Government Printing Works Annual Report 2021/22 Presentation to Portfolio Committee on Home Affairs

1. Government Printing Works Presentation Committee on Home Affairs to the Portfolio Date: 10 October 2023 . 1

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3. Presentation outline 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Conclusion 11. Tabling of the Annual Report Purpose Executive Summary Summary of GPW’s Annual Performance Targets: APP 2021-22 PART A: Annual Performance 2021/22 progress per Branch PART B: GPW Annual Financial Statements 2021/22 PART C: Audit matters: Status of resolution of Audit Findings PART D: Risk Management: Progress: Strategic Risk Register PART E: Implementation of the Ministerial Review Panel Report Consequence management 3

4. 1. Purpose To present the GPW’s Annual Report for the financial year 2021/22 to the Portfolio Committee on Home Affairs. . 4

5. 2. Executive Summary The GPW management appreciates an opportunity to present this Annual Report to the Portfolio Committee, and acknowledges the support received from the Committee in its oversight role. The Annual Report for the financial year 2021/22 represents the progress that was made in achieving the performance targets set out in the Annual Performance Plan (APP) for the year under review. GPW had a total of 18 targets set for the financial year and 13 of these targets were attained, translating into 72% achievement. The remaining five targets that were not achieved relate to the following: implementation of the reviewed security model; obtaining a clean audit opinion; the attainment of the 10% net profit margin; the submission of the Annual Financial Statements (AFS) and the In-Year-Monitoring Reports by the stipulated timeframes. The targets within Branch: Finance were adversely affected by the system failure and data loss. Plans have been put in place to address challenges that contributed to non-achievement of these targets in order to improve on overall performance. GPW has enhanced its internal capacity with skilled professionals to support GPW in the execution of its plans in areas such as Finance, ICT and Legal Services. The Government Component continued to strive to align its operations to the strategic goals that contribute to the national government outcomes and objectives as outlined in the National Development Plan. A gradual increase in revenue was experienced post relaxation of the COVID 19 restrictions, which positively enabled GPW to sustain its operations. The Ministerial Review Panel (MRP) was appointed to investigate circumstances around the ICT system crash. GPW is in the process of implementing the recommendations from the report and these are continuously monitored. • • • • • • • • • 5

6. Executive Summary, cont… Challenges experienced GPW’s catastrophic hardware crash and systems failure that led to loss of critical data on February 2021 and March 2022, left a lasting impact on the Government Component’s ability to produce credible Annual Financial Statements (AFS) and ultimately, the timeous tabling of the Annual Report to Parliament. • The knock-on effect of this loss of financial information, will remain with GPW over the foreseeable future, but management has developed focused mitigating to address challenges relating to risks of systems • In order to address above challenges, GPW management has been engaging critical stakeholders such as the National Treasury, Office of the Accountant General (OAG) and Auditor General of South Africa (AGSA) to present specific challenges caused by the system failure, including plans to address them. • 6

7. PART A :Annual Performance PART A :Annual Performance 2021/22 2021/22 7

8. 3. Summary of GPW’s Annual Performance Targets: APP 2021-22 A breakdown of the 18 targets for the 2021-22 GPW annual performance targets per branch is as follows: The office of the CEO had three (3) targets planned for the year and all targets were achieved. Branch: Operations and Production had five (5) planned targets for the financial year and all targets were achieved. • • Branch: Strategic management had four (4) targets planned for the financial year and only three (3) were • achieved, the target that was not achieved is the “Implementation of the reviewed security model for GPW”. Branch: Financial Services achieved one (1) target out of the four (4) targets that were planned for the • financial year. The targets not achieved relate to “obtaining a clean audit opinion for the year 2020/21,’ the attainment of the 10% net profit margin and AFS by 31 May and 3 IYM report 30 days after each quarter Branch: Human Resource achieved two (2) of its planned targets. • 8

