Lack of INFRACO clarity

5 February 2007
The Internet Service Providers' Association of SA (ISPA) is concerned by uncertainty surrounding the exact role of the new majority state-owned broadband company, Infraco.

While there is great hope amongst ISPA members that the emergence of Infraco on the local telecoms landscape will be a positive development, it is disconcerting that government could end up having a stake in another telecommunications operator.

Government already owns 100 percent of Sentech, a 38 percent stake in Telkom and it has a 30 percent stake in Neotel through Eskom and Transtel.

ISPA remains hopeful that Infraco will potentially open up new opportunities for its members because the adjusted estimates of national expenditure released last year stated that "The intervention in national long-distance and international connectivity infrastructure should significantly reduce SA's broadband costs."

This appears to suggest that Infraco will break Telkom's stranglehold on the market by allowing ISPs (Internet Service Providers) to purchase capacity directly from it.

According to Greg Massel, Joint Co-Chair of ISPA: "Specifics that need to be ironed out before ISPA can wholeheartedly lend its support to the establishment of Infraco relate to licensing issues, shareholders, last mile access and particularly the relationship between Infraco and other state-owned enterprises."

Trade & Industry Minister Alec Erwin said last year he planned to set up Infraco using the long-distance fibre optic networks of Eskom and Transnet. Minister of communications Ivy Matsepe-Casaburri had earlier stated that Sentech would be used by her department to roll out wireless broadband services in rural areas.

Possibly the most urgent Infraco issue to be addressed is the fact that the license conditions for Neotel would have to be changed. Neotel's license conditions had assumed that Eskom and Transtel's transmission assets would be owned by Neotel.

"Infraco is not necessarily a bad development but we have to guard against an excessive government presence in the market. While it's encouraging that private players could be brought on board as shareholders and that government is serious about boosting SA's global broadband standing, a R627 million state intervention would make any industry nervous," explained Mr Massel.

Mr Massel added that there was also the issue that government had created the legislative framework for liberalisation followed soon after by the creation of a massive state-owned infrastructure company.

Undersea wrangling

26 January 2007
The investors behind the proposed development of new submarine telecommunications cables linking Africa with the world are facing a range of obstacles - regulatory, political and economic - before the projects can even get off the ground.

The planned cable systems, if laid, will put significant downward pressure on the cost of international telephony and bandwidth.

But the projects' backers - money for three of the four planned projects will come mostly or entirely from private-sector investors - will first need to convince governments to grant them the necessary licences. This could prove difficult, given that many African governments, including SA's, have pledged their support to the East Africa Submarine System (Eassy), a project to build a cable up Africa's east coast, linking SA with systems in the Red Sea.

Eassy has become the flagship information and communications (ICT) project of the e-Africa Commission, an initiative of the New Partnership for Africa's Development (Nepad). There are fears that some governments, including SA's, will try to protect Eassy at the expense of rival systems.

Some investors backing Eassy, including Telkom, have already expressed concern that too much competition in the provision of international bandwidth could undermine the business case for all of the planned systems.

"Eassy has the support of all the major operators in the East and Southern African region," Telkom says in a written response to the FM. "With a design capacity of 640 Gbit/s, Eassy can serve the East Africa region for the next two decades."

The deployment of two or more cables in the same region will affect the commercial practicality of all the systems, Telkom adds. For many years, Telkom, by virtue of its state-sanctioned monopoly, has been able to charge excessive fees for international bandwidth on existing cable systems, Sat-3, Sat-2 and Safe.

This has kept broadband prices in SA at high levels, while other African countries, including Morocco and Mauritius, have achieved higher broadband penetration levels.

Telkom is particularly concerned about the proposed expansion of Flag Telecom's network along Africa's east coast and a new cable system called South East Africa Telecoms (Seat), which will follow a similar route.

It's not yet clear whether Flag Telecom, which is owned by India's Reliance Communications and operates the world's largest privately owned undersea cable system, will partner a local telecom operator or seek its own licence from the department of communications. Currently, only Telkom, second network operator Neotel, state-owned broadcasting company Sentech and the three cellphone operators are licensed to provide international telecom services. Most have expressed an interest in investing in Eassy.

Reliance Communications is the biggest competitor in India to VSNL, the telecom company in the Tata Group that owns a controlling stake in Neotel. Neotel and/or VSNL are expected to participate in the Eassy project and provide funding for its construction.

It is not known when Reliance will begin construction of the African leg of the Flag network.

Even less is known about Seat's plans. Separate sources have linked Seat to Blackstone, the US private equity group, and to Cornastone Technology Holdings, a local, black-owned ICT group. Blackstone denies it is involved, while Cornastone chairman Lufuno Nevhutalo did not respond to an interview request.

But details are leaking out. The FM understands that Brian Herlihy, the former development director of Africa One, an AT&T-backed initiative that was launched in the 1990s to build a cable system around Africa, is one of the players in Seat. The Africa One project failed after equity participants pulled out after the dot-com collapse. Local businessman John Mathwasa is also understood to be a senior figure behind Seat but declined to comment when contacted last week.

If Seat gets the green light from government, it will be the third cable system to be launched along Africa's east coast to be funded with private money.

A fourth cable system, this one linking SA with the Azores in the north Atlantic, has also been mooted. But this system, proposed by public enterprises minister Alec Erwin, would be funded using taxpayers' money. Erwin has created an infrastructure company, InfraCo, to provide wholesale telecom services. The idea is that this new entity, which will house the inter-city telecom assets of Eskom and Transnet, will also take ownership of the submarine cable project. The national treasury has capitalised InfraCo with R647 million.

It's not clear whether Neotel, which told the FM this week that InfraCo will supply it with long-distance bandwidth on an exclusive basis, will also enjoy exclusive access to the proposed cable.

Telkom CEO Papi Molotsane has said that he will object strongly if Neotel is also afforded exclusive access to InfraCo's proposed cable system.

Several telecom industry executives have expressed concerns about Erwin's cable plan, warning that it could undermine investments by the private sector in new cable projects.

The plan is also leading to friction in cabinet. A government source says communications department director-general Lyndall Shope-Mafole was livid when she heard of Erwin's plans, believing that Erwin was invading her department's turf. Shope-Mafole and other departmental officials have invested enormous time working on the rival Eassy project.

But Eassy has not been without its problems. African governments, represented through Nepad's e-Africa Commission, have been accused of trying to hijack the project from the companies that originally conceived the idea.

Ugandan newspaper The Monitor recently quoted Eassy finance committee chairperson Donald Nyakairu as saying that the politicians tried to hijack the process and were making unreasonable demands.

