State Information Technology Agency
2008/9 Annual Report Presentation to (PSA) Portfolio Committee
Agenda
• Strategic Objectives : Achievements
• Key Integrated Service Provision Programs
• Human Capital
• Financial Performance
OPERATIONAL
EFFICIENCY
2
IMPROVED
SERVICES
CUSTOMER &
STAKEHOLDER
SATISFACTION
FINANCIAL
SUSTAINABILITY
Achievements: Strategic Objectives
Ensuring that ICT works for the Citizens
Improve Long-Term
Financial Sustainability
Financial
Results for South Africa
Optimise
Revenue
Streams
Leverage Assets
optimally (people &
resources)
Financial Responsibility
Optimise Working
Capital
Improve Cost
Structure
Learning &
Growth
Internal Process
Customer
Be a Trusted Advisor
Modernise
Public Service
Operations
Reduce
Government Cost
of Doing Business
Optimise ICT
Infrastructure
Services
Improve
Responsiveness
Consistently
Meet Service
Levels
By Leveraging Industry Partnerships we will
Extend Service
Footprint
Maximise Efficiency of
Processes
Improve Service Level Management
Improve the Management of Service
Portfolio
Encourage
Innovation Culture
Standardise & Automate
Process
E- Innovation
SITA Process Excellence
Embed SITA
Culture & Values
Develop
Skills
Improve
Accountabilit
y
Understand Customers‘ Business &
Needs
Service Excellence
Attract &
Retain Talent.
Build Leadership &
Management
Competencies
Achievements: Strategic Objectives
Objectives/Target Set as per 2008/9 SITA Corporate Score Card:
Achieved = 19
Not Achieved = 8
Categories for Objectives:
Financial = 4 Objectives with 5 set targets
Customer = 10 Objectives with 10 set targets
Internal Processes = 4 Objectives with 5 set targets
Learning and Growth = 5 Objectives with 7 set targets
5
Achievements: Strategic Objectives
• Objectives achieved:
- Grow revenue base
- Develop and implement an integrated, consistent and robust planning cycle
regime
- Develop detailed service catalogue and service metrics
- Quality of service sample
- Develop and implement the service offerings to local government using
Shared Services model
- Improve quality of revenue and reduce costs to customers for agency
transactions
- IFMS ( Integrated Financial Management System)
- Develop and implement ICT Planning Governance Framework
- E-Gov
Achievements: Strategic Objectives
• Objectives achieved (continued):
- GWEA ( Government Wide Enterprise Architecture)
- Quality improvement – including implementation of an IT Service
Management Framework
- Improve business processes
- Develop skills ( Identified Core and Critical Skills)
- Focus on embedding SITA organizational values to ensure they are instilled
in the way we work
- Attract and retain critical skills and best performers
- Develop and implement an Integrated Talent Management Strategy
- Attainment of employment equity: EE and Disability
Achievements: Strategic Objectives
• Objectives not achieved
- Achieve working capital and cash flow targets
- Develop, implement and maintain competitive costing and sustainable pricing
strategies (commercial models)
- Convert all licensed software with a significant share of total government
ownership to a single enterprise license
- Signing of Service Level Agreements
- Clean Audit Report
- Implement procurement-specific interventions to improve operational
excellence
- Attainment of employment equity targets: Gender
Key Integrated Service Provision Programs
Government Programmatic Support
• Local Government Support Program (Municipal ICT blueprint)
The Local Government Support programme is an initiative designed for the purpose of identifying solutions, testing the concepts applicable
to identified local government requirements with the intention of implementing these solutions in municipalities.
• Electronic Health record
The objective of the Electronic Health Record project (e-HR.Za) is to design and develop a solution for an Electronic Health record for South Africa
that will allow the Department of Health (DoH) to have a single view of patient information across the country.
• SAPS and DoD
These are outsourced ICT accounts that SITA manages on behalf of these clients.
• Education: Lurits
The National Education Department has identified the need to design and implement a national learner unit record information and tracking
system (LURITS). The LURITS is a web-based system that will enable the DoE to store the unit record level data of learners and educators in a
central national database and will enable the Department to track the movement of learners from school to school throughout their school career.
• Poverty Index
This initiative is intended to help in the validation of information of people applying for indigent grants.
• IEC Call Centre (and now Presidential Hotline)
These initiatives showcase how optimization of existing ICT infrastructure can reduce the life cycle costs of solutions to government.
