Four years after its formation, the State Information Technology Agency (Sita) has finally turned the corner into profitability as it reported a pre-tax profit of R120-million in the 12 months to end March 2003 compared with a pre-tax loss of R71-million in the previous financial year.
The prime movers behind this turnaround were acting CEO and chief operations officer Ken Modise and chief financial officer Pieter Els, who previously worked for IBM in Paris. These two were in charge from September 2002 and June 2002 respectively.
In the past Sita has had its accounts qualified by the auditor general, but the problems highlighted have been rectified and the 2003 accounts were unqualified.
The main reason for the delay in publishing the 2003 annual results was printing problems, as accounts had been finalised by May 31 and the audit was completed on August 8.
Revenue rose by 44.3% y/y to R1,968-billion, while gross profit more than doubled to R392,7-million compared with R187,5-million. Operating expenses rose by only 16,7% y/y despite a 21% y/y increase in headcount to 3 043, of which 759 were contractors.
As a percentage of revenue, operating expenses, in fact, reduced from 17,8% to 16,3%. This was significantly below the 23,9% ratio in 2001 and compares with private sector information technology companies that have an expense to
revenue ratio of between 11% and 18%.
The 2003 result was achieved despite two unbudgeted-for items, namely a post-retirement medical aid contribution of R60,8-million and a R3-million bill from the auditor general.
Els has targeted a revenue growth of 20% this year and an expense to revenue ratio of 15%.
Sita has had a troubled history since it was created to procure, supply and manage technologies for all government departments. It has suffered a succession of high-level resignations, and is awaiting the arrival of a new CEO, Mavuso Msimang, who will move across from South African National Parks to start work on October 1 2003.
What has helped Sita to move to profitability was the restructuring of its mandate to a more manageable level.
Its new tasks now are to guide technology strategies, to adjudicate tenders and to liaise with private sector companies for the provision of some technologies. These tasks were set out in the Sita Amendment Bill passed in November 2002.
Overall, its goal is to streamline the use of information technology within the government and to use technology to improve efficiency and the delivery of services to the public.
Modise said Sita does not receive any government funding whatsoever, yet has certain responsibilities to perform in terms of the Sita Amendment Act.
“Firstly, we must prepare the way for bona fide e-government by undertaking essential government-related research and development that the private sector would not find economically feasible.
“Our second function is to broaden the IT skills base by identifying disadvantaged South Africans with aptitude and training them in sought-after IT skills. Over 230 people, drawn from all regions, have been trained this year,” he said.
“Sita’s third primary responsibility is to invest in infrastructure that will enhance government’s IT functions. Investments made this year in the Government Common Core Network and Seat Management programme have already delivered substantial efficiency improvements,” Modise said.
Sita will spend about R300-million on capital expenditure this year after spending R149,4-million in the past financial year.
To counter charges of favouritism and prevent potential corruption, Sita will appoint an ombudsman to oversee its IT acquisition centre, which processes more than 300 tenders worth R2,8-billion. — I-Net Bridge