In his speech to the opening of Parliament on Friday, President Mandela underscored the significant progress the government has made during 1996 to implement the Growth, Employment and Redistribution strategy. The foundation laid in the past year will be a stepping stone for the achievements of the goals we have set ourselves. This can only give momentum to the restructuring of state assets, with the first major project, the restructuring of the Telecommunications sector and Telkom SA, due for completion by April. The eminent conclusion of the Telkom transaction is evident of substantial progress made in achieving some of the goals we set ourselves.
1. TELECOMMUNICATIONS
The major focus in telecommunications following the passing of the White Paper in March 1996, has been the restructuring of Telkom and the search for a strategic equity partner for the corporation. The process is on track and we are confident that it will be completed by April 1997 as we initial]y set out.
KEY GOALS OF RESTRUCTURING
Central to the restructuring of Telkom is delivering affordable universal telephone services to all South Africans on demand. For Telkom to achieve this goal, it will have to increase its current roll-out rate dramatically. In 1995/96 Telkom's roll-out was 160 000. The target for 1996/97 is 250 000. This rate will have to increase in line with the current evidenced demand of 1.8 million lines over the next five years. If Telkom meets 90 percent of the SEP bid target by the end of year 4, it could obtain an extra year Or exclusivity if it commits to raise the roll-out to 3 million lines.
The timetable for the process has been rigorous starting with the world tour in July 1996, by the Ministry accompanied by Telkom management and board members, four unions in the sector and representatives of the Portfolio Committee of the National Assembly and the Select Committee of the Senate.
We have been able to reach a principle endorsement for taking the route of a strategic equity partner for Telkom with the representative unions in accordance with the National Framework Agreement between Government and Labour. There are ongoing discussions in terms of the NFA to finalise the details of the agreement with the representative trade unions in the sector.
MILESTONES
This is an incredibly complex process involving 13 legal transaction documents ranging from Share Transfer Agreements, Shareholder Agreements and Corporate Governance, and Strategic Services Agreements. So for those among us who are of the view that the government is stalling or not moving swiftly enough, I want to re-assure you it is not the case.
Key successes alongside this process were the passing of the Telecommunications Act and the establishment of the South African Telecommunications Regulatory Authority (SATRA), which started operating on February 3, 1997. These were critical aspects of the restructuring, setting out the necessary certainty of the regulatory environment for the potential investors.
Key outputs of this entire process will be a restructured Telkom SA Ltd, well positioned to undertake an aggressive roll-out of telephone lines and offer other multi-media services, placing South Africa in a strategic position for the information revolution.
The Draft Telkom licence issued on Friday last week, for public discussion, sets new obligations and service quality targets for Telkom. In part this will ensure that the corporation is more service and customer focused than before.
NEW LICENCES
The White Paper on Telecommunications committed SATRA to commission a study, within six months of its establishment, on the feasibility of on whether the market can accommodate the awarding of a further cellular phone licence. We are looking forward with great anticipation to the market being able to carry another cellular phone operator. Another new operator in the market will contribute greatly to competition and beater services to the customer in the sector.
The conclusion of the Telecommunications policy and legislative process should create an environment for the rapid development of the sector. This we believe will ensure that the South African telecommunications services are of world class standard and the country is globally competitive as we enter the information economy.
WORLD TRADE ORGANISATION
We are in the process of finalising our offer to the World Trade Organisation's Negotiating Group On Basic Telecommunications. We have been in bilateral discussions with our trading partners and we are confident that our offer will be accepted in Brussels on Saturday February 15, 1997.
2. BROADCASTING
At the outset government made a commitment to move away from state broadcasting and usher in a new era of public broadcasting, opening up the airwaves for new commercial broadcasters. This process led to the Independent Broadcasting Authority's Triple Inquiry Report 1995, ratified by Parliament in March 1996. In line with the recommendations of the IBA, six SABC regional radio stations were sold to new broadcasters. There is currently a process underway to sell the assets and licence of Capital radio, with Investec Merchant Bank overseeing the process. The IBA is in the process of awarding eight new regional radio licences. A new terrestrial television licence will be awarded by September 1997 heralding a new era of broadcasting in South Africa with diversity of ownership and voices in the industry.
The Department will in this current year implement the recommendations of the IBA Triple Inquiry Report on the Integration of Transkei, Bophuthatswana, Venda and Ciskei broadcasting service, following the passing of the Former State Broadcaster Integration Act in October 1996.
FUNDING A NATIONAL PUBLIC BROADCASTER
We are currently finalising the details of the public funding of the SABC's national public broadcasting service mandate. Certain public broadcasting obligation have been put on the SABC such as:
Cabinet has already approved funding the SABC for these public broadcasting mandate costs incurred between the period October 1996 to March 1997. We are in the process of finalising the details of this funding through a task team comprising the Department of Communications, Department of State Expenditure and the SABC's Finance division.
