Govt undecided on Sunspace

Read time 3min 40sec

The Department of Science and Technology (DST) has not yet decided how much to pay for shares in micro-satellite manufacturer Sunspace, and says a decision has not actually been made on whether to go ahead with the acquisition at all.

This comes after Cabinet in March approved a controversial majority equity stake acquisition in Sunspace by government.

“Funding to keep Sunspace intact will be made available through the usual budget processes of government.” The statement by Cabinet said science and technology minister Naledi Pandor would provide a detailed business case for the retention of Sunspace as it relates to the strategic imperatives of government.

The DST is now collaborating with the Department of Communications on the matter.

Squandering funds?

Deputy director-general: research, development and innovation Val Munsami explains that the initial approval is considered to be an in-principle approval pending the tabling of the business case at Cabinet.

“The business case also involves what the fair value for Sunspace would be, after a full audit is conducted.”

However, Democratic Alliance shadow minister of science and technology Marian Shinn says it's puzzling why, if the decision “in principle” to buy Sunspace was taken in February 2010 and confirmed in March 2011, the department only started to prepare a business case and purchase price after Cabinet's March announcement.

“Surely that should have been done in 2010?”

The insider feel is that there is argument within Cabinet about whether money should be spent on this project, when there are large developmental backlogs, in terms of roads, water, health and education.

November deadline

Pandor, in response to a Parliamentary question, recently said the decision to acquire a stake in Sunspace should have been finalised and presented to Cabinet before the end of October 2011.

She said the cost of the acquisition would be made known at the same time.

However, Munsami says a decision on the price and whether or not to acquire the manufacturer has not yet been made.

He says a full audit of Sunspace assets and liabilities needs to be conducted and then negotiations must be entered into with the existing Sunspace shareholding.

The DST is aiming for a decision to be made by mid to end of November.

“The acquisition will only be made following formal approval by Cabinet, and once all the legal documentation is signed off by the relevant parties - we could be looking at the first quarter of next year,” says Munsami.

Silent satellite

If the acquisition goes ahead, Sunspace will lean on government to fill its order books, at an estimated cost of R100 million.

Cabinet approved a majority equity stake of between 55% and 60% by government.

Sunspace developed SA's second national satellite, SumbandilaSat, which was providing geographical imaging for research purposes. However, there have been several problems with the satellite, with which contact has been lost for the last few months.

Invest not

Shinn previously said the idea is that once government's stake in the firm is secure, the order books for satellites would start filling up and Sunspace would start to become profitable.

Sunspace told ITWeb an investment by government would help pad its capital-intensive business.

Shinn says there are two main problems with the acquisition. The first is that SA cannot afford to build and launch its own satellites yet, and secondly, Sunspace has failed to provide a highly-successful vehicle for this so far.

“If substantial offshore and local investors have declined to become shareholders in space manufacturing, what is the compelling reason for our taxpayers to do so? We believe our developing nation cannot afford this investment, particularly with the track record of Denel and other failed state enterprises as examples.”

She adds that public money should not be invested in a satellite manufacturing company that has been unable to deliver a robust working vehicle.

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