun to improve debt collection, by engaging with debtors around reasons for non-payment and exploring alternative means of recovery.

Table 5: Summary of payments by programme

2014/2015 2013/2014

ACTUAL (OVER)/UNDER ACTUAL (OVER)/UNDER PROGRAMME NAME BUDGET EXPENDITURE EXPENDITURE BUDGET EXPENDITURE EXPENDITURE R’000 R’000 R’000 R’000 R’000 R’000 R’000

Administration 917 552 1 200 971 (283 419) 992131 981799 10 332

Business Operations 4 145 978 3 891 257 254 721 4 805 000 3 849 400 955 600

Total 5 063 530 5 092 228 (28 698) 5 797 131 4 831 199 965 932

REVENUE COLLECTION 29 Table 6: Capital investment, maintenance and asset management plan

2014/2015 2013/2014

ACTUAL BUDGET (OVER)/UNDER BUDGET ACTUAL (OVER)/UNDER INFRASTRUTURE PROJECTS EXPENDITURE EXPENDITURE EXPENDITURE EXPENDITURE R’000 R’000 R’000 R’000 R’000 R’000

Infrastructure: Network 175 000 112 833 35 246 75 000 64 979 10 021

Infrastructure: Switching Centres 100 000 - 100 000 20 000 - 20 000

Infrastructure: Data Centres 100 000 35 231 64 769 177 000 112 631 64 369

Infrastructure: Modernisation 200 000 2 616 197 384 280 000 - 280 000

Solution Development: 30 000 7 019 22 981 45 000 32 686 12 314 Transversal

Solution Development: IFMS 100 000 16 345 83 755 260 000 107 358 152 642

Solution Development: Customer 117 000 - 117000 50 000 - 50 000 Unique

Solution Development: 100 000 1 009 98 991 90 000 7 89 993 Modernisation

Solution Development: 65 000 - 65 000 65 000 - 65 000 Integration

Solution Development: R&D 115 000 22 890 92 110 100 000 21 162 78 838

Security 25 000 245 24 755 10 000 15 9 985

Service Management: Contact 40 000 4 234 35 766 30 000 2 750 27 250 Centres

Service Management: DSS & 40 000 - 40 000 30 000 311 29 689 1st Line

Operational Support: Internal IT 40 000 40 110 (110) 50 000 4 481 45 519

Operational Support: Facilities 125 000 23 993 101 007 130 000 6 952 127 888

Operational Support: Production 20 000 - 20 000 331000 2 672 328 328 toolsets

Operational Support: Integrated 146 000 - 146 000 - - - Security Management

Operational Support: ICT Academy - - - 50 000 - 50 000

Total 1 538 000 266 525 1 271 475 1 793 000 356 004 1 492 133

30 SITA ANNUAL REPORT 2014/2015 Capital Investment

SITA’s performance suffered greatly in the areas of capital investment, maintenance and asset management. In 2014/15, only about 19% of the allocated CAPEX investment was spent. While reasons may vary, the common issues are: 1. The lack of governance structures responsible for managing CAPEX. CAPEX approval was not done in a controlled manner, resulting in a lack of proper monitoring of the adequacy of the plans to achieve their targets. 2. Lack of continuity and leadership in key executive positions. The executive responsible for infrastructure services and the head of department responsible for network infrastructure were suspended, which created a vacuum at a crucial time of the financial year. 3. Changing structures within the agency meant that responsibilities were allocated differently. This created confusion and hindered visibility on the plans that were drafted. 4. Organisational health. Since the start of the turnaround strategy in 2010, employees have been unsettled in their positions, with over 100 employees unassigned (“in the pool”). Although this problem had mostly been addressed by the end of the financial year, the instability had already taken its toll on the employees. 5. Ineffective procurement processes, which contributed to critical and needed resources not being spent. 6. Poor planning and lack of monitoring are central to all these issues.

Strategies to Overcome CAPEX Underperformance SITA has improved governance structures responsible for managing CAPEX. The Projects and Financial Sustainability Committee (PFSC) chaired by the SITA Chief Financial Officer has been established to closely monitor the capital expenditure programme and escalate deviations or non-compliance to the Executive Committee on a regular basis. Executives have been allocated responsibilities for CAPEX programmes, following the approval of the macro structure by the SITA Board. Procurement plans have been created and are monitored regularly by departments. SITA is improving its planning and monitoring processes around CAPEX spend, and reports are submitted at the CEO’s weekly operations meeting.

Table 7: CAPEX expenditure vs. budget 2014/15

BUDGET ACTUAL (OVER)/ INFRASTRUCTURE EXPENDITURE UNDER NOTES PROJECTS R’000 R’000 EXPENDITURE

R7-million of the actual expenditure catered for 13/14 order payments on NGN equipment The R125-million NGN Infrastructure: 175 000 112 833 35 246 upgrades project consisted of a number of tenders that had to Network be aligned. Significant delays in approving the tenders and importing the WAN equipment affected the capital spending.

Delay caused by overall NGN delays and the replacement of the Infrastructure: core network supplier. The R105-million emergency power (UPS) 100 000 - 100 000 Switching Centres upgrades for Switching Centre were unfortunately paid under the Network Upgrade programme.

Continued

REVENUE COLLECTION 31 ACTUAL (OVER)/ INFRASTRUCTURE BUDGET EXPENDITURE PROJECTS UNDER NOTES R’000 R’000 EXPENDITURE

The infrastructure refresh tenders delayed from 2013/14 Infrastructure: Data affected expenditure in 2014/15. The larger data centre 100 000 35 231 64 769 Centres strategy led to key infrastructure tenders being cancelled and then republished but too late for 2014/15.

The planned R200-million was for cloud computing platforms, a Infrastructure: 200 000 2 616 197 384 strategic intent carried forward from 13/14. However, the cloud Modernisation strategy was postponed in favour of the infrastructure refresh.

The R30-million was for the IFMS Business Intelligence capabilities, but the programme was cancelled and alternative strategic transversal solutions were launched. Bulk Solution deployment was delayed due to infrastructure capacity and Development: 30 000 7 019 22 981 the cancellation of IFMS as main vehicle. The geographical Transversal information system (GIS) service provider contract had to be cancelled due to an inability to provide the services as stipulated in the contract.

The IFMS was cancelled, but some financial commitment had to Solution be concluded before tenders could be cancelled. Some 100 000 16 345 83 755 Development: IFMS software capabilities developed were reused on other programmes and will accelerate development in 2015/16.

The R117-million was for the e-Government programme and Solution e-Cabinet solution for the Presidency, which was delayed as a Development: 117 000 - 117 000 result of engineering works and concerns over supplier Customer Unique solvency. The e-Government development cost was reflected in R&D programme.

The R100-million was intended to assist SAPS with their crime integration platforms, as well as for Smart City solutions and Solution legacy renewals for other customers. Limited work was done Development: 100 000 1 009 98 991 on the legacy renewal but the DPW could not commit in Modernisation 2014/15. Solution architecture work was done on the Smart City concept, but then priorities changed. SAPS opted to fund their own projects without SITA’s assistance.

The R65-million was for a government-wide integration Solution platform (R20-million), which was delayed because of the Development: 65 000 - 65 000 reassessment within the large e-Government strategy, and for Integration the SITA internal process optimisation (R45-million), which was also delayed.

Continued

32 SITA ANNUAL REPORT 2014/2015 ACTUAL (OVER)/ INFRASTRUCTURE BUDGET EXPENDITURE PROJECTS UNDER NOTES R’000 R’000 EXPENDITURE

The R115-million (2% of annual revenue) was for Java Integrated Development platform (JIG) and various other emerging technologies. The technology laboratory infrastructure RFQ was cancelled because no suitable submissions were received. The Solution JIG project was put on hold until approval was granted for the 115 000 22 890 92 110 Development: R&D platform to be one of the enablers of e-Government. Getting approval for enhancing further the OpenJig took too long, and eventually contracts were cancelled. Most of the CAPEX was allocated to e-Government projects, which underspent for various reasons, such as late infrastructure and licences.

The R25-million was for Multi-Factor Authentication and Security 25 000 245 24 755 Security Testing software, which was delayed because of the potential creation of a separate security subsidiary.

The R40-million for the Service Management Centre online Service Management: 40 000 4 234 35 766 capabilities was delayed because of the larger Infrastructure Contact Centres refresh priorities.

The R40-million was for acquiring remote LAN and desktop management software but was delayed because of concerns Service Management: 40 000 - 40 000 about internal capacity. An external consultant had DSS & 1st Line recommended this function be outsourced, but capacity issues have now been addressed.

The R40-million was for internal infrastructure upgrades (R30-million) and ERP licences (R10-million). The upgrade of Operational Support: 40 000 40 110 (110) the Erasmuskloof PBX capability absorbed most of the Internal IT available funding, and ICT equipment for Western Cape and Cluster 2 was acquired.

The R125-million was for upgrading security at SITA’s office as Operational Support: 125 000 23 993 101 007 National Key Points. The review of SITA’s overall Facilities accommodation strategy delayed some upgrade projects.

The R20-million was planned for service monitoring software, Operational Support: 20 000 - 20 000 but the acquisition process was not launched because of the Production toolsets overall assessment of SITA’s internal systems capability/strategy.

Operational Support: Delays caused by a potential creation of a separate security Integrated Security 146 000 - 146 000 subsidiary, and as a result the acquisition process was only Management launched late in the year.

In 2014/15, the ICT Academy changed from a standalone Operational Support: project to a collaboration project with the National School of --- ICT Academy Government, and therefore no capital expenditure was allocated to the line item.

Total 1 538 000 266 525 1 271 475

REVENUE COLLECTION 33

PART C: GOVERNANCE TheThe SITASITA BoardBoard

The SITA Board of Directors alignsaligns itself with the understandingunderstanding that goodgoo corporate governance consists of a system of structuring, operating and controlling in order: t
t To achieve a culture based on a foundation of sound business ethics. t
t To fulfil the agency’s long-term strategic goals, while taking into account theth expectations of all key stakeholders.stakeholders. t
t To consider and care for the interests of employees, past and present. t
t To maintain excellent relations with customers and suppliers, while takingtaking intoi account the needs of the environment and the local community.

Portfolio Committees As part of its governance endeavour and oversight, SITA briefs Parliament on its legislative mandate and related activities, as well as responds to parliamentary questions. The Portfolio Committee on Telecommunications and Postal Services, which oversees the activities of SITA, is presided over by the Honourable Ms MT Kubayi MP. Its members are Honourable Ms MR Shinn MP, Honourable Ms LM Maseko MP, Honourable Mr PP Mabe MP, Honourable Mr C Mackenzie MP, Honourable Ms MV Mafolo MP, Honourable Ms LL van der Merwe MP, Honourable Mr PWA Mulder MP, Honourable Mr MQ Ndlozi MP and Honourable Ms N Ndongeni MP.

In 2014/15, SITA briefed the Portfolio Committee on: t
Progress in respect of broadband (policies and regulations, implementation plans, challenges, the broadband framework in relation to NDP and DTPS vision 2020, timeframes for envisaged broadband roll-out plan and target implementation, resources needed and any other relevant information; on broadband and schools connectivity). t
SITA’s 2014–2019 Corporate Strategy and 2014/2015 Annual Performance Plan. t
Services to the DBE. t
The state of readiness for digital migration. t
How SITA is dealing with issues raised by the Auditor-General and internal control measures used to mitigate risks in terms of the audit. t
Quarterly performance.

Executive Authority The Department of Public Service and Administration (DPSA) was the line Ministry until the promulgation of Proclamation 47 on 15 July 2014 which transferred the executive powers from the DPSA to the DTPS. All reports, as prescribed in terms of PFMA and Treasury Regulations, were submitted to the Executive Authority during the period under review. Additional reports submitted related to e-Government, SOC Rationalisation, senior executive appointments, a burglary at the SITA Centurion Data Centre, power interruptions and failures, and service delivery.

36 SITA ANNUAL REPORT 2014/2015 THE SITA BOARD OF DIRECTORSDIRECTORS

Leaders need to define strategy,p rovideprovide direction, direction, and and establish establish the the ethics ethics and and values values that that will will influenc influencee and guide practices and behavioursours to achieve sustainable performance. This is the fundamental purpose of a Board.

In terms of Section 66(1) of the Companies Act (No. 71 of 2008), the business affairs of a compancompanyy must must be be managed by, or under the directiontion of, a Board of Directors, which has the authority to exercise all the powers and perform any of the functionss of the company, except where the Companies Act or SITA’s Memorandum onon Incorporation provide otherwise..

The Board’s roles and responsibilities are provided for in: t
State Information Technology Act (No. 88 of 1988), as amended (SITA) t
Public Finance Management Act (No. 1 of 1999) (PFMA) t
National Treasury Regulations issued in terms of the PFMA (March 2005) t
Companies Act (No. 71 of 2008) t
SITA Board Charter of 9 January 2013 t
King III Report on Governance for South Africa (King III).

The Board Charter The SITA Board Charter (Corporate Governance Code) is informed inter alia by the Constitution of the Republic of South Africa; the SITA Act and Regulations; the PFMA and Regulations; the Companies Act and Regulations; the 1992, 2002 and the 2010 King Reports on Corporate Governance; as well as best practice in the management of boards of directors.

Its departure point is that governance in any context reflects the value system of the society in which it operates. In the South African context, this means collectiveness over individualism, consensus rather than dissension, humility instead of criticism, and inclusiveness as opposed to prejudice. It acknowledges that corporate governance thrives on co-existence, consultation, and high standards of morality and trust. It further recognises that corporate governance is essentially about leadership – leadership for efficiency, leadership for probity, leadership with responsibility and leadership that is both transparent and accountable. These are the ideals that inform the SITA Governance Code (the Code).

The Code begins by acknowledging the constitutional and legislative roots of SITA governance. This is followed by a brief overview of the principles of corporate governance and a detailed exposé of the powers, functions and responsibilities of the Board and the directors, including delegation of authority. The Code then deals with the constitution, responsibilities and management of the Board in session and Board Committees; the disclosure of director interest in the business of the SITA; and the need to assess the performance of individual directors

THE SITA BOARD OF DIRECTORS 37 and directors as a collective. It provides for alternative dispute resolution; and highlights the nature and importance of risk management, internal audit, information technology, compliance, and the management of stakeholder relationships. The Code also recognises that directors are entitled to have access to members of the SITA Secretariat and to secure independent professional advice at the company’s expense.

The Code concludes by recognising the pivotal nature of the role of the Company Secretary in the administration of the Company, as well as the non-static nature of its prescripts.

There has been material compliance with the provisions of the Code and a substantially revised version thereof is currently pending before the Board of Directors.

Composition of the Board Section 8(1) of the SITA Act provides that SITA will be governed and controlled by a Board of Directors appointed by the Minister after consultation with Cabinet. According to Section 10(1B)(a), the Minister may appoint an alternative member for each non-executive member of the Board, other than the Chairperson. The alternative members may attend and vote at meetings of the Board on behalf of a member if that member is unable to attend

In terms of Section 10(1) of the SITA Act, the Board consists of a maximum of 14 members appointed in the following capacities: a. A non-executive Chairperson; b. Executive members, one of whom must be designated as the Managing Director; c. Additional non-executive members, consisting of: i. One person representing the Department of Public Service and Administration; ii. One person representing the National Treasury; iii. One person as a legal expert; and iv. Other persons on the grounds of their expertise.

It also states that the majority of the Board members must be non-executive members and that the Minister must designate one of these non-executive members as the Deputy Chairperson to step in should the Chairperson be unable to perform his/her functions.

Remuneration of Board Members Non-executive directors and committee members who are not employed by government receive a fee for their contributions to the Board and committees on which they serve. Fees are determined by the shareholder. (See page 141 of the AFS for further disclosure on remuneration).

The current Board of Directors is as follows, and includes alternative members (if applicable) and outgoing Board members and their designation.

38 SITA ANNUAL REPORT 2014/2015 Mr J Vilakazi BA (Unisa), MA (Thames Valley), MA (London), MBA (California Coast University) Non-Executive Chairperson: 22 November 2012–20 November 2015 Mr Jerry Vilakazi is the founder of the Palama Group, an investment holding company with a diversified portfolio of investments. For over six years, he served as CEO of Business Unity South Africa, representing South African businesses on international business councils and structures. He is currently chairman of the Mpumalanga Gambling Board and the Mpumalanga Economic Growth Agency, non-executive chairman of Netcare Limited and holds directorships in a number of JSE-listed companies. He is also a non-executive director of General Health Group (UK), an advisor to Citibank (SA) and serves on the National Planning Commission.

Dr V Mahlati MSc (UK London School of Economics), PhD (University of Stellenbosch) Non-Executive Deputy Chairperson: 18 September 2013–17 September 2016 (resigned 13 August 2014) Dr Vuyo Mahlati is co-owner of African Financial Group, responsible for Pan African and Emerging Markets Innovative Financial Solutions, and led the Siyaya TV rural- based digital television trial licensed by Sentech. After serving two terms as President of the International Women’s Forum (IWF) South Africa, she was appointed the IWF Global Director. As part of the National Development Plan (NDP) team, she chaired the NDP Working Group on Capable and Developmental State, Active Citizenry and Nation Building, and Spatial Transformation. She is the Deputy Chair of the Integrated Urban Development Framework (IUDF) Panel of Experts and an independent member of the Industrial Development Cooperation (IDC) Agro-processing Competitive Fund. She is also on the Global Advisory Council of Corporate Women Directors International based in Washington DC, USA and the Global Advisory Council of the Global Entrepreneurial Hub Network in Vienna.

Dr Setumo Mohapi BSc in electrical engineering and computer science (MIT), Master’s in electrical engineering (MIT), PhD in electrical engineering (Wits). Chief Executive Officer: 1 April 2015 to 31 March 2019. Dr Setumo Mohapi is well versed in the ICT sector, with a wealth of experience from various executive positions held in both the public sector and private sector. He was the Chief Executive Officer at Sentech SOC Limited between 1 November 2010 and March 2015. Prior to Sentech, he worked in various technology and business positions at Transtel, Internet Solutions, Neotel and Telkom.

THE SITA BOARD OF DIRECTORS 39 Mr SF Nomvalo B.Compt Hons (Unisa), Advanced Valuations Techniques (INSEAD), Mastering Strategy (GIBS), Senior Executive Programme (Wits and Harvard Business School) Chief Executive Officer: 1 June 2013–31 June 2014 (extended: 1 July 2014–31 December 2014; 1 January 2015–31 March 2015) Mr Sithembiso Freeman Nomvalo was the CEO of SITA until the end of financial year under review. For over nine years, he was South Africa’s Accountant General at National Treasury, where he pioneered a leadership development programme that was later extended to other departments and government structures. Pursuant to this work he was invited, as faculty, to the Harvard Kennedy School of Government’s Art and Practice of Adaptive Leadership Development programme. He has served on various boards of directors and trustees on behalf of government, including the Independent Regulatory Board for Auditors and the Accounting Standards Board. He advises the University of Pretoria’s faculty of Economic and Management Sciences. He has also worked with the Commonwealth Secretariat on improving financial governance in 18 Commonwealth Caribbean countries.

Ms N January-Bardill BA and Certificate in Education (UBLS, Lesotho), MA Applied Linguistics (Essex UK), Diploma in Human Resources Management (Damelin College, South Africa) Non-Executive Board Member: 18 September 2013–18 September 2016 (resigned 19 May 2015) Ms Nozipho January-Bardill is the Executive Director of Bardill & Associates, a consulting company that focuses on strategic communications, high-level government relations, social justice, stakeholder management and sustainable development. She is an independent non-executive director of AngloGold Ashanti (AGA) and Credit Suisse Securities, Johannesburg (CSSJ). Previously, she was Executive Director, Corporate Affairs and Spokesperson for the MTN Group, and served on the boards of a number of operations in MTN Africa. She was also the South African Ambassador to Switzerland, Lichtenstein and the Holy See, and the Deputy Director-General, Human Capital Management and Head of the Foreign Service Institute in the then Department of Foreign Affairs (now DIRCO). She is a member of the United Nations Expert Committee on the Elimination of Racial Discrimination (CERD), a board member of the African Women’s Development Fund (Ghana) and a Trustee of Anglo Platinum’s Lefa La Rona Trust.

Ms S Chaba BA (Economics and Industrial Psychology); Post-Graduate Diploma in Human Resources Management (Wits), Senior Executive Programme (Wits and Harvard Business School) Non-Executive Board Member: 18 September 2013–17 September 2016 Ms Seadimo Chaba is the CEO and owner of Seadimo Chaba Consulting, a management consulting company that specialises in human capital management, strategy, change management, leadership, and performance monitoring and management. She has extensive experience at executive level in the private and public sectors, where she has worked in the petrochemical, retail and financial industries. She sits on a number of boards of state-owned enterprises, private sector companies and non-governmental organisations.

40 SITA ANNUAL REPORT 2014/2015 Mr Z Malele BSc (Computer Science) (University of Limpopo; BAP (Wits Business School); MAP (Wits Business School) Non-Executive Board Member: 18 September 2013–17 September 2016 Mr Zeth Malele is non-executive chairman of Sandford (Pty) Ltd and non-executive deputy chairman of the Gauteng Growth and Development Agency, Meadow Star Investments 28 (Pty) Ltd, and Sec-Itech (Pty) Ltd. He also serves on the ICT Governance Committee of the Ubank (Pty) Ltd Board and has held senior and strategic management positions at, among others, the Gauteng Economic Development Agency, Innovation Hub, Sybase SA, Ariel Technologies, Arivia.kom, Paracon Holdings, Blue IQ Holdings, debis Systemhaus (now T-Systems) and the SA Electrotechnical Export Council. He was part of the Presidential National Commission on Information Society and Development, and advises the Limpopo Premier on technology.

Adv T Masuku BA (University of Zimbabwe), LLB (UCT) LLM (International Business Law) (Vrije Universiteit, Amsterdam) Non-Executive Board Member: 18 September 2013–17 Sept 2016 (resigned 25 June 2014) Advocate Thabani Masuku is an admitted advocate of the High Court of South Africa and member of the Cape Bar. He is also chairperson of the Cape Bar Council Human Rights Committee and a previous chairperson of Advocates for Transformation in the Western Cape. His practice covers constitutional and public law litigation, commercial litigation (contract, companies), insurance, internet law, criminal law and commercial arbitrations. He worked as a researcher for Justice Richard Goldstone at the Constitutional Court, as a consultant at the World Bank in Washington DC, at the NEPAD Secretariat (on secondment by IDASA) and was involved in formulating political and economic governance indicators.

Adv BM Matlejoane B Proc. LLB Alternate Board Member: 21 November 2012–20 Nov 2015 (Interim Board) Non-Executive Board Member: Reappointed 18 September 2013–17 September 2016 Advocate Beatrice Matlejoane started her judicial career at D.H Zondi Attorneys, after which she became a practising advocate of the High Court from 2003 to date. The nature of her work includes, litigation, drafting of pleadings including opinions, as well as appearances in the Constitutional Court.

THE SITA BOARD OF DIRECTORS 41 Mr JS Mngomezulu B.Com. (Acc.) (Unisa), Master of Business Leadership (MBL) (Unisa) Non- Executive Board Member: 21 November 2012–20 November 2015 (interim Board) Non-Executive Board Member: Reappointed 18 September 2013–17 September 2016 Mr Stadi Mngomezulu is Deputy Director-General at National Treasury and sits on the boards of the Government Employees Pension Fund (GEPF) and the Finance and Accounting Services Sector Education and Training Authority (FASSET). He gained hands-on experience in multi-national organisations such as Lucent Technologies, Mercedes-Benz and Colgate-Palmolive. His expertise is in accounting, finance, compliance, governance, risk and strategy.

Dr A Mokgokong Bsc (University of Botswana), MBCHB (Medunsa), D.Com. Honoris Causa (Commerce) (Unisa) Alternate Board Member: 21 November 2012–20 November 2015 (interim Board) Non-Executive Board Member: Reappointed 18 September 2013–17 September 2016 (resigned May 2014) Dr Anna Mokgokong is the co-founder and executive chairperson of Community Investment Holdings (Pty) Ltd. She has been chairperson and director of Rebosis Property Fund Limited since April 2011 and serves on the boards of the following companies: Malasela Taihan Electric Cable Pty Ltd (M-Tec), Community Healthcare Holdings (Pty) Ltd and subsidiaries Conlog (Pty) Ltd, Nulec South Africa (Pty) Ltd, Malesela Transmission and Distribution (Pty) Ltd, CZ Electronics, MCT (Pty) Ltd, and Crossroads Ventures (Pty) Ltd. She is also a director of Cape Resources Plc, Afrocentric Investment Corp, Jasco Electronics Holdings, and Community Investment Ventures.

