Communications South Africa

Lack of INFRACO clarity

2007-02-07T07:46:00.000-08:00

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

2007-01-26T23:06:00.000-08:00

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

2007-01-26T22:32:00.000-08:00

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

2007-01-20T07:00:00.000-08:00

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

2007-01-20T06:58:00.000-08:00

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

2006-12-23T07:46:00.000-08:00

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

2006-12-23T07:45:00.000-08:00

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

2006-12-23T07:43:00.000-08:00

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

2006-12-23T07:42:00.000-08:00

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

2006-12-23T07:41:00.000-08:00

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

2006-12-23T07:39:00.000-08:00

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

2006-12-23T07:38:00.000-08:00

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

2006-12-23T07:33:00.000-08:00

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

2006-11-26T08:50:00.000-08:00

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?

2006-11-24T16:26:00.000-08:00

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

2006-11-24T16:21:00.000-08:00

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

2006-11-24T15:49:00.000-08:00

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

2006-11-20T23:12:00.000-08:00

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

2006-11-20T13:14:00.000-08:00

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."

The exodus continues

2006-11-18T13:32:00.000-08:00

NADIA BULBILiA (Vodacom's new head of regulatory affairs), MTN regulatory head Nkateko "Snakes" Nyoka, Primedia regulatory chief Michael Markowitz and ICT start-up VoIP-tel founder Andries Matthysen have one thing in common.

They all honed their skills at South Africa's communications regulator, Icasa. They are just a few high profile individuals who have been lured from the troubled telecoms regulator.

Whispers rebounding off Icasa's corridor walls seem to suggest that a few more high profile departures are imminent - that coming at a time when Icasa is shouldering the burden of implementing SA's new Electronic Communications Act (ECA). A source claims that disgruntled senior managers overlooked for councillor positions are also on their way out.

Deputy Communi-cations Minister Roy Padayachie says the department is concerned about the relentless staff exodus at the telecoms regulator. "We're doing everything within our capacity to lobby National Treasury to boost its funding for Icasa. However, for as long as there's a shortage of specialised skills, any increase in funding won't in any way solve Icasa's woes."

Although a myriad of explanations - including low staff morale and unattractive pay packages - have been cited as reasons for its high staff turnover, a former Icasa official lays most of the blame on Icasa head Paris Mashile's managerial incompetence.

MTN boss quits over Post Office scandal

2006-11-15T01:38:00.000-08:00

Maanda Manyatshe quit as MD of cellphone company MTN yesterday over a scandal involving allegations that he approved a tender without following proper procedures during his tenure as CE of the South African Post Office.

Manyatshe's resignation, ostensibly to "clear his name", raises the stakes with his former employer and is likely to increase tensions with his successor at the Post Office, Khutso Mampeule.

Manyatshe confirmed yesterday his lawyers were drawing up a civil damages claim of R100m against Mampeule and the Post Office.

This latest twist also throws the spotlight on to how this matter is being handled by Communications Minister Ivy Matsepe-Casaburri, as Parliament's portfolio committee on communications noted two weeks ago that the damage to the Post Office's reputation could be immense.

Since it first emerged that Mampeule had laid a criminal complaint against Manyatshe and others over a controversial tender to design a "new image" for the Post Office, it is understood that Matsepe-Casaburri has taken considerable interest in the operation of the Post Office's board, including how it handled the Manyatshe incident.

Although the accusations against Manyatshe relate to the time before he arrived at MTN, the cellphone company's shares climbed 3,1% on the JSE yesterday, which traders said was partly due to Manyatshe's resignation and partly due to positive results from rival Vodacom yesterday.

Manyatshe confirmed yesterday he was quitting because the scandal "puts my employer in an unenviable position, when you have got this cloud hanging over (me)".

He said MTN had not asked him to quit, but he conceded that the company was "under some pressure ... and I wasn't doing them any favours by remaining in my position".

Now Manyatshe says he will focus his time and attention on "clearing his name" -- but would not reveal how he would do so. He confirmed that his lawyers were drawing up papers to sue the Post Office and Mampeule for R100m, which would include his losses for his work at MTN.

