Sentech gets on with business

Government's problem child Sentech is stabilising its financial position and will spend over R1.3 billion to deliver on key projects in the next three years.

Sentech has been in financial dire straits for several years, and last February a task team was appointed to investigate the company's precarious situation. The probe found Sentech was in a “weak” and financially thorny position.

The state-owned entity has also been through a series of top-level ructions that destroyed the board that was installed last April. The board was put in place to address the issues facing Sentech, and to turn it around.

However, Sentech is making progress and presented a three-year strategic plan to Parliament's portfolio committee this month. Last year, Sentech was unable to plan further than 12 months ahead, because of a lack of top-level leadership.

CEO Setumo Mohapi presented the entity's three-year plan, which covers the financial years between 2011 and 2014. Its priorities include rolling out a digital television network as SA migrates from analogue broadcast with the aim of covering 92% of the country's population by the end of 2013. Analogue will be turned off at the end of 2013.

Sentech will also start rolling out its long-awaited national wireless broadband network by the third quarter of the year. The network has been on the cards for more than four years, after Sentech finally received funding in 2008, following a 20-month wait.

Among its operational priorities, Sentech cites stabilising the company, improving financial stability, and boosting its empowerment plan. It also wants to increase customer satisfaction and implement a sustainable human capital and retention plan.

Mohapi's presentation indicates Sentech will adopt a new business and organisational model that will support implementation of its strategy and achievement of its goals.

Sentech's budgeted revenue for this financial year is R816 million and it expects to make a R72 million profit.

The entity will spend a total of R547.5 million on rolling out the infrastructure needed to move to digital broadcast over the next three years. It will spend R375 million on operating the network in the same time frame.

The project is expected to create an additional 20 000 jobs and provide more spectrum for telecoms operators. In addition, the entity will spend R112.4 million on maintaining its broadcasting infrastructure over the next three years. It says this will create direct or indirect jobs.

The state-owned entity will also roll out a national wireless broadband network, and will invest a total of R814 million in infrastructure. The entity says the project aims to improve broadband penetration to match SA's comparative counterparts such as India, Brazil and Chile.

According to the strategy, the network is needed because there isn't enough broadband available in SA, which Sentech says is because of “market failure”.

Sentech will focus the project on schools, which is where it says the need is greatest. In the first year, it will focus on KwaZulu-Natal and aims to cover 1 254 schools. The next year, Limpopo will be covered with 7 352 schools, followed by 15 023 schools in Mpumalanga and the Eastern Cape in the 2013/14 financial year.

Sentech's history has been characterised by poor financial management, failed projects and top-level instability. Last February, Sentech was not allocated any funding for its national broadband network over the next few years because it had not spent what had previously been earmarked.

At the time of the budget speech, a treasury official labelled the state-owned entity as government's “problem child”. Sentech had been tasked with rolling out a national wholesale broadband network by government, to take broadband to the poor and expand into rural areas.

However, in the last financial year, the R500 million it was allocated in 2007/8 for the project was not spent and was sitting in the parastatal's bank account.

In the 2009/10 year to March, Sentech received a qualified audit report because auditor KPMG was unable to determine that the company had only wasted R31 million, and incurred irregular expenditure of R14 million. KPMG was appointed last April.

However, by the end of September, Sentech had averted a cash crunch and had R230 million in the bank. Its operating margin improved from 7.7% to 27%, while its net profit margin jumped from 13% to 32%. Sentech had expected to be R100 million in the red by the beginning of the new financial year, which starts tomorrow.

Its annual report for 2009/10 indicated the organisation faced high costs, marginal growth and no vision. Sentech has battled with executive-level instability.

Last April, a new board was appointed to address the issues raised by the task team and turn the entity around. Former COO Beverly Ngwenya replaced Sebiletso Mokone-Matabane at the helm of the company.

Mokone-Matabane quit the company last March, before her contract was due to expire in September last year. Then Ngwenya resigned last July in the face of disciplinary action.

CFO Mohammed Cassim was also suspended pending a disciplinary process in the middle of last year. This left chairman Quaresh Patel to head up operations. Last November, the entity finally appointed a new CEO, Setumo Mohapi, and Logan Naidoo was appointed as chairman last month after Patel stepped down in November.