Mr Z Nomvete Certificate in Aeronautical Engineering (Ireland), Diploma and Licence in Aviation Maintenance (Ethiopia), Diploma as Flight Engineer B727 (Ethiopia), Management Advancement Programme (Wits Business School) Alternate Board Member: 21 November 2012–20 November 2015 (interim Board) Non-Executive Board Member: Reappointed 18 September 2013–17 September 2016 Mr Zukile Nomvete is chairman of Dragon Pride International Holdings, a non- executive director of Aurco (Pty) Ltd and was previously a non-executive director at the South African Civil Aviation Authority. He has been Chairman of the Board for Great North Transport, South African Rail Commuter Corporation (now PRASA), the Gauteng Tourism Authority, 1Time Airlines, Moving Into Dance Mophathong and Pekwa Travel. He was Deputy Chair of the Civil Aviation Authority and a director at the Airports Company of SA, SUNAIR and the Tourism Business Council of SA. He previously served as executive director of Transnet responsible for SAA and its subsidiaries as well as Transnet’s property portfolio. He is an honorary colonel of the South African Air Force and chairman of World Expo 2025 South Africa.

42 SITA ANNUAL REPORT 2014/2015 Mr G Victor BSc (Engineering) (cum laude) (Wits), MSc (Stanford), MEng (Stanford), B.Compt Hons (Unisa), CA (SA) Non-Executive Board Member: 18 September 2013–17 September 2016 Mr Graeme Victor is the group CEO of Du Pont Telecom (Pty) Ltd. Prior to joining Du Pont, he was managing director at Tiscali World Online, Vodacom Service Provider and Computicket. Before his various stints in senior management, he founded Kessel Feinstein Consulting, growing it into a highly successful consulting business over 10 years.

Ms M Williams Non-Executive Board Member: 18 September 2013–17 September 2016 Ms Michelle Williams has held a number of key positions in the public and private sectors. Her career includes being Government Chief Information Officer from 2007 to 2011 and head of research at the Department of Communications. Previously she worked for Siemens, the National Institute for Economic Policy, the Education Policy Unit, the Economic Policy Research Project and the Southern Africa Labour and Development Research Unit.

Mr N Gosebo MSc (Computer Science) (New Jersey Institute of Technology) Non-Executive Board Member: 19 May 2014–17 September 2016 Mr Ntjatji Gosebo is Deputy Director-General in the Government Chief Information Office within the DPSA. With over 30 years’ experience in information technology, he coordinates and consolidates public administration IT efforts across the three spheres of government. He was Information Technology Advisor to the Minister of Public Service and Administration between 1999 and 2003, and played a leading role in conceptualising and establishing the Government IT Officers’ Council, as well as the SITA Amendment Act of 2002 and the e-Government Policy Framework of 2001. He contributes thought leadership related to the adoption of information technology as a strategic tool of public administration, particularly in developing economies. He has presented papers at international and domestic conferences and been published in peer-reviewed journals.

THE SITA BOARD OF DIRECTORS 43 Mr M Ndlangisa BSc Hons (Computer Science and Information Systems) (Rhodes University), MSc (Computer Science) (Rhodes University), Higher Diploma in Computer Auditing, IEDP (Wits and London Business School) Executive Director: 1 June 2014–31 May 2017 Mr Mboneli Ndlangisa has spent all of his working life in ICT. Before joining SITA, he worked for MIH group as head of ICT Strategy and Business Development. The responsibility entailed giving strategic support to all ICT subsidiaries within the group. Before that, he held senior management positions in organisations such as SSA (COMSEC), Standard Bank of South Africa and Telkom SA. He is a Certified Information Systems Security Professional (CISSP) and Certified Information Security Manager (CISM).

Lt General J Nkonyane (Ret.) BSc (Statistics and Financial Accounting) (University of Toronto, Canada), MBL (Unisa) Executive Director: 1 June 2014 – 31 May 2017 Lt General (Ret.) Justice Thulile Nkonyane is the former Chief Logistics of South African National Defence Force (SANDF) in which he served from 1998 to 2014. He championed the SANDF’s stewardship project that enabled the SANDF to achieve its first unqualified audit opinion in 2011/2012. As Chairman of the Castle Control Board (CCB), he orchestrated the repositioning strategy of the CCB that resulted in the Castle of Good Hope (CGH) becoming a major player within the heritage and tourism industry – a project that will result in CGH attaining the UNESCO Heritage Site listing. Over the past 30 years, he has held various strategic positions, from serving as a commander during the liberation struggle, to being a financial administrator in various private sector entities in Canada. His areas of specialisation are strategic planning, leadership, financial accounting and logistics.

Mr W Mudau BSc Hons (Computer Science) (University of Limpopo), UED (University Education Diploma) (University of Venda), MBA (University of North West – Potchefstroom University for CHE) Alternate Board Member: 19 May 2014 – 17 September 2016 Mr Walter Mudau is a Chief Director at the DPSA responsible for policy, strategy and regulations, ICT oversight and SITA oversight. Previously, he worked for more than 10 years at the University of Venda as Deputy Director: ICT Services where he was also a part-time lecturer in statistics and business management. He has also lectured in computer studies at a teacher training college and taught high school mathematics.

44 SITA ANNUAL REPORT 2014/2015 Mr DC Niddrie B.Ed (University of Durban Westville) Alternate Board Member: 18 September 2013–17 September 2016 Mr. Niddrie is a media, broadcasting and ICT sector strategy consultant. He was the co-founder and steering committee member of the Campaign for Independent Broadcasting (CIB). On behalf of the CIB, Mr. Niddrie contributed to media legislation and helped develop the process by which the first board of the SABC was appointed. Previous positions include Executive Director of the Public Broadcasting Initiative, Director of Broadcasting for the independent Media Commission and Head of Strategic Planning at the SABC.

Ms R Mokoena ”B.Juris. (University of Zululand), LLB (Natal), MBA (Milpark Business School) Alternate Board Member: 19 May 2014–17 September 2016 Ms Refiloe Mokoena was admitted as an Attorney of the High Court of South Africa in 1990. She practises for her own account as an attorney, regulator, liquidator, estate agent, auctioneer and alternative dispute resolution practitioner. She has worked as a member of the Broadcasting Complaints Commission of South Africa, where she had to enforce the provisions of the Code of Conduct for the Broadcasters and ensure compliance with the Code. She has also served on the ICASA Complaints and Compliance Committee enforcing the provisions of the ICASA Act. She currently serves on the Regulating Committee of the Airports Company of South Africa (ACSA) and the Air Traffic Navigation Services (ATNS) where she is responsible for enforcing the provisions of both the ACSA Act and ATNS Act.

Mr. G Ncanywa BSc (Computer Science and Mathematical Statistics) (University of Fort Hare) Alternate Board Member: 19 May 2014–17 September 2016 Mr Gracious Mnikelo Ncanywa is Applications Development and Maintenance Manager at Standard Bank Limited. He held the same portfolio at the South African Revenue Service (SARS) until being appointed Chief Architect for SARS modernisation strategy. An avid ICT professional, he is also a founding member of the local Microsoft subsidiary responsible for building the local technical capacity for support structures in Southern Africa. Prior to joining Microsoft, he worked as an IBM Systems Engineer in Mainframe Systems at companies such as General Motors, Ford Motor Company, BP Southern Africa, SAB Miller and Daimler Chrysler.

THE SITA BOARD OF DIRECTORS 45 Adv J De Lange BA (UCT), LLB (UCT) Alternate Board Member: 19 May 2014–17 September 2016 Advocate Johnny de Lange runs a legal and policy consultancy, and currently advises the Department of Environment Affairs and the Speaker of the National Assembly. He was a Member of Parliament for 20 years (1994–2014), during which time he served as chairperson of the Portfolio Committee on Justice (later including Constitutional Development) and the Portfolio Committee on Water and Environmental Affairs, and was Deputy Minister for Justice and Constitutional Development (2004–2009). He was appointed as Advocate of Supreme Court of South Africa (Cape Division) in 1984 and member of the Cape Bar from 1985 to 1993. From 1994 to 1996, he served as a member of the Constitutional Assembly, which was responsible for the drafting and adoption of South Africa’s Constitution in 1996 .

46 SITA ANNUAL REPORT 2014/2015 BOARD ATTENDANCE

SPECIAL BOARD WORK NAME BOARD BOARD DEVELOPMENT SESSIONS INDUCTION NOTES

Jerry Vilakazi (Chairperson) 7/7 7/7 3/3 2/4 0/1

1/3 Dr Vuyo Mahlati (Dep. 3/7 2/7 Attended the 2/4 - Resigned on 13 August 2014 Chairperson first day only

Freeman Nomvalo 7/7 5/7 3/3 4/4 1/1 (Managing)

On sabbatical from January Nozipho January Bardill -- - - - 2014 to 31 March 2015

Seadimo Chaba 7/7 5/7 3/3 2/4 -

Zeth Malele 7/7 6/7 2/3 3/4 -

Thabani Masuku - 1/7 - 2/4 - Resigned on 25 June 2014

Beatrice Matlejoane 6/7 2/7 - - -

Stadi Mngomezulu 4/7 5/7 3/3 2/4 -

Dr Anna Mokgokong 1/7 1/7 - 1/4 - Resigned on 26 May 2014

Zukile Nomvete 6/7 4/7 - 3/4 -

Graeme Victor 7/7 6/7 1/3 3/4 -

Michelle Williams 6/7 5/7 3/3 3/4 -

Ntjatji Gosebo 2/7 1/7 3/3 1/4 1 Appointed on 19 May 2015

Mboneli Ndlangisa 5/7 4/7 3/3 2/4 1 Appointed on 1 June 2014

Lt. General Justice 5/7 3/7 3/3 2/4 1 Appointed on 1 June 2014 Nkonyane (Ret.)

Walter Mudau (Alternate) 6/7 5/7 3/3 3/4 -

David Niddrie (Alternate) - - - - - Never attended

Refiloe Mokoena (Alternate) 5/7 4/7 3/3 1/4 1 Appointed on 19 May 2015

Johnny de Lange (Alternate) 3/7 1/7 3/3 - - Appointed on 19 May 2015

Gracious Ncanywa 4/7 4/7 3/3 2/4 1 Appointed on 19 May 2015 (Alternate)

BOARD ATTENDANCE 47 BOARDBOARD COMMITTEESCOMMITTEES

Each Board Committee is governed byby a charter or terms ofof referencereferen approved by the Board, and committeecommittee membershipmembership is restrictedrestricted to BoardBoard membersmembers only.only. TheThe commitcommitteeste are: 1. A Audit,udit, Risk and Compliance Committee (ARCC) 2.2. H Humanuman Resources,Resources, Nomination anandd Remuneration CommitteeCommittee 3. So Socialcial andand EthicsEthics CommitteeCommittee 4. I ICT,CT, Innovation anandd ResearcResearchh anandd DeveDevelopmentlopment (ICT, RDI) CommitteCommitteee 5.5. PProcurementrocurement CommitteeCommittee 6. CChairpersons’hairpersons’ Committee

Audit,A dit Risk Ri k and d CCompliance li CCommittee itt The ARCC is established in terms of Section 51(1)(a)(ii) of the PFMA and Section 27.1.1 of the Treasury Regulations and operates according to terms of reference that are reviewed annually by the Board. The committee’s responsibilities include: t
Monitoring compliance with relevant legislation and ensuring that management addresses any instances of non-compliance and that appropriate internal management controls are implemented and maintained to protect SITA’s interests and assets. t
Monitoring and reporting on organisational performance against predetermined objectives. t
Reviewing the activities and effectiveness of the Internal Audit Department. t
Evaluating the independence, objectivity, effectiveness and cost of the external auditors. t
Reviewing the accounting and auditing concerns identified by internal and external audits. t
Reviewing the accuracy, reliability and credibility of financial reporting. t
Overseeing SITA’s financial and non-financial risk management and controls, including IT risks and controls. t
Reviewing management decisions related to accounting policies, practices and disclosures. t
Enquiring about operational and financial risk identification, and the measures in place to contain these risks. t
Monitoring and reporting on instances of fraud and corruption. t
Reviewing periodically and approving the Committee Charter and ensuring compliance with SITA’s Code of Conduct. t
Regularly reporting to the Board and recommending the AFS, Annual Report and the external auditors’ report for approval by the Board.

Human Resources, Nominations and Remuneration Committee The Human Resources, Nomination and Remuneration Committee comprises non-executive directors, and management attends meetings by invitation. The committee’s responsibilities include: t
Making recommendations to the Board on executive management appointments t
Overseeing and monitoring the human capital management strategies and implementation t
Determining the organisation’s general policy on remuneration t
Recommending to the Board specific remuneration packages for executive management

48 SITA ANNUAL REPORT 2014/2015 Social and Ethics Committee

The Social and Ethics Committee comprises non-executive directors, and management attends meetings by invitation. The committee’s responsibilities include: t
Monitoring the agency’s activities, having regard to any relevant legislation, other legal requirements or prevailing codes of best practice t
Promoting good corporate citizenship t
Promoting environment, health and public safety, including the impact of the agency’s activities, products or services t
Overseeing client relationships, including the agency’s advertising and public relations t
Monitoring labour and employment issues, including the agency’s standing in terms of the International Labour Organisation Protocol on decent work and working conditions, and the agency’s employment relationships and contribution towards the educational development of its employees.

ICT, Innovation and Research and Development Committee The ICT, RDI committee comprises non-executive directors, and management attends meetings by invitation. The committee’s responsibilities include: t
Ensuring that SITA’s overall IT systems and strategy are managed effectively t
Monitoring the efficiency and effectiveness of stakeholder relations t
Ensuring effective marketing of SITA’s services, systems and products t
Maintaining best practices in client services with world-class standards and turnaround times t
Sustaining a customer-centric organisational culture wherein SITA’s clients come first t
Establishing SITA as a leader in research and development, and a training corporate entity which designs local solutions that enhance service delivery using the world’s best practices

Procurement Committee The Procurement Committee comprises non-executive directors, and management attends meetings by invitation. The committee’s responsibilities include: t
Providing the final evaluation and approval of all tenders that are recommended by management for award in line with the PFMA and Treasury Regulations t
Renewing contracts that have expired

Before this committee approves any tenders, the Internal Audit Department executes agreed procedures for tenders within the R30-million threshold; tenders beyond this amount are submitted for external review.

Chairpersons’ Committee The Chairperson of the Board chairs the Chairpersons’ Committee whose members are the other committee chairpersons, and management attends the meetings by invitation. The committee’s responsibilities include: t
Overseeing key SITA strategic activities t
Identifying, promoting and evaluating inter-committee linkages and synergies t
Reviewing annually, and when necessary, the corporate performance of SITA

BOARD COMMITTEES 49 t
Conducting periodic reviews of SITA’s role, functioning and mandates t
Overseeing the Board decisions with respect to high risk areas t
Supervising all communication and stakeholder management initiatives of SITA t
Acting on behalf of the Board between Board meetings.

The Board recognises that it is ultimately accountable and responsible for the performance and affairs of SITA and that the use of delegated authorities to Board Committees and management does not discharge the Board and its directors of their duties and responsibilities.

Attendance of Board and Committee Meetings 2014/2015

HR, AUDIT, RISK & SOCIAL & MEMBERS BOARD NOMINATIONS & PROCUREMENT ICT, RDI CHAIRPERSONS’ PARLIAMENTARY COMPLIANCE ETHICS REMUNERATION

Number of Sittings 197 9 31192 4

Mr J Vilakazi 17 2 2

Dr V Mahlati 6 441

Ms S Chaba 16 8 2 5 2

Mr Z Malele 17 1 10 9 1 4

Adv T Masuku 1101

Adv B Matlejoane 81 2 2

Mr J Mngomezulu 12 1 0 9

Dr A Mokgokong 2- 1 1

Mr Z Nomvete 126 5 211 3

Mr G Victor 16 6 8

Ms M Williams 16 7 7 2

Mr W Mudau 12 4 7

Mr N Gosebo 8

Mr G Ncanywa 13 3 1 5

Adv L De Lange 71

Ms R Mokoena 13 3 0 6 1

Mr F Nomvalo 17

50 SITA ANNUAL REPORT 2014/2015 Table 8: In-year changes in Board committee membership

NAME PRIOR TO 29 APRIL 2014 AFTER 29 APRIL 2014

Mr J Vilakazi Chairpersons’ Committee Chairpersons’ Committee Chairpersons’ Committee Chairpersons’ Committee Dr V Mahlati ICT, RDI Committee ICT, RDI Committee Procurement Committee Procurement Committee Human Resources, Nominations and Human Resources, Nominations and Remuneration Committee Remuneration Committee Ms S Chaba Social and Ethics Committee Social and Ethics Committee Procurement Committee Procurement Committee Chairpersons’ Committee Chairpersons’ Committee ICT, RDI Committee, Audit, Risk and Compliance Committee Mr Z Malele Procurement Committee ICT, RDI Committee Chairpersons’ Committee Human Resources, Nominations and Audit, Risk and Compliance Committee Remuneration Committee Adv T Masuku Human Resources, Nominations and Social and Ethics Committee Remuneration Committee Procurement Committee Audit, Risk and Compliance Committee Audit, Risk and Compliance Committee Human Resources, Nominations and Human Resources, Nominations and Adv B Matlejoane Remuneration Committee Remuneration Committee Social and Ethics Committee Social and Ethics Committee Audit, Risk and Compliance Committee Procurement Committee Mr J Mngomezulu Procurement Committee Chairpersons’ Committee Human Resources, Nominations and Human Resources, Nominations and Dr A Mokgokong Remuneration Committee Remuneration Committee Social and Ethics Committee Social and Ethics Committee Human Resources, Nominations and Human Resources, Nominations and Remuneration Committee Remuneration Committee Mr Z Nomvete Audit, Risk and Compliance Committee Audit, Risk and Compliance Committee Social and Ethics Committee Chairpersons’ Committee Audit, Risk and Compliance Committee Audit, Risk and Compliance Committee Mr G Victor ICT, RDI Committee ICT, RDI Committee ICT, RDI Committee ICT, RDI Committee Ms M Williams Audit, Risk and Compliance Committee Audit, Risk and Compliance Committee Mr N Gosebo ICT, RDI Committee ICT, RDI Committee Mr W Mudau (Alternate) Audit, Risk and Compliance Committee ICT, RDI Committee Mr G Ncanywa (Alternate) Human Resources, Nominations and Remuneration Committee Adv L De Lange (Alternate) Audit, Risk and Compliance Committee Human Resource, Nominations and Remuneration Committee Ms R Mokoena (Alternate) Procurement Committee Social and Ethics Committee Mr F Nomvalo Lt. Gen. J Nkonyane (Ret.) Mr. Mboneli Ndlangisa

BOARD COMMITTEES 51 RISK MANAGEMENTMANAGEMENT

In terms of the PFMA, Treasury Regulations and good corporate governance,go the company should strive to ensure that responsibility for risk management is vested at all levels of management and that the risk management strategy is incorporated into the agency’s language andan culture, and embedded in the behaviour and mind-set of its people. SITA’s risk management is guided by the Board-approvedBo Risk Management Policy and Framework. The Risk Management Strategy details the initiatives andan activities, and is approved by the Chairman of the ARCC.ARCC.

Corporate risk management involves identifying events or circumstances, and aassessing their likelihood, impact and severity, especially when changes occur in the operating environment. ForF example, risks and mitigation plans may be required when restructuring the company, evaluating new projectsprojec or expanding to new markets. Risks are not limited to sudden, abrupt events but can arise from gradual changes over time. Risks may be strategic, operational and financial.

SITA carries out an annual risk assessment in the first quarter of the financial year, and the Risk Management Division follows up throughout the year to ensure that risk mitigation and management plans are implemented. In 2014/15, a risk assessment was conducted in the first quarter according to the Risk Management Plan. Departments had their own operational risk registers to monitor and implement the mitigation plans as per the agreed dates. The Risk Management Division followed up on the implementation and gave quarterly progress reports to the ARCC, which presents the risk management quarterly reports to the Board for approval. By the end of the financial year, 68% of the mitigation plans had been implemented, with the remaining 32% comprising risk mitigation plans that are implemented over a long period of time.

To ascertain the current level of SITA’s risk management maturity, Corporate Executive Board (an independent international risk management assessing body) conducted an organisation-wide survey in 2014/15. The assessment found that SITA’s current risk maturity level is 3+.

52 SITA ANNUAL REPORT 2014/2015 INTERNAL CONTROLROL

The Board is ultimately responsibleble for establishing a framework of internal controls. These controlscontrols are designed to provide cost-effectiveective assurance assurance of of the the financial financial wellness wellness andand financialfinancial manamanagementgement of of the company. The internal controlrol environment includes the assignment of authority and responsibility, segregation of duties, supervision,on, integrity and ethical values, and governance structures. It is managed by management and monitored by the Internal Audit Department.

Despite the internal controls in place,lace, in 2014/15 the Internal Audit (and the Auditor-General) identified internal control weaknesses. These weree reported to manamanagementgement for appropriate corrective action. The Executive Committee and the ARCC monitoror the implementationimplementation of corrective actions.

Internal Audit Department The Internal Audit Department reports functionally to the ARCC (see page 64). It focuses on the risk, governance and control processes of the agency and is responsible for expressing an opinion on the adequacy and effectiveness of the internal controls within those processes. The department currently has the following divisions: t
Internal Audit Assurance Services t
Information Technology Assurance Services t
Integrity Assurance Services t
Performance Audit Services t
Professional Technical Audit Service

During 2014/15, Internal Audit conducted 238 audit projects (114 planned and 124 unplanned) in the following areas: supply chain management, risk management, delegation of authority, Oracle enterprise resource planning (ERP) infrastructure, national key points, data centres and provincial operations, and segregation of duties. The audits identified areas where controls are inadequate and ineffective. Progress continues to be made, particularly in SCM (acquisition management), finance (cash management), information security (governance) and SITA’s ERP system. However, the current governance levels need to improve further, to provide management and the Board with the appropriate level of assurance.

INTERNAL CONTROL 53 COMPLIANCECOMPLIANCE WITH LAWS ANDAN REGULATIOREGULATIONSNS

To ensure compliance with laws and reregulations,gulations, the Audit, Risk and CompCompliance Committee (see page 64), the Company Secretary (see page 74) and the following divisions within SITA haveh a role to play: tt
The Finance Division maintains a PFMA checklist, as recommended by NatNationali Treasury, and updates the checklistchecklist evereveryy montmonthh tt
The CorCorporateporate Services Division ensures that SITA is comcompliantpliant with all applicableappl human resource management and facility management laws and regulationsregulations tt
The LeLegalgal Services Division assists with interpretininterpretingg the laws and regulationsregulation applicable to SITA tt
The ICT Service Delivery Division ensures that SITA is compliant with all applicableapp ICT laws

54 SITA ANNUAL REPORT 2014/2015 FRAUD AND CORRUPTIONRRUPTION

SITA has adopted a zero tolerancece stance towards fraud and corruption. The agency has a robust Anti- Corruption and Anti-Fraud Strategy,tegy, designed to deter, detect and resolve issues of unethical behaviour perpetrated within and against SITA.SITA. The strategy focuses on preventing, deterring and detecting corruption, fraud and other crimes of dishonesty,nesty, and is supported by fraud awareness training and education initiatives. The strategy is regularly reviewedd andand updated,updated, in lineline withwith goodgood governance practices.

Key components of the strategy include:include: t
The SITA Code of Ethics t
Training on SITA’s policies andd procedures, rules and reregulationsgulations t
Restricting suppliers who engage in unethical behaviour t
Conducting fraud and corruption detection reviews t
Conflict of interest checks t
Vetting of employees t
Fraud risk workshops t
Regular presentations and formal training for employees on the manifestations of fraud and corruption within SITA t
Communication campaigns (ethics and integrity)

Progress reports on the implementation of this strategy are regularly given to the relevant Board Committees.

