A Solution to Sentech Funding Crisis gets a political push in South Africa

Mergers, Acquisitions and Financial Results

Parliament's communications committee is determined to end the long-standing stalemate between the treasury and state-owned signal carrier Sentech over funding for its broadband wireless strategy.

The committee has demanded that Sentech, treasury and communications department officials report back by May on progress made in dealing with the hurdles which have prevented the treasury from approving funds for the project.

Sentech aims to provide affordable and high-speed telecommunications access for schools, clinics and hospitals in rural areas. Key to the treasury's reservations on this project has been its dissatisfaction with Sentech's business plan, which it says lacks detail.

The communications committee called on the parties to explain the standoff last Friday, after a week in which both Sentech and Communications Minister Ivy Matsepe-Casaburri bemoaned the lack of state funding for the enterprise.

Sentech chief financial officer Siddique Cassim told the committee that the total capital requirement for the broadband wireless strategy was R4,4bn. Of this, the treasury was asked to fund R3,1bn -- in tranches of R912m in the 2007-08 fiscal year, R666m in the next fiscal year and more in subsequent years. However, only R500m has been allocated in the current year, with no commitments for the future .

The R500m was granted on condition that Sentech exit the retail market and focus on wholesale activities; that its business plan was sustainable and that it raise additional funding from the market.

Communications committee chairman Ismail Vadi said it was impossible for a business to operate with such uncertainty over its future funding.

The treasury's head of public finance, Andrew Donaldson, explained that the business plan for the broadband wireless strategy had insufficient detail on whether its services would be used, and whether the initiative would be sustainable.

Donaldson was worried that Sentech was spreading itself too thin. It should concentrate on its core responsibility of signal distribution and the implementation of a "very ambitious" plan to convert from analogue to digital broadcasting by November 2011.

Donaldson said while Sentech was wanting to roll out a broadband wireless network, it had neglected investment in maintaining and renewing broadcasting infrastructure, its core mandate. About R500m derived from tariffs on broadcasters over the past five years had been "depleted" Donaldson said, through Sentech's investment in the loss-making broadband wireless initiative.

Business Day