9. Summary of 2021/22 overall performance, cont.. Government Printing Works had a total of 18 targets planned for the 2021/22 financial year. Fourteen (13) targets were achieved, representing overall achievement of 72%, and 5 were not achieved. The summary is as follows: GPW ANNUAL PERFORMANCE: 2021/22 Total planned targets Achieved Not Achieved 18 13 5 9

10. Annual Annual Performance Performance 2021/22 progress per Branch progress per Branch 2021/22 10

11. 4. Annual 4. Annual Performance 2021/22 progress per Performance 2021/22 progress per Branch Branch 4.1. Branch: Office of the CEO Outcome Planned Annual Target 2021/2022 Actual Achievement Deviation from plan target to actual achievement 2021/2022 Reason for Deviation 2021/2022 INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) Secured and protected ICT environment 100% security vulnerabilities mitigated as detected by security assessment 100% Microsoft patches released, applicable to GPW environment N/A N/A 98,07% system availability Overachieved by 2.57% Efforts were put to maintain servers, which contributes positively towards the server uptime ICT server’s uptime availability maintained 95.5% servers’ availability INTERNAL AUDIT Independent and objective assurance and consulting service provided 90% of approved annual internal audit plan implemented 94% of approved annual internal audit plan implemented Overachieved by 4% N/A 11

12. 4.2. Branch: Operations and Production Outcome Planned Annual Target 2021/2022 Actual Achievement 2021/2022 Deviation from plan target to actual achievement 2021/2022 Reason for Deviation Security printed material produced 100% of Identity Documents/ cards delivered that conform to client’s specification 100% of 2 334 522 Identity Documents/ cards delivered that conform to client specifications N/A N/A Security printed material produced 100% of Travel Documents delivered that conform to client’s specification 100% of 553 132 Travel Documents delivered that conform to client specifications N/A N/A Security printed material produced 100% Examination Papers of delivered that conform to client’s specification 100% of 17 150 015 Examination Papers delivered that conform to client specifications N/A N/A Government Information coordination and distributed 100% of government gazettes published that conform to client’s specifications 100% of 2 763 Government Gazettes published that conform to client specifications. N/A N/A Security printed material produced 99% of High Security Certificates delivered that conform to client specifications 100% of 11 881 934 High Security Certificates delivered N/A N/A 12

13. 4.3. Branch: Strategic Management Deviation from plan target to actual achievement 2021/2022 Reason for Deviation Outcome Planned Annual Target 2021/2022 Actual Achievement 2021/2022 Marketing and Stakeholder Relations N/A N/A GPW integrated marketing strategy implemented Integrated marketing and communication strategy reviewed, and implementation plan developed Integrated marketing and communication strategy reviewed, and implementation plan developed Overachieved by 3 SADC Countries GPW integrated marketing strategy implemented Follow-up engagements conducted with 8 potential customers in the SADC region Follow-up engagements conducted with 11 potential customers in the SADC region Strategic Support N/A N/A Resilient, agile and sustainable business in the event of disaster 100% implementation of business continuity management identified outputs Business continuity risk assessments were conducted for all branches. Terms of Reference were developed for the Crises Management as well as the BCM Teams. Security Management The process to appoint the service provider was not concluded at quarter 4 Assets, people and information protected and secured Implementation of the reviewed security model for GPW As a result of BAC not approving the appointment of service provider for ISO18788 Security Operations Management System 13

14. 4.4. Branch: Financial Services Outcome Planned Annual Target 2021/2022 Actual Achievement 2021/2022 Deviation from plan target to actual achievement 2021/2022 N/A Reason for Deviation Quality financial and supply chain management services compliant with legislation policy provided Quality financial and supply chain management services compliant with legislation policy provided Quality financial and supply chain management services compliant with legislation policy provided Unqualified audit opinion for 2020/2021 Target not Achieved Non availability of data due to system crash 3 positive working capital ratio maintained 10% Net profit margin achieved 5.27 positive working capital target achieved Overachieved by 2.27 N/A Target not achieved N/A The 10% profit margin could not be reached due to some transactions not the financial system( i.e. depreciation and cost of sales) including surrender Provision Lack of reliable information due to data loss has contributed to the delays in submitting the AFS. Quality financial and supply chain management services compliant with legislation policy provided AFS by 31 May and 3 IYM report 30 days after each quarter Target not achieved N/A 14