• Youth Development Programme (Youth Internship Programme)
This programme offers unemployed diplomates and graduants an opportunity to enter into the ICT world through a year long internship
programme.
9
Key Integrated Service Provision Programs
Modernizing Government Systems
•
Government-wide Enterprise Architecture (GWEA)
The value of this framework would empower government ICT entities to: align their ICT plans and capabilities with
departmental business plans and capabilities; to make informed decisions pertaining ICT investment, acquisition and
development; to identify and reduce duplication of ICT; to improve security and interoperability among government
information systems.
•
Next Generation Network (NGN)
The asset provides new capability to offer fully converged communications network that offers functionality such as
data, voice and video transmission in a defines quality of service framework.
•
Network Operations Centre (NOC)
•
•
•
This asset enables SITA to proactively monitor the NGN to minimize network outages that may negatively affect
service delivery.
Integrated Financial Management System (IFMS)
The purpose of the IFMS project is to consolidate, integrate and upgrade Government’s out-dated legacy transversal
I.T. systems in order to meet new legislative and organisational requirements, introduce cost-effective technologies,
eliminate duplication, support e-Government initiatives and contribute to broader socio-economic objectives such as
contributing to skills development and stimulating the domestic ICT industry, particularly BEE and SMME
companies.
Next Generation e-Government
Establish an e-Government platform that is central, scalable, flexible, extensible, reliable, customizable, and
integrated on which online services can be delivered to citizens/business/foreigners, etc.
Implementation of Free Open Source Software (FOSS)
This initiative is intended to deliver numerous outcomes among which are to (1) develop skills for FOSS
(research showed this was the key problem) (2) Promote open standards and open source (3) Facilitate
migrations to FOSS by government departments (Migrations can be application, desktop, back-end,
enterprise systems)
Human Capital
Equity Performance
Employment Equity:
Actual
Target
• Race  62.83%
-
60%
• Gender  45.87%
-
46%
• Disability  1.34%
-
1%
12
Key Human Capital Programs
• Development of Core Technical Skills
• Development: Leadership and Management Skills
• Culture Improvement
• Youth Internship Programme
13
Financial Performance
Governance Structure
• Audit and Risk Committee
• Strong Internal Audit
• Anti-Fraud hotline
• All issues reported are investigated and appropriate action taken
Audit Report
• Previous year
- Unqualified
- Emphasis of matter
• Current year
- Unqualified
- No emphasis of matter
Audit Report (continued)
• Items included in other matters:
- Non-compliance with PFMA:
 Contract Management System not in place
 Approval to retain surpluses not requested from National Treasury
- Non-compliance with SITA Act
 Service Level Agreements not signed
 Vacant prescribed Directors positions -- Managing Director and Legal Representative
- Key Governance Responsibilities
 Audit delays
 Material audit adjustments to the annual financial statements (Projects)
 Internal control weaknesses
 Non-compliance with legislation
 Information systems not supportive
 Unresolved prior year audit findings
• Various investigations as reported on in the audit report
Financial Performance
• Revenue increased with 10% in line with the budget. Tariffs within the
mainframe environment were lowered resulting in R225m less revenue
than budgeted.
• Suppliers were paid more promptly, but challenges were experienced in
timeous debt collection. This impacted negatively on working capital and
the organisation generated less cash from operations than budgeted.
This impacted on our capital expenditure program.
• Notwithstanding the above challenges and strategies put in place to
address these problems, our solvency ration at the end of the year was
2.41:1 and our liquidity ratio was 1.98:1, leaving the company healthy
and the financial structure sound.