Last year the Kenyan government, fed up with the delays, said it would build its own, US$110 million cable system to link the port city of Mombasa with Fujairah in the Gulf of Oman.

Kenya Data Networks, a data communications carrier, is also believed to be planning to invest in a new cable system to connect to a Flag Telecom-owned cable system in Yemen.

Licensed telecom operators have until February 12 to sign Eassy's construction and maintenance agreement, failing which they will be excluded from the project.

Consumer Group Fires Salvo At Telkom

January 20, 2007
STINGING criticism from the world-renowned Reuters news agency, evidence from numerous analysts and a verbal lashing by President Thabo Mbeki himself have failed to penetrate Telkom's impervious skin and force it to cut its prices.

So what impact will come from 200 despondent consumers moaning about the high cost of a phone call?

Probably very little, but a full-page advert they placed in the Mail & Guardian this week is a piece of public activism that just may make Telkom's price-fixing executives squirm in momentary discomfort.

The advert placed by the Telecoms Action Group (Tag) was funded by individual consumers including a sprinkling of lawyers, journalists and representatives of a couple of hi-tech companies.

It is big, bold and aims straight for the jugular. Under the headline, "The more of this you read, the more infuriated you'll become", the advert says: "Last year, Telkom recorded a staggering R9,3bn in profit. At your expense. Don't expect the government to step in. They couldn't give a hoot. They've got a 38% shareholding."

It points out that South Africans pay five times more for a local call now than in 1996, and that our internet access is among the most expensive in the world. Telkom has laid off 35000 staff in seven years, so its profits sky-rocket while consumers wait up to six months to get a line, it says.

The action group was set up by journalists Richard Frank and Alastair Otter, who run the tectonic.co.za newsletter.

Frank admits that Telkom is unlikely to react. "We are not naive enough to think our one advert is going to make Telkom slash its prices by 50% and neither is government or the regulator going to do much," he says. "The main purpose is to show that consumers have a voice in SA."

In reply, Telkom issued a statement on Friday saying it was committed to adjusting its pricing model consistently in order to make telecommunications more affordable and accessible to business as well as the broader public.

Its last price revision saw an overall cut of 2,1% on a basket of products, while high-speed internet access line rental fell an average of 24%, it said.

Icasa CEO’s shock exit scuttles money probe

A LENGTHY investigation into alleged wrongdoing by controversial Independent Communications Authority of SA (Icasa) CEO Jackie Manche has been quietly dropped, after she was allowed to resign rather than face a disciplinary inquiry.

Manche resigned on December 22 but the news was kept so quiet that not even members of Parliament’s communications portfolio committee were aware that she had quit and that Icasa had curtailed its probe.

The development raises questions about government’s bid to beef up accountability of officials, and it was unclear whether it is in line with the Public Finance Management Act (PFMA).

The resignation also means it will not be disclosed whether Manche was guilty of violating the PFMA, the Icasa Act and the internal procedures of Icasa, which regulates the telecoms and broadcasting sectors.

“Because she didn’t want to get into the matter of the case, she opted to resign and the investigation wasn’t completed,” Icasa chairman Paris Mashile said yesterday.

Manche herself declined to comment.

Yesterday, Icasa claimed that it issued a statement on December 22 informing media of the development. Business Day, however, has no record of having received it last month.

The statement, received yesterday, says: “With her decision to resign, council has decided not to continue with the protracted disciplinary process, and all charges placed against Ms Manche have been withdrawn.”

The statement also expressed “sincerest gratitude” for her service, while Manche expressed gratitude for the opportunity to serve and contribute to national development.

Her contribution was sporadic, however, as Manche was suspended on full pay for 10 months after her behaviour came up for scrutiny. The probe began when a senior official resigned after the theft of R110000 from a safe and the theft was not reported timeously. Procedures for procuring 11 vehicles were also investigated.

Manche’s resignation surprised Democratic Alliance MP Dene Smuts, who serves on the communications portfolio committee. She said Manche’s suspension on full pay for 10 months had been absurd, and now the truth would never be known.

“What was going on was clearly outrageous, with cash disappearing from a safe, but we as a parliamentary committee have never managed to glean real information.”

That was due partly to the eva-siveness of Icasa’s chairman and because the African National Congress (ANC) had “backed off” from dealing with Icasa’s governance problems, she said.

Although that chapter had an unsatisfactory ending, it was an opportunity to appoint a strong CEO to clean up the host of problems at Icasa, Smuts said.

Icasa recently advertised 17 vacancies, including posts for six managers and three advisers to its councillors. Even then it will still lack GMs, technical experts and specialists in competition and economic analysis.

It also lacks a ninth councillor, but that vacancy has triggered a row between the portfolio committee and the ANC.

The ANC wants to pick a replacement from a short list of three approved by Communications Minister Ivy Matsepe-Casaburri, but Smuts said those candidates were not strong enough and Icasa should re- advertise for someone with economics experience.

Smuts said she would protest “very vehemently” if the councillor position went to one of the short-listed trio, Mashila Matlala. Matlala was a senior manager in the communications department but was demoted after leaking information to the second network operator. “I established the fact of that with a parliamentary question,” Smuts said.

It was crucial that Icasa ran effectively, as new legislation to cut the cost of telecommuni-cations was entirely dependent on a strong regulator, Smuts said.

Playing catch-up

FOR the past two years, President Thabo Mbeki’s annual state of the nation address has raised SA’s high telecommunications prices as one of the key challenges facing the economy.

In 2005, the president said he believed that the “unacceptable situation” in which some of SA’s fixed-line rates were 10 times those of developed countries would soon become a thing of the past. This would be achieved by taking “bold steps” to further liberalise the telecommunications industry.

Last year, he spoke about telecoms costs in relation to the Accelerated and Shared Growth Initiative (Asgi-SA). Not only did telecoms infrastructure need to be expanded and modernised, but costs would have to be tackled if planned interventions in targeted industries such as tourism, chemicals and agriculture were to be a success.

With the president due to deliver his 2007 state of the nation address in the coming weeks, sadly little has changed on the telecoms price front. Granted, the second phone operator — Neotel — has finally kicked off. This was a landmark event as it was a step forward in government’s long-awaited liberalisation strategy. But it is already clear that Neotel will not make a real impact on prices in the short or medium term. It has neither the financial muscle nor the infrastructural reach to do so. Far more will have to be done on the competition front if there is to be a significant fall in telecoms prices any time soon.

