Govt mum on Telkom tender process

Bonnie Tubbs
By Bonnie Tubbs, ITWeb telecoms editor.
Johannesburg, 23 Feb 2015
Government has yet to answer questions around its sudden and resolute appointment of Telkom as SA's lead broadband company.
Government has yet to answer questions around its sudden and resolute appointment of Telkom as SA's lead broadband company.

There is no excuse government can use to justify the lack of a tender process in its appointment of Telkom as lead broadband agency - a move that has been slated as uncompetitive and likely to further entrench the incumbent's monopoly - according to those in the know.

President Jacob Zuma's State of the Nation Address (SONA) announcement that SA's fixed-line incumbent will lead broadband deployment (at national, provincial and local levels) continues to raise alarms and questions. However, government remains mum as to what this means for the industry - and what happened to the tender process that should have taken place ahead of this decision.

Western Cape premier Helen Zille on Friday slammed government's decision to make Telkom lead broadband entity despite the apparent lack of a tender process, saying this amounted to corruption.

"It is telling that Telkom tendered for the Western Cape broadband contract, and was beaten in open competition by several other providers. By shielding Telkom from open competition, president Zuma has removed all incentives to produce an effective and affordable service."

According to Zuma, Telkom's task includes the rollout of a broadband project that will see eight district municipalities across all provinces - apart from Gauteng and the Western Cape - being kitted with broadband networks.

Deputy minister of telecoms and postal services, Hlengiwe Mkhize, said last week that Cabinet had taken a "firm decision" to designate Telkom to this role, with the end result being a new national broadband company.

Absent tender

Although government has indicated it is resolute in its decision to appoint Telkom to this mammoth task, it has failed to offer any details or explanation around the obligatory tender process that a project of this scale would require.

Treasury communications director Phumza Macanda quickly responded to ITWeb's query around this last week, saying the issue did not concern National Treasury and suggesting it be directed to "the department to which Telkom reports".

However, the Department of Telecommunications and Postal Services (DTPS) has failed to respond to any of ITWeb's e-mails, SMSes or voice mails. This morning, DTPS spokesperson Siya Qoza offered assurance that a response would be forthcoming "sometime today".

Solidarity spokesman Marius Croucamp says the fact that no tender was allocated ahead of Telkom's appointment "raises alarms".

No loophole

IDC analyst Mark Walker explains any expenditure to be undertaken by government, over a certain threshold, must go through a government tender process. "We are talking broadband for the entire country here, and that is a heck of a lot of money. For sure there would have had to have been a tender process."

Johannesburg's broadband network project alone will cost R3.4 billion, and involves just 900km of fibre.

Apart from the value aspect, Walker says, is the matter of shareholders. Although government has a 51% stake in Telkom (40% directly and 11% through the Public Investment Corporation), the company's other shareholders would want to see a commercial return on their investment, he notes.

"What about the other 49% of shareholders, who are expecting not only returns, but transparent business. This is where I believe the Democratic Alliance (DA) in the Western Cape has the right idea, having gone to tender for its broadband rollout."

The third aspect Walker points to, which again does not excuse the lack of a tender process, is that of effectiveness of delivery. "The fact of the matter is broadband is an essential catalyst for economic development and if Telkom is best equipped in terms of execution ability then that is fair enough, but a tender process in that case would have been the fair way to eliminate other players."

He says, despite Telkom's entrenched network and workforce, other players would - given a tender - have been able to partner to provide a single entity that could deliver the same. "It would not necessarily have been a knock-out."

DA shadow minister of telecoms and postal services, Marian Shinn, says, while Telkom does have more network - albeit ageing copper - than any other network provider, it is unacceptable that government should select one JSE-listed company to lead the process.

"They think they own it and can direct it. Telkom is JSE-listed and its board is answerable to all its shareholders. They should sell their shares in it and let it compete for market [share] on an open tender basis."