"The biggest thing for me, though, is how do I clear my name publicly? Afterwards, I can still go anywhere," he said.

MTN CEO Phuthuma Nhleko said that he "supports and respects Maanda's decision to act in the interests of the company ... his management of the operation has been exemplary".

Brian Gouldie, MTN's executive for consumer business, has been appointed acting MD.

The scandal erupted after Mampeule laid a complaint with the police against Manyatshe, two other former Post Office executives, and a company trading as Vision Design House (VDH).

This complaint alleges that Manyatshe, the Post Office's retail GM, Geoffrey Mabote, and transformation executive Francis Matabane were behind the irregular appointment of VDH to create a "new image" for the Post Office.

The Post Office paid R99,5m to VDH, then cancelled the deal.

In his complaint, Mampeule said that while 19 bidders had initially tendered for the job, the tender 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 also claimed VDH charged 285% more than similar projects, and that its work was sub-standard.

VDH sued the Post Office for the money it wanted for the rest of the contract, but Mampuele said not only were those proceedings "without any merit whatsoever", but the Post Office "is of the view that it has been defrauded out of substantial sums of money".

Until now, the police have taken no steps

Manyatshe said the VDH contract "went through the Post Office procurement process" and was driven by various executives and departments, including the procurement department, the Post Office tender board, and its executive committee.

"The deviation from tender was fully justified by the executive of procurement. I only signed the agreement after the (procurement department) had advised me that the Post Office procurement process was not violated," he said.

In recent weeks, the Mail and Guardian newspaper has published allegations that in exchange for pushing through its tender, VDH agreed to do work on Manyatshe's house as a kickback.

Manyatshe disputed this, saying that VDH "did not do any alterations to my places of residence, neither did they do any landscaping in any one of them".

Are the standards really that low?

2006-11-07T13:10:00.000-08:00

Recent media reports about ICASA and the Department of Communications (DoC) indicate that these two institutions are quite happy with their own performance, and rate themselves very highly. Users and journalists disagree.

In a recent Mail & Guardian survey the Director General of Communications, Lyndall Shope-Mafole, was given an E, meaning: “Do yourself and the country a favour – resign”. Shope-Mafole’s response to her E was that she not only disputes this grade but thinks that the DoC is in fact ‘performing well’, and gives herself a C-grade.

A similar scenario is playing itself out with ICASA . ICASA has come under fire recently with massive staff losses, a criminal investigation against its CEO, its chairman accused of sleeping on the job and many people feeling that ICASA suffers from a general lack of performance.

The Regulator however seems oblivious to the dent these accusations have caused their reputation and has chosen to give itself an A for its excellent performance.

It is quite astounding that both ICASA and the DoC are brazen enough to congratulate themselves on a job well done when local telecoms prices remain extremely high and our broadband penetration is more than 15 times lower than the OECD average.

The recently released ICASA ADSL Regulations provide a good example of the problems that exist within the Regulator. The regulations were heavily criticized for their lack of clarity and foreseeable problem with implementation.

If one considers that the ADSL regulation process took in excess of two years it is all the more shocking that such a poor set of regulations was Gazetted.

Attempts to contact ICASA from both industry and consumers to gain clarity on the regulations were met with an endless round of excuses with the final nail in the coffin from the chairman himself - Paris Mashile.

Mashile stated that ICASA did not have enough evidence to ascertain that Telkom’s prices were in fact unreasonable, practically wiping out the two years of work on regulations aimed at reducing the price of ADSL.

While industry is grappling with what to do to fall in line with the regulations, ICASA, who should be leading the fray, is nowhere to be found.

This rather dismal performance from the Regulator begs for the definition of ‘excellent performance’ to be rehashed.

The Department of Communications is however not setting the best example for their independent regulatory arm.

The DoC is not performing much better with the heavy burden of Telkom’s monopoly still weighing the sector down. The much touted arrival of the SNO, which was incidentally four years late, has not relieved too much of the strain yet.