15. PART B: GPW Financial PART B: GPW Financial Statements Statements 2021/22 2021/22 15

16. 5. Annual Financial Statements The AFS for 2020/21 were submitted to the AGSA on the 31stMay 2021, one year after its statutory submission date, due to the data losses experienced by GPW on the 04thFebruary 2021 • The audit report was signed off on the 20thSeptember 2022. The Annual Report for the same period was prepared by GPW management and tabled by the 30thSeptember 2022. • GPW received a disclaimer audit opinion for the 2020/21 AFS due to the data loss which eroded the general ledger. The balances in the AFS were not supported by the general ledger which resulted in limitation of scope. • GPW management put all its efforts in recapturing the data lost covering the period from November 2019 to February 2021. Despite all these effort, the recaptured data was again lost when the database crashed on the 25thMarch 2022, and wiped out the financial data and the supporting schedules. • The data loss adversely impacted the opening balances from the 1stApril 2020. This negatively affected the compilation of credible financial statements for the 2020/21 financial year, and the knock-on effect will be experienced by GPW in the next financial years. Consultation with relevant stakeholders such as National Treasury, OAG and AGSA serves to address this challenge, to support the entity to find solutions that will turn this situation around to the benefit of GPW. • GPW management have developed plans to address identified challenges related to the system failures and data losses in the short, medium and long term, in order to improve operations and gradually reverse the adverse audit opinions. • 16

17. 5.1 Important to note The percentages in this presentation are calculated based on the variance between 2020/21 and 2021/22. The AFS items highlighted in red were the basis of the disclaimer opinion in the 2020/21 audit. Reasons for variances above 6% are provided in the slides that follow. The figures used on the analysis of the Financial Statements are as per the adjusted AFS based on the adjustments allowed by AGSA. 17

18. 5.2. Statement of Financial Position 2021-2022 2020-2021 Variance AFS caption Variance % Reasons R’000 R’000 R’000 Reversal of impairment losses and depreciation based on useful lives Property, plant and equipment 1 378 396 1 387 051 -8 655 -1% Intangible assets 21 772 24 596 -2 824 -11% The eGazette system was affected by the system failure and is being re-automated. Non-current assets 1 400 168 1 411 647 -11 479 -0,81%

19. Statement of Financial Position, cont… 2020-2021 2021-2022 Variance AFS caption Variance % Reasons R’000 R’000 R’000 The decrease can mainly be attributed to the improvement in the creditor payment Payables from exchange transactions 175 895 199 622 -23 727 -11,89% The provision for the surrender of surplus in 2022 to National Treasury was recognized (R499 million) Provisions 509 324 4347 504 977 11616,68% Operating lease liability 201 201 0 0,00% No movement. Current liabilities 685 420 204 170 481 250 235,71% Decrease in operating lease agreements Lease liability 230 354 -124 -35% Non-current liabilities 230 354 - 124 -35% Total Liabilities 685 650 204 524 481 126 235%

20. Statement of Financial Position, cont… 2020-2021 2021-2022 Variance AFS caption Variance % Reasons R’000 R’000 R’000 Capital fund 2 539 926 2 539 926 - 0% No movement. The decrease can be attributed to the net loss in 2022 Accumulated surplus 1 279 272 1 633 665 -354 393 -22% Total Net Assets 3 819 198 4 173 591 - 354 393 -8%

21. 5.3 Statement of Financial Performance 2021-2022 Variance 2020-2021 AFS caption Variance % Reasons R’000 R’000 R’000 GPW adjusted its budgeted revenue for the 2020/21 financial year from R1.5 billion per the original budget to R745 million per the adjusted/ final budget in anticipation of the impact of COVID-19 on the operations of the organisation. The year under review was without such adjustments 1 159 141 816 648 342 493 41,94% Revenue As a result of the legacy open orders from 2019 to 2021, which had to be closed during the current financial year, a credit of R 216 million was realised to Cost of sales, which resulted in a lower than expected cost of sales. Cost of sales 675 591 697 549 -21 958 -3% Gross surplus 483 550 119 099 364 451 306,01%