SITA has established an independent Ethics Line where employees and stakeholders can anonymously report any irregular practices. The Ethics Line operates 24/7, 365 days of the year. Operators are able to take calls in all official languages. Other reporting channels include SMS, fax, email and Free Post. SITA’s Ethics Line is supported by SITA’s Whistle-blowers Policy, which is based upon and aligned to the Protected Disclosures Act (No. 26 of 2000), which came into effect on 16 February 2001. In order to comply with the Act, SITA strives to create a culture that facilitates the disclosure of information by employees relating to criminal and other irregular conduct in the workplace, and to promote the eradication of criminal and other irregular conduct within SITA.

SITA’s Anti-Corruption and Anti-Fraud Strategy is further bolstered by SITA’s Anti-Corruption and Anti-Fraud Policy and Response Plan, which serves to confirm SITA’s zero tolerance stance and to reinforce existing systems, policies, procedures, rules and regulations. Reported allegations of fraud, corruption or other crimes of dishonesty committed by any employee of SITA are pursued by thorough investigation and to the full extent of the law. This may include taking disciplinary action within a reasonable period of time after the incident, instituting civil action, initiating criminal prosecution by reporting the matter to the SAPS or any other relevant law enforcement agency, and any other appropriate and legal remedy available.

FRAUD AND CORRUPTION 55 MINIMISINGMINIMISING COCONFLICTNFLICT OF INTEREST

Executives, prescribedprescribed officers, managers,managers, all all SITA SITA em employeesployees a and consultants have a legal and ethical obligation to act in the best interest of the agency. ThereforTherefore,e they are not allowed to pursue interests that are in conflict with and/or undermine the interests of SITSITA.A. The purpose of the SITA Conflict of Interest Policy, read with the SITA Code of Ethics and the SITA Policy on GiftsG and Entertainment, is: tt
To enable directors, executives, prescribed officers, managers, employees a and consultants to acquire and maintain ppersonalersonal outside interests, providedprovided that these interests do not ininterfere, or have the potential to interfere,interfere, with their obligations to SITA, or improperlyimproperly influence the judgmentjudgme expected of them when actingacting on behalf of SITA. tt
To protect directors, executives, prescribed officers, managers, employees a and consultants from real or perceived charges of conflict of interest, by providing a mechanism for the objective review and approval of any personal outside interests held by them and establishing a formal procedurepr for dealing with any possible conflicts of interest. t
To protect and manage the reputational risks of SITA, by avoiding any real or perceived bias or self-interest by directors, executives, prescribed officers, managers, employees and consultants acting in situations where SITA has approved the holding of personal outside interests. t
To allow transactions to be treated as valid and binding, even though an affected person has, or may have, a conflict of interest with respect to that transaction.

The primary objectives of this policy are: t
To promote and enforce ethical business practices and standards in SITA t
To provide guidance on the behaviours expected in accordance with the values of SITA t
To promote transparency and avoid conflicts of interest t
To ensure fairness and consistency in decision-making t
To document the process for the disclosure, approval and review of activities which may amount to actual, potential or perceived conflicts of interest t
To provide a mechanism for the objective review of personal conflicts of interests

Each person shall at least annually, or as and when changes occur, complete a declaration form. Any person with a conflict of interest with respect to a contract or transaction must disclose this in writing to the Company Secretary. In the case where the contract or transaction will be considered at a Board or Board Committee meeting, any person with a conflict of interest must disclose all material facts to the Chairman of the Broad or the Board Committee prior to the meeting. Any person with a conflict of interest will not participate nor be permitted to hear the Board’s or Committee’s discussion of the matter except to disclose material facts and to respond to questions. There is an obligation to report all incidents which are clearly in contravention of the SITA on Conflict of Interest, the SITA Code of Ethics, the SITA Gifts and Entertainment Policy, or the Prevention and Combating of Corrupt Activities Act (No. 12 of 2004). Any person who suspects that the Act has been contravened should immediately report it to the Office of the Company Secretary, the Chief Executive Officer or the Chairman of the Social and Ethics Committee. If prima facie evidence exists that the Act has been transgressed, the matter should be reported to the SITA ethics officer or legal adviser who may, if necessary and after appropriate consultation with the Company Secretary, Chief Executive Officer or the Chairman of the Social and Ethics Committee, have the matter reported to SAPS.

56 SITA ANNUAL REPORT 2014/2015 CODE OF CONDUCTUCT

The purpose of the SITA Code off Conduct is to establish a set of ethical values and standardstandardss that are consistent with the objectscts and vision of SITA, and the constitutional and lelegalgal framework.

All business conduct should be wellwell above the minimum standards required by law. Accordingly, employees must ensure that their actions ccannotannot bebe interpretedinterpreted as contravening, in any way, thethe llawsaws anandd reguregulationslations governing the SITA’s operations.. Anything prohibited by the SITA’s policies, applicable laws and regulations would still be prohibited even if donedone on behalf of a SITA Board member or SITA employeeemployee representing SITASITA..

All Board members and SITA employeesployees are required to comply with the Code. The principles contained in the Code also apply to contract labour,ur, consultants, temporary employees, part-time employees, casual employees, suppliers and others acting for andnd on behalf of SITA. AlthoughAlthough SITA has limited legallegal rirightsghts to enforce the CodeCode on its goods and service providers, SITA can exercise moral persuasion to gain compliance or choose not to enter into business relationships with providers who do not comply with the Code. SITA will not conclude contracts or collaborate with any third party that has sought in any sphere of activity to improperly influence day-to-day activities and decision-making within SITA.

SITA will consider any contravention of the Code as a serious matter. In a similar vein, any investigation that is conducted into any suspected or alleged contravention will be treated confidentially.

Any Board member or employee who believes that their actions have, or may have, been in contravention of the Code should report the matter to their immediate supervisor, to a person at management level, to the Chairperson of the Board, the Chairperson of the Social and Ethics Committee, the Chief Executive Officer, or the Company Secretary as the case may be. Any Board member or employee who suspects that a fellow Board member or employee has contravened the Code should report this promptly and confidentially, preferably in writing, to their immediate supervisor, to a person at management level, or to the Chairperson of the Board, the Chairperson of the Social and Ethics Committee, the Chief Executive Officer, or the Company Secretary as the case may be. The Board member or employee making the report should not confront the suspected individual. This will facilitate the maintenance of confidentiality and impartiality of any subsequent investigation into the matter and also limit the risk of damaging the reputation of the suspected person should the suspicion be unfounded.

Any breach or suspected breach of ethical standards by a Board member or employee will be dealt with in accordance with the applicable disciplinary policies and procedures. It is the Board’s responsibility to bring any breach of ethical standards by a Board member to the attention of the President of the Republic of South Africa through the office of the responsible Minister.

CODE OF CONDUCT 57 COMPANYCOMPANY SECRETARY

AllAll directors have access to the advice and services of the SITA ComCompanyp Secretary, who is responsible to the Board for ensuringensuring compliance with established procedures,procedures statutes and regulations. The Company Secretary’s responsibilities include: t
t EnsuringEnsuring that directors (individually and collectively) are aware of, and ununderstand,de the law applicable or relevant to SITA; and are kept abreast of changeschanges in the law, the implicationsimplication of the changes and how to respondrespond to tthehe changeschanges t
t EnsuringEnsuring that SITA is compliant with all applicable laws and reregulations,gulations, andand that the Board of Directors is conversant and compliescomplies with the provisionsprovisions of the SITA Act, the ComCompaniespanie Act, the Companies RegulationsRegulations and the PFMA t
t InductingInducting and orientingorienting new directors, and guidingguiding directors as to their duties,du responsibilities and powers, in particular with reference to ethics and good governance t
Providing legal advice to the Board and Board Committees on issues pertaining to and of SITA t
Assisting with Board Strategy and APP development, and monitoring performance against predetermined objectives t
Ensuring the Board has relevant, accurate, timely and complete information in order to monitor, review, make decisions and report to shareholders t
Preparing agendas for Board and Board Committee meetings in consultation with the Chairperson of the Board and Chairpersons of Board Committees, and ensuring that adequate notice of meetings is given and all meeting papers and other important information are provided in time t
Ensuring that Board meetings are properly constituted, and providing support to the Board Chairperson and the Chairpersons of Board Committees during and outside meetings so as to ensure the proper running of Board and Board Committee meetings t
Developing Board and Board Committee Terms of Reference, Policies and Procedures for approval by the Board and ensuring that they are regularly reviewed, and that Board policy, resolutions, instructions and wishes are consistently implemented t
Arranging indemnification for directors to the extent allowed by the law, and ensuring the protection of the intellectual property of SITA and that the interests of SITA are protected when contracting t
Ensuring that the Board has comprehensive communication and stakeholder management frameworks, strategies, policies and programmes t
Acting as chief correspondent of SITA, and ensuring the preservation of institutional memory as prescribed by legislation and policy, or as deemed appropriate by the Board

58 SITA ANNUAL REPORT 2014/2015 PART D: HUMAN CAPITAL MANAGEMENT In 2014/15, the SITA Board approved the Human CapiCapital Management Strategy, which defines specific focus areas that support the achievementachievemen of the SITA Corporate Strategy from a ppeopleeople peperspective,rspective, throuthroughgh pproperroper human cacapitalpita planning and well-developed policies, practices and proprogrammes.grammes.

In 2014/15, the Board also approved the followingfollowing human resources (HR) ppolicieso and strategies: tt
TaTalentlent Management Strategy anandd FramewoFrameworkrk tt
Succession Management PoliPolicycy tt
Career Management PoPolicylicy tt
Organisational Development and Design Policy tt
HHumanuman Capital Planning Policy tt
RRelocation,elocation, Secondment and Transfers PolicPolicyy tt
RRewardsewards and Recognition Policy t
Competency Assessment Policy

The implementation of these strategies and policies will go a long way in ensuring that SITA achieves its objective of becoming a performing organisation. These policies were institutionalised through company-wide awareness roadshows.

The following human capital management priorities were set for 2014/2015:

Table 9: Human capital management priorities (2014/2015)

HIGH LEVEL INTERVENTIONS / PROGRAMMES YEAR 1 STATUS IMPACT

STRATEGIC OUTCOME 1: SITA AS AN EMPLOYER OF CHOICE

t
Develop and implement a comprehensive Employee t
SITA is able to compete to attract and retain the best Value Proposition (EVP) skilled employees in the ICT market.

t
Develop an integrated talent management strategy t
85% of employees have completed their performance and framework. contracts on the ERP system whilst 56% completed their PARTIALLY interim performance reviews t
Review the HR development strategy. ACHIEVED t
For the third successive year (since 2012), the Top t
Develop and approve retention strategy. Employers Institute certified SITA as a Top Employer in South Africa. t
Approve the leadership development strategy. t
A memorandum of understanding is in place with North t
Approve and implement work from home policy. West University to finalise the EVP.

Continued

60 SITA ANNUAL REPORT 2014/2015 HIGH LEVEL INTERVENTIONS / PROGRAMMES YEAR 1 STATUS IMPACT

STRATEGIC OUTCOME 2: BUILD A HEALTHY ORGANISATION t
Conduct organisational health assessment. The OHI survey resulted in a score of 40, representing an t
Conduct the OHI survey. improvement of 10 points compared to 2013. This score of 40 falls into the bottom quartile, which denotes a t
Implement large-scale intervention and CIBART weak organisational health profile. (conflict, identity, boundaries, authority, roles and tasks). t
Implement stress management workshop. (The OHI score is the best available predictor of an t
Implement sports and recreation programmes. ACHIEVED organisation’s future capacity to perform. Companies in t
Assess the need for family-friendly practices. the top quartile perform on average three times better t
Comply to occupational health practices. financially and operationally.) t
Benchmark catering services and training of SITA catering staff. t
Carry out a feasibility assessment of the gym facilities. STRATEGIC OUTCOME 3: DEVELOP A HIGH PERFORMANCE AND INNOVATIVE ORGANISATION t
Define and establish the SITA culture programme. t
559 employees participated in the Arbinger Culture t
Implement the Arbinger culture training programme, training programme. which is targeted at improving organisational culture t
The Board approved the revised Integrated Performance and conflict resolution. Management Policy. t
Review the current performance management policy t
The rewards and recognition policy and programme and rewards programme. were approved and implemented. 2156 employees ACHIEVED t
Implement capacity-building programme to participated: 425 who were part of the pilot programme empower managers and employees on performance and 1731 who received long-service awards. management. t
2096 employees participated in job-relevant training, as t
Develop and approve rewards and recognition policy part of the capacity-building programme. and programme. t
Salary benchmarking completed and is pending Board t
Conduct salary benchmarking across the business. approval. STRATEGIC OUTCOME 4: CREATE A CUSTOMER-CENTRIC ORGANISATION t
Conduct a needs analysis. t
The Customer Service Focus Programme was developed t
Appoint a training service provider. ACHIEVED and piloted. t
Conduct customer service training. STRATEGIC OUTCOME 5: FACILITATE TECHNICAL AND ORGANISATIONAL CAPABILITY t
Develop and implement the Human Capital Plan. t
The Human Capital Planning Policy was approved and t
Attract and retain top talent. the process piloted in the LAN & Desktop, Service Management and Hosting, Storage & Printing divisions. t
Implement learnership and internship programmes. t
The WSP was approved and recorded an over- t
Implement workplace skills plan (WSP) to empower achievement of 102% – 2096 employees (2049 planned SITAzens to fully leverage their capabilities. ACHIEVED training) participated in job-related training. (1020 t
Skills audit. non-WSP related interventions were also implemented.) Approve succession and career management policies. t
t
The skills audit was implemented, covering 553 employees in the pilot areas. t
The Board approved the succession and career management policies.

61 HUMAN CAPITAL MANAGEMENTMAN

EmployeeEmployee Wellness

TheThe Employee Wellness Programme is designed to help employees reresolveso their personal and emotional difficultiesdifficulties that that may may be be a ffaffectingecting their their workplace workplace per performanceformance and and functi functioning.o It is a short-term, therapy programme that focusesfocuses on clariclarifyingfying the problem, implementing solutions aandnd monitoring progress. The result isis healthier,healthier, more productiveproductive employeesemployees withwith improvedimproved rerelationslations at hhomeome andand at work. Every attempt has been mademade to adhere to relevant standards of confidentialityconfidentiality andand reportingreporting excelexcellencel throughout the Employee AssistanceAssistance Programme (EAP) Report to EXCO. The annual utilisation rate for this period was 8.9%, which is within the industry benchmark.benchmark.

Face-to-faceFace-to-face counselling is the preferredpreferred method forfor the employeesemployees to addraddresse their personal problems, and 123 individual cases were opened for the reporting period. Figure 2 shows the most common reasons for self- referral by employees.

Figure 2: Top reasons for self-referral

Top presenting problems

Stress

Bereavement Traumatic events Couple Relationships Family Issues Phase of Life Adjustments

In response to the high level of stress among almost a quarter of SITA’s employees, a large-scale intervention was rolled out across SITA, whereby individual and corporate health profiles were developed through medical bio-metric assessments and health screenings. Budgets were allocated to ongoing wellness interventions, which were developed based on the assessments. Stress management training sessions were conducted to mitigate the high-stress levels for identified, high-risk individuals, and all employees were encouraged to use SITA’s health and wellness services.

Employees affected by bereavement are supported through counselling interventions by SITA’s service partners, and a spiritual development intervention was designed for roll-out across SITA offices. An external service

62 SITA ANNUAL REPORT 2014/2015 provider, Careways Services, provides counselling services for employees with couple relationship problems, as well as financial wellness services, and audiology and eye screening clinics. A retirement and financial wellness programme was also rolled out across SITA.

HR Challenges Faced by SITA While significant progress was made during 2014/15 with regard to human capital management, certain challenges remain: t
Vacancies. Out of a total 3255 approved permanent positions, 667 are vacant. The Organisation Design and Development policy now delimits vacancies that have not been filled for six months or more. Dedicated resources are to be allocated to expedite the filling of these vacancies t
Employee turnover. The SITA turnover rate for the period was 16.8% which is slightly above the industry norm of 15.2%. However, in the same period, an increase in the number of preventable resignations was observed. Measures put in place to address this issue include: succession management, recognition and reward, and validation of the salary scale compared to the ICT market t
Employee equity. The EE targets achieved were 45% for gender (annual target was 50%) and 1.2% for disability (annual target was 2%) t
Employee morale. Low employee morale is still in the lower quartile as shown in the OHI Survey results t
Fixed-contract employees. Amendments to the Labour Relations Act related to employees on fixed contracts will entail cost and procedure changes

Table 10: High-level HR interventions/programmes (2015–2019)

YEAR 2 YEAR 3 YEAR 4 YEAR 5

STRATEGIC OUTCOME 1: SITA AS AN EMPLOYER OF CHOICE t
Implement integrated talent t
Review and implement t
Monitor the implementation t
Monitor and evaluate. management strategy and talent management strategy of the talent management framework. and framework. strategy and framework. t
Implement corporate social t
Review and implement t
Monitor the implementation responsibility programme in corporate social of the SITA retention strategy. collaboration with responsibility programmes communication and in collaboration with marketing. communications and marketing. t
Implement leadership development programme. t
Ensure conducive working conditions for employees. t
Implement the SITA retention strategy.

Continued

HUMAN CAPITAL MANAGEMENT 63 YEAR 2 YEAR 3 YEAR 4 YEAR 5

STRATEGIC OUTCOME 2: BUILD A HEALTHY ORGANISATION

t
Implement work stability t
Enhance implemented t
Review implemented t
Monitor and evaluate. programme. stability programmes. stability programmes. t
Implement awareness and t
Enhance implemented t
Review implemented education programmes. awareness and education awareness and education t
Implement family–friendly programmes. programmes. practices. t
Implement family–friendly t
Comply with occupational t
Comply with occupational practices. health practices. health practices. t
Comply with occupational t
Monitor and evaluate use of t
Establish day-care facilities health practices. services. and wellness clinic services. t
Sustain the day-care facilities t
Implement improved health and wellness clinic services. menus. t
Sustain the improved health t
Launch and promote the menus. gym facilities. t
Sustain and promote the gym facilities.

STRATEGIC OUTCOME 3: DEVELOP A HIGH PERFORMANCE AND INNOVATIVE ORGANISATION

t
Implement and monitor the t
Implement continuous t
Implement continuous t
Monitor and evaluate. current performance improvement initiatives to improvement initiatives to management policy and drive the attainment of a drive the attainment of a rewards programme. high performance culture. high performance culture. t
Implement rewards and recognition programmes linked to innovation. t
Implement and embed the High Performance Organisation (HPO) model and improvement plan.

STRATEGIC OUTCOME 4: CREATE A CUSTOMER-CENTRIC ORGANISATION

t
Evaluate the impact of the t
Monitor and evaluate. t
Monitor and evaluate. t
Monitor and evaluate. Customer Service Focus Programme.

STRATEGIC OUTCOME 5: FACILITATE TECHNICAL AND ORGANISATION CAPABILITY

t
Implement the Human t
Review and monitor the t
Review and monitor the t
Monitor and evaluate. Capital Plan. Human Capital Plan. Human Capital Plan. t
Attract and retain top talent. t
Attract and retain top talent. t
Attract and retain top talent. t
Attract and retain top talent. t
Monitor and evaluate t
Implement learnership and t
Review and implement t
Review and Implement implemented learnership internship programmes. learnership and internship learnership and internship and internship programmes. t
Conduct company-wide programmes. programmes. t
Compile and implement skills audit. t
Compile and implement t
Compile and implement WSP. t
Compile and implement WSP. WSP. t
Monitor and evaluate WSP. t
Review the implementation t
Review and monitor succession and management t
Implement succession and of succession and career succession and career processes. career management management processes. management processes. processes.

64 SITA ANNUAL REPORT 2014/2015 HUMAN RESOURCERCE OVERSIGHT STATISTICS

Personnel Costs

TOTAL EXPENDITURE PERSONNELONNEL PERSONNEL EXP. AS AVERAGE PERSONNEL FOR THE ENTITY EXPENDITUREDITURE A % OF TOTAL EXP. NO. OFOF EMPLOYEESEMPLOYEES COSTCOST PER EMPLOYEEEMPLOYEE (R’000) (R’000)000) ((R’000)R’000) (R’000)(R’000)

R5 140 502 R1 206 496.64496.64 23%23% 33563356 R359.50R359.50

Personnel Costs by Occupational Category

PERSONNEL AVERAGE PERSONNEL OCCUPATIONAL EXPENDITURE AS % OF NO. OF EMPLOYEES COST PER EMPLOYEE CATEGORY (R’000) PERSONNEL EXP. (R’000)

Top management R18 768.77 2% 23 R816.03

Senior management R138 443.89 11% 145 R954.79

Professional qualified R172 909.63 14% 313 R552.43

Skilled R784 070.47 65% 2146 R365.36

Semi-skilled R84 325.71 7% 676 R124.74

Unskilled R7 978.17 1% 53 R150.53

TOTAL R1 206 496.64 100% 3356 R359.50

Performance Rewards

SITA did not pay performance bonuses in 2014/15 because the company performance targets were not achieved. However, awards in recognition of long service were paid out, amounting to R6 172 500.

HUMAN RESOURCE OVERSIGHT STATISTICS 65 Training Costs

PERSONNEL TRAINING TRAINING NO. OF AVG. TRAINING OCCUPATIONAL EXPENDITURE EXPENDITURE EXPENDITURE AS A % EMPLOYEES COST PER CATEGORY (R’000) (R’000) OF PERSONNEL COST TRAINED EMPLOYEE (R’000)

Top management R18 768.77 R83.99 0.45% 16 R 5.25

Senior management R138 443.89 R2 799.91 2.02% 260 R 10.77

Professional qualified R172 909.63 R2 964.17 1.71% 356 R 8.33

Skilled R784 070.47 R14 478.26 1.85% 1946 R 7.44

Semi-skilled R84 325.71 R3 166.06 3.75% 531 R 5.96

Unskilled R7 978.17 R57.05 0.72% 8 R 7.13

Total R1 206 496.64 R23 549.43 1.95% 3117 R 7.56

Employment and Vacancies

ORGANISATION ARCHITECTURE SIYASHESHA - PLACEMENT AND PROGRAMME MIGRATION MACRO STRUCTURE REALIGNMENT

2011/12 (V10.2) 2012/13 (V10.3) 2013/14 (V10.4)

Approved Actual Approved Actual Approved Actual structure # employee Vacancies structure # employee Vacancies structure # employee Vacancies positions headcount positions headcount positions headcount

3183 2436 1802 3221 2303 965 3239 2259 930

Note: all data as end March 2015

The challenge for SITA is finding suitable skills. To develop the requisite skills, intensive internship and learnership programmes were implemented. An external service provider was also procured in order to expedite the recruitment and placement process, as internal recruitment capacity was insufficient. SITA uses social media and recruitment search engines such as LinkedIn and PNet to attract skilled resources.

66 SITA ANNUAL REPORT 2014/2015 Employment Changes

SALARY BAND APPOINTMENTS TERMINATIONS EMPLOYMENT EMPLOYMENT AT BEGINNING AT END OF THE OCCUPATIONAL OF PERIOD PERIOD CATEGORY PERM FTC TOTAL

Top management 18 6 5 11 6 23

Senior management 135 21 0 21 11 145

Professional qualified 325 3 3 6 18 313

Skilled 1791 164 277 441 86 2146

Semi-skilled 481 47 200 247 52 676

Unskilled 50246 3 53

Total 2800 243 489 732 176 3356

Note: Board members and Learners are excluded from the employment figures at beginning of period but included in the figures at end of period because they are also included in the personnel costs.

Reasons for Staff Leaving

REASON FOR TERMINATION NUMBER % OF TOTAL NO. OF STAFF LEAVING

Abscondment 1 0.57%

Contractor resignation 56 31.82%

Deceased 12 6.82%

Dismissal 3 1.70%

Dissatisfaction: salary 1 0.57%

Early retirement: 55 > 60 2 1.14%

End of contract 19 10.80%

Full-time studies 2 1.14%

Ill health 1 0.57%

New career opportunities 51 28.98%

Personal – reason not disclosed 19 10.80%

Retirement 8 4.55%

Spouse Transferred 1 0.57%

Total 176 100.00%

Staff turnover 2014/2015 5.24%

HUMAN RESOURCE OVERSIGHT STATISTICS 67 Labour Relations: Misconduct and Disciplinary Action

NATURE OF DISCIPLINARY ACTION NUMBER

Verbal warning 1

Written warning 2

Final written warning 2

Dismissal 2*

Settlements (employees exited) 6

Suspensions 13

Total number of cases 26

Note: Due to the negative effects of the Organisational Architect project, managers did not actively pursue disciplinary processes. One dismissal was settled out of court and converted to an employee exit. All suspensions were lifted except for one where the case against the employee is still ongoing.