It is difficult to quantify exactly how much business in SA has lost as a result of high prices. But there is a clear pointer in this week’s announcement by Reuters, one of the world’s largest global information providers, that it will not be ploughing any more money into SA. Reuters CEO Tom Glocer argues that while there are attractive opportunities in SA, telecoms services are far more expensive here than in other developing nations and the available bandwidth is flaky.

The reasons for SA’s current high prices are well documented, having their genesis in the 1998 privatisation deal where government gave Telkom a five-year monopoly in return for US and Malaysian investors buying a 30% stake in the organisation. The monopoly period was compounded by the failure to create a strong and independent regulator in the form of the Independent Communications Authority of SA (Icasa), or to empower it with transparent rules of the game.

The rise of cellular phones, wireless broadband and voice over internet protocol has improved services and lowered costs in small pockets of the industry, but Telkom’s firm grip on the fixed-line market has left SA dangerously far behind the curve internationally.

This situation will not be fixed by government’s current strategy of “managed liberalisation”, particularly when the process is overseen by a weak regulator that is underfunded, overstretched and has been crippled by a management crisis.

Far more dramatic action will have to be taken if the goal of lowering the cost of doing business in SA is to be achieved. And that action will have to be led by Mbeki since his Communications Minister, Ivy Matsepe-Casaburri, has repeatedly failed to make any real progress on opening up the market or empowering the regulator.

The first step is to implement government’s plan to unbundle the local loop: the copper cable that connects customers to the network. This will give other operators and internet service providers access to Telkom’s telephone exchanges, allowing them to offer services on the lines now controlled by Telkom. The time for protecting Telkom is well and truly over. Both Telkom and the market have been given more than enough notice of such a move.

We hope that Mbeki will set the scene for some real progress on lowering telecoms costs in this year’s state of the nation address. Too much time has already been lost.

Post Office Hits Back At Allegations of Tainted Tender

THE embattled Post Office has hit back in court papers at claims that yet another of its tenders is flawed and tainted by irregularities.

In its dispute with Cade Transport, which is asking the court to review the Post Office's decision to award a lucrative three-year contract to a company called Crossroads Distribution, the Post Office has dismissed the allegations as "simply unfounded".

In an affidavit signed by Nat Maelane, the Post Office executive for supply chain management, the parastatal claims that "the tender process was both transparent and equitable. The points-scoring exercise that was undertaken at the request-for-proposals stage (showed) that (Cade's) ability to (do the job) ... was inadequate and unsatisfactory relative to that of the selected preferred bidder."

The Post Office is under siege at the moment with suspect tenders tumbling out of the woodwork. Communications Minister Ivy Matsepe-Casaburri has stepped in to scrutinise deals concluded by the state-owned company.

The disputed Crossroads tender was awarded under suspended CEO Khutso Mampeule, who had taken former CEO and MTN MD Maanda Manyatshe to task over a tender awarded on his watch to marketing company Vision Design House.

The dispute with Cade could cost the Post Office about R240m if Cade claims damages.

Cade executive chairman Parmanathan Mariemuthu said in court papers the decision to appoint Crosswords "significantly undermines the promotion of black economic empowerment", as Cade had better empowerment credentials. He said he was "at a loss as to how this could have happened".

Cade scored the highest of all the bidders in an initial "expression-of-interest" phase of the tender, with 85%, while Crossroads was placed eighth with a score of 56%. But at the next "request-for-proposals" stage of the tender, Crossroads jumped to the head of the queue, and was picked for the contract. Crossroads bid R344m for the contract, while Cade says it bid a cheaper R240m.

The Post Office said the expression-of-interest phase was aimed at finding out "in general terms the ability of a service provider to provide transportation services". The request-for-proposals stage had a "different focus".

The Post Office said that Cade had problems, including "the limited size of (its) management team", and its "price per kilometre in relation to volume transported" was the most expensive. The Post Office said "the price tendered by (Cade) ... was approximately R13m higher than that of Crossroads".

Importantly, the Post Office denied Cade's claim that this decision was counterproductive for black economic empowerment. It said that Cade's bid lacked "sufficient clarity, and did not include all cost and benefit ramifications".

But a number of problems with Crossroads appeared to linger, including the fact that the contract was awarded "subject to further price negotiations ... and successful due diligence".

On Friday, Mariemuthu criticised the Post Office for not communicating properly.

"What has surprised us throughout the whole process is that the Post Office has never chosen to engage us, even before we went to court. Rather, they have always chosen to communicate with us through their lawyers, who are being paid for by the taxpayer."

Crossroads had even sourced equipment from Cade, he said.

Mariemuthu said: "We will fight this right to the end. If we stop fighting for business justice, what is the point of even having a constitution?"

Ivy is reluctant to take on Telkom

In the recent Cabinet Report Card released by the Democratic Alliance, Communications Minister Ivy Matsepe-Casaburri’s performance rating was the worst it has been in the last few years.

The minister received a dismal four out of ten, mainly due to her inability to address the high prices and poor service delivery due to Telkom’s monopolistic position.

According to the 29 337 votes received by the public, Matsepe-Casaburri’s rating was even worse with dip of 0.3 points leaving her with a score of 3.7 out of 10. Matsepe-Casaburri’s score is also lower than the average cabinet score of 4.3 for 2006.

It is further telling that her score has decreased steadily over the past three years. Matsepe-Casaburri received a rating of six in 2004 and five in 2005.

According to the DA: “Communications Minister Ivy Matsepe-Casaburri has fallen steadily in the DA’s rankings over the past three years because of her ongoing reluctance to take on Telkom, whose monopolistic practices make South Africa one of the most expensive places in the world to communicate.”

The DA Report was critical towards the minister’s attempts at gaining more control over ICASA.

“More of the same from Communications Minister Ivy Matsepe Casaburri in 2006, as she continued her efforts to turn the country’s communications authority into “Ivy’s Communications Authority of South Africa,” the DA report said.

As can be expected the Department of Communication’s shareholding in Telkom and its inability to influence the high prices of communications in South Africa came under fire.

“Communication costs in South Africa, especially for fixed-line telephony, are currently among the highest in the world. However, as a 38% shareholder in Telkom, the Minister has still not managed to convince Telkom to stop its discriminatory practices and set fairer access tariffs,” the DA said.

“From a delivery point of view, the Department’s inability to drive down the costs of, and promote access to, broadband communications and telephony remains a problem,” the report said.

Mampeule slips into top Post Office meeting

Suspended Post Office chief executive Khutso Mampeule's attendance at the SA Post Office board meeting on Thursday highlights the differences between the board members. Three board members resigned last week, following Mampeule's suspension.