Dawie Roodt, a renowned South African economist, recently estimated that Telkom’s extended monopoly due to the SNO’s delayed launch cost South Africa in excess of R 50-billion in the last five years.

The reason provided for this shocking delay, which has resulted in a huge waste of money, is that the DoC miscalculated how long it would take. In a recent interview in Black Business Quarterly the Minister of Communications, Dr. Ivy Matsepe-Casaburri, is quoted as saying that they underestimated the process of introducing a second national operator.

While it is admirable that the DoC is coming clean on some of its mistakes, it does not seem to realize the biggest one, namely not opening up the market to true competition.

Their ‘managed telecoms liberalization’ has proved to be a dismal failure, but instead of cutting their losses and following the rest of the world, Government is clinging ever more ardently to the idea that they should control this industry.

Government, through the Department of Public Enterprises, is in fact getting even more involved in telecoms and is in the process of establishing their latest telecommunications infrastructure company - InfraCo.

Government and ICASA seem to have lost their way. They have forgotten that their role is to ensure affordable and universal telecommunications services to all South Africans. Should they not be rating themselves according to these criteria?

Apparently not. While local businesses and consumers suffer due to the high price of telecoms and poor availability of broadband services both ICASA and the DoC are quite content with their performance.

This may be an indication that these organizations are not entirely in touch with what consumers and businesses need, or maybe it is merely an indication of the standards they set themselves.

The socialist way

2006-11-07T03:23:00.000-08:00

Government has done it again. Instead of opening up the market to competition and allowing free market principles to dictate broadband service delivery and pricing, it formed another state-controlled company called InfraCo, which will allegedly solve all our bandwidth woes.

In its latest telecoms venture, government has used the telecommunication arms of Eskom and Transnet to form InfraCo. The idea behind the new company is that it will allow any business, even Telkom, to make use of its well-developed country-wide fibre-optic network for its bandwidth purposes.

Government has further indicated that InfraCo may lay a new submarine telecommunications cable on the west coast of Africa to service part of the country’s international bandwidth needs.

These developments follow not too long after our esteemed Communications Minister, Ivy Matsepe-Casaburri, said in parliament that Sentech, another state owned company, will form the core of South Africa’s wireless broadband infrastructure network.

Sentech is incidentally still waiting for its bag full of money from government to expand its current wireless broadband coverage. But the long wait is proving costly, as it is struggling to hold on to the last of its MyWireless customers after many of its subscribers decided to jump ship in the past two years.

InfraCo, on the other hand, has been earmarked for R647m in funding from the state, enough to at least establish themselves as a serious player in the local bandwidth market.

Don’t get me wrong, it’s great that there will be more bandwidth available to telecoms companies and Internet Service Providers, but do we really need another state-owned enterprise in the already crowded government-controlled telecommunications environment? Will this really do the trick of increasing competition?

So let’s get this straight. Government’s latest plan in its “managed telecoms liberalisation” quest is to form and fund a state-owned company that will effectively compete against Telkom, another company in which the state has a majority share.

And where does Neotel, our second national operator in which government again has a large stake, fit in? Well, it will obviously be able to lease facilities or purchase bandwidth from the other two state-controlled entities to bring new services and “true competition” to the market. And if all of this fails to bring down prices and extend broadband coverage, we still have the parastatal Sentech which will imminently roll out wireless services countrywide and connect even the most rural of villages.

If you are thinking that government is playing an all too dominant role in the struggle to “liberalise” telecoms in SA, you would be right on the button. In an industry where free market forces should decide price and service delivery, government conveniently has its finger in every pie.

It seems that government is still not convinced that its experiment of sheltering Telkom from real competition failed dismally. The initial plan was that in this protected environment Telkom would invest in infrastructure, bring services to rural communities and drop its prices to make South Africa a vibrant information technology hub.

This business model was doomed to fail from the start. Of the numerous fixed lines connected during its monopolistic reign, Telkom has disconnected a large portion due to non-payment. Our local telecoms prices have also stayed artificially high due to the lack of competition.

