Broadband Infraco, the state's wholesale entity, has dismissed some staff members implicated in breaches of procurement processes as it seeks to improve its corporate governance.
The entity also put capital projects on hold after a breakdown of internal controls during the last financial year, which led to a qualified audit opinion and R151 million in irregular, fruitless and wasteful expenditure.
Broadband Infraco this month presented its annual report to Parliament and CFO Ramasela Magoele said the agency had taken steps to improve internal controls during the financial year.
Measures included irregular expenditure being identified by management and reported, action taken against employees in line with company policy and the Labour Relations Act, policies and procedures were reviewed, and employees were trained to ensure proper implementation, says Magoele.
According to the annual report, 20 permanent staff were terminated, which included voluntary and involuntary separations. Its employee base increased 7.7% during the year to 168 and key vacancies such as CFO, CTO and chief marketing and sales executive were filed.
Infraco incurred R4 million in irregular expenditure this year, and identified R73.6 million in fruitless and wasteful expenditure from previous financial years.
Breakdown
Magoele says capital expenditure was an area where there were significant breakdowns in the internal control environment last year, which led to the irregular expenditure. As a result, Broadband Infraco put a hold on projects, which were not properly authorised, until corrective measures were implemented, she says.
Last year, R130 million in irregular, fruitless and wasteful expenditure occurred directly as a result of a fibre-optic cable framework agreement for short term-engineering contracts. Broadband Infraco's annual report notes that some employees have been dismissed as a result, although it does not indicate how many.
Total capital expenditure was R115 million, a significant drop from last year's R536 million. Magoele says the lower spend was due to "organisational realignment" to address corporate governance issues, which led to vacant positions and a delay in executing its capital programme.
Auditor KPMG noted that an investigation was launched last year into alleged misconduct resulting from a breach in the tender and procurement policies, as well as a breach in the delegation of authority regarding a number of matters in the human resources department.
The accounting authority commissioned the investigation based on instruction from the Department of Public Enterprises regarding an enquiry received from the Public Protector. In addition, in 2010/11, acting CEO Andrew Shaw commissioned investigations into every tender worth more than R10 million to make sure proper processes had been followed.
Doing better
Broadband Infraco reported improved results for the 2011/12 year, trimming its net loss from R206.9 million to R95.2 million. Revenue gained from R297.6 million to R393.6 million.
For the first time in its history, it generated cash from operations of R52.8 million. It also received an unqualified audit and said internal restructuring to align to market needs and governance was complete.
Chairman Mandla Ngcobo, writing in the fourth annual report, says the year under review saw a "new picture emerge". A number of efforts have been put in place to turn Broadband Infraco around, starting with the appointment of an almost entirely new executive team, he says.
"Broadband Infraco is gearing towards establishing itself as a credible and formidable force in the South African and African telecommunications market. This implies growing the customer base, improving revenue, further expanding the network, and better aligning ourselves to achieve our mandate in under-serviced areas."
CEO Puleng Sajanamane says Broadband Infraco has expanded connections to under-serviced areas by providing 12 675km of fibre, an increase from 6 000km in 2008. Connections had also been established with Swaziland, Namibia, Mozambique and Zimbabwe. Connections ran from both coasts to the rest of the world.
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