State IT unit facing serious cash-flow crisis
State Information Technology Agency says available cash balance of R500m enables it to be sustainable for 20 working days
The agency tasked with consolidating and co-ordinating the government’s information technology resources is facing a serious cash-flow crisis that threatens the functions of the state.
The State Information Technology Agency (Sita), which was established two decades ago and tasked with facilitating electronic services between the government and the public as well as overseeing the procurement and delivery of IT processes, told MPs on Tuesday its available cash balance of R500m enables it to be financially sustainable for only 20 working days.
While Sita essentially does not have enough cash to sustain its operations at the moment, it says the crisis can be averted if the agency is able to find alternative interventions to convert its trade and other receivables totalling R1.6bn into cash. Trade and other receivables are the total amounts owing to a company for goods or services it has sold.
Sita is responsible for about R2bn annually in IT procurement spend on behalf of government departments. It has previously been embroiled in tender controversies and accused of failing to provide reliable government IT systems.
However, Sita acting CEO Ntutule Tshenye insisted in a presentation to parliament that the agency was on track to getting its house in order and remained in a sound financial position. The agency just needed to find alternative interventions to convert its trade and other receivables into cash, he said.
“This will allow the agency to grow and refresh its infrastructure to maintain its revenue base,” Tshenye said.
He said the agency has a sound financial position and continues to fast-track initiatives to recover its revenue base and has implemented stringent measures to minimise operational expenditure.
Tshenye said the recovery of critically overdue debt, the delayed signing of agreements resulting in no billing for services delivered, and the lack of capex funding had negatively affected the cash flow.
“Cash-flow levels are monitored on a daily basis to ensure there are proper controls over the collection and disbursement of cash,” he said.
Cash and cash equivalents amounted to R623.2m as at September 2019 compared with R1.1bn as at March 2019. Sita had assets amounting to R4bn in September 2019, and liabilities of about R1.2bn
Tshenye, who was briefing members of parliament’s communications portfolio committee on the agency’s financial statements and governance challenges, said since its inception the organisation has been grappling with a number of systemic and institutional challenges that have prevented it from fully achieving its objectives.
“In response to the systemic and institutional challenges, the agency implemented a new business model supported by a new macro organisation structure. However, the full implementation of the business model remains to be concluded,” Tshenye said.
The successful implementation of the business model compelled the agency to take action to root out fraud and corruption.
“This, however, inevitably resulted in the substantial loss of critical core and scare skills in key functions of the organisation,” Tshenye said.
He said the subsequent reduced organisational capacity has resulted in the agency not being able to fully meet customer demand and targets. This has also led to the agency “capacitating itself with existing employees who do not necessarily possess the required leadership competencies to drive a turnaround in organisational performance”.
“In general, these employees are acting for extended periods in senior and executive management levels; these levels require the appropriate digital skills and thought leadership to propel the agency forward in the [fourth industrial revolution],” Tshenye said.
“The board of directors regard corporate governance as fundamental to the success of the business and they are fully committed to ensuring good governance is practised in order for the company to remain a viable and sustainable business,” he said.
“Sita has seen a change in administration, resignation of two directors including the end of term of the CEO. Interventions are under way to fill critical leadership vacancies, namely CEO, CFO, chief procurement officer and company secretary,” Tshenye said.