In a letter from his lawyers to the Post Office board chairman, Phuti Tsukudu, Mampeule notified her of his intention to attend.

Communications minister Ivy Matsepe-Casaburri announced last week that she had appointed an auditing firm to do an investigation of the Post Office.

A jovial Mampeule came out of the board meeting at the Sandton Sun Intercontinental in Johannesburg, cracking jokes with Liz Thebe, the Post Office group executive for human relations.

Sources said Mampeule had arrived unannounced and had disrupted the meeting by complaining that he had received his papers late. He then allegedly forced the meeting to discuss the Post Office's articles of association and the Companies Act. As a result, the meeting ran out of time to discuss what was on its agenda.

Mampeule told Business Report: "I can't comment on the proceedings of the board. They are confidential."

Twiggs Xiphu, a spokesperson for the Post Office, said: "Mampeule remains a board member while on suspension. Therefore it is not surprising that he attended the meeting."

If the comments by Thebe outside the meeting overheard by Business Report are anything to go by, morale at the Post Office is at its lowest.

"People want to feel as if it's a free-for-all. I tell them I am working hard so that when the chief executive comes back it will not be as if he had been away. They ask me: 'Is he coming back?' I tell them he is," Thebe said.

Thebe had been asked to make a presentation to the meeting but it was cancelled due to a late start.

Transport company set to sue Post Office

THE SA Post Office, already under-fire for awarding suspect tenders, is set to be sued for a further R240m, this time by a company that is 25% owned by Investec Bank that claims it was suspiciously overlooked for a massive contract.

The contract, which expires in three years, involved handling all the Post Office’s postal road freight.

This is a significant matter for the Post Office, and could increase its liabilities significantly if the matter goes against it. It is also a sign of further turbulence at the parastatal, as this tender took place under the tenure of Post Office’s “Mr Clean", its CEO Khutso Mampeule, who was suspended two weeks ago.

Mampeule himself initiated a criminal charge against his predecessor Maanda Manyatshe over an alleged illegally issued tender and corruption. Manyatshe, who had taken over as MTN CEO recently, resigned his job over the allegations and has threatened to sue the parastatal and Mampeule for R100m. Communications Minister Ivy Matsepe-Casaburri last week mandated SizweNtsalubaVSP to probe all the suspect tenders.

CADE Transport, which claims it was overlooked for the tender, has lodged legal papers and the Post Office is expected to file their answering papers on Monday.

Cade’s executive chairman, Parmanathan Mariemuthu wants the entire tender process started from scratch.

According to Mariemuthu, CADE scored the highest during the “expressions of interest" phase of the tender with 85% but was later pipped to the post by a company, Crossroads Distribution, which was placed eighth (56%) in the initial tender phase.

SAPO got 18 responses to its invitation to tender, with seven bidders then asked to submit final proposals in the “request for proposals" phase.

Interestingly, Crossroads bid R344m for the contract — which meant the Post Office would have to pay R100m more for the same services. When pressed, the Post Office’s lawyers, Webber Wentzel and Bowens (WWB) said CADE had lost out on the grounds of “ability and experience" and “financial" factors.

Mariemuthu said this was awkward and demanded clarification given the fact that CADE’s bid was underwritten by Investec and was R100m cheaper. In addition, CADE operates 350 trucks, yet Crossroads only operates 41 trucks, which could be used to deliver post, he argued.

“I am at a loss as to how this could have happened," he said.

Minutes from a Post Office board meeting in the Weekender’s possession suggest that the appointment of Crossroads was part of a “deviation from tender" — ironically the same reason why Mampeule instituted criminal proceedings his predecessor.

Mariemuthu has raised other issues, including the fact that the appointment of Crossroads “significantly undermines the promotion of black economic empowerment" as Crossroads has a lower empowerment score than CADE.

WWB wrote back to Cade saying the complaint was an “attempt to raise your company’s failed tender, which failed on its merits, to an issue of public concern with significant implications requiring review aimed at restoring public confidence in tender processes is disingenuous and overstated".

WWB said the process was “exemplary" and “constituted a yard-stick against which all tender processes should be sought to be benchmarked".

Sacked postal chief in boardroom drama

AS TENSIONS continue to mount at the board of the South African Post Office, high drama ensued yesterday when suspended CEO Khutso Mampeule insisted on attending a board meeting.

Mampeule was suspended two weeks ago for allegedly “undermining the authority of the board”, following a criminal complaint he laid against his predecessor, Maanda Manyatshe, over a disputed tender.

As a result, Manyatshe quit his post as MD of cellphone company MTN and is now suing the Post Office for R100m.

Mampeule’s arrival at the board meeting upset some other board members.

This could further raise tensions in the board at a time when Communications Minister Ivy Matsepe-Casaburri is seeking to defuse the chaos through her own “independent forensic audit”.

Mampeule said yesterday he had “exercised my rights as a director” to attend. He would not reveal what was on the agenda, but said “these are extraordinary times, and there are extraordinary issues to be discussed”.

Mampeule said his attending the meeting “did not infringe on the minister’s process”, which was continuing. He said he attended the whole meeting.

When asked whether there were any objections to his presence at the meeting from the remaining directors, Mampeule referred the question to the chairwoman, Phuti Tsukudu.

Tsukudu referred all questions to her spokesman, Johannes van Niekerk.

Van Niekerk played down yesterday’s events, saying “nothing untoward happened” and the rest of the board “knew (Mampeule) was going to attend”.

This comes as reports of rifts in the board have gained pace, and last week three board members — Marthinus Crous, Jackie Lange and Phumeza Dzingwe — quit, ostensibly due to their displeasure over Mampeule’s suspension.

Yesterday, the Communications Workers Union said it “applauds the resignations” and urged the remaining board members to “step down pending the finalisation of the investigation”.

The union said it was disappointed that it had not been consulted by Matsepe-Casaburri on the terms of her probe.

Matsepe-Casaburri said last week she had appointed Andrew Maralack of auditing firm SizweNtsaluba VSP Forensics.

She said that “no individual will be spared” and her probe would include an investigation of all suspicious tenders, the role of Manyatshe and Mampeule throughout the entire drama, and governance at the institution.

Ivy Matsepe-Casaburri award the final insult

A prominent online editor has lashed out at the recent African ICT Achievers Awards, calling the South African Minister of Communications’ award ‘the final insult’.

Online editor Peter Griffiths from Business in Africa gives a synopsis of the African ICT Achievers Award. For the sake of completeness we have published the article below in its original format:

On Saturday evening I attended the African ICT Achievers Awards and for the most part was quite glad that we were congratulating ‘Africans’ for putting every effort in to develop the sector.