FINANCIAL VIABILITY OF THE PUBLIC BROADCASTER
There is currently a resource review of the SABC led by the corporation's management assisted by a reputable change management consulting firm McKinsey. The focus of this work is to devise a turn around strategy and a long term financial viability Of public broadcasting. This will be achieved through a funding mix involving advertising, licence fees, sponsorship and government funding for clearly identified public interest projects. Government funding for the public broadcaster will be located within the recommendation of the resource review process in the SABC, which will be completed by April 1997.
BROADCASTING POLICY
The Department is currently establishing a broadcasting policy unit in line with having a three-tier separation of function - policy, regulatory and operations. Historically, the department's brief was to deal with Posts and Telecommunications, as a result there was no broadcasting policy capacity. Building policy capacity will be a key focus because this function will be critical to the drafting of White Paper on Broadcasting to be undertaken during the course of the current financial year.
Key issues to be addressed in the White Paper include:
3. POSTAL SERVICES
Important progress has been made in dealing with problems in the Postal Service ranging from the deterioration of the delivery of mail with the introduction of the Witspos mail sorting centre. Delivery performance has improved dramatically during the past year, with 90 percent of the mail now being delivered on time in accordance with delivery standards set by management and monitored by independent auditors. However, the Post Office handles some 8 million mail items a day, even with a delivery standard of 99 percent, one percent represents 80 ()00 letters that cannot be delivered.
Theft, crime, and violation of mail continue to be a problem and the Post Office management is taking numerous steps to address this issue. Proposed measures include the creation of a special security investigation unit as well as the installation of video cameras in mail centres. A number of crime syndicates have already been broken.
WORK PROGRESS
Key activities for this year include the development of a White Paper on Postal Policy and a Postal Services Bill, both of which are scheduled to go before Parliament this year. The White Paper on Postal Policy will set out government's vision in respect of postal services and will define the role of the Post Office in a democratic South Africa. These processes are fundamental to reforming postal services since it is government's view that unless the Post Office adapts to changes in customer needs, government priorities, and communications industry as whole, it faces a bleak future.
CHALLENGES
Key challenges facing the Post Office include:
The current criteria for state subsidy of the post office and the tariff structure for postal service are under review. In line with all government institutions the state subsidy for the 1997/98 financial year for the Post Office has been reduced and will continue to shrink.
This is in accordance with the government's overall macro-economic strategy and its efforts to foster greater efficiency in the public sector, while simultaneously reducing the budget deficit.
A tariff adjustment will be effected from April 1 this year, and both the Department and the Post Office are currently engaged in consultation with stakeholders through the National Postal Forum. In conjunction with these increases in tariffs, every effort will be made to ensure that cost and service inefficiencies are reduced and ultimately eliminated in the Post Office. These adjustments notwithstanding, South Africa continues to enjoy one of the lowest postal tariffs.
NEW PROJECTS
The Strauss Commission of enquiry into the provision of rural financial services has produced a report promoting the utilisation of the Postbank for rural banking services. Revitalised role for the Postbank is therefore under consideration.
Since 1994, more than one million new postal box addresses have been provided in historically disadvantaged communities.
The Post Office is paying out pensions in some areas of the country, and new areas for expansion of this service is under consideration.
The proposed national lottery for South Africa will require the participation of an organisation with wide customer reach, the ability to handle cash payments and collections, and a good information technology network. The Post Office is ideally placed for this role.
4. GENERAL
The following legislation was piloted through Parliament in 1996:
A preliminary list of Bills for tabling in 1997 sitting of Parliament includes:
5. CONCLUSION
The communications sector is characterised increasingly by cross-border capital flows. This has brought about increased pressure on the restructuring of markets. Policies surrounding the development of the information and communications technology are linked to calls for increased market and trading access, liberalisation and the promotion of competition.
ln an attempt to prepare for the future challenges, the Department has separated the policy-making, regulatory and operations or implementation functions. This will ensure the formulation of clear policies, clear and solid regulatory frameworks for the efficient, effective and equitable delivery of services.
The regulatory institutions include the Independent Broadcasting Authority and the South African Telecommunications Regulatory Authority.
The overall policy thrust of the Department involves the exercise of shareholder responsibility, the integration of information and communications services in development planning, evaluation of policies on the basis of socio-economic criteria and improvement of the awareness of the significant value of communications.
There is a need to focus on the questions of sustainability and affordability in the development of communications policy. The barriers which once separated the three sectors of the information and communications services are breaking down, since each sector can process and exchange information in digital form. These developments will have a significant influence on trading, industrial and economic strategies in every country. This is the challenge we are preparing to meet.
For further information, please contact Connie Molusi; Phone: (021) 462-1632 Fax: (021) 462-1646 Ministry for Posts, Telecommunication and Broadcasting.