Financial Performance, …
• Highlights:
- Revenue growth of 10% to R3,976 bn
- Significant reduction in supplier payment periods
- Solvency ratio 2.41:1
- Liquidity ratio 1.98:1
• Areas for improvement:
- Debtor days: 65.87 days vs target of 65 days
- Cash generated by operations: R87m vs budgeted R163m
19
Abridged Statement of Financial Performance for the year ended 31 March 2009
Revenue
Cost of sales
Gross surplus
Operating expenses
Results from operating activites
Surplus before tax
Surplus after tax
Gross surplus %
Opex %
Surplus after tax %
20
2009
Rm
3,976.7
3,206.5
770.2
708.8
112.2
216.1
153.7
19.37%
17.82%
3.87%
2008
Rm
3,607.6
2,690.3
917.3
607.4
351.8
428.0
299.2
25.43%
16.84%
8.29%
Abridged Statement of Financial Position as at 31 March 2009
2009
Rm
Assets
Non-current assets
Current assets
Total assets
Net assets and liabilities
Net assets
Liabilities
Non-current liabilities
Current liabilities
Total net assets and liabilities
Solvency ratio
Liquidity ratio
Benchmark: Solvency ratio – 2:1, Liquidity ratio – 1.5:1
21
2008
Rm
682.1
1,919.0
2,601.1
633.9
1,926.7
2,560.6
1,519.7
1,366.0
112.8
968.6
2,601.1
108.8
1,085.8
2,560.6
2.41
1.98
2.14
1.77
Abridged Cash Flow Statement for the year ended 31 March 2009
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activites
(Decrease)/Increase in cash and cash equivalents
Cash and cash eqivalents - beg of year
Cash and cash equivalents - end of year
22
2009
2008
Rm
Rm
87.1
271.1
(198.4) (261.4)
(5.2)
(5.2)
(116.5)
4.5
1,101.2
1096.7
984.7 1,101.2
Trade and other receivables
Trade receivables
Provision for doubtful debts
Other receivables
Ageing of trade receivables
Current
Past due 0 - 30 days
Past due 31 - 120 days
Past due 121 - 365 days
Past due - more than 1 year
23
2009
Rm
941.1
(69.9)
871.2
16.9
888.1
2009
Rm
%
583.4 67%
197.0
23%
60.6
7%
(17.8)
-2%
48.0
6%
871.2 100%
2008
Rm
845.8
(57.4)
788.4
13.2
801.6
2008
Rm
%
457.6 58%
110.4 14%
88.4 11%
95.5 12%
36.5
5%
788.4 100%
Revenue growth
Revenue
3977
4000
3608
3357
3500
2904
3000
2637
2500
Revenue
2000
1500
1000
500
0
31 Mar 05
24
31 Mar 06
31 Mar 07
31 Mar 08
31 Mar 09
Revenue growth (continued)
• Achieved budget revenue growth of 10%
• Growth areas:
- Labour ( 8%)
- Network and internet (20%)
- Software licenses and maintenance (27%)
- Project revenue (159%)
- Sundry (111%)
• Reduction:
- Computer equipment and maintenance (22%)
- Mainframe income (10%)
Cost of sales – 2009 in R’m
Cost of Sales
3,500
3,207
3,000
2,645
2,691
2,372
2,500
2,141
2,000
Cost of Sales
1,500
1,000
500
31 Mar 05
26
31 Mar 06
31 Mar 07
31 Mar 08
31 Mar 09
Cost of sales (continued)
• Increased from previous year:
- Depreciation (66%) due to capital expenditure in previous and current year
- Direct Labour (18%) due to higher demand
- Service delivery overheads (48%) due to agency transactions and computer
equipment and maintenance costs
Capital expenditure – R’m
CAPITAL EXPENDITURE
300
262
250
199
200
149
CAPITAL EXPENDITURE
150
124
100
81
50
0
31 Mar 05
28
31 Mar 06
31 Mar 07
31 Mar 08
31 Mar 09
Capital expenditure (continued)
• Areas of spending on Capital Expenditure:
- Buildings: R20m
- Computer equipment: R110m
- Office furniture: R33m
- Intangible assets (software): R36m
Gross surplus – R’m
Gross surplus
1000
917
900
770
800
712
700
600
532
496
Gross surplus
500
400
300
200
100
0
31 Mar 05
30
31 Mar 06
31 Mar 07
31 Mar 08
31 Mar 09
Gross surplus (continued)
• Reasons for decrease
- Increase in agency transactions which translates into lower gross margin
- Reduced tariffs in mainframe environment (R225m) to support lower
expenditure for government
Operating expenses – R’m
Operating expenses
800
709
700
592
607
600
476
500
411
Operating expenses
400
300
200
100
0
31 Mar 05
32
31 Mar 06
31 Mar 07
31 Mar 08
31 Mar 09
Operating expenses
• Reasons for increase:
- Operating leases (R13m)
- Foreign exchange loss (R11m)
- Impairment on trade receivables (R16m)
- Audit fees (R4m)
Net surplus – R’m
Net surplus for the year
299
300
250
200
154
143
Net surplus for the year
150
100
81
69
50
31 Mar 05
34
31 Mar 06
31 Mar 07
31 Mar 08
31 Mar 09
Net surplus
• Reasons for decrease
- Lower gross surplus
- Increase in Operating expenditure
Thank you