22. Statement of Financial Performance, cont.. 2021-2022 Variance 2020-2021 AFS caption Variance % Reasons R’000 R’000 R’000 Other income 48 085 47 363 722 1,52% The increase is based on an operational year with limited restrictions 386 130 273 880 112 250 41% Expenses Operating surplus 145 505 107 418 38 087 35% Surrender of surplus 499 900 National Treasury surrender The variance is based on the net surplus declared in the year under review. Deficit/ surplus - 354 395 -107 418 -246 977 229,92%

23. 5.4. Budget vs Actual 2021-2022 Budget Actual AFS caption Variance Reasons R’000 R’000 Due to the second national Covid-19 lockdown, between July 2021 and September 2021, GPW was not functioning optimally, which resulted in a decrease in revenue generation. Revenue 1 495 760 1 207 226 288 534 Cost of sales is in direct relation to revenue generation, hence, a decrease in revenue will cause a decrease in Cost of sales. The allocated budget was not utilised in personnel costs, material usage, operational expenditure and depreciation. Cost of Sales 913 811 675 591 238 220 Limited spending on travel and subsistence, training and courier expenses led to a cost-saving when compared to budgeted expenses. This was a direct result of Covid-19 restrictions. Even though GPW is in the process of filling open positions, not all open positions have been filled during the 2022 financial year, which led to a reduced spend on personnel costs. General, Admin Expenses and employee cost 411 703 385 781 25 922 Due to Covid-19 and the international lockdown of borders, GPW halted purchases of machinery from abroad and other capital expenditure. GPW also amended their asset register by expensing items valued at R 7 000 and less. This affected the calculation of the amount spent on additions to minor assets. Capital Expenditure 541 500 47 047 494 453

24. PART C: Audit matters PART C: Audit matters 24

25. 6. Status of resolution of Audit Findings Internal Audit performs a follow-up assessment on all audit issues identified in completed internal audit reports, as well as AG management report. This is accomplished by performing appropriate verification (such as testing/discussion/evaluation) to determine if management actions provided in response to audit recommendations have been properly implemented. Once IA is satisfied that the audit findings have been sufficiently addressed and the route cause resolved, the issue is considered closed. We have noted a volume of findings that are in progress of being resolved by management in various branches. For the financial year 2021/22 = 94 findings were raised by AG in July 2023 – not tested (follow up review) A summary of progress made follows: 25

26. Status of resolution of Audit Findings, cont.. Audit Area Total Resolved Not Resolved Finance 212 70% 30% ICT 58 0% 100% Supply Chain 26 92% 08% Risk Management 12 75% 25% Strategic Management - AOPO 5 80% 20% Business Development 29 20% 80% Security Services 6 17% 83% Manufacturing & Engineering 5 20% 80% Human Resources 5 40% 60% OHS 2 0% 100% TOTAL 360 41% 59% 26

27. PART D: Risk Management PART D: Risk Management 27

28. 7. Progress: Strategic Risk Register Risk descriptions RR Mitigation plans 1. Failure to recover from business disruptions 1. Implementation of the following: Infrastructure Refresh: SAN & Backup Solution Infrastructure Refresh: SITE 1 and SITE 2. Network Infrastructure Refresh for Bosman, Visagie, CSIR, Masada, Limpopo, East London, Northwest, Zandfontein. Email cyber-resilience solution with capabilities for email security, web security, back up and archiving solution Firewall renewal and upgrade Enterprise Architecture (EA) and Business Process Management (BPM) • • • • • • Extreme 2. Monthly back up and restore tests conducted Multiple layers of back up implemented disk to disk (Apollo storage) and Disk to Tape (Veeam Backup software) Backup restore tests and backup of virtual machines in production Ongoing monitoring of scheduled backups in order to remediate warnings and failure • • • 28

