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Altron’s multibillion-rand Gauteng broadband deal ends

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 17 Apr 2023

The tumultuous broadband contract between JSE-listed technology services firm Altron and the Gauteng Provincial Government has come to an end.

This emerged today when Altron, which is currently finalising financial results for the year ended 28 February, issued an operational update and trading statement to its shareholders.

The company’s results are expected to be released on the Stock Exchange News Service on or about 15 May.

According to Altron, the extension of the multibillion-rand Gauteng Broadband Network (GBN) contract, for phase two, came to an end on 8 March.

It explains the rollout of the project experienced delays outside of Altron’s control, resulting in fewer sites being deployed than initially scoped for in the original tender awarded.

An assessment was performed over the inventory pertaining to this project, resulting in an impairment of R31 million in business unit Nexus, it adds.

E-government ambitions

Considered Gauteng province’s flagship ICT project, the provincial government began implementing the GBN in 2014, as part of the city region’s modernisation agenda.

The project is in line with the province’s e-government strategy, which aims to ensure the modernisation of government and delivery of services in the digital age.

It also aims to improve linkages and integration among city region governments and their departments.

The provincial government sees high-speed connectivity as a critical foundational infrastructure requirement for success of the province's city region modernisation agenda.

The Department of e-Government was mandated to provide broadband connectivity to 3 000 Gauteng provincial government sites.

Phase one of the project commenced in 2014 and was completed early in 2018, with 1 181 sites connected.

Its implementation has been marred by wasteful expenditure, non-compliance, missed key milestones and disgruntled SMEs crying foul for being side-lined from the lucrative project.

There has also been a growing fallout between the State Information Technology Agency and the department over the management of the project.

The parties were feuding over financial management of the project after ITWeb reported that Altron wanted to discontinue offering broadband services over non-payment.

Amid the stand-off, the Department of e-Government later paid Altron Nexus R142 million for broadband network services after the company threatened to shut down services in 2021.

At the time, the department said it would not pay for new sites, pledging to only cough up for maintenance up until October 2021.

Constitutional Court ruling

In its trading statement, Altron adds that following reports released in January 2023, the auditor-general (AG) identified material uncertainties in the City of Tshwane’s (COT’s) 2022 financial statements relating to going concern, management in accordance with auditing, accounting and reporting principles, and decided to follow a conservative approach and provide R134 million in respect of part of Altron Nexus’s exposure to COT.

It notes this provision is raised for Altron’s accounting purposes and does not constitute any waiver, nor does it mean Altron is abandoning its rights and claim.

On a successful outcome of recovery greater than the carrying amount, the respective provision will be reversed in the relevant financial results.

Despite the raising of this provision, it adds, significant progress has been made on the matter, with the Constitutional Court ruling the contract valid and binding on 19 May 2021, COT embarking on a section 116(3) of the Municipal Finance Management Act process in October 2022, the parties signing an arbitration agreement on 5 April 2023, and the arbitration process having commenced on 12 April 2023 in parallel with the aforesaid section 116(3) process.

The matter relates to a dispute between Thobela Telecoms, in which Altron is a minority shareholder, and City of Tshwane over the city’s allegations that the tender award process was irregular due to internal processes and procedures at the City of Tshwane not being correctly followed.

The project was later put on hold by the City of Tshwane, pending the outcome of the litigation proceedings.

The city subjected the multibillion-rand broadband contract to judicial review after discovering what it says were serious irregularities, which “taint the legality of the deal”.

Tshwane’s administration, then led by the Democratic Alliance, instituted an investigation into the procurement process of the deal after the AG found the contract to be irregular.

The AG’s report determined the value of the contract at R2.73 billion.

Solly Msimanga, who led the administration at the time, contended “the broadband contract and its procurement are riddled with irregularities and non-compliance”.