This is especially so when many states have only recently realised the need to provide cheap and accessible telecommunications, which means many of the tools required to create a successful ICT sector are not in place yet.

So seeing Glory Mushinge, a journalist from Zambia dedicated to ensuring more people understood what ICT was about, even if they didn’t necessarily have access, win an award for Excellence in ICT Journalism in Africa was an absolute pleasure.

However, I had to grit my teeth when the award for Top Public Sector CIO in Africa went to Kgabo Hlahla of the South Africa Department of Home Affairs (DHA). A website that isn’t exactly user-friendly is a common feature with government sites, however, the reason for the teeth gritting stems from a small device called the telephone; a device quite fundamental to ICT development.

Last week I called several DHA offices. Calls were either not answered, or when they were, were ‘transferred’ to someone who then didn’t answer. Although, auto-answering services and voicemail worked beautifully. This is a serious problem. How can a gentleman who heads a department that can’t even answer phones, quite a basic element to the ICT sector, win the accolade of being Africa’s best chief information officer?

ICT use doesn’t appear to be particularly stretched either on the website, which could be used to allow people to make ‘free’ phonecalls to the department over the Internet using VoIP, not to mention providing addresses (with maps) of all the offices in a particular region.

I don’t for a second think that the rest of Africa’s CIO’s have faired this poorly, which brings me to a further problem I had with the African ICT Awards: Only a few countries outside South Africa were represented. If we are going to congratulate ‘Africa’, then we need to make sure that we know what the whole of Africa is up to.

Sticking with the trend of acknowledging South African companies, Sentech and Arivia.com both won awards. The South African signal distributor’s CEO Sebiletso Mokane-Matabane was named Top ICT Business Woman in Africa 2006. While she may have done many other things to deserve the accolade, Sentech reported a net loss of R74mn ($10.3mn) for the year to March from a loss of R68.8mn the previous period, partly because of the company's inability to win market share from competitors in the wireless broadband market. There is nothing notable about this.

Arivia.com won the award for Top ICT Company in Africa, yet their website doesn’t work properly in Firefox, a free webbrowser and Internet Explorer’s biggest challenger. Given that part of the difficulty of developing a vibrant ICT sector in Africa is the cost of software licenses, surely the top company would make sure that its website was at least compatible with open source alternatives?

The final insult, to those who deserved awards, came when South Africa’s Minister of Communications, Ivy Matsepe-Casaburri, won a Nepad special mention award for her work in driving ICT development on the continent.

The gentleman sitting next to me was equally bemused by the prospect of this saying: “That’s politics, but perhaps she got it for driving Africa backwards.” There are countries much poorer than South Africa that have made regulatory changes far quicker and more effectively than Matsepe-Casaburri. Just take a look at Uganda and bear in mind that it took the minister's department 4 years longer than necessary to license the country's Second National Operator (SNO).

As long as we continue to stroke the egos of those who don’t perform, we undermine the effort to congratulate and recognise those who do, which is sad given that there are people out there fully deserving of an African ICT Achievers Award.

Minister stamps authority on Post Office probe

COMMUNICATIONS Minister Ivy Matsepe-Casaburri has revealed exactly how she plans to probe the chaos at the South African Post Office, but it is unlikely that the probe will be finished before the end of the year.

Matsepe-Casaburri represents the Post Office’s 100% shareholder, government. She said last week that she would “investigate the actions of both the board and management in this saga”, and revealed later in the week that she had appointed Andrew Maralack of SizweNtsaluba VSP Forensics to probe the matter.

In response to questions on Friday, Post Office spokesman Twiggs Xiphu said Maralack’s probe would “include, but is not limited to, the allegations of all parties, corporate governance issues as well as management actions”.

This seems a massive task, given the dimensions of the problem at the Post Office. Not only are there insinuations of criminal conduct against former CEO Maanda Manyatshe, but there are also allegations of irregularities levelled at Manyatshe’s accuser, Khutso Mampeule, and conflict-of-interest concerns that have even been raised against chairwoman Phuti Tsukudi.

The bickering has been harmful to everyone: Manyatshe stepped down from his position as MD of cellphone company MTN, Mampeule was suspended 10 days ago for appearing “to undermine the board’s authority, and his impartiality has been called into question” when it came to a forensic audit into improper tender practices.

To boot, the board appears riven by the conflict and last week Tsukudi confirmed that three of the 14-member board — Marthinus Crous, Jackie Lange and Phumeza Dzingwe — had quit, ostensibly due to unhappiness with the decision to suspend Mampeule.

Matsepe-Casaburri last week confirmed that her probe would include looking at the number of people quitting the Post Office, and she said the investigation would need to take place urgently “to avoid lowering of staff morale and to restore corporate governance”.

But given the sizeable scope of the probe, it seems unlikely that it will be completed any time soon.

Xiphu said yesterday that “hopefully” the investigation would be completed this year, but said the Post Office had no definite idea when this would be.

On Friday, Tsukudu’s spokesman, Albi Modise, said there was no definite end-date for the probe.

“There have been allegations and counter-allegations made and the investigation will get to the heart of the matter.”

But what seems clear is that the internal investigations at the Post Office, including its own forensic probe into any tender irregularities, will all take a back seat to the minister’s probe.

And if people are not at least a little scared, they should be: Matsepe-Casaburri warned on Friday that “no individual will be spared if they are found to have been involved in any unlawful actions”, as the “interests and investments that government has made in the Post Office will be protected”.

The problems began this year after Mampeule laid a criminal complaint against Manyatshe, who quit the Post Office last year to join cellular company MTN as its South African MD.

Mampeuele was appointed in June last year, and his complaint arose after one of the Post Office’s suppliers, Vision Design House (VDH), sued the Post Office for money it was owed under a contract it signed with Manyatshe to design and build the Post Office’s “new image”.

Mampeule is fighting the VDH claim, and part of his opposition stems from his belief that “there was no satisfactory explanation for why the decision had been taken to deviate from (the Post Office’s) normal tender process to award the contract to VDH, which had not been a bidder from the outset”.

Mampeule said that while 19 bidders had tendered for the job, the process was “suddenly aborted and shortly afterwards the extraordinary step was taken of appointing VDH, which had not participated in the initial process”.

“It was readily apparent that Mabote and Manyatshe were very concerned to have VDH appointed for the new image project, even if it meant misrepresenting the facts and flouting the prescribed procedures.”

He said the board took a resolution under which “I have been instructed to lay a charge with the South African Police Service, and to request an investigation based on the contents of this affidavit”.

