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ANC pushes through R1.2bn broadband buyout

Martin Czernowalow
By Martin Czernowalow, Contributor.
Johannesburg, 30 Jan 2015
The COJ can now buy itself out of the Johannesburg Broadband Network Project deal, at a cost of R1.2 billion.
The COJ can now buy itself out of the Johannesburg Broadband Network Project deal, at a cost of R1.2 billion.

Tempers flared at the City of Joburg (COJ) council meeting last night, with the ANC pushing through a motion for the city to buy itself out of a Johannesburg Broadband Network Project contract, as opposition parties stormed out of the council chambers.

The adoption of the motion will see the city buy itself out of the Johannesburg Broadband Network Project deal, at a cost of R1.2 billion, and also paves the way for the establishment of a municipal-owned entity (MOE) that will take over the running and management of the network.

A source close to the issue says the Democratic Alliance (DA) and other minority opposition parties left the council chambers "in protest against the ANC-led mayoral committee's insistence to push through the establishment of the municipality-owned entity to manage the Joburg Broadband Network".

"The DA's position is that the city should cut its losses by selling the broadband infrastructure to a private telecoms operator," says the source. The official opposition has been vehemently opposed to the insourcing of the network, ever since the motion was originally placed before the council, in August last year.

The party's main objection to the move centres on the cost of withdrawing from the deal and the lack of skills and capacity within the COJ to run the project via an MOE.

Following last night's walkout by opposition parties, the ANC still had enough councillors in the chamber to form the quorum and to continue the meeting. "The ANC councillors approved all the recommendations pertaining to the Joburg Broadband Network," says the source.

Earlier hopes that the mayoral committee would face opposition from within the ranks of the ANC - as it is understood that some ANC councillors shared the concerns voiced by opposition factions - ultimately did not materialise.

Service to the city

The adoption of the recommendations pertaining to the Johannesburg Broadband Network Project clears the way for the establishment of the MOE. This will most likely be done in accordance to the Local Government: Municipal Systems Act (Act 32 of 2000), which would allow the COJ to establish or participate and/or acquire or hold an interest in a private company.

A mayoral committee report states the MOE will receive a mandate to provide various services to the city, including the provision of spare capacity on the network to the Independent Communications Authority of SA, at cost-related pricing.

It will also take over the Johannesburg Broadband Network's assets and contracts on the network, and manage the delivery of the city's smart city objectives. Furthermore, the MOE will be responsible for maintaining a city-wide database of telecoms assets and manage the city's ICT operations.

The R3.4 billion Johannesburg Broadband Network Project deal - a contract between the COJ and CitiConnect Communications - has been in dispute since last year and the proposal to terminate the deal was driven by the mayoral committee, led by executive mayor Parks Tau.

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". Despite being on the council's agenda numerous times since August, the motion had been deferred several times.

The dispute centred 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 project in 2011, for a period of 15 years. After this time, the project would be taken over by the city.

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.

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 mayoral committee report.

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