Equity Targets and Employment Equity Status

OCCUPATIONAL CATEGORY MALE

CURRENT NO BLACKS WHITE TOTAL AFRICAN COLOURED INDIAN ACTUAL % TARGET CURRENT ACTUAL % TARGET

Top management 12 0 0 71% 70% 3 29% 30% 15

Senior management 56 3 5 71% 70% 20 29% 30% 84

Professional qualified 63 10 20 71% 70% 132 29% 30% 225

Skilled 703 77 78 71% 70% 360 29% 30% 1218

Semi-skilled 218 14 3 71% 70% 15 29% 30% 250

Unskilled 36 1 0 71% 70% 0 29% 30% 37

TOTAL 1088 105 106 71% 70% 530 29% 30% 1829

Note: The overall target was 70% for Blacks (Race) and 50% for Gender (women)

68 SITA ANNUAL REPORT 2014/2015 OCCUPATIONAL CATEGORY FEMALE

CURRENT NO BLACKS WHITE TOTAL AFRICAN COLOURED INDIAN ACTUAL % TARGET CURRENT ACTUAL % TARGET

Top management 6 2 0 72% 70% 0 28% 30% 8

Senior management 37 6 2 72% 70% 16 28% 30% 61

Professional qualified 31 2 6 72% 70% 49 28% 30% 88

Skilled 561 38 24 72% 70% 305 28% 30% 928

Semi-skilled 358 25 6 72% 70% 37 28% 30% 426

Unskilled 16 0 0 72% 70% 0 28% 30% 16

TOTAL 1009 73 38 72% 70% 407 28% 30% 1527

Note: The combined actual percentage achieved was 72% for Blacks (race)and 45.5% for Gender (women)

OCCUPATIONAL CATEGORY DISABLED STAFF

MALE FEMALE TOTALS CURRENT TARGET CURRENT TARGET

Top management 02%02%0

Senior management 12%12%2

Professional qualified 22%02%2

Skilled 17 2% 8 2% 25

Semi-skilled 52%42%9

Unskilled 02%02%0

TOTAL 25 2% 13 2% 38

Note: Combined actual percentage achievement for disability: 1.13%

SITA exceeded the target for designated black employees but has been struggling to achieve the gender and disability targets, mainly because of ICT skills shortages among women. As a result, SITA’s internship programme favours females, while a concerted effort is being made to partner with organisations for the disabled to assist in meeting the target.

HUMAN RESOURCE OVERSIGHT STATISTICS 69 HEALTHHEALTH SAFETYSAFETY ANDA ENVIRONMENTAL ISSUESIS

A safe and hazard-free workinworkingg environment is one ooff the most important factors for ememployeeployee commitment and peperformance.rformance. SITA has the follfollowingo initiatives to mitigate and control hazardous riskrisks:s: tt
Risk assessments: environmental risks assessment has been conducted wwith the aim of identifying health hhazards,azards, improving working conditions and preventing the risk of employees contracting infectious diseases. AAssessmentsssessments focused on noise levels, ventilation and airborne infections, sanisanitation,t offices/building, etc. tt
FFirstirst aid services: first aid training has been provided to occupational healhealthth and safety representatives who inspect and manamanagege first aid boxesboxes.. tt
Medical services: a room has been desidesignatedgnated for sick staff members to reretiret to in order to take a moment, monitor chronic medical cases and have a rest before returninreturningg to work.

SOCIAL RESPONSIBILITY

SITA believes that the correlation between people, business and the community is inseparable, and that a company is fundamentally a social structure. In line with its commitment to promoting sustained social and economic development, ongoing support has been provided to the communities in the geographical areas where the agency operates. Many SITA employees have also taken the initiative to actively contribute in cash and kind, and volunteered their time to support events such as Mandela Day and International World Aids Day.

SITA’s Social Responsibility programme supports those who have been economically marginalised and previously disadvantaged. As modern technology is one of the most powerful vehicles through which to drive transformation, the programme has focused on empowering teachers and learners in secondary schools through ICTs. This past year’s efforts have focused on the installation of ICT labs at secondary and some primary schools in various provinces throughout the country, in collaboration with key stakeholders such as the Ministry for Telecommunications and Postal Services and ICT industry partners. These initiatives have resulted in opening doors to the world of digital information and connecting the schools to a vast array of opportunities.

SITA is also a proud sponsor and strategic branding, communications and technology partner of the Techno Girl Programme, a national job shadowing initiative. In 2014/15, SITA opened its doors to approximately 110 girls in Grades 10–12 who are considering careers in Science, Technology, Engineering and Mathematics, fields with a gender imbalance. The programme exposes girls to the world of work during school holidays and increases their knowledge of possible careers choices.

SITA strives to manage its operations in a sustainable manner, thereby minimising its carbon footprint. For the GovTech 2014 conference, SITA adopted green business practices creating opportunities to effectively manage this event, reduce input costs and increase operational efficiencies. To offset the carbon footprint on the environment, SITA donated approximately 60 trees to two schools in KwaZulu-Natal. The agency also plays a key role in providing advice to other government departments on green technology and e-waste management.

70 SITA ANNUAL REPORT 2014/2015 PART E: ANNUAL FINANCIAL STATEMENTS STATEMENTSTATEMENT OF RESPONSIBILITYRESPO BYBY THE BOARDBOARD OFOF DIRECTORSDIREC

The directors are responsible for the preparation, integrity and ffaira presentation of the report on pperformanceerformance informationinformation and the annual fifinancialnancial statementsstatements ooff S SITA. The financial statements presented on page 105 to 145 have been prepared in accordance with GGenerallye Recognised Accounting PPracticeractice and include amounts based on judgments and estimates made by management.ma

The ggoingoing concern basis has been adopted in preparinpreparingg the financial statements.statemen

The directors have no reason to believe that the ororganisationganisation will not be a gogoing concern in the foreseeable future based on forecasts and available cash resources. These financial statemstatementse support the viability of SITA. The report on performance information and the annual financial statements haveha been audited by the Auditor- General, who was given the give unrestrictive access to all financial records and related data, including of minutes of all meetings of the Board, committees of the Board and executives. The directors believe that all representations made to the Auditor-General are valid and appropriate.

The annual financial statements set out on pages 105 to 145, which have been prepared on the going concern basis, were approved by the Board of Directors on 29 July 2015 and were signed on its behalf by:

Jerry Vilakazi Chairman of the Board of Directors 14 August 2015

Setumo Mohapi Chief Executive Officer 14 August 2015

72 SITA ANNUAL REPORT 2014/2015 REPORT BY THE CHIEF EXECUTIVE OFFICER

General Review of State ICT

Customer confidence and service delivery A key focus of the leadership team is restoring customer confidence and improving service delivery. Over the last few months, SITA has conducted a number of workshops and EXCO offsite sessions to understand and improve the agency’s current state of operations. Based on these engagements, several challenges were identified that need to be urgently addressed to enable SITA to effectively deliver value to the public. The recent organisational diagnostic supported the views expressed by SITA’s customers about the agency: t
Long lead times and perceived corruption in procurement t
Poor service delivery to customers t
High costs of SITA services t
Loss of critical skills t
Demotivated staff t
Ageing and outdated infrastructure t
Customer dissatisfaction t
Insufficiently proactive or innovative product design and customer solutions

SITA continues to implement initiatives aimed at improving customer satisfaction and addressing critical service delivery issues raised in the client satisfaction survey of 2012/2013. Performance levels are closely monitored and reported on against signed Service Level Agreement (SLA) metrics, in order to improve performance and thus customer service delivery. SITA continues to establish governance mechanisms (both manual and automated) that will ensure better service delivery, specifically regarding customer complaints. SITA has concluded the 2016/2016 Annual Performance Plan (APP), to ensure a more focused approach to improving performance. Going forward, accountability and good governance will be the agency’s key drivers.

Security and upgrading The security of government data and SITA’s network continues to be reviewed in line with best practices. SITA solutions are designed to withstand any form of cyber-attack and have the necessary operational structures, standards, business processes and management technologies to respond to any threat. Modernising of the data and switching centres is underway. The data centre and disaster recovery infrastructure are being upgraded, and management systems deployed to monitor, control and command the information system infrastructure, with a strong emphasis on disaster recovery. The core network is also being refreshed and should yield further cost efficiencies for internet connectivity. The objective is to upgrade and refresh the entire network infrastructure, in order to deliver further benefits to our customers and enable readiness for the rollout of e-Government.

Supply chain management To deliver on its mandate of cost effectively procuring IT goods and services to government, SITA is enhancing its SCM capability. An integrated procurement strategic plan has been approved, which will enable the agency to address key challenges. Changes to the procurement function are intended to ensure clean and transparent processes, fast and efficient turnaround times, and real cost savings for government.

REPORT BY THE CHIEF EXECUTIVE OFFICER 73 Human capital and skills In July 2015 the placement process for 11127 employees, displaced as a result of the turnaround restructuring at the beginning of 2013/2014, was concluded. The process of filling the outstanding executive positions continues and should be finalised in time for the new executives to be part of the leadership team who will be driving the implementation of the 2015–2018 strategic plan. The EXCO has resolved to prioritise filling 410 out of a total of 1023 vacancies budgeted for in order to contain operational expenditure. During 2014/15, the Board approved a number of critical human capital management-related strategies and policies, including the five-year Human Capital Management Strategy. A Skills Audit is underway and will ensure that SITA becomes aware of its current capability needs and can thus position itself to meet present and future requirements.

Strategic Overview SITA continues on its journey of implementing the strategic plan, which aims to improve service delivery, create transparency on costs and result in a high-performance organisation through: t
Becoming customer-led, served by highly motivated and skilled employees t
Radically improving and transforming procurement systems and processes t
Developing and implementing integrated e-Government services in partnership with our customers and in alignment with the MTSF t
Modernising and upgrading infrastructure, and improving the security of government data assets

The SITA strategy for 2015–2018 and the APP for 2015/16 were revised, approved and tabled at Parliament. The Corporate Balanced Scorecard was aligned to the changes in the corporate strategy and APP.

Services Rendered The agency provides mandatory and optional services to government, including:

MANDATORY OPTIONAL

Providing or maintaining Public Telecommunications Providing training on ICTs for government Networks (PTN) and Value Added Networks (VAN)

Providing or maintaining transversal systems Developing application software

Providing data processing for government Technical Maintaining software and ICT infrastructure Information Systems (TIS)

Processing data for department-specific applications Procuring ICTs for government or systems

Setting standards of interoperability Providing ICT technology or business advice to government

Setting security standards Conducting research and development

Setting certification standards for government ICT acquisition Providing management services for government ICTs

Certifying information and technology acquisitions for compliance Providing authentication products

Facilitating the elimination of duplications

Leveraging economies of scale

74 SITA ANNUAL REPORT 2014/2015 Programme Structure

SITA’s work is centred on initiatives that support six key programmes:

STRATEGIC PROGRAMME GOALS

To address all issues relating to delayed procurement turnaround times, Programme 1: Procurement removing customer pain points, and transforming the procurement function

To provide high-quality IT services to enable government to deliver efficient Programme 2: Service Delivery and convenient services through the use of ICT

To optimise the provision of SITA’s IT infrastructure services in order to increase Programme 3: Infrastructure availability, flexibility, scalability, predictability and security

To ensure an effective and efficient financial management, and ensure Programme 4: Financial Sustainability financial growth and sustainability

To build and maintain organisational capability to enable SITA to achieve its Programme 5: Organisation strategic imperatives and become an employer of choice within the ICT industry

Programme 6: Governance and To provide leadership, strategic management, governance, risk and resource Administration management in line with government-accepted norms and standards

Revenue The deficit before tax for the quarter ending 30 June 2015 was R215.3-million, from a revenue of R1.235-billion, or -17.4% as a percentage of revenue. The actual revenue of R1.235-billion is 31.5% above the budgeted R939.4- million, and the cost of sales of R1.305-billion is 16.7% above the budget of R1.118-billion. Net deficit after tax amounted to R155-million.

Infrastructure Spending SITA underwent a number of reviews to ensure alignment between the operational and strategic capital requirements against the available capital for the year. On 29 July 2015, the SITA Board approved R640-million for infrastructure investment in 2015/2016:

APP PROGRAMMES GROWTH MAINTAIN REFRESH GRAND TOTAL

Programme 1: Infrastructure R361 274 221 R189 959 658 R89 405 226 R640 639 105

Programme 2: Solution Development R140 095 671 R34 232 000 R9 632 286 R183 959 957

Programme 3: Service Management R600 000 R17 129 140 R3 565 000 R21 294 140

Programme 4: Operational Support R1 435 000 R6 282 520 R102 655 104 R110 372 624

Grand Total R503 404 893 R247 603 317 R205 257 616 R956 265 826

REPORT BY THE CHIEF EXECUTIVE OFFICER 75 By 31 July 2015, R215 004 513 had been spent on the network upgrade projects and R41 434 383 on the upgrade and maintenance of the data centre capabilities. The majority of the contracts for the infrastructure spend are now in place and the allocated amount will be fully utilised.

Integrated financial management system The award of the integrated financial management system (IFMS) tender to the original software manufacturer (OSM) was delayed by over four months. SITA had concluded all the required processes, but probity services by National Treasury resulted in the delay. The actual impact cannot be estimated until the award is made to the OSM, and the delay will continue to increase until the award is concluded.

E-Cabinet The e-Cabinet project was delayed by the construction work that the Department of Public Works (DPW) had to complete at both the Union Building and Tuynhuys, but SITA and DPW are working to recover lost time. SITA and the Presidency have developed a plan to get the project back on track, the commitment of the Presidency staff to this project is commendable.

The Western Cape Broadband project target had to be revised after the supplier could not complete the site preparations as per the original plan. SITA has been engaging with the supplier to get the project back on track.

Capacity Constraints The scarcity of ICT skills, especially for software developers and testers, business analysts and IT architects, is an organisational capacity challenge for SITA in meeting its business objectives. The total number of vacancies at the end of the year was 667 out of 3255 approved permanent positions. Therefore, SITA needs a sound staffing model that provides a balance between buying talent and building organisational capacity, and establishing a strong Employee Value Proposition (EVP) that both attracts and retains top talent. In 2014/15, the Board approved a number of strategies and policies that will enable SITA to address its capacity constraints, including the Talent Management Strategy, Leadership and Skills Development Strategy, Competency Management Policy, Succession Management Policy and Career Management Policy. SITA has established strategic partnerships with tertiary institutions, including the North-West University and the University of Pretoria, to implement its capacity building programmes. SITA also continues to develop ICT skills through its internship and learnership programmes. In 2014/2015, SITA employees attended a total of 3117 ICT-related training interventions and 208 trainees underwent the SITA internship programme.

Utilisation of Donor Funds The Board revised the capital expenditure budget for 2015/16 from R1.151-billion to R956.3-million, in line with the estimated available cash.

76 SITA ANNUAL REPORT 2014/2015 Transfer Payments to Organisations t
None

Events After the Reporting Date t
None

Corporate Governance Arrangements

Internal Audit Function The Internal Audit Function (IAF) continued to fulfil its mandate, of providing independent, objective assurance and consulting activity designed to add value and improve the SITA’s operations. Through a systematic and disciplined approach, the IAF assists SITA in evaluating and improving the effectiveness of risk management, control and governance processes within the agency.

The IAF operates in accordance with an approved Internal Audit Charter and is guided by a fully functional Audit, Risk and Compliance Committee (ARCC). The IAF has processes in place to ensure that existing staff obtain appropriate qualifications and are kept abreast of changes within the Internal Audit profession.

Through, inter alia, engagement with internal stakeholders, the IAF formulated a comprehensive three-year rolling plan, incorporating an annual risk-based internal audit plan approved by the ARCC. The 114 audits planned for the year were fully executed. In addition, the IAF undertook 124 unplanned projects, including various consulting activities and ad-hoc management requests. Relationships with management improved, as shown by the number of unplanned specialised projects, which in turn indicates that management sees the value of the IAF within its systems of governance and control. The IAF’s executive has complete access and a direct reporting line to the ARCC, and presents reports at each committee meeting on internal audit activities.

Audit, Risk and Compliance Committee The ARCC continues to operate within its terms of reference, which are reviewed annually. During 2014/15, the ARCC met five times. The Accounting Officer and executive management are always represented, and the Auditor-General is always invited to attend, ensuring that these meetings are as effective and transparent as possible. The ARCC provides objective oversight and advice on institutionalising risk management, business continuity and anti-corruption processes throughout SITA.

Risk management The risk management culture within SITA continues to improve, with management taking an active role. The Enterprise Risk Management Strategy was successfully implemented during the year. The Chief Risk Officer championed good governance practices through key governance committees, and the direct reporting line to the Accounting Officer continues to create a strong tone at the top. The benefits of risk management were

REPORT BY THE CHIEF EXECUTIVE OFFICER 77 continuously communicated through awareness campaigns promoting the embedding of risk management principles and processes within SITA. The ARCC actively monitors SITA’s risk profile, which includes strategic, operational, corruption and business continuity risks and forms the basis for the SITA’s internal audit plans. SITA supported and monitored the successful implementation of its anti-corruption plan and encouraged strong ethical values from all its employees. The anti-corruption plan is implemented across numerous functions and results in a multi-dimensional approach to mitigating identified corruption risks and combating corruption holistically. SITA has a zero tolerance stance on corruption, and the mitigation of identified corruption risks is supported at all levels.

Internal policy review In the period under review, the following Codes, Charters (Terms of Reference), Policies and Procedures were adopted and/or reviewed: t
Fixed Asset Management Policy t
Competency Assessment Framework t
Revised Supply Chain Management Policy t
Integrated Talent Management Framework t
Career Management Policy t
Recognition and Rewards Policy t
Succession Management Policy t
Accounts Receivable Policy t
Debt Management Policy t
Accounts Payable Policy t
Revised Foreign Exchange Policy t
Revised Banking and Investment Policy t
Revised Competency Management Policy t
Revised Organisation Design Policy t
Revised SITA Integrated Talent Management Policy t
Revised Human Capital Resource Planning Policy t
SITA Secondment, Transfers and Relocating Policy t
SITA Risk Management Policy t
SITA Risk Management Framework t
Revised Integrated Corporate Performance Management Policy t
SITA Skills, Training and Leadership Development Framework and Strategy t
Policy on Policy Development t
Corporate Social Investment Strategy t
Corporate Social Investment Policy t
Revised Employee Conflict of Interest Policy t
Revised Gifts and Entertainment Policy t
Integrated Internal Control Framework

78 SITA ANNUAL REPORT 2014/2015 Other Governance Matters

Integrated sustainability management SITA recognises that strategy, risk, performance and sustainability are inseparable, as outlined in the King III best practices, and that the agency is (and is seen to be) a responsible corporate citizen. SITA views sustainability as a business practice that creates value for stakeholders through managing the environmental, social and governance factors affecting the agency’s ability to achieve sustainable service delivery. SITA acknowledges the importance of reporting the results of its operations in a way that brings together information about the SITA’s strategy, governance, and performance and future prospects while reflecting the commercial, social and environmental context within which it operates. SITA continues to emphasise the importance of embedding the management of environmental and sustainable development issues in its core business, and has already integrated sustainability aspects in its strategic objectives (see pags 37 to 43). At the core of its sustainability agenda, SITA recognises the need to be cost efficient and environmentally friendly, to ensure that resources are used efficiently and in a socially and environmentally responsible manner. To this end, cost-saving initiatives and green practices are gradually being introduced into business practices.

South Africa has made a conscious effort to move towards a green economy, as part of the long-term plan to grow the economy while mitigating the effects of climate change. Embracing the government’s efforts, SITA strives to live green in all aspects of its work, in interactions with customers and employees, leading by example in ensuring that the impact on the environment is as minimal as possible. To this end, SITA adopted sustainable event management principles. The aim is to minimise SITA’s carbon footprint and impact on the environment throughout the different stages of event planning and execution. SITA uses an environmental policy document to plan an event and ensure adherence to these principles. For instance, service providers selected must be committed to, and provide proof of being committed to, environmental objectives. After an event, targets are revised and improvements recommended for the next event. The success of this approach was acknowledged when the GovTech 2014 conference, the foremost gathering of ICT professionals from the private and public sector received a gold class pass on the green scoreboard. This translates to an 84. 7% score for planning and implementation of sustainable business practices, an improvement on the 79.2 % achieved in 2013.

Supply chain management Improvements in the SCM function have begun to make a visible contribution towards operational efficiency and good governance within the SITA. SITA is committed to further and more substantial improvements that will keep the supply chain function responsive to the strategic needs of stakeholder. Key initiatives include: t
The development of an Integrated Procurement Strategic Plan, which was approved by EXCO in January 2015 and subsequently endorsed by SITA Board of Directors on 29 July 2015. The strategy provides a roadmap of the approach and initiatives that SITA must embark on to establish procurement excellence that enables service delivery to our clients. A service provider has been appointed to assist with developing the process and tools for implementing the strategy. t
The Board approved the revised SCM Policy of 2011 on 25 November 2014, and the supplementary revision on 29 July 2015. The revised SCM Policy enables the organisation to enhance internal controls to address majority of findings raised by Auditors-General during the last financial year. t
A new procurement organisational structure, which incorporates new capabilities required to address current challenges, has been approved, and the recruitment process to fill critical leadership positions is underway.

REPORT BY THE CHIEF EXECUTIVE OFFICER 79 t
An ECM (Enterprise Content Management) Contract Tracking and Management system has been developed internally and was rolled out in November 2014. All contracts are now stored in one electronic database. t
New procurement checklists for various process stages have been introduced to enhance the quality of execution and to curb non-compliance by practitioners, including other process-related risks. t
New practices have been introduced to ensure that the CEO approves all business cases requesting deviation from the normal procurement process, irrespective of value. In addition, the Chief Procurement Officer must pre-approve any deviation before the market or targeted supplier is engaged. This control will curb the abuse of procurement deviation by procurement practitioners and end-users from line of business.

Asset management In terms of sub-section 57(b) of the PFMA as amended, the officials of a public entity are responsible for the effective, efficient, economical and transparent use of the entity’s resources. In addition to the normal day-to- day administration and management of SITA’s asset register, the SITA’s Asset Management Unit undertook several key activities to improve the overall asset management environment of SITA:

Asset verification. The internal asset verification was concluded by 31 March 2015. The involvement of SITA employees in the process enhanced the organisation’s hands-on knowledge and awareness of asset management matters. In 2014/15, overall coverage for asset verification was 99.81%, which we believe is within acceptable levels.

Asset disposal. In line with the SITA’s Asset Management Policy, Treasury Regulations and the King III Code on Corporate Governance, in 2014/15 the Asset Management Unit disposed of 830 assets with a net book value of R7 516 284. Of these, 36 assets (with a net book value of R7 965) were donated to schools, one vehicle (with a net book value of R27 683) was sold and the remaining assets (with a net book value of R7 520 121) were sold as scrap, as they had no value for use.

ICT Capability Approximately 85% of the total SITA third party expenditure was spent on enhancing SITA ICT capability.

Information on Predetermined Objectives Every month, divisional heads report to the CEO on progress made with regard to programme delivery and measurable objectives, as contained in the SITA 2014/2019 Strategic Plan and 2014/2015 APP. Detailed information on annual performance against predetermined objectives is set out on pages 37 to 43 of this report.

Standing Committee on Public Accounts (SCoPA) Resolutions There were no SCoPA Resolutions.

Exemptions and Deviations Granted by National Treasury The following exemptions and deviations were granted by National Treasury:

80 SITA ANNUAL REPORT 2014/2015 Deviations 2014/2015

AWARDED ITEM NAME DESCRIPTION AMOUNT AWARDED VENDOR

Request for the functional enhancement of existing Release 2 and Release 2 and Release 3 enhancement to include Magna BC Business 1 Release 3 R4 393 512 ICPC, including maintenance and support for a Consulting (Pty) Ltd Enhancement period of two years.