When this became public knowledge, it caused a furore, made worse by Manyatshe’s ill-advised efforts to get an interdict preventing the Mail & Guardian newspaper from publishing details of the criminal complaint.

Manyatshe then quit MTN to “clear his name”.

Importantly, though, he has confirmed that his lawyers are drawing up papers to sue the Post Office and Mampeule for R100m.

Manyatshe is adamant that he has not done anything wrong, saying that “the deviation from tender was fully justified by the executive of procurement”.

But the focus then shifted to Manyatshe’s accuser, Mampeule.

Mampeule then made exactly the same mistake as Manyatshe, rushing to court to get a court interdict to prevent Business Report publishing details of Matsepe-Casaburri’s concerns about an insurance joint venture he put together called Post Sure.

This diverted attention, and Mampeule was then in the firing line.

In a letter to the Post Office chairwoman, Matsepe-Casaburri noted that the proper procedure to get approval from government before a new business venture had not been followed.

She asked: “On what basis and by what process has a selection (or) short-list (of an insurance partner) been done without authority of the shareholder?”

She noted that the PostBank MD had not been involved in discussions, which she said “would be not only incredible but unacceptable, given the role the bank would have to play”.

In addition, she asked about Mampeule’s complaint against Manyatshe.

Mampeule was suspended — after, according to Matsepe-Casaburri, he refused to take a “leave of absence”. So what is it that Mampeule has done, exactly?

Tsukudi said Mampeule “app-ears to undermine the board’s authority and his impartiality has been called into question” when it came to a forensic audit into tender practices.

This relates to a forensic audit that the Post Office is conducting into all the contracts signed by post offices, including the suspect tenders signed in the past.

Mampeuele is thought to have sought to intervene in how the audit was taking place.

Mampeule denies any wrongdoing, however, saying his suspension was an attempt to divert attention from his “concerted effort to uproot corruption” at the Post Office.

It seems there is a lot of ill will on all sides, both from within the board at the way the Manyatshe complaint was handled by Mampeule, and the perception that Mampeule is something of a maverick himself.

The question that remains now is whether Matsepe-Casaburri can handle this hornet’s nest. If this matter drags on too long, then the Post Office is at risk of squandering the goodwill it generated last year when it finally returned to profit, making R486m in profit for the year to March this year.

Loser of the Year

MyADSL founder Rudolph Muller handed out awards to those who had helped to grow the telecommunications industry. He also dished out a booby prize for those who had done nothing but stifle it.

Based on votes by the internet community, the Independent Communications Authority of SA (Icasa) and Communications Minister Ivy Matsepe Casaburri were strong contenders, which proves that whatever good they think they are doing, the people who run the industry strongly disagree.

But of course it was Telkom that surged ahead to take the award in the end. The prize: an antiquated modem that downloads data at a sluggish 33,6kB per second.

Muller could not resist another sly dig as he named Telkom the Loser of the Year. Perhaps Telkom would fail to understand the irony of the ultra-slow modem and would issue a press release announcing that it had won another award, he quipped.

Postal chaos

JUST as it looked as though the South African Post Office was finally on a path towards financial stability, chaos has again erupted.

This culminated last week in the suspension of group CEO Khutso Mampeule, following a series of allegations which raise serious questions about corporate governance at the organisation, about the role of the board and about how Communications Minister Ivy Matsepe-Casaburri has handled this crisis.

And make no mistake, it’s a crisis. In the past two months, former Post Office CEO Maanda Manyatshe, who still holds some sway at the organisation, has been locked in a bruising battle with Mampeule. Both have attempted to gag the press; both have levelled outrageous allegations against the other and the board; and both are now out of their posts, with Manyatshe quitting as MD of cellphone company MTN and Mampeule now suspended.

This tussle started when Mampeule cancelled a R100m contract awarded during the former CEO’s tenure to a company called Vision Design House. He then laid a criminal complaint against Manyatshe for awarding the tender without proper procedure amid allegations that Vision Design would do work on Manyatshe’s house.

Manyatshe, who denies any wrongdoing, has threatened to sue Mampeule and the Post Office for a staggering R100m.

Mampeule, in turn, stands accused of calling a board meeting without including Post Office chairperson Phuti Tsukudu in order to discuss selling insurance products through Postbank branches. Mampeule argues that because Tsukudu was on the board of Mutual & Federal, a competitor in this matter, there was a conflict of interest. Further, he points fingers at the board of the Post Office, saying his suspension is an attempt to divert attention from his fight against corruption. To top it all, Tsukudu needs to explain why R89000 was allegedly paid by the Post Office to a placement company she owns, Tsukudu Associates.

Confused? You’re in good company. Given the bewildering swirl of allegations and counterallegations being made, it’s small wonder that most members of the public haven’t a clue who to believe. The lingering impression is that the Post Office, long maligned as being hopelessly inefficient and corrupt, is once again in deep trouble.

And quite clearly, there is a real leadership problem, a situation which appears to have been going on for far longer than the two months Manyatshe and Mampeule have been at each others’ throats. The Post Office has long been government’s problem child, having for years made massive losses which government has had to subsidise to the tune of about R300m a year.

Not too many years ago, operating losses were about R600m, revenue growth was stagnant and customers were deserting in droves. Some were converting to e-mail and other forms of communication but many others simply no longer trusted the Post Office due to theft, poor delivery and patchy service.

However, in the past two to three years, it seemed to be recovering. The most recent set of results show that, while it is more or less breaking even once the subsidy and other one-off adjustments are removed, the picture is healthier at a revenue and operating level.

The same cannot be said of its governance. The board has commissioned a forensic audit to investigate improper tender practices. While that is good, the fact that the board chairperson is implicated in alleged misconduct suggests that a broader probe is needed.

It looks as though this will now take place. Matsepe-Casaburri, who until now has been disturbingly silent on the matter, has finally come to the party and will investigate the actions of the board and management in this saga. We eagerly await the findings.

Dear Ivy, how are you going to save the Post Office from itself?

LET’S face it, post is not a sexy business. It’s a hard grind, with postal businesses around the world facing the threat of galloping technology.

The South African Post Office has not escaped this trend, with far more nimble competitors having exploited its many weaknesses. As an organisation that South Africans love to hate (running a close second to Telkom), it has long borne the brunt of consumer anger. Whether it has been through incompetence, high tariffs or corruption scandals, there has been no shortage of copy about the organisation. But the Post Office has managed to outdo even itself with the latest shenanigans. Former CEO Maanda Manyatshe and his successor, Khutso Mampeule, have engulfed the Post Office in a swirl of accusations and counteraccusations, leaving those watching from the sidelines dumbstruck. This includes Communications Minister Ivy Matsepe-Casaburri, who seems to have been caught off-guard, writing an irate letter to the board chairperson in October in an attempt to get answers.

