Broadband Infraco, Sentech merger still on the cards

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 02 Apr 2024
The State Digital Infrastructure Company is still on the cards for government.
The State Digital Infrastructure Company is still on the cards for government.

The “rationalisation” of wholesale infrastructure provider Broadband Infraco (BBI) and signal distributor Sentech is at an “advanced stage”, says the communications ministry.

However, it is still dependent on the revision of BBI’s turnaround plan to establish funding requirements for the long-intended merger.

The ministry provided this insight in a Parliamentary response to a question about the progress, as at 1 January, from Natasha Mazzone, Democratic Alliance MP and shadow minister of communications and digital technologies.

Sentech will take charge of BBI by means of an acquisition, resulting in the formation of a State Digital Infrastructure Company. The entity’s creation falls within government’s mandate to consolidate state-owned companies that operate within similar environments.

The Department of Communications and Digital Technologies (DCDT), which is the ministry behind the proposed merger, provided a progress update to Mazzone, saying: “The necessary acquisition processes were concluded with a sale offer by the Sentech board that was accepted by the BBI board.

“This followed a due diligence inquiry and engagements with relevant authorities, such as ICASA, the Takeover Regulatory Panel, Competition Commission and National Treasury.

“There have been ongoing discussions with the Industrial Development Corporation, which is a 26% shareholder of BBI, on its role post the acquisition.”

South Africa has more than 700 state-owned entities, with the majority badly run, as depicted by the state of Eskom, Transnet and the South African Post Office, to name a few.

Given government’s troubled track record with state-run entities, ICT pundits have questioned whether the country needs a company of this magnitude in the sector.

Despite this, the DCDT put forward plans to establish a digital infrastructure company, backed by the communications ministry’s predecessors, including former ministers Stella Ndabeni-Abrahams and Dr Siyabonga Cwele.

In the 2020 National Budget, it was revealed the DCDT would submit to Cabinet the Bill motivating for the establishment of the state-owned digital infrastructure entity.

Later that year, the department indicated the business case for the merger of Sentech and BBI had been finalised, and was awaiting Cabinet and Parliament processes.

In 2021, it was revealed a new proposal was being considered to facilitate the process of having one state infrastructure company. At the time, the DCDT said a process that would potentially see BBI acquire Sentech was on the table.

In December 2022, former communications minister Khumbudzo Ntshavheni said government’s plans for the merger had reached an advanced stage, with April 2023 provided as the date when the company would be established.

However, Ntshavheni was reshuffled to her current role as minister in the Presidency, making way for Mondli Gungubele as communications and digital technologies minister.

In addition to the revised BBI turnaround plan to establish funding requirements for the acquisition, the department noted other conditions need to be met to conclude this process.

This includes the state, as the sole shareholder of Sentech, providing the entity with funding based on the approved turnaround plan.

“The minister must also approve the sale of 74% of shares of BBI to Sentech by signing the sale of shares agreement submitted by Sentech to the minister with applicable terms and conditions. Suspensive conditions that can be fulfilled or waived must also be determined.

“The BBI memorandum of incorporation must also be amended in line with the sale agreement, as well as Sentech concluding the integration of BBI as its subsidiary.”

In the case of the State IT Agency (SITA), the ministry said it is in the process of developing a roadmap for the review of its business model.

“The details of the review are expected to be submitted to the department by the end of the current financial year. Once complete, the implementation of the new SITA business model and roadmap will commence in the new financial year and continue thereafter. The department would then monitor progress through performance reports submitted by SITA.”