Maintenance and support of the IP Granite 2 Encryption Software R16 646 745 Nanoteq (Pty) Ltd encryption software and Nanoteq supplied hardware

Law Trust Information 3 PKI Solution Support and maintenance of PKI solution R649 800 Security Solutions (Pty) Ltd

Library Information Provision of Library Information Systems CIPAL Brocade Library 4 R9 468 401 Systems to SITA Services NV

Repair and Three (3) Request for deviation from normal procurement Year Maintenance for process and award Schneider Electric Once Off 5 R7 500 000 Schneider Electric Galaxy Range Repair and three years’ maintenance for Galaxy Products Range Products

6 Renewal of Licences The renewal of RADSIM licences and support R157 320 Maretek CC

Repairs on UPS No 4 located in SITA Centurion 7 Repair of UPS R419 916 Schneider Electric Building

Dumpmaster Software Renewal, maintenance and support for Blue Turtle 8 R4 425 494 Licences Renewal Dumpmaster software licences Technologies (Pty) Ltd

CMMI (Capability 9 Maturity Model CMMI Training R7 298 813 CCMI Institute Integration)

Performance Management Development and delivery of a performance 10 R1 120 981 Epi-use (Pty) Ltd Capacity-Building management capacity-building programme Programme

Email Security Renewal of email security technology (SOPHOS) Business Connexion 11 R1 208 682 Technology Licences licences (Pty) Ltd

Renewal, maintenance and support of HylaFAx Obsidian Systems (Pty) 12 HylaFAx Licences R99 516 licences, including procurement of additional licences Ltd

Continued

REPORT BY THE CHIEF EXECUTIVE OFFICER 81 AWARDED ITEM NAME DESCRIPTION AMOUNT AWARDED VENDOR

Enterprise Licence Agreement: procurement of 13 Adobe Licences R7 324 619 Adobe systems Adobe licences including support and services

Executive Placement of advertisement for Executive: Service Media24 and Times 14 R160 854 Advertisement Delivery and Systems Media

15 Lectora Licences Renewal of Lectora licences R84 759 Bytes People (Pty) Ltd

Renewal, maintenance and support, including Blue Turtle Technologies 16 TOAD Licences R142 688 procurement of additional licences (Pty) Ltd

Supply Grid Remedy of the current supply grid configuration, to RO-AL Construction 17 Remediation and supply transitional (rental) units and to upgrade key R10 197 779 (Pty) Ltd Upgrade power supply components for a period of one year

Renewal of SAAB Grintek licences on behalf of the 18 DoD Licences R8 326 231 SAAB Grintek (Pty) Ltd Department of Defence (DoD)

Provision of maintenance of coffee, tea and hot HOT Vending Solutions 19 Vending Machines R345 500 chocolate vending machines month on month cc

Software AG South 20 ARIS Licences Renewal of ARIS software licence R5 865 043 Africa (Pty) Ltd

Renewal, maintenance and support Bomgar Netvision Network 21 Bomgar Licences R6 340 582 software licence Solutions

The renewal of Foresight licences for a period of Gijima Holdings (Pty) 22 Foresight Licences R484 272 one year Ltd

23 SAS SAPS BI The renewal of SAS SAPS BI for a period of one year R83 801 SAS Institute (Pty) Ltd

The renewal of the SAS licences for the Vulindlela SAS Vulindlela 24 project on behalf of National Treasury, for a period R4 683 917 SAS Institute (Pty) Ltd Licences of one year

CA Service Desk The renewal of CA Service Desk Manager for a 25 R6 041 843 CA Southern Africa Manager period of three years

Deviation to appoint Gijima and XON for LAN and LAN and Workplace workspace support including hardware 26 R46 603 304 Gijima and XON Support maintenance at KZN Department of Health (DoH) for a period of nine months

Deviation to appoint current service provider for KZN LAN and 27 provision of LAN and desktop support to the KZN OTP R865 853 SIZWE Pty Ltd Desktop Support for a period not exceeding three months

Deviation to reappoint Faranani IT Services (Pty) Ltd Faranani IT Services 28 Mpumalanga PAAB for the support and maintenance of the PAAB system R4 965 237 (Pty) Ltd / application for the Mpumalanga DoH

Continued

82 SITA ANNUAL REPORT 2014/2015 AWARDED ITEM NAME DESCRIPTION AMOUNT AWARDED VENDOR

Deviation to appoint current service provider for 29 KZN OTP provision of LAN and desktop support to the KZN OTP R2 308 938 SIZWE Pty Ltd for a period not exceeding three months

IT infrastructure solution for the Department of 30 DPME Infrastructure R3 067 132 Integral Networking Performance Monitoring and Evaluation

Deviation to appoint Vodacom (Pty) Ltd for the renewal of maintenance of VAST services for SASSA 31 SASSA VSAT R8 866 574 Vodacom (South African Social Security Agency) for a period not exceeding two years

Deviation for the extension of contract RFB 32 Microfilm Services R1 032 000 Meniko 861/2010 (Microfilm Services) for DOD

Deviation to appoint EMC computer systems for the EMC Equipment and EMC Computer 33 maintenance and support of EMC equipment and R5 898 835 Software Systems software for a period of 12 months

DCS Cabinets and Maintenance of the cabinets and UPs for 34 R1 771 941 Telenetix Technology UPs Department of Correctional Services

Contract Expansion 2014/2015

ORIGINAL DESCRIPTION PREVIOUS NEW EXPIRY CONTRACT EXTENSION % REASON FOR EXTENSION EXPIRY DATE DATE AMOUNT AMOUNT INCREASE

Replacement tender RFB 1154 was LAN and Cabling cancelled due to poor costing model. 30-Jun-13 31-Jan-14 R487 008 R243 504 50% Infrastructure The new replacement tender RFB 1233/2014 closed on 8 September 2014.

The new replacement contract RFQ Cash-in-Transit 27-Aug-13 28-Feb-14 R152 800 R173 000 113.22% JZM-733-AH-2014 commenced from 1 July 2014 for one year.

The Bloemfontein Data Centre was Multi-disciplinary not included in assessment for the Consultant successful implementation of the Engineering for Cloud 28-Feb-13 28-Feb-14 R1 343 262 R199 158 15% SITA cloud computing project. If this Computing and Tier centre is not included, it will not be Rating able to provide cloud computing services to the Free State province.

Continued

REPORT BY THE CHIEF EXECUTIVE OFFICER 83 ORIGINAL DESCRIPTION PREVIOUS NEW EXPIRY CONTRACT EXTENSION % REASON FOR EXTENSION EXPIRY DATE DATE AMOUNT AMOUNT INCREASE

Contract extended for three months Hardware to allow the replacement process Maintenance and 30-Sep-13 31-Dec-13 R28 463 018 R15 290 930 54% (RFQ 1988) to be finalised. The RFQ is Software Support being reviewed by Internal Audit.

Maintenance and Extension of the current contract to Support of Rofin 30-Nov-13 30-Nov-14 R32 113 162 R153 788 818 478.90% allow the research and testing of Equipment alternate products to be finalised.

Contract extension with the current Diginet Term Discount 31-Oct-13 31-May-14 R146 788 493 R105 000 000 71.53% service provider to allow the Telkom Agreement MSA to be finalised.

Maintenance of To allow for the finalisation of RFQ Audio-visual and 27-Sep-13 31-Mar-14 R2 001 488 R379 810 18.98% 1144/2013, which is the replacement Video Conferencing RFQ. The RFQ is under adjudication. Equipment

To allow an open bid process. The replacement tender is 1209 and the Lease Vehicles for SITA 30-Sep-13 28-Feb-14 R7 638 167 R2 492 436 19% evaluation commenced on 25–29 August 2014.

Replacement tender 1219 is under Provision of Vending 01-Oct-13 31-Mar-14 R6 100 122 R1 006 164 16.49% evaluation and targeted completion Machine date is end of November 2014.

Contract was extended pending the Eastern Cape Offices 01-Dec-13 30-Apr-14 R481 399 R124 419 25.85% outcome of the relocation processes/ Security discussions at the province.

Armed Response and Contract was extended pending the Monitoring Services 01-Nov-13 01-Jun-14 R10 245 R1 861 18.17% outcome of the relocation processes/ (PE) discussions at the province.

Contract was extended pending the Hygiene Services (PE) 01-Nov-13 30-Apr-14 R31 608 R6 005 19.00% outcome of the relocation processes/ discussions at the province.

The replacement contract with Provision of Security Fidelity was established for a period Services for SITA 31-Jul-13 31-Jan-14 R15 560 571 R5 957 243 38.28% of 1 year (until 31 March 2015) as per Pretoria Buildings NT 16A6.6

The replacement tender was submitted for cancellation due to Courier Services 27-Aug-13 28-Feb-14 R600 000 R600 000 100% incorrect specification and costing model, and permission sought to participate in the NT RT contract.

Continued

84 SITA ANNUAL REPORT 2014/2015 ORIGINAL DESCRIPTION PREVIOUS NEW EXPIRY CONTRACT EXTENSION % REASON FOR EXTENSION EXPIRY DATE DATE AMOUNT AMOUNT INCREASE

Contract was extended for six months Provision of Business 14-Feb-13 31-Aug-13 R23 544 600 R11 772 300 50% to allow for the finalisation of the Process Architecture project.

Contract was extended with the current service provider to allow for Courier Services 28-Feb-14 31-Aug-14 R1 242 835 R500 000.00 40.23% the finalisation of the replacement process.

Hardware Tender for/replacement contract Maintenance and Month to underway and the technical 31-Jan-15 R171 432 908 R278 967 511 162.73% Support for SAPS (RFB month requirements tabled in the next Bid 769) Specification Committee.

The replacement tender 1211 tabled Bandwidth and Email 28-Feb-14 30-Nov-14 R65 835 319 R27 465 301 41.72% in the Recommendations Committee Cleansing for adjudication on 3 September 2014.

Provision of STM Transmission Services 31-Mar-13 31-Mar-15 R34 722 063 R42 903 327 123.56% Partnership process in progress. between SITA and Telkom.

LAN and Desktop Fixed-term contract process in Support Services 30-Apr-14 30-Sep-14 R20 117 897 R9 309 196 46.27% progress. Countrywide for SAPS

Hardware To allow the replacement process Maintenance and 31-Mar-14 30-Sep-14 R4 523 818 R2 769 279 61.22% RFQ 1988 to be finalised. The RFQ is Support being reviewed by Internal Audit.

LAN and Desktop To allow the replacement process Services for KZN 31-Mar-14 30-Sep-14 R6 705 965 R6 716 760 100.16% RFQ 1988 to be finalised. The RFQ is Provincial being reviewed by Internal Audit. Department

To allow the client to finalise the Access Link and Neotel connection, which is already Bandwidth between installed. As soon as IT equipment has Legislature & Ocean 31-Apr-14 30-Apr-15 R142 609 R142 614 100.00% been moved to Neotel connection, the Terrance Office Telkom data line will be dismantled building and the contract will be terminated.

DR Broadband Service 31-Mar-14 31-May-14 R6 344 812 R1 057 468 16.67% Partnership process in progress. for SITA

Continued

REPORT BY THE CHIEF EXECUTIVE OFFICER 85 ORIGINAL DESCRIPTION PREVIOUS NEW EXPIRY CONTRACT EXTENSION % REASON FOR EXTENSION EXPIRY DATE DATE AMOUNT AMOUNT INCREASE

Provision of Hardware Maintenance at the Department of Basic The replacement tender process Education (DBE) and 30-Jun-14 31-Dec-14 R4 928 724 R993 581 20% underway and business case the Department of submitted to SCM. Higher Education and Training (DHET)

The replacement tender process RFB Monitoring Services 1207 presented at the 31-May-14 31-May-15 R2 255 148 R751 756 33% for the DBE Recommendations Committee for cancellation due to poor costing model.

IT Support Services To allow the finalisation of the for the Core IT 31-May-14 30-Jun-14 R3 149 136 R2 094 175 66% replacement tender 1208 which is Infrastructure of under evaluation. SAPS

Replacement RFB 1073/2013 under Courier Services for 1-Sep-14 28-Feb-15 R500 000 R1 900 000.00 380% evaluation and request for SITA cancellation submitted for approval.

Cleaning Services for To allow initiation and finalisation of 1-Sep-14 28-Feb-15 R364 719 R229 638 63% SITA Pietermaritzburg replacement contract.

The client had exhausted all the funds in the previous contract and printing Paper Supply 1-Mar-13 30-Apr-16 R986 240 R1 730 000 175% services were still needed. This expansion relates to increase of the capped amount.

Metro Connectivity in the EThekwini To allow line of business to do price 31-Oct-14 31-Oct-16 R18 800 211 R12 501 525 66% Metropolitan bench mark. Municipality

Cleaning Services at Replacement RFB 1124 was cancelled Erasmuskloof, Perseus 31-May-13 31-Jan-15 R9 930 739 R4 081 052 41.10% and the replacement tender RFB 1252 Park and Centurion closed on 30 October 2014.

Replacement RFB 1124 was cancelled Cleaning Services at 31-Jan-14 31-Jan-15 R275 253 R307 109 111.57% and the replacement tender RFB 1252 Blenny closed on 30 October 2014.

Provision of Maintenance and To allow finalisation of the Support of SAPS Rofin , 30-Nov-14 30-Nov-19 R3 211 3162 R582 252 167 1813.13% replacement tender process. Spheron and Nikon Equipment for 3 Years

Continued

86 SITA ANNUAL REPORT 2014/2015 ORIGINAL DESCRIPTION PREVIOUS NEW EXPIRY CONTRACT EXTENSION % REASON FOR EXTENSION EXPIRY DATE DATE AMOUNT AMOUNT INCREASE

Hardware Maintenance and Selected Software and Maintenance of To allow finalisation of the 31-Jan-15 31-Oct-15 R171 432 908 R210 872 652 123.01% WAN and LAN and all replacement tender process. Computer-related Peripheral Equipment

Internet Services and Selected Allied To allow finalisation of the 30-Nov-14 30-Apr-15 R65 835 319 R13 616 083 20.68% Services for SITA and replacement tender process. its Clients

DBE Hardware To allow finalisation of the 31-Dec-14 31-Jun-15 R4 928 724 R1 063 132 21.57% Maintenance replacement tender process.

For the Maintenance of Video Wall To allow the procurement process to Equipment in the 31-Nov-14 31-Aug-15 R6 143 099 R1 030 900 16.78% publish an open bid as a replacement Network Operations of the current contract. Centres at SITA Gauteng.

Maintenance and To allow for the finalisation of the Support Contract for replacement tender. The specification 31-Jan-15 31-Jan-16 R3 531 943 R690 115 19.54% HP Automation still needs to be presented to Bid Software Speciation Committee for approval.

To allow for the finalisation and Provision of Cleaning transitioning of the replacement 30-Apr-12 31-Jan-15 R275 254 R307 109.82 111.57% Services tender (RFB1252/2014) which is under adjudication.

To allow for the finalisation and Provision of Cleaning transitioning of the replacement 31-May-13 30-Apr-15 R6 714 596 R3 216 144 47.90% Services tender (RFB1252/2014) which is under adjudication.

RFB 1207/2014, which was intended Provision of to replace this contract, was cancelled Monitoring Services 31-May-15 31-May-16 R1 978 200 R751 716 38.00% due to deficiency in the specification. for DBE The business case for the replacement tender submitted by 31 May 2015.

To allow for the finalisation of RFB Provision of Physical 1289/2014 which is at the Guarding Services for 31-Mar-15 30-Jun-15 R16 464 743 R4 112 723 24.98% adjudication stage. The targeted SITA Pretoria completion date is dependent on the Buildings PC Schedule (July 2015).

Continued

REPORT BY THE CHIEF EXECUTIVE OFFICER 87 ORIGINAL DESCRIPTION PREVIOUS NEW EXPIRY CONTRACT EXTENSION % REASON FOR EXTENSION EXPIRY DATE DATE AMOUNT AMOUNT INCREASE

Cancellation of the replacement tender was approved on 20 January 2015. The Maintenance and cancellation was due to misalignment support of Discovery 31-Jan-15 31-Jan-16 R955 183 R1 380 802 144.56% of the scope of work and costing Solution model. Line of business is currently reviewing the specification so that they can submit for publication.

Request for Deviation to Reappoint Faranani Extended on a month-to-month basis IT Services (Pty) Ltd until the replacement contract RFB for the Support and 1286/2014 is concluded. RFB 1286 is Maintenance of the 31-Mar-15 30-Sep-15 R4 965 237 R4 099 272 83% being reviewed by Internal Audit and PAAB System / the target for Management Application for the Procurement Committee is 14 May Mpumalanga DoH 2015. (Deviation)

Extended to allow for the finalisation Symantec End User of a resource plan and a replacement Security and Services 30-Apr-15 30-Apr-16 R9 920 097 R10 515 303 106% contract. The business case to start a for SAPS replacement tender will be submitted by 24 April 2015.

Interim Financial Statements

Interim financial statements were issued at the end of each quarter of the financial year as prescribed. These reflected a fair view of the financial performance, financial position, changes in net assets and cash flows of SITA at the end of each quarter.

Approval The Annual Financial Statements set out on pages 105 to 145 have been approved by the Chief Executive Officer.

Chief Executive Officer 14 August 2015

88 SITA ANNUAL REPORT 2014/2015 REPORT OF SOCIALAL ANDAND ETHICS COMMITTEETEE

Introduction

The Social and Ethics Committeee of the State Information Technology Agency SOC has pleasure in presenting its Report for the Financial Year endednded 31 March 2015.

Background This report is provided by the Socialocial and Ethics Committee in terms of Regulation 43(5)(c) of the Companies Regulations promulgated in terms of the Companies Act 71 of 2008, as amended (the Companies Act).

The purpose of the Committee is to enforce a more structured and focused approach to social and ethical issues, with standardised and comparable performance and information reported upon.

Composition and Terms of Reference This statutory Committee was established by the SITA Board of Directors on 9 January 2013 and its terms of reference were approved on 30 April 2013. The said terms of reference were revised during the past financial year.

The Committee monitors and oversees the functions as set out in the Companies Act as well as the responsibilities assigned to it by the Board.

Information on the composition of the Social and Ethics Committee, its terms of reference and its procedures are set out more fully in the Corporate Governance Report and the Annual Report.

Purpose and Functions

Legislation and codes of best practice The Committee is responsible for monitoring the Company’s activities, having regard to any relevant legislation, other legal requirements and prevailing codes of best practice in the areas set out in the Companies Act. In respect of legal and regulatory requirements, during the year under review the Committee, inter alia: t
Discharged those regulatory obligations of a Social and Ethics Committee as prescribed by Regulation 43(5) of the Companies Regulations; t
Considered reports provided by management regarding compliance with legal and regulatory requirements in terms of the Company’s Legal and Regulatory Compliance Policy;

REPORT OF SOCIAL AND ETHICS COMMITTEE 89 The Company is committed to high moral, ethical and legal standards in dealing with all of its stakeholders. All the Directors and employees are required to maintain high standards to ensure that the Company’s business is conducted honestly, fairly and legally and in a reasonable manner, in good faith and in the best interests of SITA. These principles are set out in SITA Code of Conduct.

Social and economic development The Committee monitored and reviewed the implementation of policies regarding adding value to and giving to the communities in which SITA operates, including Corporate Social Responsibility.

Labour SITA is committed to fair labour practices and freedom of association. The Company’s policies are aimed at eliminating unfair discrimination and promoting equality in line with, inter alia, the South African Constitution, the Labour Relations Act, the Employment Equity Act and the Broad-Based Black Economic Empowerment Act. The Committee monitored and reviewed the implementation of labour policies, including: t
Attraction, retention and development of skills to support the Company’s growth plan t
Employment equity t
Employee turnover t
Learnerships and bursaries t
Educational training and development of its employees; and t
Literacy

Safety, health and environment SITA is committed to providing its employees with a safe and healthy work environment. The Committee monitored and reviewed the implementation of safety, health and wellness policies, including: t
Safety performance; t
Occupational health and wellness; and t
Tuberculosis, HIV and Aids

Seadimo Chaba Chairperson: Social and Ethics Committee 14 August 2015

90 SITA ANNUAL REPORT 2014/2015 REPORT OF THE AUDIT,UDIT, RISK AND COMPLIANCE COMMITTEEOMMITTEE

We are pleased to present our reportport for the Financial Year ended 31 March 2015.

Committee Members andand AttendanceAttendance The Committee consists of the members listed hereunder and has met as reflected below, in line with its approved terms of reference.

MEMBERSS NUMBERNUMBER OFOF MEETINGSMEETINGS

NAME AND SURNAME 7

Adv B Matlejoane 1/7

Mr J Mngomezulu3 1/7

Mr Z Nomvete 6/7

Mr G Victor 6/7

Ms M Williams 7/7

Mr W Mudau 4/7

Audit, Risk and Compliance Committee Responsibility

The Committee has complied with its responsibilities arising from the requirements of the Companies Act of 2008, the Public Finance Management Act of 1999, and National Treasury Regulations of 2005. The Committee has adopted appropriate formal terms of reference as its audit committee charter, has regulated its affairs in compliance with this charter and has discharged all its responsibilities as contained therein.

The Adequacy, Reliability and Accuracy of the Financial Information Provided to Management and Other Users of Such Information The Committee is of the opinion, based on the information and explanations given by management, the internal auditors, and the Auditor-General on the results of its audits that the financial information provided to management and other users of such information is adequate, reliable and accurate.

3. Ceased to be member of Committee after first meeting of the Financial Year

REPORT OF THE AUDIT, RISK AND COMPLIANCE COMMITTEE 91 The Effectiveness of Internal Control

From the various reports of the Internal Auditors, the Audit Report on the Annual Financial Statements and the management letter of the Auditor-General, no significant or material non-compliance with prescribed policies and procedures were reported. Thus the system of internal control for the period under review was generally effective. However, attention is drawn to the following areas of concern: t
CAPEX t
Billing and Collections t
Supply Chain Management

The Effectiveness of Internal Audit The Committee received a wide variety of risk-based audit reports from the internal auditors and is of the opinion that internal audit is effective in the fulfillment of its mandate. We are satisfied with the activities of the internal audit function, including its annual work programme, co-ordination with the external auditors, the reports of significant investigations and the responses of management to specific recommendations.

The Risk Areas of the Institution’s Operations A Risk Management Committee meets on a regular basis and shares its reports with the ARCC. A risk register is kept and updated continuously to ensure that all the major risks facing the programmes and entities under the National Treasury are recorded. The risk management system will be subject to internal audit in the coming year.

Accounting and Auditing Concerns Identified as a Result of Internal and External Audits No additional accounting and auditing concerns have been reported.

The Institution’s Compliance with Legal and Regulatory Provisions The Committee has noted the in-year management and reporting in terms of the SITA Act, the PFMA and all other applicable law and is satisfied with the quality thereof.

Evaluation of Financial Statements The Committee has evaluated the annual financial statements of the agency for the year ended 31 March 2015 and, based on the information provided, concurs and accepts the Auditor-General’s conclusions on the annual financial statements, and is of the opinion that the audited annual financial statements be accepted and read together with the report of the Auditor-General.

92 SITA ANNUAL REPORT 2014/2015 Independence of External Auditors

In terms of the PFMA the Auditor-General is responsible for the external audit of the affairs of the agency. However, the Auditor-General is, in terms of the Public Audit Act (No. 25 of 2004) as amended, authorised to outsource such an audit.

The Auditor-General outsourced the external audit of the affairs of the agency to PricewaterhouseCoopers (PwC), which conducted the 2014/2015 audit. The Committee is satisfied with the independence of the Auditor- General and of PwC.

Issues raised in prior year The Committee has reviewed the agency’s implementation plan for audit issues raised in the prior year and is satisfied that the matters have been adequately resolved except for the following: t
CAPEX t
Collections t
Supply Chain Management

Zukile Nomvete Chairman: Audit, Risk and Compliance Committee 14 August 2015

REPORT OF THE AUDIT, RISK AND COMPLIANCE COMMITTEE 93 REPORTREPORT OF THE AUDITOR-GENERALAUDITOR-GENE TO PARLIAMEPARLIAMENTNT ONON THE STATE INFORMATIONINFO TECHNOLOGY AGENCY SOC LIMITLIMITEDE

Report on the financialfinancial statementstatementss

IntroductionIntroduction 1.1. I have audited the financial statements of the State Information TechnologyTechnology Agency SOC Ltd set out on pagespages 105 to 145, which comprise the statement of financial position as at 31 March 2015, the statement of financial performance, statement of changes in net assets, and cash flow statement the statement of comparison of budget information with actual information for the year then ended, as well as the notes, comprising a summary of significant accounting policies and other explanatory information.