Why are these two men at war? At the heart of it seems to be a battle over who gets to claim the title of postal “Mr Clean”. The frontrunner has long been Manyatshe, who was appointed MD of the Post Office in late 2000. He not only inherited a highly bureaucratic, dysfunctional and loss-making organisation which had been leaderless for two years, but with it came one of government’s first attempts to forge a public-private partnership. A consortium led by New Zealand Post International was appointed a year earlier as strategic management partner with the task of helping to turn around the entity. A new policy was put in place, government subsidies were to be phased out and financial targets were established to take the ailing Post Office into a new era.

Inevitably, Manyatshe and his management team clashed with the consortium — it was simply impossible to have two strong leaders running the place. Less than a year later, the consortium was gone and subsidies were back, albeit more targeted and with a limited lifespan. With a comparatively free hand, Manyatshe embarked on a turnaround strategy which revolved around beefing up the courier and technology functions, using the Postbank to move into banking and financial services, and seeking out international alliances.

An integral part of this strategy was a big anticorruption drive, with a forensic audit finding that some staff displayed an alarming propensity for questionable and corrupt practices. Hair-raising stories emerged and the Scorpions were called in to investigate widespread criminal activities involving both employees and outsiders. Just some of these included contracts with nonexistent companies and kickbacks for employees.

By the time he left in 2004, Manyatshe pronounced that his onslaught on crime and corruption had paid off with order largely restored. He had certainly left the Post Office in far better financial shape, having turned in a profit at operating level.

But when Mampeule took over in 2005 he also went on a big anticorruption drive. This must have irritated Manyatshe no end, but when the new CEO went on the warpath and laid a criminal complaint against Manyatshe for allegedly awarding a R100m tender without proper procedure, he stirred up a hornets’ nest. Manyatshe has much to protect, and has done so with vigour.

Neither man has since covered himself in glory. Both have taken to the trenches to defend themselves, attempting to gag the press and making outrageous allegations about one another and the board. Both are now out of jobs, with Manyatshe resigning as MD of MTN and Mampeule suspended while the board looks into allegations that he flouted governance procedures. If ever there was an unseemly squabble, this is it.

Unfortunately, because the slew of allegations have muddied the waters, it is impossible to make any sort of informed judgment on the matter. That will fall to the two investigations under way, one commissioned by the board which is looking into improper tender practices, and the second being undertaken by the minister into the actions of both the board and management.

The lasting impression, however, is that of a CEO and a board which is out of control. In Matsepe-Casaburri’s letter to board chairperson Phuti Tsukudu, it is obvious that the minister is concerned about a range of practices at the organisation. She has clearly been kept out of the loop on a key financial services deal the Post Office embarked upon, and was in the dark about board concerns regarding a potential conflict of interest involving the chairperson.

While a minister should keep out of the day-to-day running of any state organisation, it is critical that the shareholder (government) is aware of governance concerns, and major deals that will affect the core strategy of the organisation. Matsepe- Casaburri will have to move swiftly if she is to contain the fallout which threatens to do lasting damage to the organisation’s brand.

This is normal

The SABC paid R123 000 for its CEO, Dali Mpofu, to be featured on the front cover of the glossy Leadership magazine in June this year.

This is according to a response by Communications Minister Ivy Matsepe-Casaburri to a written parliamentary question from the Democratic Alliance.

The DA asked her whether there were any sound reasons to justify the use of public funds for the profiling and marketing of an individual.

Matsepe-Casaburri replied that "this is normal in organisational communication and does not amount to personal publicity".

The minister admitted that the SABC paid R123 000 to the business magazine, and that the money came out of the corporation's marketing and public affairs division as well as the international and regulatory affairs budgets.

Matsepe-Casaburri said that Phumelele Ntombela-Nzimande, the SABC's group executive: public, international and regulatory affairs, had authorised the expenditure.

The magazine's editorial position apparently requires those featured on its cover page to pay, and the amount varies depending on the size and type of company.

The magazine's editor, John Doolan, could not be reached for comment.

The June edition of the magazine led with an article written by Doolan, which began by retracing Mpofu's footsteps in relation to his family, educational and professional background.

According to the minister, this "provided the SABC with an opportunity to communicate its new corporate strategy of 'total citizen empowerment' and to focus on the new vision the organisation has recently adopted".

"The article was not personal publicity for Mpofu," she said.

"The only question that focuses on him as an individual was the first question in the article, and presumably it was done to give readers who might not be familiar with Mpofu an opportunity to know the person who is at the helm of an important public institution such as the SABC."

Deputy President Phumzile Mlambo-Ngcuka's spokesperson, Thabang Chiloane, said there had been several magazines, including Leadership, that requested payment to feature her on their front cover.

"But I never took any of those offers," Chiloane said.

Matsepe-Casaburri also said that the public broadcaster spent R6,3-million on its coverage of the elections in the Democratic Republic of Congo, including last month's repeat vote to determine that country's president.

She said the money was used to deploy 66 staff in three regions of the DRC and to provide logistical and technological support for feeds, live crossings and broadcasts.

The Star tried to reach Mpofu for comment on Wednesday morning, but was unable to reach him.

Government not delivering

Sentech was promised government funding to help with the roll out of wireless broadband infrastructure to improve their coverage, but unfortunately the government coffers have as yet not opened for the parastatal.

According to Sentech’s Winston Smith: “No money has come through for Sentech yet.” When asked about government’s new focus on setting up Infraco as an infrastructure provider Smith stated that in principle Sentech have no problem with them.

Smith did add, however, that there was very little information available about the new company making it difficult to comment on the role that Infraco will play in SA telecoms.

The Minister of Communications, Ivy Matsepe-Casaburri, reiterated her commitment towards making Sentech the ‘Government’s wireless broadband provider’ in her budget speech earlier this year, but despite these words nothing much has happened.

“Sentech will form the core of our wireless broadband infrastructure network that our country will use to advance its socio-economic development goals,” the minister said.

“Sentech’s wireless broadband infrastructure network will be expanded beyond the current footprint and enabled it to carry voice to the end user in the provision of this service, thus giving full effect to its multimedia licence,” she continued.

This effectively makes Sentech a third national operator, enabling it to deliver a wide range of services including voice.

For Sentech to meet the Department of Communication’s demands a great deal of money is needed, but so far it’s been all talk and no do from Government.

