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ICT pundits weigh-in as govt prepares state-run ICT firm

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 16 Oct 2023
The merger of Sentech and Broadband Infraco will create government’s State Digital Infrastructure Company.
The merger of Sentech and Broadband Infraco will create government’s State Digital Infrastructure Company.

The jury is still out on whether South Africa needs another state-owned entity, in the form of the State Digital Infrastructure Company, with some analysts saying it “will not add value to the ICT market”.

SA 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.

The creation of the State Digital Infrastructure Company falls within government’s mandate to consolidate state-owned firms that operate within similar environments.

As entities that operate in the broadband and communications space, it was decided Broadband Infraco (BBI) and Sentech would merge to form the digital infrastructure firm.

However, given government’s troubled track record with state-run entities, questions have once again crept up as to whether the country needs a company of this magnitude within the ICT sector.

Clear mandate

Professor RabelaniDagada, from the Institute for Intelligent Systems at the University ofJohannesburg, says post-1994 universal access and access to telecommunications is a constitutional right in South Africa.

Additionally, government sees telecoms as an important sector to propel socio-economic transformation.

However, this does not mean government should have its own state-owned infrastructure company, Dagada comments. “Government should rather create a conducive environment that would enable entrepreneurs and the private sector to provide telecoms services in South Africa.”

Whether government needs a state-owned digital infrastructure company will depend on its mandate and scope of operation, notes Mark Walker, associate vice-president for Sub-Saharan Africa at IDC.

According to Walker, strategically, its mission should be to promote, facilitate and accelerate access to digital infrastructure for citizens.

“[This is] an organisation that identifies digital infrastructure needs, prioritises these, navigates and eases appropriate regulation to fast-track provision of digital infrastructure, and finally, provides and manages (possibly via commercial providers) key infrastructure – especially government-related public infrastructure.”

Long in the making

Establishing the entity is something government has been mulling for some time, 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 Department of Communications and Digital Technologies (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 that 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.

Last December, former communications minister Khumbudzo Ntshavheni said government’s plans for the merger had reached an advanced stage, earmarking April 2023 as the date on which the company will 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 a parliamentary reply to queries on the consolidation of entities under the DCDT, Gungubele revealed the rationalisation project had been undertaken by the department, with the initial phase involving BBI and Sentech.

“This will entail the transfer of the 74% shareholding in BBI by the State to Sentech, while the 26% will remain with the Industrial Development Corporation. Sentech has since concluded and submitted a due diligence report and turnaround plan to the department, which together with the sale share agreement, are still under consideration by the department.”

Speaking on the sidelines of the State IT Agency (SITA) GovTech 2023 conference, the incumbent minister said an update on the merger would be provided when it becomes available.

SITA hosted its GovTech conference last month, attended by industry players from the political and private spheres, as well as SMMEs.

In a post-GovTech statement, Leon Rolls, president of the Progressive Blacks in ICT lobby group, implored the communications minister to postpone the merger for a few more years.

Said Rolls: “We are of the view that the merger between Sentech and Broadband Infraco must be put on hold for the next five years, to allow for all three entities [BBI, Sentech and SITA] to find each other and build common ground. This includes SABC, as we are moving into the world of streaming and massive content sharing via the internet.

“This GovTech made us realise a merger now will produce a premature baby with many complications that will destroy recent progress.”

Ill-fated future?

While the intended merger of BBI and Sentech has been on the cards for some time now, Walker says government has been too preoccupied with political objectives, rather than the social impact this could bring.

Furthermore, it appears the complexity associated with such an organisation is vastly underestimated – not only from a financial and operations performance perspective, but with the added intricacy of political intrigue that invariably is brought to bear, he explained.

“The management, executive, technical and operational skills in these organisations need to be significantly improved for any chance of success to be realised – while there are pockets of technical and operational excellence, often times these are overshadowed by poor management and reckless executive interference.”

Dagada notes that in a country with an efficient government, he would encourage the establishment of a state-owned digital infrastructure company.

Unfortunately, the South African government has failed dismally to run infrastructure-related companies, he highlights. “Based on our history since 1994 and evidence before us, the state-owned digital infrastructure company will not succeed, and government should abandon this idea.

“Under normal circumstances, the law enforcement agencies (military, police, national intelligence agency and secret service) can use this infrastructure and ensure it is highly-secured. But government will not be able to compete with the private sector to get highly-skilled technicians and engineers to run this network.

“Besides, due to corruption and inefficiency in the public sector, this infrastructure [company] will suffer the same fate as Eskom, Transnet and others.”

As for a way forward, Dagada believes government should sell, lease, or appoint a private sector company to manage the Sentech and BBI infrastructure.

“Alternatively, government can manage this infrastructure through a public-private partnership.

“But still, this network should not be used to compete with the private sector network operators, but rather to provide a highly-secured network to the law enforcement agencies.”

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