29. Progress: Strategic Risk Register, cont… Risk descriptions RR Mitigation plans 2. Leakages and unauthorized issuance of security documents 1. Implementation of a security and fraud prevention plan 2. Resolutions of the reported cases of fraud and corruption High 3. Consequence management to deal with misconduct cases 3. Loss of production time 1. Implementation of the time and attendance management system 2. Implementation of Standard Operating Procedures, quality and quantity management High 3. Waste management and preventative maintenance 29

30. Progress: Strategic Risk Register, cont… Risk descriptions RR Mitigation plans 4. Failure to secure paper for the production of secure printed material 1. Establish strategic partnerships with suppliers Within Risk Tolerance 2. Conduct research into development of a polycarbonate plant 5. Cyber security attacks 1. 2. Strengthen ICT security (firewalls) Continuous backup, testing and restoration, as per approved schedule. Patch management performed monthly. The signed Business Agreement and SLA between GPW and SITA addresses disaster recovery support i.e whitespace proposal received by GPW to assist with remote back up. Fill posts within ICT security in accordance with the new structure 3. 4. Moderate 5. 30

31. Progress: Strategic Risk Register, cont… Risk descriptions RR Mitigation plans 6. Vendors discontinuing production of equipment 1. Investment in research and development capacity in line with the organizational structure Within Risk Tolerance 7. System outages 1. Implementation of the ICT Strategy and mitigations linked to risk no.1 IT Steering Committee established to guide ICT operations Cloud platform used to compensate for lack of compute power (ICT server hardware) within the current datacentre environment. 2. 3. Extreme 31

32. Progress: Strategic Risk Register, cont… Risk descriptions Risk descriptions RR RR Mitigation plans Mitigation plans 8. Loss of Revenue Monitoring of back orders Monthly monitoring of raw material prices effected through the AX system Resolution of complaints registered during the customer engagement sessions and the provision of Service Delivery Improvement Reports Ensure progress towards promulgation of the Security Printers Bill Implement footprint expansion plan locally and into SADC and other African countries • • • • • High 32

33. Progress: Strategic Risk Register, cont… Risk descriptions RR Mitigation plans 9. Inability to attract, develop and retain critical skills 1. Implement the revised recruitment plan and fill critical posts 2. Development of the Change Management Strategy and Plan to harness and ensure culture change 3. Training of officials and empowerment with requisite critical skills 4. Development and implementation of reward and recognition measures High 33

34. Progress on Strategic Risk Register cont. Risk descriptions Risk descriptions RR RR Mitigation plans Mitigation plans 10. Reputational damage to the GPW brand 1. Re-automation of the e-Gazette and tender system 2. Implementation of the Back to Basic Committee resolutions 3. Development and implementation of ISO 9001 standards 4. Implementation of the Audit Action Plan and Risk Management Plan 5. Development of the Change Management Strategy and Plan to harness and ensure culture change High 6. Conduct fraud investigation and ethics management 34

35. PART E: PART E: Status on implementation of Ministerial Review Panel Recommendations 35

36. 8. Status on implementation of MRP Recommendations The incident of the 4thof February 2021 The server supporting key functions at the Government Printing Works (GPW) crashed and resulted in the loss of critical data. Ministerial Review Panel (MRP) was appointed to investigate the incident in 2021 In their investigation, the MRP focused on Information and Communication Technologies (ICT), Human resources, Finance, Operations and Production and Security functional areas. Report finalised and presented to the Portfolio Committee on Home Affairs on 05th July 2022. • • • • • Government Printing Works (GPW) Management received the report in September 2022. • Immediately, GPW management developed actions plans in order to systematically and adequately • respond to MRP recommendations. 36