Accounting authority’s responsibility for the financial statements 2. The board of directors, which constitutes the accounting authority is responsible for the preparation and fair presentation of the financial statements in accordance with South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA) and the Companies Act of South Africa, 2008 (Act No. 71 of 2008), and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor-general’s responsibility 3. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with International Standards on Auditing. Those standards require that I comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the

94 SITA ANNUAL REPORT 2014/2015 reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion 6. In my opinion, the financial statements present fairly, in all material respects, the financial position of the State Information Technology Agency SOC Ltd as at 31 March 2015 and its financial performance and cash flows for the year then ended, in accordance with SA Standards of GRAP and the requirements of the Companies Act of South Africa.

Emphasis of matter 7. I draw attention to the matters below. My opinion is not modified in respect of these matters.

Significant uncertainties 8. With reference to note 27 to the financial statements, the public entity is the defendant in various lawsuits. The public entity is opposing these claims. The ultimate outcome of these matters cannot presently be determined and no provision for any liability that may result has been made in the financial statements.

Additional matters 9. I draw attention to the matters below. My opinion is not modified in respect of these matters.

SITA as the procurement agent on behalf of other government institutions 10. According to section 7(3) and (5) of the State Information Technology Agency Act, 1998 (Act No. 88 of 1998) (SITA Act), every department must, and while other public bodies may, procure information technology related goods and services through SITA. 11. In instances where requests are received from government departments and other public bodies, SITA acts as the procurement agent on behalf of these institutions. SITA must facilitate the procurement process strictly in terms of the prescribed legislation. SITA will make a recommendation to the accounting officer or accounting authority on a preferred bidder(s). The accounting officer or accounting authority, however, retains the right to accept or reject SITA’s recommendation. 12. During the audit of procurement of information technology goods and services for government departments and other public bodies by SITA, we have identified several instances of non-compliance with laws and regulations pertaining to the procurement process, contract management and adherence to internal control. The details of these findings are included under paragraphs 46-53 of this report. These non-compliance matters may cause modifications to the government departments and other public body’s auditors’ reports.

REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE STATE INFORMATION TECHNOLOGY AGENCY SOC LIMITED 95 Other reports required by the Companies Act 13. As part of my audit of the financial statements for the year ended 31 March 2015, I have read the Directors’ Report, the Audit Committee’s Report and the Company Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports I have not identified material inconsistencies between the reports and the audited financial statements in respect of which I have expressed an unqualified opinion. I have not audited the reports and accordingly do not express an opinion on them.

Report on other legal and regulatory requirements 14. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the general notice issued in terms thereof, I have a responsibility to report findings on the reported performance information against predetermined objectives for selected objectives presented in the annual performance report, non-compliance with legislation and internal control. The objective of my tests was to identify reportable findings as described under each subheading but not to gather evidence to express assurance on these matters. Accordingly, I do not express an opinion or conclusion on these matters.

Predetermined objectives 15. I performed procedures to obtain evidence about the usefulness and reliability of the reported performance information for the following selected objectives presented in the annual performance report of the entity for the year ended 31 March 2015: t
Objective C1: Enhance efficiency of government business processes on pages 5,6 and 7 t
Objective C2: Improve security of government data assets on page 7 t
Objective C3: Review and improve performance of SCM on pages 7,8 and 9 t
Objective C5: Drive economies of scale in the acquisition of large ICT goods and services on page 9 t
Objective C6: Drive transformation agenda on page 9 16. I evaluated the reported performance information against the overall criteria of usefulness and reliability. 17. I evaluated the usefulness of the reported performance information to determine whether it was presented in accordance with the National Treasury’s annual reporting principles and whether the reported performance was consistent with the planned objectives. I further performed tests to determine whether indicators and targets were well defined, verifiable, specific, measurable, time bound and relevant, as required by the National Treasury’s Framework for managing programme performance information (FMPPI). 18. I assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete. 19. I did not identify any material findings on the usefulness and reliability of the reported performance information for the following objectives:

96 SITA ANNUAL REPORT 2014/2015 t
Enhance efficiency of government business processes t
Improve security of government data assets t
Review and improve performance of the SCM t
Drive economies of scale in the acquisition of large ICT goods and services t
Drive transformation agenda

Additional matters 20. Although I identified no material findings on the usefulness and reliability of the reported performance information for the selected objectives, I draw attention to the following matters:

Achievement of planned targets 21. Refer to the annual performance report on pages 37 to 49 for information on the achievement of the planned targets for the year.

Adjustment of material misstatements 22. I identified material misstatements in the annual performance report submitted for auditing on the reported performance information of ‘Drive economies of scale in the acquisition of large ICT goods and services ‘. As management subsequently corrected the misstatement, we did not raise any material findings on the usefulness and reliability of the reported performance information.

Compliance with legislation 23. I performed procedures to obtain evidence that the entity had complied with applicable legislation regarding financial matters, financial management and other related matters. My findings on material non-compliance with specific matters in key legislation, as set out in the general notice issued in terms of the PAA, are as follows:

Procurement and contract management 24. Goods and services of a transaction value above R500 000 were procured without inviting competitive bids as required by Treasury Regulations 16A6.1. 25. Sufficient appropriate audit evidence could not be obtained that all contracts and quotations were awarded in accordance with the legislative requirements as supporting documentation for two (2) contracts and one (1) quotation could not be provided.

Expenditure management 26. The accounting authority did not take effective steps to prevent irregular expenditure as per the requirements of section 51(1)(b)(ii) of the Public Finance Management Act.

REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE STATE INFORMATION TECHNOLOGY AGENCY SOC LIMITED 97 Internal control 27. I considered internal control relevant to my audit of the financial statements, annual performance report and compliance with legislation. The matters reported below are limited to the significant internal control deficiencies that resulted in the findings on non-compliance with legislation included in this report.

Financial and performance management 28. The entity did not review and monitor compliance with applicable laws and regulations.

Other reports

Investigations 29. The special investigations unit is currently investigating two (2) cases relating to procurement irregularities. 30. There are seven (7) cases where potential irregularities in respect of supply chain management and ICT service delivery are being investigated that may result in financial misconduct. 31. The internal audit department has completed twenty nine (29) investigations in the current year in respect of supply chain management, ICT service delivery and corporate services.

Pretoria Date: 29 July 2015

98 SITA ANNUAL REPORT 2014/2015 CERTIFICATE BY THETHE COMPANYCOMPANY SECRETARY

I, Mashumi K Mzaidume, in my capacityapacity as Company Secretary of SITA SOC Ltd, hereby certify that, to the best of my knowledge andnd belief, the company has lodged with the Registrar of Companies all such returns as are required of it in terms of Companies Act No 71 of 2008, and that all such returns are true, correct and up to date.

Mashumi K Mzaidume Company Secretary 14 August 2015

CERTIFICATE BY THE COMPANY SECRETARY 99 DIRECTORS’DIRECTORS’ REPORTREPORT

1.1. Introduction

The directors have pleasure in presentinpresentingg their report, which forms part oof the audited annual financial statements of the State Information Technology Agency SOC Ltd for the year endeden 31 March 2015. This report and the annual financial statements comply with the requirements of the PubPublic Finance Management Act No 1 of 1999 (as amended), the SITA Act No 88 of 1998 (as amended by Act 38 of 2002)2 and the Companies Act No 71 of 2008. The Board of Directors is the accounting authority in terms of sectionsectio 49(2) (a) of the PFMA.

2. Nature of Business The nature of the company’s business is the provision of information technology, information systems and related services in a maintained information systems security environment to, or on behalf of, participating national government departments, provincial government departments, and local government. In this regard the company is an agent of the South African Government, in accordance with SITA Act No 88 of 1998 (as amended by Act 38 of 2002). The company derives all its revenue from ICT services and goods.

3. Registration Details The company’s registration number is 1999/001899/30. The registered office is 459 Tsitsa Street, Erasmuskloof, Pretoria, 0001.

4. Ownership The company is wholly owned by the Government of the Republic of South Africa as represented by the Minister for Telecommunications and Postal Services, Dr Siyabonga Cwele.

5. Equity Contributed There were no changes to either the authorised or issued share capital of the company during the year ended 31 March 2015. Details of the authorised and issued share capital can be found in note 12 to the annual financial statements.

100 SITA ANNUAL REPORT 2014/2015 6. Financial Highlights

The financial performance is set out on pages 105 to 145 of this report. The group financial performance is summarised as follows:

31 March 2015 31 March 2014

Rand % change

Revenue 5 089 678 442 8.48

Gross surplus 1 134 831 917 34.68

Surplus for the year – before tax 207 996 070 209.00

Total assets 3 725 842 126 0.79

Net assets 2 730 915 672 5.58

Cash generated from operations 160 156 016 -66.44

7. Dividends

There were no dividends declared for the current financial year (2014: R Nil).

8. Internal Controls The Board has the ultimate responsibility for establishing a framework of internal controls. The controls are designed to provide cost effective assurance that assets are safeguarded and that liabilities and working capital are efficiently managed. The internal control environments were effectively managed by management and monitored by the internal audit department. During the year internal controls operated effectively.

9. Public Finance Management Act (PFMA)

PFMA compliance Various sections of the PFMA place responsibility on the Board to ensure that the company complies with all applicable legislations. Any non-compliance with legislation is reported on a quarterly basis to both EXCO and the Board of Directors.

Materiality and Significance Framework A Materiality and Significance Framework has been developed for reporting losses through criminal conduct and irregular, fruitless and wasteful expenditure, as well as for significant transactions per section 54(2) of the Act, that require ministerial approval. The framework was approved by the Board of Directors and the Minister of Public Services and Administration for the 2012/13 financial year.

DIRECTORS’ REPORT 101 Material losses through criminal conduct, irregular, fruitless and wasteful expenditure Section 55(2) b of the PFMA requires that SITA include in the annual report particulars of any material losses through criminal conduct and any irregular expenditure and fruitless and wasteful expenditure that occurred during the financial year.

Public Private Partnerships The company did not enter into Public Private Partnership during the current financial year.

Basis of Presentation The annual financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practices (GRAP) including any interpretations and directives issued by the International Accounting Standards Board (IASB). In terms of these standards (GRAP), in the absence of a standard or pronouncement comprising the GRAP financial reporting frameworks that specifically applies to a transaction, other event or condition, management should apply judgement and may consider the following pronouncements, in descending order, in developing an accounting policy for such a transaction, event or condition.

t
Standards of GRAP that have been issued, but are not yet effective, t
IPSAS t
IFRS

Events Subsequent to the Date of Financial Position t
There are no events subsequent to the date of the financial position.

Going Concern The directors confirm that they are satisfied that the company has adequate resources to continue in business for the twelve month period from the date of this report. For this reason they continue to adopt the going concern basis for preparing the financial statements as confirmed in the Statement of Responsibility by the Board of Directors on page 12

DIRECTORS Disclosure of directors’ remuneration is detailed in the Audited Annual Financial Statements. The following individuals were directors during the year under review:

102 SITA ANNUAL REPORT 2014/2015 Non-executive directors: Jerry Vilakazi (Chairperson) Vuyo Mahlati (Deputy Chairperson) Resigned 13 August 2014 Nozipho January-Bardill Seadimo Chaba Zukile Nomvete Graeme Victor Michelle Williams Ntjatji Gosebo 19 May 2014 to date Zeth Malele Thabani Masuku Resigned 25 June 2014 Beatrice Matlejoane Stadi Mngomezulu Anna Mokgokong Resigned 26 May 2014

Alternate directors Walter Mudau 19 May 2014 to date Johnny De Lange 19 May 2014 to date Refiloe Mokoena 19 May 2014 to date Gracious Ncanywa 19 May 2014 to date D C Niddrie

Company Secretary Mashumi K Mzaidume 12 May 2014 to date

DIRECTORS’ REPORT 103

ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2015 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2015

in Rand Note 2015 2014

Assets

Non-current assets 1,008,780,868 874,700,690 Property, plant and equipment 4 613,913,014 475,657,828 Intangible assets 5 291,785,142 245,649,295 Non-current portion of Prepayments 10 – 64,211,206 Deferred tax assets 7 103,082,712 89,182,361

Current assets 2,717,061,257 2,821,828,139 Cash and cash equivalents 8 1,539,404,636 1,630,152,938 Trade and other receivables 9 1,022,868,657 1,021,490,046 Income Tax receivable 140,478,942 91,696,017 Current portion of Prepayments 10 14,309,022 78,489,137

Total assets 3,725,842,125 3,696,528,828

Net assets and liabilities

Net assets 2,730,915,672 2,586,626,536 Share capital 11 1 1 Reserves 12 627,334,546 627,334,546 Accumulated surpluses 2,103,581,125 1,959,291,989

Liabilities

Non-current liabilities 127,445,745 109,266,745 Post-retirement employee benefits 13 127,445,745 109,266,745

Current Liabilities 867,480,708 1,000,635,547 Trade and other payables 14 688,444,211 771,920,024 Provisions 15 – – Income received in advance 16 179,036,497 228,715,523

Total net assets and liabilities 3,725,842,125 3,696,528,828

106 SITA ANNUAL REPORT 2014/2015 STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31 MARCH 2015

In Rand Note 2015 2014

Revenue 17 5,089,678,442 4,692,013,369

Cost of sales 18 3,954,846,525 3,849,400,431

Gross surplus 1,134,831,917 842,612,938

Other income 19 34,457,302 37,317,228

Operating expenses 20 1,083,613,962 936,570,443

(Deficit)/Surplus from operating activities 85,675,257 (56,640,277)

Finance income 21 160,654,579 147,289,814

Finance expenses 22 38,333,766 23,336,437

Surplus before income tax 207,996,070 67,313,100

Income tax expense 23 63,706,934 21,891,736

(Deficit)/Surplus for the year attributable to shareholder 144,289,136 45,421,364

STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 31 MARCH 2015

Accumulated in Rand Share capital Reserve Total surpluses

Balance as at 31 March 2013 1 627,334,546 1,913,870,625 2,541,205,172

Surplus for the year – – 45,421,364 45,421,364

Balance as at 31 March 2014 1 627,334,546 1,959,291,989 2,586,626,536

Surplus for the year – – 144,289,136 144,289,136

Balance as at 31 March 2015 1 627,334,546 2,103,581,125 2,730,915,672

Note 11 12

: ANNUAL FINANCIAL STATEMENTS 107 CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2015

in Rand Note 2015 2014

Cash flows from operating activities

Receipts 5,162,983,377 4,795,897,586

– Sale of goods and services 5,088,469,135 4,716,913,183

– Finance income received 74,514,242 78,984,403

Payments (5,002,827,361) (4,318,622,078)

– Payment to suppliers and employees (4,863,307,114) (4,199,381,387)

– Finance costs paid (13,130,037) (384,055)

– Income tax paid 30.1 (126,390,210) (118,856,636)

Net Cash flows from operating activities 30.2 160,156,016 477,275,508

Cash flows from investing activities

Purchase of property, plant and equipment (194,400,037) (148,620,890)

Purchase of intangible assets (59,994,211) (207,383,333)

Proceeds from the sale of property, plant and equipment 3,489,930 29,019

Net Cash flows from investing activities (250,904,318) (355,975,204)

Cash flows from financing activities

Repayment of interest-bearing borrowings

Net Cash flows from financing activities – –

(Decrease)/Increase in cash and cash equivalents (90,748,302) 121,300,304

Cash and cash equivalents at beginning of year 1,630,152,938 1,508,852,634

Cash and cash equivalents at end of year 8 1,539,404,636 1,630,152,938

108 SITA ANNUAL REPORT 2014/2015 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 31 MARCH 2015

In Rand Note ACTUAL BUDGET VARIANCE

Revenue a 5,089,678,442 5,182,472,519 –1.79%

Cost of sales b 3,954,846,525 4,145,978,015 –4.61%

Gross surplus 1,134,831,917 1,036,494,504

Other income c 34,457,302 30,690,714 12.27%

Operating expenses d 1,083,613,962 839,042,159 29.15%

Surplus from operating activities 85,675,257 228,143,059

Net Finance income e 122,320,813 52,250,000 134.11%

Surplus before income tax 207,996,070 280,393,059 –25.82%

Income tax expense 63,706,934 78,510,056 –18.86%

Surplus for the year attributable to shareholder 144,289,136 201,883,003 –28.53%

The budget represented above is the approved final budget that has been prepared on the accrual basis for a period of 1 year.

Notes: a. The variance is mainly due to agency sales as well as business opportunities which did not materialise as planned. b. The variance in respect of cost of sales is mainly due to lower depreciation expenses as a result of underspending on CAPEX and under expenditure in respect of agency sales. c. The variance is mainly due to higher than expected income in respect of GovTech conference sponsorships. d. The variance is mainly due to higher labour costs as a result of changes in SITA structure which now has additional number of Executives and non-recoverable resources and more than planned expenditure on professional services, subsistence and travel, software, service contracts, marketing and training costs. e. The variance is mainly due to the net fair value adjustments on trade receivables and payables with regards to notional interest earned and incurred as well as interest received on bank balances.

: ANNUAL FINANCIAL STATEMENTS 109 NOTES TO THE ANNUAL FINANCIAL STATEMENT FOR THE YEAR ENDED 31 MARCH 2015

1. Reporting Entity The State Information Technology Agency SOC Ltd (SITA) is a state owned company domiciled in South Africa. The company is primarily involved in the provision of information technology, information systems and related services in a maintained systems security environment on behalf of participating government departments, including provincial and local government departments. The financial statements for the year ended 31 March 2015 were authorised and approved in accordance with a resolution of the Board of Directors on 29 July 2015.

2. Basis of preparation

These financial statements are presented in South African Rands (R), which is the company’s functional currency. They have been prepared on the historical cost basis except for financial instruments which are recorded at fair value.

a. Statement of compliance The annual financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practices (GRAP) including any interpretations and directives issued by the Accounting Standards Board (ASB). In terms of these standards (GRAP), in the absence of a standard or pronouncement comprising the GRAP financial reporting frameworks that specifically applies to a transaction, other event or condition, management should apply judgement and may consider the following pronouncements, in descending order of the hierarchy listed below, in developing an accounting policy for such a transaction, event or condition. t
Standards of GRAP (Generally Recognised Accounting Practices) that have been issued, but are not yet effective, t
IPSAS (International Public Sector Accounting Standards) t
IFRS (International Financial Reporting Standards)

b. Use of estimates and judgements The preparation of financial statements in conformity with the basis of preparation requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, revenue and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. The results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods.

110 SITA ANNUAL REPORT 2014/2015 3. Significant accounting policies The principle accounting policies adopted in the preparation of these financial statements are set out below. The accounting policies are consistent with those used to present previous years financial statements, unless specifically stated.

3.1 Foreign currency transactions

Transactions in currencies other than in Rand are defined as foreign currency transactions. Transactions in foreign currencies are translated at the rates of exchange ruling at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated into Rand at the rate of exchange ruling at the reporting date. Non monetary assets and liabilities that are measured in terms of the historical cost in a foreign currency are translated at the exchange rate ruling at the original transaction date. Any foreign exchange differences are recognised in surplus or deficit in the period in which the difference occurs.

3.2 Financial instruments

Financial assets and liabilities are recognised in the statement of financial position when the company has become party to contractual provisions of the financial instruments.

A financial asset and a financial liability is initially recognised at its fair value plus, in the case of a financial asset or a financial liability not at fair value through surplus or deficit, transaction costs that are directly attributable to the acquisition or issue of a financial asset or a financial liability

After initial recognition, financial assets, including derivative assets, are measured at their fair values, without any transaction costs it may incur on sale or other disposal, except for the following financial assets:

Loans and receivables are measured at amortised cost using the effective interest method.

After initial recognition, financial liabilities are measured at amortised cost using the effective interest method, except for financial liabilities at fair value through surplus or deficit. Financial liabilities at fair value through surplus or deficit, including derivatives that are liabilities, are measured at fair value.

At the end of each reporting period, financial assets measured at amortised cost are assessed whether or not there is any objective evidence of impairment. If objective evidence exists that an impairment loss has been incurred, such loss is recognised in surplus or deficit. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.

When a subsequent event causes the amount of an impairment loss to decrease, the decrease in the impairment loss is reversed through surplus or deficit.

A gain or loss on a financial asset or a financial liability classified as at fair value through surplus or deficit, including a derivative asset or liability, is recognised in surplus or deficit.

: ANNUAL FINANCIAL STATEMENTS 111 3.3 Property, plant and equipment a. Recognition and measurement Items of property, plant and equipment, except land, are measured at cost less accumulated depreciation and accumulated impairment losses. Land is stated at cost and is not depreciated. The cost of items of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Where an asset is acquired at no cost, or for a nominal amount , its cost is its fair value as at the date of acquisition.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

Where components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

b. Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the company and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. Repairs and maintenance costs are not capitalised, they are recognised in surplus or deficit as incurred.

c. Depreciation Depreciation is recognised in the surplus or deficit on a straight-line basis over the estimated useful life of each item of property, plant and equipment. Land is not depreciated. Depreciation begins when the item of property, plant and equipment is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation ceases when the asset is derecognised.

The estimated useful lives for the current and comparative periods are as follows:

Original useful lives Revised useful lives

t
Buildings 17 – 53 years 5 – 54 years

t
Computer equipment 3 – 13 years 3 – 25years

t
Office furniture 7 – 13 years 3 – 36 years

t
Vehicles 9 – 13 years 4 – 19 years

Depreciation methods, useful lives and estimated residual values are reviewed at each reporting date. The effect of changes in the depreciation methods, useful lives and estimated residual values are accounted for in accordance with the Standard on Accounting Policies, Changes in Accounting Estimates and Errors as a change in estimate.

112 SITA ANNUAL REPORT 2014/2015 d. Derecognition The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future economic benefits or service potential are expected from its use or disposal. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset at the disposal date and is recognised in surplus or deficit.

3.4 Intangible assets

Intangible assets that are acquired by the company are initially measured and recognised at cost. Subsequently they are carried at cost less accumulated amortisation and impairment losses.

Intangible assets with finite useful lives are amortised over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. Amortisation is charged to surplus or deficit on a straight line basis over the estimated useful lives of intangible assets. The amortisation period and the amortisation method is reviewed annually and any changes are accounted for in terms of the Standard on Accounting Policies, Changes in Accounting Estimates and Errors, as a change in accounting estimate.

Expenditure on an intangible item is recognised as an expense when it is incurred unless it forms part of the cost of an intangible asset that meets the recognition criteria.

Computer software Computer software is initially recognised at cost. Subsequently it is carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is charged on a straight line basis over the estimated useful life of the software. Annual license fees on software are expensed in the year of accrual.

Software is amortised over a useful life of between 2 and 26 years.

Research and development Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in surplus or deficit in the year in which it is incurred.

Development costs that have been incurred on internally generated intangible assets are capitalised and recognised as an intangible asset when management can demonstrate all of the following: t
the technical feasibility of completing the intangible asset so that it will be available for use or sale; t
its intention to complete the intangible asset and use or sell it; t
its ability to use or sell the intangible asset; t
how the intangible asset will generate probable future economic benefits or service potential. t
the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset. t
its ability to measure reliably the expenditure attributable to the intangible asset during its development.

: ANNUAL FINANCIAL STATEMENTS 113 3.5 Leases Lessee Leases where the company does not retain a significant portion of the risks and rewards of ownership are classified as operating leases. Payments made under operating leases are recognised in the surplus or deficit on a straight-line basis over the lease term. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

There are no items of Property, plant and equipment classified as finance leased assets.

Lessor Rental income (net of any incentives given to the lessee) from operating leases is recognised on a straight-line basis over the term of the relevant lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.

Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised, as an integral part of the total lease income on a straight-line basis, over the lease term.

Assets leased to third parties under operating leases are included in property, plant and equipment in the statement of financial position.

a) Determining whether an arrangement contains a lease The company ensures that the following two requirements are met, in order for an arrangement transacted by the company to be classified as a lease in terms of GRAP 13: t
Fulfilment of the arrangement is dependent on the use of an asset or assets, and this fact is not necessarily explicitly stated by the contract but rather implied; and t
The arrangement conveys a right to use the asset or assets, if one of the following conditions is met: t
the purchaser has the ability or right to operate the asset or direct others to operate the asset; or t
the purchaser has the ability or right to control physical access to the asset; or t
there is only a remote possibility that parties other than the purchaser will take more than a insignificant amount of the output of the asset, and the price that the purchaser will pay is neither fixed per unit of output nor equal to the current market price at the time of delivery.

