A showdown is expected this evening between City of Johannesburg (COJ) councillors and the council's mayoral committee over the buyout of the city's multibillion-rand fibre broadband project and the establishment of a municipal-owned entity (MOE) to take over the running of the project.
ITWeb has in its possession a report by the COJ mayoral committee, led by executive mayor Parks Tau, which will be filed as part of a motion for the city to buy itself out of the Johannesburg Broadband Network Project contract, at a cost of R1.2 billion.
The contract - between the COJ and CitiConnect Communications - is in dispute and a proposed motion to terminate the deal is on the agenda for the council meeting later today.
The dispute centres on claims that CitiConnect Communications had created intermediary companies to sell spare capacity on the COJ's network, as well as that it laid fibre for a second network in the city's trenches.
CitiConnect manages an entity called BWired, which was established by the city in partnership with Ericsson South Africa when the broadband project was initiated. Ericsson won the tender for the R3.4 billion project in 2011, for a period of 15 years. After this time, the project would be taken over by the city.
However, a source close to the issue says the mayoral committee is expected to come up against strong opposition to the motion, even from within the ranks of the ANC. It is understood that at the centre of the opposition to the motion is the cost of withdrawing from the deal and the lack of skills and capacity to run the project via an MOE.
The mayoral committee originally tabled the motion in August last year, proposing to terminate the deal, on the basis of "breaches of the build, operate and transfer agreement with Ericsson SA by CitiConnect". But despite being on the council's agenda numerous times since August, the motion has been deferred several times.
"I don't think they [the mayoral committee] will have a very easy time passing this motion. Normally, the ANC can count on its majority to push through motions, but this time ANC and DA councillors are standing together, so I expect that the motion will be voted down," says the source.
Opposition to the proposed establishment of an MOE and buyout of the project has also been noted by DA Gauteng finance committee member Ashor Sarupen, who confirmed previously some ANC councillors are against the move.
Sarupen claims, should the project be bought out by the city, it is likely to stall for the next two to three years, as the metro would first have to find the right skills and create capacity to take over the network. This means long delays can be expected before the project goes live, he adds.
'Bad faith conduct'
Meanwhile, the report compiled by the mayoral committee explains why the contract between the COJ and CitiConnect Communications is in dispute. It says subsequent to the near-completion of the network, the COJ discovered that CitiConnect Communications "had committed numerous acts of repudiation" of its obligations in terms of the contract.
"The most serious of these being the creation of intermediary companies to sell spare capacity on the network and the implementation of a second network, in the COJ's trenches, under the ownership of one of the intermediaries and without the consent or knowledge of the COJ..." the report states.
The document adds CitiConnect Communications undertook to remedy the breaches, but the number and persistence of the breaches and the "bad faith conduct" of the entity undermined the trust and good faith required by the parties to continue the contract.
At this stage, a total of 900km of fibre has been laid, and covers areas such as Orange Farm, Diepsloot, Alexandra and Soweto, which were previously underserviced areas, says the report.
It was initially envisaged the network would become operational on 1 July 2013. "The effect of not starting on 1 July 2013 was that the city had to enter into various contracts with other service providers to ensure its ICT services were not disrupted," says the report.
In support of its proposal to establish an MOE, the mayoral committee has included a feasibility study by independent consultancy Mott MacDonald, which confirms the viability of establishing such an entity.
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