Unless Sentech receives funding soon this may prove to be yet another proposed intervention by the Department of Communication which served only to hold back competition without the promised tangible results.

Suspend all Post Office managers

All South African Post Office managers and board members should be suspended pending a forensic audit into its contracts, the Communication Workers' Union (CWU) said on Monday.

Expressing shock at the suspension of Post Office chief executive Khutso Mampeule, the CWU said it would challenge the decision if it was an attempt to divert attention from, or tamper with, the corruption investigation.

This was a claim made by Mampeule after his suspension on full pay on Friday at a meeting of the Post Office's board, pending the outcome of a disciplinary case against him.

"I believe my suspension is an attempt to divert attention from my concerted effort to uproot corrupt actions, such as those in the Vision Design House matter," he said.

Board chairperson Phiti Tskudu said on Friday the board had lost confidence in Mampeule.

"He appears to undermine the board's authority and his impartiality has been called into question with regard to the management of the planned forensic audit the board has commissioned to investigate allegations around improper tender practices."

Last month, Mampeule told parliament seven Post Office executives had resigned or been axed in the past 18 months as a result of his anti-corruption drive.

Thirteen suspect contracts had been uncovered and cancelled during an audit of all contracts.

Mampeule said his fight against corruption had "affected some powerful and well-connected people" on the board.

Business Day reported on Monday that he was seeking legal advice on suing the company.

His predecessor, Maanda Manyatshe, who resigned last week as managing director of MTN after Mampeule laid criminal charges against him for tender fraud, is suing the Post Office for R100-million.

The CWU believed the probe into contracts signed under Manyatshe was correct, said spokesperson Mfanafuthi Sithebe.

It was equally correct to pursue the investigation through the Office of Serious Economic Offences.

The CWU further called for "the correct intervention" by the Communications Ministry - amid questions by the parliamentary portfolio committee on communications about Communication Minister Ivy Matsepe-Casaburri's handling of the matter.

Unviable rural telecoms

Two years after the government licensed seven consortiums to offer telecommunications services to rural communities, the country has yet to see the benefits.

The consortiums were tasked with rolling out cellular network services and internet to areas with a teledensity of less than 5 percent.

The seven underserviced area licensees (Usals) are Bokone Telecoms, to operate in the Capricorn district in Limpopo; Kingdom Communications and Thinta Thinta Telecommunications (T3), to cover the Zululand district and Ugu district, respectively, in KwaZulu-Natal; Ilizwi Telecommunications and Amatole Telecommunications for the Eastern Cape's OR Tambo and Amatole districts, respectively; Karabotel, to operate in central district of North West; and Bokamoso Consortium for the Lejweleputswa district in the Free State.

They were given R5 million each to set up the network. A further R10 million each is still pending.

A report by research firm BMI-Techknowledge (BMI-T) paints a gloomy picture of what the future looks like for the Usals.

The report, released last month, shows that of the six Usals that participated in the study, three have made a combined R2.4 million in revenue. Two did not disclose revenues and one was not available.

It has been more than two years and none of these Usals are close to breaking even. Experts say Usals, like other businesses, should be given eight years - five years to break even and three years to make a profit.

But without intervention from the Independent Communications Authority of SA (Icasa) and the Usals, "most may not survive", says BMI-T director Mandla Kuzwayo.

The Usals have 17 000 subscribers. Average revenue per user for the Usals' subscribers is R20.

"The Usals hope to go Ebitda positive in year-three is unrealistic," the report warns. Ebitda is earnings before interest, taxes, depreciation and amortisation. The Usals rely heavily on the business plans that were drawn up by consultants.

The Usals lack corporate governance and are in need of training and support at board and management level. Moreover, they are unable to attract third-party funding. The biggest problem is they cannot manage their own finances. Of the R35 million, R2.4 million was used for the business and network plans and the balance on working capital.

But it must be borne in mind that the licences were granted in areas other operators did not consider profitable and most if not all the Usals are run by small enterprises or previously disadvantaged individuals.

Given all these factors, the Usals can be blamed for their misery because they took this huge task with no clear understanding of how the telecoms market works. The government can also be blamed for licensing the Usals and leaving them to fend for themselves with no support.

Tebogo Khaas, the chairman of the SMME Forum, says the Universal Services Agency and Usals should do some introspection because at present the Usals "were set up for failure".

Lyndall Shope-Mafole, the director-general of the department of communications, says it is not fair that the Usals are set up for failure.

"The reason we have Usals is because the private sector does not want to operate in those rural areas because they are unprofitable."

The Universal Services Agency, which is tasked with funding Usals, admits that the Usals are struggling. It commissioned the study to avoid giving them a second tranche of the R35 million. "This was to ensure that we avoid giving the next tranche because it is taxpayers' money."

Telkom, MTN and Vodacom are cannibalising the Usals through roaming agreements. This is making the situation worse. It has prompted four Usals to form a shared service company, in which they will share infrastructure such as billing systems and network.

The chairman of the Usals Forum, Bule Mhlongo, says the problem with the government is that it does not know how to deal with the Usals.

"We don't feature anywhere Â… nobody knows where to fit us in," she says, adding that it is premature for Icasa to license other Usals in Mpumalanga, Limpopo and the Eastern Cape.

Critical to the Usals' success is the 800 megahertz spectrum allocation, which allows telecoms operators to offer wireless services. The spectrum is used for broadcasting purposes but Icasa is investigating the feasibility of allowing broadcasting and telecoms operators to share the spectrum.

Telecoms incumbents are making it harder for Usals to make profits because of the high interconnection fees they demand from them.

Icasa is negotiating an interconnection model for Usals.

BMI-T suggests that Icasa negotiates cost-based interconnection for the Usals. It recommends that the government increases the Usals' funding because with R5 million there is not much that they can buy. The funding is also taxed by the SA Revenue Service.

Another recommendation is the amendment of Usals' regulations. The government is urged to force the parastatals and municipalities to transfer their telecoms services to the Usals. This will be difficult since municipalities are considering entering the telecoms industry by partnering with value-added network service operators.

Shope-Mafole says the minister of communications, Ivy Matsepe-Casaburri, will announce a number of initiatives before the end of the year to help the Usals. In response to why the government does not implement training and marketing programmes for Usals as soon as they are licensed, Shope-Mafole says: "We can't foresee everything … we have to prioritise and there is so much to do at a particular time."

Universal Services Agency's board member, Bibi Khan, says the Usals issue is complex but not unique. "Without a viable source of funding and a viable business plan, Usals are doomed for failure."