37. Status on implementation of MRP Recommendations, cont… Historical organizational instability, has had an effect on organizational culture. Lack of handover between senior managers leaving the organization had an impact on business continuity. GPW has an inherent challenge in terms of institutional capacity due to structural gaps and vacancies. The approved organizational structure is being implemented since 01 April 2022 to address capacity gaps. • • • Implementation level: Progress on certain recommendations is dependent on other departments or entities, outside GPW (i.e. Public Service Commission, National Treasury). Investigations, although time frames are allocated, depends on complexity of matters being investigated. • • 37

38. Status on implementation of MRP Recommendations, cont… Actions plans were developed based on the SMART principle. Project office is established to facilitate the implementation process. Implementation model has been developed to guide the implementation of recommendations. Government Technical Advisory Centre (GTAC) has been appointed and commenced with technical assistance. • Work-streams are established and meet bi-weekly. Work-streams serve as implementation committees or platforms of MRP recommendations. They also assist in monitoring and evaluation of progress made. • • • • Investigations and progress made to date : – Forensic investigating team appointed and GPW awaits the consolidated report from the investigating team. – On cases referred to Public Service commission, a response has been received and they have closed the matter. – DPSA provided a team of labour relations specialists to support GPW on labour relations cases. The team is supporting GPW with all cases referred to them. • 38

39. Status on implementation of MRP Recommendations, cont… Unit Office of the Chief Financial Officer Total Completed In progress Percentage 21 11 10 52% 18 11 7 Security 61% 17 8 9 Human Resources Office of the Chief Executive Officer Office of the Chief Information Officer 47% 32 26 6 81% 61 30 31 49% 4 1 3 Manufacturing and Engineering 25% 5 1 4 Operations Management 20% 1 0 1 Internal Audit 0% 5 5 0 Facilities Management 100% 2 0 2 Legal 0% 39

40. Status on implementation of MRP Recommendations, cont… MRP Recommendations 0 74 93 Completed In Progress Outstanding GPW had a total of 167 Recommendations To date, 93 Recommendations have been completed (56%) To date, 74 Recommendations are currently in progress (44%) • • • 40

41. Status on implementation of MRP Recommendations, cont… Unit Office of the Chief Financial Officer In progress 0 - 6 Months 7 – 12 Months ‘>12 Month 10 5 2 3 7 2 3 2 Security 9 1 5 3 Human Resources Office of the Chief Executive Officer Office of the Chief Information Officer 6 6 0 0 31 11 15 5 3 1 2 0 Manufacturing and Engineering 4 1 1 2 Operations Management 1 0 0 1 Internal Audit 2 1 0 1 Legal 41

42. 9. Consequence management Disciplinary action taken against officials working in in the ICT business unit A total of nine officials, comprising of 8 Deputy Directors and a Director were issued with letters of intended disciplinary action. Based on their representations, 6 were reprimanded, 1 got a written warning and one official was put on precautionary suspension. A team of forensic investigators was appointed to investigate further system failures and data losses An investigation has been completed and the report submitted for implementation. Disciplinary action taken against acts of misconduct within GPW and sanctions implemented accordingly. 42

43. 10. Conclusion GPW will continue to: – put all efforts in ensuring stabilization and sustenance of its ICT operations to mitigate the risk of further system failures and data losses – focus of current and emerging risks and implement the risk appetite and tolerance frameworks – resolve all audit findings, strengthen internal controls to attain good governance and strive to attain a clean audit outcome – optimally utilize expertise from external service providers which it has contracted across all functional areas, for the betterment of all its operations – implement financial standards to improve the quality of its financial statements GPW management commits to ensuring compliance with statutory dates for submission of reports and plans to Parliament, based on the guidance and support from all relevant stakeholders. GPW enlists the support from oversight structures such as the Ministry of Home Affairs and the Director General, AGSA, National Treasury and Portfolio Committee on Home Affairs, in its transformation initiatives in order to achieve overall success • • •

44. 11. Tabling of the Annual Report • The GPW’s Annual Report for the financial year 2021/22 is hereby tabled to the Portfolio Committee on Home Affairs for consideration.

45. THANK YOU HA KHENSA SIYABULELA SIYABONGA RE A LEBOGA DANKIE SIYATHOKOZA