The company’s assessment of whether an arrangement contains a lease is made at inception of the arrangement, with reassessment occurring in the event of limited changes in circumstances as specified by GRAP 13.

3.6 Impairment

The carrying amount of the company’s tangible and intangible assets with a finite useful life, other than financial assets and deferred taxation assets, are reviewed at each reporting date to determine if there is any indication of impairment. If such an indication exists, the recoverable amount of the asset is estimated to determine the extent of impairment loss (if any). Where an asset does not generate cash flows that are independent from other assets, the company estimates the recoverable amount of the cash generating unit to which the asset belongs.

114 SITA ANNUAL REPORT 2014/2015 An impairment loss is recognised in surplus or deficit whenever the carrying amount of an asset exceeds the recoverable amount.

The recoverable amount of an asset is the higher of the asset’s fair value less costs to sell and it’s value in use. Fair value less costs to sell is determined by ascertaining the current market value of an asset after deducting any costs relating to the realisation of the asset. In assessing the value in use, the expected future cash flows from the asset are discounted to their net present values using a pre-taxation discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

A previously recognised impairment loss is reversed if the recoverable amount increases as a result of a change in the estimates previously used to determine the recoverable amount, to an amount not higher than the carrying amount that would have resulted, net of depreciation and amortisation, had no impairment loss been recognised. A reversal of an impairment loss is recognised as income immediately if the impairment was recognised previously as an expense.

3.7 Employee benefits a) Defined contribution plan A defined contribution plan is a post-retirement benefit plan under which the company pays fixed contributions into a separate company and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in the surplus or deficit when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. b) Defined benefit plan The post retirement benefit plan is a defined benefit plan. Medical benefits are provided for all permanent employees via three medical funds. All contributions paid are charged to the surplus or deficit in the year to which they relate. The company provides post-retirement health care benefits to a closed group of qualifying employees and retirees. The entitlement to post-retirement health care benefits is based on the qualifying employee remaining in service up to retirement age. The expected cost of these benefits are accrued for over the period of employment, using the projected unit credit method. Annual valuations of these obligations are carried out by independent qualified actuaries. Any actuarial gains or losses arising from experience adjustments and changes in actuarial assumptions are recognised as an expense in the period in which the plan is amended. c) Termination benefits Termination benefits are recognised as an expense when the company is demonstrably committed, without a realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy.

Termination benefits for voluntary redundancies are recognised as an expense if the company has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present values.

: ANNUAL FINANCIAL STATEMENTS 115 d) Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus plans if the company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

3.8 Provisions

Provisions are recognised when the company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. Provisions are not made for future operating losses.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as an interest expense.

3.9 Revenue

Revenue comprises amounts invoiced to customers for goods and services and is recognised at the fair value of the consideration received or receivable, and excludes value added tax.

Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer, recovery of the consideration is considered probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognised by reference to the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: (a) The amount of revenue can be measured reliably. (b) It is probable that the economic benefits or service potential associated with the transaction will flow to the company. (c) The stage of completion of the transaction at the reporting date can be measured reliably. (d) The costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

When the outcome of a transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable.

116 SITA ANNUAL REPORT 2014/2015 3.10 Finance income Finance income comprises interest income earned on funds invested, interest charged on overdue customer accounts and adjustments in terms of GRAP 104

Interest is recognised on the time proportion basis using the effective interest method over the period to maturity, when it is determined that such income will accrue to the company.

3.11 Finance expenses

Finance expenses comprise interest and penalties payable on overdue accounts and adjustments in terms of GRAP 104. Interest is calculated and recognised in surplus or deficit using the effective interest method.

3.12 Taxation

Income tax comprises current and deferred tax. Income tax expense is recognised in surplus or deficit except to the extent that it relates to items recognised directly in the statement of changes in net assets.

Current taxation comprises tax payable calculated on the basis of the expected taxable income for the year, using the tax rates enacted or substantively enacted at the reporting date, and any adjustment of the tax payable for previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided for is based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities using the tax rates enacted or substantively enacted at the reporting date. The effects of deferred taxation of any changes in tax rates is recognised in the surplus or deficit, except to the extent that it relates to items previously charged and credited directly to the statement of changes in net assets.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which the associated unused tax losses and deductible temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their assets and liabilities will be realised simultaneously.

: ANNUAL FINANCIAL STATEMENTS 117 3.13 Related parties The company operates in an economic environment currently denominated by entities directly or indirectly owned by the South African government. As a result of the constitutional independence that is guaranteed for the different spheres of government, only parties within the national sphere of government are considered to be related parties.

Key management is defined as being individuals with the authority and responsibility for planning, directing and controlling the activities of the company.

Close family members of key management personnel are considered to be those family members who may be expected to influence, or be influenced by key management individuals in their dealings with the company. All related party transactions are disclosed in terms of the requirements of IPSAS 20 Related Party Disclosures. The objective of the standard and the financial statements is to provide relevant and reliable information and therefore materiality is considered in the disclosure of these transactions.

3.14 Irregular, fruitless and wasteful expenditure

Irregular expenditure is defined as expenditure incurred in contravention of or not in accordance with a requirement of any applicable legislation.

Fruitless and wasteful expenditure represents expenditure that was made in vain and would have been avoided had reasonable care been exercised.

All irregular, fruitless and wasteful expenditure are charged in surplus or deficit in the period in which they are identified.

3.15 Cash and cash equivalents

Cash includes cash-on-hand and cash with banks. Cash equivalents are short-term highly liquid investments that are held with registered banking institutions with maturities of three months or less and are subject to an insignificant risk of change in value.

118 SITA ANNUAL REPORT 2014/2015 4. Property, plant and equipment

Computer Office in Rand Land Buildings Vehicles Total Equipment furniture

At 31 March 2015 Cost Balance at beginning of year 24,743,595 264,162,979 638,176,743 112,968,539 1,148,757 1,041,200,613 Additions and improvements – 2,465,907 169,367,048 22,567,083 – 194,400,037 Disposals/Retirements – (60,975) (16,448,012) (598,715) (232,456) (17,340,158) Balance at end of year 24,743,595 266,567,911 791,095,779 134,936,907 916,301 1,218,260,493 Accumulated depreciation Balance at beginning of year – 102,870,313 388,608,917 73,309,880 753,675 565,542,785 Depreciation charge – 5,183,049 37,486,844 5,870,067 49,122 48,589,082 Disposals/Retirements – (45,677) (9,096,373) (437,555) (204,783) (9,784,389) Balance at end of year – 108,007,685 416,999,388 78,742,392 598,014 604,347,479

Net carrying amount 24,743,595 158,560,226 374,096,391 56,194,515 318,287 613,913,014

At 31 March 2014 Cost Balance at beginning of year 24,743,595 261,936,023 585,070,709 111,909,686 1,148,757 984,808,770 Additions and improvements – 2,256,532 141,669,266 4,695,092 – 148,620,890 Disposals/Retirements – (29,576) (88,563,232) (3,636,239) – (92,229,047) Balance at end of year 24,743,595 264,162,979 638,176,743 112,968,539 1,148,757 1,041,200,613 Accumulated depreciation Balance at beginning of year – 93,318,168 436,819,697 74,487,573 831,200 605,456,638 Depreciation charge – 9,574,904 9,841,264 1,771,643 –77,525 21,110,286 Disposals/Retirements – (22,759) (58,052,044) (2,949,336) – (61,024,138) Balance at end of year – 102,870,313 388,608,917 73,309,880 753,675 565,542,785

Net carrying amount 24,743,595 161,292,666 249,567,826 39,658,659 395,082 475,657,828

None of the items of property, plant and equipment are held under finance lease.

A register of land and buildings is available for inspection at the registered office of the company.

: ANNUAL FINANCIAL STATEMENTS 119 5. Intangible assets

Internally generated in Rand Intangible assets Total intangible asset

At 31 March 2015 Cost Balance at beginning of year 193,272,694 346,243,408 539,516,102 Additions and improvements 6,099,245 53,894,966 59,994,211 Disposals/Retirements (44,288) – (44,288) Balance at end of year 199,327,651 400,138,374 599,466,025 Accumulated amortisation Balance at beginning of year 118,752,399 175,114,408 293,866,807 Amortisation charge 13,852,566 – 13,852,566 Disposals/Retirements (38,490) – (38,490) Balance at end of year 132,566,475 175,114,408 307,680,883

Net carrying amount 66,761,176 225,023,966 291,785,142

At 31 March 2014 Cost Balance at beginning of year 203,050,505 168,942,765 371,993,270 Additions and improvements 30,082,690 177,300,643 207,383,333 Disposals/Retirements (39,860,501) – (39,860,501) Balance at end of year 193,272,694 346,243,408 539,516,102 Accumulated amortisation Balance at beginning of year 145,845,513 – 145,845,513 Amortisation charge 2,085,566 – 2,085,566 Disposals/Retirements (29,178,680) – (29,178,680) Impairment – 175,114,408 175,114,408 Balance at end of year 118,752,399 175,114,408 293,866,807

Net carrying amount 74,520,295 171,128,999 245,649,295

Intangible assets comprises of software and licenses. Internally generated intangible assets relate to the development of IFMS and solutions for Transversal Solutions.

Due to a strategic change in direction relating to IFMS, an amount of R175m was required to be impaired.

120 SITA ANNUAL REPORT 2014/2015 6. Capital and Operational commitments

in Rand 2015 2014

Budgeted and contracted for 255,974,751 329,076,990

255,974,751 329,076,990

The capital and operational commitments are funded through the company’s operational activities.

7. Deferred tax assets

Deferred tax assets are attributable to the following:

Statement of financial in Rand 2015 2014 performance movement

Movement in impairment on trade receivables 5,439,344 66,470,320 61,030,976

Movement in asset impairment – 49,032,034 49,032,034

Accrual for leave pay benefits 1,877,297 20,207,679 18,330,382

Post-retirement medical benefits 5,090,120 35,684,809 30,594,689

Income received in advance (13,910,128) 50,130,219 64,040,346

Notional interest adjustment 55,146 823,989 768,842

Leases (129,622) 305,396 435,018

Prepayments 8,985,216 (2,003,264) (10,988,479)

Section 24C allowance 14,275,553 (49,764,794) (64,040,346)

Depreciation/amortisation (7,782,576) (67,803,676) (60,021,101)

13,900,351 103,082,712 89,182,361

Reconciliation between opening and closing balance

Deferred tax asset at beginning of year 89,182,361 62,679,080

Statement of financial performance movement 13,900,351 26,503,281

– current year 13,900,351 26,503,281

Deferred tax asset at end of year 103,082,712 89,182,361

: ANNUAL FINANCIAL STATEMENTS 121 8. Cash and cash equivalents

in Rand 2015 2014

Cash with Banks 1,539,404,636 1,630,152,938 – Current account balance 33,214,317 127,455,638 – Unidentified receipts (2,758,230) – – Interest Accrual 247,552 360,963 – Call account balance 2,000,000 2,159,964 – Monies held in trust 32,914,754 – Payroll account 9,922 9,523 – CPD account 1,473,762,721 1,500,155,249 – Cash float 13,600 11,600

Ring-fenced cash 239,890,840 286,122,601 – IFMS Project 100,162,242 100,000,000 – Income received in advance 64,946,598 111,340,601 – Municipal guarantees 1,437,000 1,437,000 – Post retirement medical benefits 73,345,000 73,345,000

Available Cash 1,299,513,796 1,344,030,338

Ring-fenced cash represents cash received from customers to be utilised for specific projects in the future, deposits held for rental and municipalities and money that has been ring-fenced to manage the immediate risk of an uncovered post- retirement medical benefit liability.

The company’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 24.

The average rate of interest on the cash balances was 5.89% (2014: 5.16%)

9. Trade and other receivables

in Rand 2015 2014

Trade receivables 1,284,426,934 1,275,463,890 Less: Impairment of trade receivables (304,077,708) (279,194,675) 980,349,226 996,269,215 Other receivables 42,519,431 25,220,831 1,022,868,657 1,021,490,046

The company’s exposure to credit and currency risk and impairment losses related to trade and other receivables are disclosed in Note 24.

122 SITA ANNUAL REPORT 2014/2015 10. Prepayments

in Rand 2015 2014

Software maintenance costs – Non-current portion – 64,211,206

Software maintenance costs – Current portion 14,309,022 78,489,137

14,309,022 142,700,343

11. Share Capital

in Rand 2015 2014

Authorised and issued

One ordinary share at R1.00 each 1 1

12. Reserves

in Rand 2015 2014

Opening balance 627,334,546 627,334,546

Movement – –

Closing balance 627,334,546 627,334,546

The State Information Technology Agency Act, 1998 (Act no.88 of 1998)(as amended by Act no.38 of 2002) resulted in the reduction of the company’s share capital from R627 334 547 to R1. Approval was granted by National Treasury to transfer the difference to reserves.

: ANNUAL FINANCIAL STATEMENTS 123 13 Post-retirement employee benefits

in Rand 2015 2014

Present value of unfunded obligations 127,445,745 109,266,745 Plan assets – – Unrealised actuarial gains – –

127,445,745 109,266,745

Movement in the present value of the defined benefit liability

Balance at beginning of year 109,266,745 124,987,745 Statement of financial performance movement 18,179,000 (15,721,000) Current service cost 3,889,000 3,921,000 Interest cost 10,569,000 7,031,000 Contributions paid (634,000) (1,070,000) Settlement (gain)/loss (2,953,000) – Curtailments (13,487,000) Realised actuarial (gain)/loss 7,308,000 (12,116,000) Balance at end of year 127,445,745 109,266,745

Employee benefit expense:

Current service cost 3,889,000 3,921,000 Interest cost 10,569,000 7,031,000 Settlement (gain)/loss (2,953,000) – Curtailments – (13,487,000) Net actuarial losses/gains recognised in surplus or deficit 7,308,000 (12,116,000) Negative/positive past service cost – – Total employee benefit expense 18,813,000 (14,651,000)

124 SITA ANNUAL REPORT 2014/2015 Principal actuarial assumptions Zero–coupon South Zero–coupon South Gross Discount Rate African bond yield African bond yield curve – 9.0% curve – 9.7% 0.5% lower than 2% higher than CPI valuation discount Healthcare Cost Inflation inflation – 8.7% rate at each term to maturity – 9.0% Pre-retirement mortality assumptions: – Males SA85-90 L SA85-90 L – Females SA85-90 L SA85-90 L Post-retirement mortality assumptions: PA(90) rated down PA(90) rated down 2 year(s) 2 year(s) – Males plus 1% future plus 0.5% future improvement improvement PA(90) rated down PA(90) rated down 2 year(s) 2 year(s) – Females plus 1% future plus 0.5% future improvement improvement Expected retirement ages: 65 years – ex Infoplan; 65 years – ex Infoplan; – Males 60 years – others 60 years – others 65 years – ex Infoplan; 65 years – ex Infoplan; – Females 60 years – others 60 years – others Continuation percentage 100% 100% Percentage married at retirement 90% 90%

The medical inflation rate is assumed to be 0.5% lower than the valuation discount rate at each term to maturity.

The company provides for post-retirement medical benefits to the following qualifying employees: a) Ex-Infoplan employees who transferred to the company on 1 April 1999 and who remain members of SITA approved medical aids. b) Ex-SAPS employees who transferred to the company on 1 April 1999, and c) Other former public sector employees who transferred to the company on or after 1 April 1999 and who remain members of SITA approved medical aids.

The amounts due in respect of the company’s liability regarding the post-retirement medical benefit has been determined by independent actuaries as at 31 March 2015 using the projected unit credit method.

The current service cost, interest cost and actuarial gains and losses are included in the line item Operating Expenses (staff costs) in the Statement of Financial Performance.

It is anticipated that the contributions to be paid in 2015/16 will amount to R683 000

: ANNUAL FINANCIAL STATEMENTS 125 Sensitivity analysis relating to the assumed medical cost trend rates: Increase of Decrease Base 1% of 1%

Change in Liability in Rand 101,438,000 127,445,745 162,204,000 Change in Liability as a % –20.41% 27.27%

Service cost and Interest cost in Rand 11,554,000 14,458,000 18,290

2015 2014 2013 2012 2011 Experience adjustments (12,050,000) (28,536,000) (23,274,000) 3,015,001 (1,887,674)

Present value of defined benefit obligation 127,445,745 109,266,745 124,987,745 129,151,713 114,230,403

13.1 Employee benefits All permanent employees are members of the following independent funds:

Denel Retirement Fund: The Denel Retirement Fund is a defined contribution fund, managed by a Board of Trustees in terms of the Pension Funds Act of 1956 (Act no. 24 of 1956). The company has no financial liability in respect of this fund.

Government Employees Pension Fund: Retirement benefits are provided by membership of the Government Employees Pension Fund which is a defined benefit fund. However, as the company’s responsibility regarding the funding of the shortfall of the pension fund is limited to the current contributions made on behalf of its employees, this fund is classified as a defined contribution fund from the company’s perspective. The Government of South Africa as the employer is responsible for any shortfall in this Fund. This responsibility is governed by the General Pensions Act 29 of 1979 and Government Employees Pension Law, Proclamation 21 of 1996.

SITA Pension Fund: The SITA Pension Fund, which is administered by Alexander Forbes, is a defined contribution fund. The company has no financial liability in respect of this fund.

The contributions charged against income for the above mentioned pension funds amounted to R83.5 million (2014: R75.8 million).

Current medical benefits: The company contributes to three medical aid schemes for the benefit of permanent employees and their dependants. Contributions charged against income amounted to R84.5 million (2014: R80.3 million). The company’s financial obligation is limited to the current company contributions.

126 SITA ANNUAL REPORT 2014/2015 14. Trade and other payables

in Rand 2015 2014

Trade payables 439,675,296 512,653,545 Leave pay accrual 77,214,837 70,510,205 Accrual for 13th cheque 5,191,539 5,043,178 Non-trade payables 166,362,539 183,713,096

688,444,211 771,920,024

The company’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 24.

15. Provisions

in Rand 2015 2014

Balance at beginning of year – – Additional provision (reversed)/raised during the year – – Utilisation of provision during the year – – Balance at end of year – – ––

Provision is in respect of performance bonus.

16. Income received in advance

in Rand 2015 2014

Unearned Revenue 13,927,657 17,374,922

Ring fenced cash (Refer to note 8) 165,108,840 211,340,601

– Income received in advance 64,946,598 111,340,601

– IFMS 100,162,242 100,000,000

179,036,497 228,715,523

Income received in advance represents monies received from customers to be utilised for specific projects in future periods. Unearned Revenue represents amounts that have been billed as per the contract with the customer, but relate to future activity of the contract.

: ANNUAL FINANCIAL STATEMENTS 127 17. Revenue

in Rand 2015 2014

BPO Service desk – 34,016 Commercial Printing 8,072,540 47,557,562 ICT Advisory Services 34,503,774 50,760,104 Information Management 41,940,021 34,253,062 Managed Applications 535,588,260 521,638,308 Managed Desktop 397,210,682 393,551,075 Managed Infrastructure 2,077,341,663 1,528,785,564 Project Management 50,050,283 226,295,992 Requesting and Fulfillment 1,563,704,580 1,603,338,632 Security Management 24,068,338 11,593,222 Service Management Centre 179,967,954 127,622,503 Training 28,649,865 28,799,858 Solution development 148,580,482 117,783,470 5,089,678,442 4,692,013,369

18. Cost of sales

in Rand 2015 2014

Direct depreciation 44,667,149 20,232,341 Direct amortisation 10,661,614 2,085,308 Direct labour 1,098,592,312 981,137,832 Service delivery expenditure 2,800,925,450 2,845,944,950 3,954,846,525 3,849,400,431

19. Other income

in Rand 2015 2014

Profit on disposal of assets 19,039 29,019 Operating lease income 11,534,190 14,553,749 Income from GovTech conference 20,070,483 20,744,373 Sundry income 2,833,590 1,990,087 34,457,302 37,317,228

128 SITA ANNUAL REPORT 2014/2015 20. Operating expenses The following separately disclosable items are included in operating expenses:

in Rand 2015 2014

Auditor’s remuneration – Audit fees 9,805,349 11,761,166

Amortisation Total amortisation 13,852,566 2,085,566 Included in Cost of sales (10,661,614) (2,085,308) Non-recoverable amortisation 3,190,952 258

Depreciation Total depreciation 48,589,082 21,110,286 Included in cost of sales (44,667,149) (20,232,341) Non-recoverable depreciation 3,921,933 877,946

Impairment movement – Trade and other receivables 21,827,222 12,158,083 – Impairment on IFMS – 175,114,408

Software written-off 86,703,914 –

Net Loss on disposal of assets 4,090,675 41,814,384

Operating lease expense 40,963,924 34,823,344

Staff costs 476,794,268 373,542,172

Refer to Annexure A for Director’s remuneration

21. Finance income

in Rand 2015 2014

Notional Interest earned 86,084,990 68,233,392 Foreign exchange gain 55,347 72,019 Interest on cash balances 74,514,242 78,984,403 160,654,579 147,289,814

: ANNUAL FINANCIAL STATEMENTS 129 22. Finance expenses

in Rand 2015 2014

Notional Interest incurred 24,170,595 22,202,548 Interest paid 13,130,037 384,055 Foreign exchange loss 1,033,134 749,834

38,333,766 23,336,437

23. Income tax expense

in Rand 2015 2014

Current tax expense Income tax charge 77,607,285 48,395,017 Prior year under provision – –

Deferred tax expense Origination and reversal of temporary differences (13,900,351) (26,503,281) Total income tax expense 63,706,934 21,891,736

Reconciliation of effective tax rate

Profit for the period 144,289,136 45,421,364 Total income tax expense 63,706,934 21,891,736 Profit excluding income tax 207,996,070 67,313,100

2015 2014 %R%R

Income tax using the company’s domestic tax rate 28.00% 58,238,900 28.00% 18,847,668 Non-deductible expenses 2.63% 5,468,034 4.52% 3,044,068 Overprovision current tax Underprovision deferred tax asset Effective income tax 30.63% 63,706,934 32.52% 21,891,736

130 SITA ANNUAL REPORT 2014/2015 24. Financial instruments a) Credit risk Credit risk is the risk of financial loss to the company when the customer or counterparty to the financial instrument fails to meet its contractual obligations and arises principally from the company’s receivables from customers.

The company limits its counterparty exposure arising from money market instruments by dealing only with well- established financial institutions of high credit standing. Exposure relating to trade and other receivables, which mainly consist of national and provincial government departments as well as local government, is managed by entering into contractual agreements that indicate payment terms of the services rendered. These customers fall within the ambit of the Public Finance Management Act,1999 (Act No. 1 of 1999) and the Municipal Finance Management Act, 2003 (Act No.56 of 2003). These legislations prescribe that suppliers of products and services be paid within 30 days or as stipulated by agreements entered into.

The carrying amount of financial assets represents the maximum credit exposure. The maximum credit exposure to credit risk at the reporting date was:

Carrying amount in Rand Note 2015 2014

Direct depreciation 9 980,349,226 996,269,215 Direct amortisation 9 42,519,431 25,220,831 Direct labour 8 1,539,404,636 1,630,152,938 3,954,846,525 3,849,400,431

Impairment losses The aging of trade receivables net of the impairment loss at the reporting date was:

in Rand 2015 2014

Not past due 572,606,452 566,476,996 Past due 0 – 30 days 71,112,135 116,941,632 Past due 31 – 90 days 147,549,922 125,587,242 Past due 91 – 360 days 144,300,591 159,742,431 Past due – more than 360 days 44,780,126 27,520,913

980,349,226 996,269,215

The due date of invoices is determined as being 30 days after the invoice date.

: ANNUAL FINANCIAL STATEMENTS 131 Credit quality of financial assets

Trade receivables The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings, except for the credit quality of individual government debt that cannot be determined individually as government as a whole is assessed by international rating agencies in total. Management does not deem it appropriate to assign a national rating to specific debtors. Government debt does not prescribe and therefore the credit risk exposure is limited.

