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Sentech wants to source own funding

Paul Vecchiatto
By Paul Vecchiatto, ITWeb Cape Town correspondent
Cape Town, 12 Mar 2007

Sentech has applied to National Treasury to upgrade its board status so it can seek alternate sources of funding, the national signal distributor's CEO, Sebiletso Mokone-Matabane, told Parliament.

This could allow the under-funded parastatal to circumvent government and seek project funding elsewhere.

The company has been mandated to build a countrywide wireless broadband network, but has, to date, not received funding from government for the project. While Sentech has applied for funding, there is still no clarity as to whether the parastatal will receive the R1 billion it says it needs to establish the network, due to be completed by December.

Market commentators have said it is critical for government to finalise funding for the project as soon as possible, or SA will not accomplish its goal of bridging the digital divide to provide e-government services. However, government seems to be stalling.

Addressing the Parliament Portfolio Committee on Communications on Friday, Mokone-Matabane said an application had been made to allow the Sentech board to be governed by the Section 2 rules of the Public Finance Management Act, rather than the current Section 3(b) rules.

"We need to be more flexible in sourcing finance to keep up with our commercial competition, who are able to source funds from the markets quickly and relatively easily," she said.

Sentech COO Frans Lindeque said the current rules forbid Sentech from sourcing funds other than from the National Treasury, a time-consuming process that means the parastatal often loses out on commercial opportunities.

"The current structure means we are not flexible enough to react to current and fast-moving market conditions," he said.

Mokone-Matabane said if Sentech were allowed Section 2 status, its board would have the same fund-raising powers as its peers, such as Eskom and the South African Broadcasting Corporation.

"Considering Cabinet has earmarked Sentech as a national strategic asset, it makes sense to upgrade the board's status," she said.

Tight budget

Siddique Mohammed, Sentech's CFO, said the group now adopted a more "realistic" approach to its budget planning.

"In the past, we used to budget on what we thought we would need to meet our tasks. However, we have been so under-funded that now we budget just around what we have," he said.

Mohammed said Sentech had embarked on a round of cost-cutting and introducing operational efficiencies in order to reduce its accumulated loss from R84 million to R40 million and then hopefully eliminate it altogether.

During the briefing, Sentech reported its strategy to migrate to digital terrestrial TV was on track and that it had received sufficient funding for the 2007/8 financial year; it had received R120 million, although it had only requested R85 million. For the 2008/9 year, it has requested R159 million and for the following financial year it has asked for R137 million.

Meanwhile, the Department of Communications previously said it would allocate funding for the broadband network project as soon as it ensures Sentech will not be indirect competition to private sector service providers. While an investigation, to determine Sentech's competitive position, is under way, it is unclear when government will wrap this up.

Related stories:
Sentech needs funding clarity
Sentech has to wait for funding

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