Sentech is not about to go bankrupt, says chairman Quraysh Patel, but the national signal distributor is facing serious financial, management and technology challenges.
He introduced Sentech's annual report to the Parliamentary Portfolio Committee on Communications yesterday afternoon.
Patel said the board, appointed in April, had to get involved in the day-to-day running of the state-owned company, as it could not trust senior management to give it the correct information.
He said the board was “horrified” to learn Sentech had no risk mitigation strategy in place, that it had deviated from its core business of signal transmission into unrelated businesses such as telecommunications, that there had been financial mismanagement, and that its procurement policies were not in place.
Patel also accused the current suspended CFO Mohamed Cassim of “gross negligence” in his management of the company's finances. He said that although Cassim remained an employee, he was not drawing a salary.
“We, as the board, decided we would not continue to pay him and so give him money to defend himself. Although he [Cassim] has written us a letter saying he regards this as a termination of his employment, we do not consider it so,” he said.
Among the allegations levelled by Patel against Cassim is the fact that he did not pay value-added tax to the South African Revenue Service for three years, leaving the company with a tax bill of R150 million.
He also alleged Cassim had allowed VAT monies to be paid out of the ring-fenced R500 million that had been granted to Sentech by the National Treasury for the rollout of a national broadband network to connect schools.
Other irregular items concerned expenditure of R31 million with RentWorks Networks and another R14 million with Screamer, a company that was using Sentech spectrum to resell its own services - a practice that is against the law - Patel claimed.
Moving forward
Patel said Sentech still had more than R190 million in cash to continue its operations, but that it needed further government grants to continue its roll out of digital TV towers and to build a national broadband network.
He said the previous board and management of the company had pursued business strategies that were detrimental to Sentech, and this had also resulted in unusual business practices.
Patel cited the fact that Sentech had sold its satellite services (V-Sat) to some 200 schools. He explained that it was an expensive system to obtain connectivity and that the schools were not offered the e-rate (the law that says schools are entitled to a 50% discount on their connectivity).
“Satellite is very expensive. If we as a country want to connect rural areas, we have to use a terrestrial system.”
Oncoming train?
Patel also described Sentech as a “monster as it wanted to gobble up all the frequency it could so as to perform its carrier-of-carrier businesses that never matured”.
Members of Parliament said that while the new Sentech board seemed to be trying to turn the company around, they still had a large number of concerns.
Eric Kholwane (ANC) said: “There seems to be a light at the end of the tunnel. But I worry if Sentech would be able to fulfil its mandate of connecting rural areas as the ANC determined at its Polokwane conference.”
Johnny de Lange (ANC) suggested previous board members should come and explain what they were doing to Parliament.
“We see that some of the previous board members gave themselves sudden salary increases when they knew they were going to leave,” he said.
Natasha Michael (DA) stated she was concerned about the high cost of the legal bills concerning all the disciplinary actions that Sentech employees were facing.
Committee chairperson Ismail Vadi expressed concern at the increasing involvement of the Sentech board in operational matters, and urged that a new CEO be found as quickly as possible.
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