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State Information Technology Agency

2008/9 Annual Report Presentation to Portfolio Committee of Police

2

Agenda

• Strategic Objectives : Achievements

• Key Integrated Service Provision Programs

• Human Capital

• Financial Performance

• Overview of SITA/SAPS information for 2008/09 financial year

OPERATIONALEFFICIENCY

FINANCIALSUSTAINABILITY

IMPROVEDSERVICES

CUSTOMER & STAKEHOLDERSATISFACTION

Achievements: Strategic Objectives

By Leveraging Industry Partnerships we will

E- Innovation SITA Process Excellence Service Excellence

Ensuring that ICT works for the Citizens

Improve Responsiveness

Cus

tom

er

Leverage Assets optimally (people &

resources)Optimise Working

Capital

Results for South Africa

Improve Cost Structure

Improve Long-Term Financial Sustainability Financial Responsibility

Fina

ncia

l

Optimise Revenue Streams

Modernise Public Service

Operations

Reduce Government Cost of Doing Business

Be a Trusted Advisor

Consistently Meet Service

Levels

Maximise Efficiency of Processes

Standardise & Automate Process

Improve the Management of Service Portfolio

Understand Customers‘ Business & Needs

Improve Service Level Management

Encourage Innovation Culture

Extend Service Footprint

Develop Skills

Embed SITA Culture & Values

Lear

ning

&

Gro

wth Build Leadership &

Management Competencies

Attract & Retain Talent.

Inte

rnal

Pro

cess

Improve Accountability

Optimise ICT Infrastructure

Services

5

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

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

9

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.

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-GovernmentEstablish 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

12

Equity Performance

Employment Equity:

Actual Target

• Race 62.83% - 60%

• Gender 45.87% - 46%

• Disability 1.34% - 1%

13

Key Human Capital Programs

• Development of Core Technical Skills

• Development: Leadership and Management Skills

• Culture Improvement

• Youth Internship Programme

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.

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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

20

Abridged Statement of Financial Performance for the year ended 31 March 2009

2009 2008Rm Rm

Revenue 3,976.7       3,607.6     Cost of sales 3,206.5       2,690.3     Gross surplus 770.2          917.3        Operating expenses 708.8          607.4        Results from operating activites 112.2          351.8        Surplus before tax 216.1          428.0        Surplus after tax 153.7          299.2        

Gross surplus % 19.37% 25.43%Opex % 17.82% 16.84%Surplus after tax % 3.87% 8.29%

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Abridged Statement of Financial Position as at 31 March 2009

2009 2008Rm Rm

AssetsNon‐current assets 682.1       633.9     Current assets 1,919.0    1,926.7  Total assets 2,601.1    2,560.6  

Net assets and liabilitiesNet assets    1,519.7    1,366.0  LiabilitiesNon‐current liabilities 112.8       108.8     Current liabilities 968.6       1,085.8  Total net assets and liabilities 2,601.1    2,560.6  

Solvency ratio 2.41         2.14       Liquidity ratio 1.98         1.77       

Benchmark: Solvency ratio – 2:1, Liquidity ratio – 1.5:1

22

Abridged Cash Flow Statement for the year ended 31 March 2009

2009 2008Rm Rm

Cash flows from operating activities 87.1 271.1Cash flows from investing activities (198.4)     (261.4)    Cash flows from financing activites (5.2)         (5.2)        (Decrease)/Increase in cash and cash equivalents (116.5)     4.5Cash and cash eqivalents ‐ beg of year 1,101.2   1096.7Cash and cash equivalents ‐ end of year 984.7      1,101.2  

23

Trade and other receivables

2009 2008Rm Rm

Trade  re ceivables 941.1       845.8       P rov is ion  fo r doubtful  debts (6 9.9)         (5 7.4 )        

871.2       788.4       Other rece ivab le s 16.9          13.2         

888.1           801.6         

Ageing  of  trade  rec eivab le s Rm % Rm %Curre nt 583 .4 67% 457 .6 58%Past  due  0  ‐  30 da ys 197.0       23% 110 .4 14%Past  due  31  ‐ 120 days 60 .6 7% 88 .4 11%Past  due  121 ‐  365  days (17.8)         ‐2% 95 .5 12%Past  due  ‐  more  than 1 year 48 .0 6% 36 .5 5%

871 .2 100% 788 .4 100%

20082009

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Revenue growth

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%)

26

Cost of sales – 2009 in R’m

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

28

Capital expenditure – R’m

Capital expenditure (continued)

• Areas of spending on Capital Expenditure:

- Buildings: R20m

- Computer equipment: R110m

- Office furniture: R33m

- Intangible assets (software): R36m

30

Gross surplus – R’m

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

32

Operating expenses – R’m

Operating expenses

• Reasons for increase:

- Operating leases (R13m)

- Foreign exchange loss (R11m)

- Impairment on trade receivables (R16m)