Cash at bank

2015 2014

Zero risk (CPD) 1,473,762,721 1,500,155,249 Fitch BBB 65,380,763 129,465,371 Cash on hand 261,152 532,318 1,539,404,636 1,630,152,938

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

2015 2014

Balance at beginning of year 279,194,675 267,036,592 Impairment loss recognised 24,883,033 12,158,083 Balance at end of year 304,077,708 279,194,675

The impairment loss is based on history on invoices over 360 days and specifically identified invoices that are considered doubtful based on information in the company’s possession. Each debtor is analysed individually and a decision to impair is made.

132 SITA ANNUAL REPORT 2014/2015 b) Liquidity risk Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The company’s approach in managing liquidity risk is to ensure, as far as possible , that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions, without incurring unacceptable losses or risking damage to the company’s reputation. This risk is managed by maintaining adequate cash reserves by continuously monitoring cash flow forecasts, actual cash flows and the maturity profile of financial assets and liabilities.

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

31 March 2015 Carrying Contractual in Rand 6 months or less 6 – 12 months 1 – 2 years amounts cash flow

Trade and other payables 688,444,211 688,444,211 688,444,211 – – 688,444,211 688,444,211 688,444,211 – –

31 March 2014 Carrying Contractual in Rand 6 months or less 6 – 12 months 1 – 2 years amounts cash flow

Trade and other payables 771,920,024 771,920,024 771,920,024 – – 771,920,024 771,920,024 771,920,024 – –

c) Currency risk Currency risk arises from exposure to foreign currencies when the value of the rand changes in relation to these currencies. The company primarily transacts in US dollar when dealing with foreign transactions.

The company’s exposure to foreign currency risk was minimal.

: ANNUAL FINANCIAL STATEMENTS 133 d) Interest rate risk At the reporting date the interest rate profile of the company’s interest-bearing financial instrument was:

Carrying amount in Rand 2015 2014

Fixed interest rate The company does not hold any fixed interest rate financial instruments.

Fair value sensitivity analysis for fixed rate instruments The company does not account for any fixed rate financial liabilities at fair value through surplus or deficit, and the company does not designate derivatives (interest-rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a change in interest rate at reporting date would not affect surplus or deficit.

Variable interest rate Cash and cash equivalents 1,539,404,636 1,630,152,938

Fair value sensitivity analysis for variable interest rate instruments The sensitivity analysis below has been determined based on the exposure to interest rates at reporting date and the stipulated change taking place at the beginning of the financial year and held constant in the case of variable rate borrowings. A 100 basis point increase or decrease has been used, as this represents management’s assessment of the possible change in the interest rates.

If interest rates had been 100 basis points higher/lower and all other variables held constant, the company’s surplus before taxation would increase/decrease by: 1,539,405 1,630,153

2015 2014 Carrying amount Carrying amount

e) Categories of financial instruments Financial instruments at amortised cost:

Cash and cash equivalents 1,539,404,636 1,630,152,938 Trade and other receivables 1,022,868,657 1,021,490,046 Trade and other payables 688,444,211 771,920,024

134 SITA ANNUAL REPORT 2014/2015 25. Related parties Transactions with government The company is 100% owned by the government of South Africa represented by the Minister for Telecommunications and Postal Services.

The company is a schedule 3A National Public Entity in terms of the Public Finance Management Act,1999 (Act No.1 of 1999). The related party disclosures is in terms of the requirements of GRAP 20 (Related Party Disclosures).

Related parties of the company consist of government departments, state-owned enterprises and other public entities in the national sphere of government and key management personnel of the company and close family members of related parties. All transactions entered into with related parties are at arm’s length. This entails that all transactions occur in the normal course of operations and are at the same terms and conditions as available to all customers and suppliers alike.

Transactions with key management personnel The key management personnel are directors and executive managers of the company for the year ended 31 March 2015.

Transactions with key management personnel are disclosed in Annexure A.

26. Operating leases

Operating lease expense The company entered into non-cancellable operating lease agreements for the occupation of certain premises. At the reporting date, the future minimum lease payments under these lease agreements were as follows:

in Rand 2015 2014

Less than 1 year 35,766,033 21,960,255 Between 1 and 5 years 21,618,268 18,977,178 More than 5 years – – 57,384,301 40,937,433

Operating lease income The company entered into non-cancellable operating lease agreements with tenants. At reporting date, the future minimum lease payments receivable under these lease agreements were as follows:

in Rand 2015 2014

Less than 1 year 52,174 50,413 Between 1 and 5 years – 37,810 More than 5 years – – 52,174 88,223

The average period for operating lease agreements is 5 years.

: ANNUAL FINANCIAL STATEMENTS 135 27. Contingent liabilities Litigations and claims: There are various claims against SITA estimated at approximately R25.3 million. Based on legal advice, the probability is not determinable in the majority of these claims as the ruling could go either way. Furthermore, it is not possible at this stage to estimate the exact potential damages and legal costs involved as it will have to be proved by the plaintiffs/defendants. Legal costs in respect of these matters is expected to amount to at least R5.4 million.

Contingent liability relating to surplus funds In terms of section 53(3) of the Public Finance Management Act, SITA is required to remit back to National Treasury, any surpluses at the end of its financial year. However, as SITA does not receive a vote from National Treasury and is self-sustaining, self-funding entity, a submission is in the process of being made to National Treasury via DoTPS for SITA to retain it’s accumulated surpluses as at 31 March 2015. Until such time as this approval is granted, the surplus of R144 289 136 is considered to be a contingent liability. Based on previous experience, it is expected that the request to retain SITA’s accumulated surplus as at 31 March 2015 may be granted.

28. Contingent liabilities

At the date of approval of these financial statements, the following Standards and Interpretations were in issue but not yet effective:

Standard/Interpretation Applicable to SITA

GRAP 18 Segment reporting N/A

GRAP 20 Related Party Disclosures YES

GRAP 32 Service concession arrangements N/A

GRAP 105 Transfer of functions between entities under common control N/A

GRAP 106 Transfer of functions between entities not under common control N/A

GRAP 107 Mergers N/A

GRAP 108 Statutory Receivables N/A

With regards to GRAP 20 an assessment of the impact of their application has been made and it has been determined that these standards will only have a impact on the company’s disclosure in the annual financial statements.

136 SITA ANNUAL REPORT 2014/2015 29. a) Irregular Expenditure

2015 2014 RR

Opening Balance 65,399,354 54,449,489 Add: Irregular Expenditure – current year 13,980,190 35,152,553 Less: Amounts condoned (22,751,178) (24,202,688) Add/(Less): Prior year adjustment 175,722 – Less: Amounts recoverable (not condoned) – – Less: Amounts not recoverable (not condoned) – – Irregular expenditure awaiting condonation 56,804,088 65,399,354

Analysis of expenditure awaiting condonation per age classification

Current year 13,980,190 30,699,200 Prior years 42,823,898 34,700,154 Total 56,804,088 65,399,354

b) Fruitless and Wasteful Expenditure

2015 2014 RR

Opening Balance 1,861,517 3,002,186 Add: Fruitless and Wasteful expenditure – current year 8,530,842 – Less: Amounts written off – (1,140,669) Less: Amounts not recoverable (not condoned) – – Fruitless and wasteful expenditure awaiting write-off 10,392,359 1,861,517

Analysis of expenditure awaiting write-off per age classification

Current year 8,530,842 – Prior years 1,861,517 1,861,517 Total 10,392,359 1,861,517

Details of Fruitless and Wasteful Expenditure Prior Years The balance of R1,861,517 in respect of prior years relates to a matter under criminal investigation by the Serious Commercial Crime Unit (SCCU). Recovery of the loss is not certain and can only be initiated upon conclusion of the criminal investigation.

Current year The amount of R8,530,842 represents fruitless and Wasteful expenditure resulting from compounded interest accumulated over the past 4 years in respect of back billing for the period March 2011 to March 2014.

: ANNUAL FINANCIAL STATEMENTS 137 1. Details of Irregular Expenditure – Current year

Prior Year Current Item No. Incident Totals 2013 Year IE00073 1 Irregular expenditure arising from the continued procurement of VSAT services – 3,162,144 3,162,144 without a valid contract in place, after expiry of the initial contract on 31 January 2014. IE00090 Irregular expenditure arising from the failure by senior officials to follow the 2 – 56,495 56,495 Procurement policies and procedures when procuring services relating to the hire and use of conference facilities: IE00086 Irregular expenditure arising from failure by officials to follow SITA’s own 4 – 295,176 295,176 procurement policies and procedures in the procurement of access links and bandwidths for various sites of clients. IE00084 Irregular expenditure arising from the continued procurement of ERP support and 5 3,741,240 – 3,741,240 maintenance services without a valid contract in place, after expiry of the contract extension on 30 September 2013. IE00072 Irregular expenditure arising from continued procurement of maintenance and 6 4,779,617 – 4,779,617 support services of PBX systems for a client, without a valid contract in place, after expiry of the initial contract (no. RFB677) on 31/12/2013. IE00074 Irregular expenditure arising from the continued procurement, without a valid 8 63,963 – 63,963 contract, of commercial cleaning services for SITA WC provincial office, after expiry of the initial contract on 30 September 2013. IE00075 Irregular expenditure arising from the continued procurement, without a valid 9 19,995 – 19,995 contract, of maintenance and repair of office air conditioning units for the provincial office, after expiry of the initial contract on 30 September 2013. IE00076 Irregular expenditure arising from the continued procurement, without a valid 10 19,603 – 19,603 contract, of maintenance and repair of access control units for the provincial office, after expiry of the initial contract on 30 September 2013. IE00077 Irregular expenditure arising from the continued procurement, without a valid 11 12,107 – 12,107 contract, of SOLIMAR software and maintenance for the provincial office, after expiry of the initial contract on 31 December 2013. IE00078 Irregular expenditure arising from the continued procurement, without a valid 12 22,634 – 22,634 contract, of maintenance and repair of access control units for the provincial office, after expiry of the initial contract on 30 September 2013. IE00079 13 Irregular expenditure arising from the continued procurement of services for a 457,409 – 457,409 client from a supplier without a valid contract in place . IE00080 14 Irregular expenditure arising from the continued procurement of services from a 487,131 – 487,131 supplier after expiry of the initial contract on 31 Dec. 2012. IE00081 Irregular expenditure arising from the continued procurement of services for a 15 36,423 – 36,423 client from a supplierwithout a valid contract in place after expiry of the initial contract on 31 Dec. 2012. IE00082 Irregular expenditure arising from the continued procurement of services for a 16 55,448 – 55,448 client from a supplie rwithout a valid contract in place after expiry of the initial contract on 31 Dec. 2012. IE00083 17 Irregular expenditure arising from the continued utilisation of labour broker resources 770,805 – 770,805 without a valid contract in place, after expiry the initial contract on 31 December 2013. Totals 10,466,375 3,513,815 13,980,190

138 SITA ANNUAL REPORT 2014/2015 2. a) Details of Irregular Expenditure Condoned

Condoned by Item No. Incident (condoning Amount authority) IE00071 Irregular expenditure arising from the continued procurement, without a valid contract, of services for the migration of two clients’ sites from their existing Telco Service Provider (Telkom) into a separate Virtual Private Network (VPN) on the SITA Next Generation Network (NGN) from 1 September 2013 to 31 March 2014.

1 Board of Directors 22,501,656 Internal Audit, based on the result of their investigation, concluded that: t
there is no defined process-flow to guide the process to renew/extend existing contract upon expiry. t
Due to this weakness, accountability for the irregular exp. could not be attached to anyone of the several officials that were involved in the process.. IE00056 Irregular expenditure arising from continued procurement, 2 Board of Directors 119,290 without a contract, of security services after expiry of the contract extension on 31 Dec. 2012. IE00054 Irregular expenditure incurred when officials tasked an electrical contractor to provide emergency plumbing services. The electrical contractor, in turn, sub-contracted the 3 Board of Directors 130,232 work to a plumbing contractor. The work was carried out over a period of 6 months. No authorisation was obtained for this deviation from the normal procurement processes and procedures. Totals 22,751,178

: ANNUAL FINANCIAL STATEMENTS 139 30. Cash flow notes

30.1 Normal tax paid

in Rand 2015 2014 (91,696,017) (21,234,398) Opening balance 77,607,285 48,395,017 Current year normal tax charge 140,478,942 91,696,017 Closing balance 126,390,210 118,856,636

30.2 Reconciliation of net cash flows from operating activities

in Rand 2015 2014

NET CASH INFLOW FROM OPERATING ACTIVITIES 207,996,070 67,313,100 Surplus before taxation Adjustments for non-cash flow items: 62,441,648 23,195,852 – Depreciation/Amortisation 21,827,222 12,158,083 – Increase/(decrease) in provision for impairment – debtors 3,055,810 – – VAT on provision for impairment – debtors – 175,114,408 – Increase in provision for impairment – assets 86,703,914 – Increase in provision for impairment – prepayments 4,090,675 41,814,384 – Loss on disposal or scrapping of property, plant and equipment (19,039) – Profit on disposal or scrapping of property, plant and equipment – 43,327 – Other adjustment 18,179,000 (15,721,000) – Increase/(Decrease) in provision for post-retirement employee benefits 24,170,595 22,202,548 – Finance costs paid (86,084,990) (68,233,392) – Finance income received – – – Increase in provisions 342,360,905 257,887,310 Operating profit before working capital changes Working capital changes: (26,261,643) 16,227,705 Decrease in trade and other receivables 41,687,407 (83,548,919) Decrease/(Increase) in prepayments made (83,475,813) 198,553,833 Increase/(decrease) in trade and other payables (49,679,025) 160,981,371 Increase/(decrease) in income received in advance 224,631,831 550,101,300 Cash generated in operations (126,390,210) (118,856,636) Normal taxation (24,170,595) (22,202,548) Finance costs paid 86,084,990 68,233,392 Finance income received 160,156,016 477,275,508

140 SITA ANNUAL REPORT 2014/2015 ------77,344 48,286 Total medical or to pension, to Contributions Contributions insurance funds insurance Other allowances Travel Travel Allowances Ad-hoc Ad-hoc payment Basic Salary Acting Allowance 3,613,668 – – – 107,950 – – 3,721,618 Fees as Fees Director ectors do not receive compensation from the company. compensation from ectors do not receive in Rand – 31 March 2015 POSITION Duration NON-EXECUTIVE DIRECTORS Chairperson VilakaziMr J Deputy Chairperson V MahlatiDr 12 months 31-Mar-15 514,642 4.5 months 13-Aug-14 223,666 9,826 2,276 524,468 225,942 BOARD MEMBERS BOARD Ms N January BardillMs S Chaba J De Lange**Adv Mr N Gosebo*Mr Z Malele 12 months 31-Mar-15 11 months 12 months 31-Mar-15 31-Mar-15 11 months 31-Mar-15 77,344 416,728 12 months 31-Mar-15 509,868 13,424 15,299 430,152 525,167 Adv B MatlejoaneAdv Mr S Mngomezulu*Dr A MokgokongMs R Mokoena**W Mudau**Mr Mr G Ncanywa**Mr D Niddrie**Mr Z Nomvete 12 months 12 monthsVictorMr G 31-Mar-15 31-Mar-15 WilliamsMs M 2 month 127,596 11 months 31-May-14 31-Mar-15 that serve 12 months employees of dir *State on the Board 11 months of the company. directors alternate are 31-Mar-15 These ** 45,446 232,730 31-Mar-15 12 months 31-Mar-15 12 months 225,944 31-Mar-15 12 months 12 months 31-Mar-15 451,826 31-Mar-15 323,060 416,532 1,483 8,184 304 12,473 17,624 13,424 13,631 129,079 240,914 45,750 238,417 469,450 336,484 430,163 Adv T Masuku Adv months 3 25-Jun-14 48,286 Annexure A

: ANNUAL FINANCIAL STATEMENTS 141 Total medical or to pension, to Contributions Contributions insurance funds insurance Other allowances Travel Travel Allowances Ad-hoc Ad-hoc payment Basic Salary Acting Allowance – 233,848 18,928,518 – 1,531,268 269,900 1,678,142 22,641,676 Fees as Fees Director 10 months 31-Mar-1510 months 31-Mar-15 – – 3 months – 30-Jun-15 1,435,833 – 9 months 1,633,333 – 31-Mar-153 months – 30-Jun-15 36,257 – 300,000 223,306 – 200,000 12 months 21,000 31-Mar-15 – 21,000 – – 34,362 791,215 1,487 – 206,401 39,000 1,758,320 1,487 95,697 2,850 1,855,820 – 1,224,868 – 225,000 75,000 57,142 – 18,900 358,555 3,600 – 140,236 1,175,351 31,250 14,400 350,613 188,641 1,523,606 in Rand – 31 March 2015 POSITION Duration EXECUTIVE COMMITTEE MEMBERS EXECUTIVE COMMITTEE Officer) Executive Mr (Chief F Nomvalo Lt-Gen J Nkonyane (Ret.) (Deputy Chief Officer) Executive 12 monthsMr (Deputy M Ndlangisa Chief Executive 31-Mar-15Officer) (Office of the CEO)Ms C Houvet Officer) Financial Mr J Moshesh (Chief Services) Corporate (Executive: Mlokothi V Mr 9 months Executive: (Acting Tisani Mr M 12 months Services)Corporate 31-Mar-15 9 months 31-Mar-15 Executive) Audit Mr R Alli (Chief 31-Mar-15 Executive)Mr Chief Audit D Boucher (Acting – 2,719,167 Tshibubudze 8 monthsMr S Officer) Procurement (Chief – 31-Mar-15 Executive: Mr (Acting S Mthethwa 4 monthsSupply Chain Management) 31-Jul-15 Officer)Techmology Mr (Chief P Munyai – Services) Customer Ms M Mosupi (Executive: – 1,374,272 12 months Solution 9 months Executive: Dr D Mashao (Acting – 1,677,432Development, Norms & Standards) 31-Mar-15– 1,277,769 31-Mar-15 51,099 – Mr Chief Risk M Dondolo Officer) (Acting Secretary)Mr M Mzaidume (Company 808,480 – – 12 months Secretary) Company Ms S Kgope (Acting – 31-Mar-15 – 96,102 11 months 1 month 31-Mar-15 – – 712,450 28,200 31-May-15 18,900 – 1,785 2,749,152 42,420 30,000 1,293,040 – – 1,511,951 – – – 88,564 9,600 18,900 1,577,839 45,294 – 25,200 16,433 261,070 1,587,739 – 954,358 – 61,388 1,764,020 174,677 168,000 1,031,493 4,800 – 53,150 1,086,276 25,200 270,000 – 65,376 – 200,720 827,920 18,900 40,452 1,686,960 107,047 1,907,898 – 23,100 – 950 171,673 14,400 1,266,718 119,910 1,088,668 5,689 76,222

142 SITA ANNUAL REPORT 2014/2015 – – Total medical or to pension, to Contributions Contributions insurance funds insurance Other allowances Travel Travel Allowances 9,400 9,400 48,126 48,126 48,126 43,772 34,372 69,474 48,126 43,772 34,372 69,474 43,772 43,772 48,126 43,772 43,772 48,126 Ad-hoc Ad-hoc payment Basic Salary Acting Allowance Fees as Fees Director in Rand – 31 March 2014 POSITION Duration NON-EXECUTIVE DIRECTORS Chairperson VilakaziMr J Deputy Chairperson V MahlatiDr MEMBERS BOARD Ms S Bvuma** Mr K Dlamini 12 monthsMs N January Bardill 31-Mar-14 406,219 7 months 31-Mar-14 79,371 7 months 4 months 31-Mar-14 6-Aug-13 69,926 12,860 1,343 2,495 419,079 80,714 72,421 Ms S ChabaMr P Kgame** Mr R Mabena** T Masuku Adv Mr Z MaleleMs B Malongete** Ms M Maponya** 7 months 31-Mar-14 months 7 81,958 31-Mar-14 7 months 31-Mar-14 44,772 171,307 2,593 713 6,713 84,551 45,485 178,020 Adv B MatlejoaneAdv Ms M Mdlulwa** Ms N Mhlakaza** Mr S Mngomezulu*Dr A MokgokongMs T Moloko** M Mphahlele** Prof Ms K R Mthimunye** 7 months 31-Mar-14 12 months 264,132 31-Mar-14 12 months 31-Mar-14 1 month 110,835 30-Apr-13 2,759 550 48,126 266,891 111,385 48,126

: ANNUAL FINANCIAL STATEMENTS 143 – – – Total medical or to pension, to Contributions Contributions insurance funds insurance Other allowances Travel Travel Allowances 50,742 50,742 while on special leave. The payment was made in the current financial year financial was made in the current payment The while on special leave. Ad-hoc Ad-hoc payment Basic Salary Acting Allowance 1,699,003 – – 531,580 44,917 – – 2,275,500 Fees as Fees Director ectors do not receive compensation from the company. compensation from ectors do not receive in Rand – 31 March 2014 POSITION Duration Mr W MudauMr Mr DC NiddrieMr Z NomveteMs N Ntsinde**Mr G Pillay* 7 months 7 months 31-Mar-14 12 months 31-Mar-14 1 month 31-Mar-14 30-Apr-13 1 month 313,767 30-Apr-13 43,772 10,116 323,883 43,772 Ms F Potgieter** Ms F Potgieter** VictorMr G WilliamsMs M that serve employees of dir *State on the Board attended have meetings that they would and for fees paid their retainer who were of the company directors previous are These ** scheduled during the period 01 January 2013. meetings that were 2013 – 31 March to but relates 7 months 7 months 31-Mar-14 31-Mar-14 81,658 75,058 2,696 2,079 84,354 77,137

144 SITA ANNUAL REPORT 2014/2015 Total medical or to pension, to Contributions Contributions insurance funds insurance Other allowances Travel Travel Allowances Ad-hoc Ad-hoc payment 311,486 30,000 4,200 8,514 354,200 Basic Salary 2,166,667 23,500 2,190,167 Acting Allowance – 116,686 14,015,894 – 756,868 247,300 956,459 16,093,207 Fees as Fees Director 2 months 31-May-13 12 months 31-Mar-141 month 31-Mar-149 months 31-Dec-138 months 31-Mar-1411 months 28-Feb-148 months 31-Mar-14 1,233,779 12 months 31-Mar-145 months 43,291 104,774 31-Mar-14 1,123,578 610,746 168,000 27,490 1,058,856 576,081 25,200 2,873 21,255 104,000 1,014,047 483,513 179,640 1,200 7,600 1,606,620 200,000 18,900 11,834 61,690 9,600 100,200 120,681 23,100 827,327 44,351 43,200 1,186,828 87,961 101,529 901,132 6,000 1,183,485 163,203 1,320,650 56,836 567,604 in Rand – 31 March 2014 POSITION Duration EXECUTIVE COMMITTEE MEMBERS EXECUTIVE COMMITTEE Mr BK Mosley-Lefatola Officer) Executive (Chief Officer) Executive Mr (Chief SF Nomvalo Operations Officer)Ms KPS Ntshavheni (Chief 12 months Officer) Financial Mr JC Moshesh (Chief 10 months 31-Mar-14 31-Mar-14 ICT Mosupi (Executive: ServiceMs AM Delivery) 12 months Executive: (Acting Mr M Lebelo 31-Mar-14ICT Service Delivery) Corporate Mr (Executive: BD Mushwana Services) Executive: (Acting Tisani Mr M Services)Corporate Supply Chain TL Mjoli (Executive: Ms Management) Executive: Mr (Acting S Mthethwa 1,792,656Supply Chain Management) (Executive: Tuganadar Mr N Solutions & Standards) Government 1,534,597 Executive: Dr D Mashao (Acting Solutions & Standards) Government Audit) Internal Mr AR Alli (Executive: Secretary)T Zide (Company Ms Secretary) Company Ms S Kgope (Acting 12 months 31-Mar-14 10 months 31-Mar-14 25,200 5 months 31-Aug-13 25,200 99,698 1,917,554 24,650 65,403 1,625,200 532,797 1,056,345 415,972 151,795 14,400 9,500 37,860 1,260,400 10,500 21,245 588,192 16,695 443,167

: ANNUAL FINANCIAL STATEMENTS 145 NOTES

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146 P O Box 26100, Monument Park 0105, South Africa

Tel: +27 12-482 3000 Fax: +27 12-367 5151 [email protected] http//www.sita.co.za

RP151/2015 ISBN: 978-0-621-43625-9