- Audit fees (R4m)

34

Net surplus – R’m

Net surplus

• Reasons for decrease

- Lower gross surplus

- Increase in Operating expenditure

Overview of SITA/SAPS information for 2008/09 financial year

• SITA 2008/2009 Strategic Plan Alignment

• Financial Results for 2008/2009

• Overview of Police ICT cost drivers

• Role of Agency

• Police Strategic Projects

SITA Strategic Plan Alignment

SITA Strategic PlanFinancial Sustainability

Infrastructure Optimisation

Extend Service Footprint

Reduce Cost

Modernise Public Service Operations

Achieve Operation Excellence

Develop our people

Police Business Unit PlanFinancial Sustainability

Reduced Turnaround Times

Proposal Responsiveness

Value for Money

Modernize SAPS Service Operations

ITIL Alignment of Services Support Processes for SAPS

Skills development for Core Competency gaps

Financial Results for 2008/2009

Recurring ICT Support Services

Infrastructure Upgrade Programme(SAPS and IJS CAPEX funding)

ANNUAL ICT SERVICES 2006/2007 Growth 2007/2008 Growth 2008/2009HOSTING SERVICES R 155,609,584 30.3% R 202,773,418 14.6% R 232,406,081BUREAU SERVICES R 4,169,332 20.4% R 5,020,105 13.4% R 5,694,464NETWORK SUPPORT SERVICES R 107,228,033 15.4% R 123,762,232 22.5% R 151,562,936DISTRIBUTED SUPPORT SERVICES R 257,713,159 8.4% R 279,394,752 30.2% R 363,771,896APPLICATION MAINTENANCE SERVICES R 150,961,674 19.5% R 180,472,557 11.8% R 201,763,993

R 675,681,782 17.1% R 791,423,064 20.7% R 955,199,370

INFRASTRUCTURE PROJECTS 2007/2008 2008/2009NETWORK UPGRADE R 155,227,286 R 182,237,161MAINFRAME UPGRADE R 36,464,776AD HOC EXPANSIONS (PBX, NETWORK) R 169,891,914 R 78,856,127

R 325,119,200 R 297,558,064

SAPS Costing Model – 2008/2009

SAPS Costing(VAT Incl)

R 733,768,616

R 39,873,431

R 136,378,189

R 46,499,054

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Error MarginCorporate OverheadsDivisional OverheadsCost of Services

SAPS

Overheads Contribution

R222,750,674

for 2008/2009

Overview of Police ICT cost drivers

Hosting ServicesMainframe Upgrades reduced maintenance fees

Network Services Maintenance introduced on 28 new switching centres (R38m)Active Directory and new regional support (R20m)

Application Services Key contractors converted to permanent employees

Decentralised Support Services10% to 20% year-on-year growth from 05/06Equipment increased from 117,377 to 119,377

Police ICT equipment growth

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

'03/04 '04/05 '05/06 '06/07 '07/08 '08/09

WorkstationsPrintersLAN Equipment

Police ICT equipment growth

0

1000

2000

3000

4000

5000

6000

7000

8000

'03/04 '04/05 '05/06 '06/07 '07/08 '08/09

ScannersFAXDigital Media

Role of Agency

Management and support of core ICT capabilityUtilize SA ICT industry on competitive basis as partners to render support services to Police

REVENUE CHANNELED TO INDUSTRY PARTNERS

ANNUAL ICT SERVICES 2008/2009 2009/2010HOSTING SERVICES 66.04% 63.00%BUREAU SERVICES 80.00% 80.00%NETWORK SUPPORT SERVICES 65.82% 66.00%DISTRIBUTED SUPPORT SERVICES 47.63% 45.00%APPLICATION MAINTENANCE SERVICES 50.73% 46.00%

TOTAL 55.81% 53.50%

Act as procurement agency for Police managed ICT projects

Industry Partners

AfriGIS Al Indigo Arivia.Com BCIT

BCX Carlysle Human Capital (PTY) Ltd. Cornastone Dimension

Data

Exponant Faranani (PTY) Ltd. Forensic Data Analysis GijimaAST

Investigative Software ServicesKanimambo Computing (PTY) Ltd.

Koba IT Solutions (569) Lechabile (PTY) Ltd.

Neotel Real Global Business Solutions Relational Database Consulting

Simeka Resource Solutions (PTY) Ltd.

Tshilhulwane C entre (Ethleumu) Sizwe

Police Strategic Projects – 2008/09

SITA supported/established the following strategic projects in 2008/2009

Deployment of E-Docket solution to 107 Police stations

Development and implementation of Forensic Laboratory E-Dockets for exhibit management

Implementation of the AVL vehicle tracking in 24,650 Police vehicles

Implementation of GIS satellite imagery obtained from CSIR

Integrated Case Docket Management System (ICDMS)

Integrated Case Docket Management System (ICDMS)

SITA

Thank you