And who can blame Telkom? It is merely utilising its biggest asset, namely being a legally protected monopoly, to ensure the best possible returns for shareholders. And how advantageous is it that its majority shareholder, namely government, is also the entity which can decide on whether it will allow true competition or not.

Most telecoms experts and officials are well aware that it is strong competition and not governmental interference that brought about lower broadband prices and improved service delivery internationally, so why does government continue to protect Telkom and other operators from free market forces?

While the answer to this question is not entirely clear, what is crystal clear is that both local businesses and ordinary South Africans are continuing to suffer as a result of a lack of true competition in the telecoms space.
Our ADSL services remain nearly 1 000% more expensive than comparable services internationally, and the very high cost for bandwidth in South Africa continues to suck the life out of the local IT industry.

Maybe InfraCo will actually have a positive impact on bandwidth prices and broadband provisioning in South Africa, and maybe Sentech gets its money and rolls out cheap wireless broadband for all. But maybe government should not confuse public service with doing business.

Our communications minister, however, remains optimistic that consumers may see lower prices before Christmas 2006, mainly as a result of Neotel’s entrance into the market.

SAT3 confusion

2006-11-05T10:39:00.000-08:00

The Minister of Communications was recently quoted as saying that the SAT3 cable, running down the west side of Africa, was "at full capacity". This comment raised some eyebrows in the telecoms community.

The SAT3/WASC system has a full capacity of 120 Gb/s, and while some telecoms experts believe that its current capacity may be sold out they are quite certain that it is far from running at capacity.

“SAT-3/WASC/SAFE cable has been designed to operate for a period of up to 25 years. During the life of the cable system, upgrades can be effected which are aimed at increasing the amount of equipped capacity in the system. This is achieved by installing more equipment at cable landing stations,” Telkom said.

While there is no publicly available information as to how much capacity Telkom has on the SAT3 system and exactly what the system’s current full capacity is, it is believed that the system is currently configured at 40 Gbps.

This means that the system still has a ‘spare’ upgrade capacity of 80 Gbps, which in effect means that it is very far from running at ‘full capacity’.

Most telecoms experts that were contacted said that it is highly unlikely that the capacity on the system is fully utilized. Telkom confirmed this in an official response.

“The majority of the parties in the SAT-3/WASC/SAFE consortium have not exhausted their allocated capacity. However the phenomenal growth in broadband has led to increased levels of utilization which have seen the cable system being upgraded to release more capacity for the investors,” said Lulu Letlape, Group Executive for Corporate Communication at Telkom.

Telkom invested $85 million in 2002 in SAT3/WASC/SAFE which makes it the major shareholder in the system, an investment that has paid great dividends to the telecoms giant. Telkom is also the system’s network administrator. The full system cost an estimated $ 650-million to develop.

The Minister’s comments are thought to be part of her drive to promote the construction of a new submarine telecommunications cable system on the West coast of Africa.

While detailed information about this intended cable system is not yet available, it is closely linked to the needs of the projected square kilometer array telescope for which South Africa is bidding.

Erwin comes to the rescue

2006-11-03T06:51:00.000-08:00

DETAILS are still sketchy about what government intends to do with Infraco, a new company it unveiled last week to lower the cost of broadband.

Which assets are in the company, who will be allowed to buy its bandwidth, what plans there are to extend its reach, and when it will start operating are among the great unknowns.

The hard facts are few: its core asset is a national telecoms backbone built by Eskom, and R627m has been budgeted to develop the new state-owned entity.

Anyone craving further details must wait until the end of the month, when Public Enterprises Minister Alec Erwin will clarify his plans. What Erwin has said is that Infraco is essential to make SA’s hi-tech sector globally competitive by rapidly increasing the availability of broadband and decreasing its cost to introduce “a genuinely competitive” supply of bandwidth.

It is not surprising Erwin deems it necessary to step into the telecoms arena, given the failure of his colleague, Communications Minister Ivy Matsepe Casaburri, to usher in better and cheaper services. Despite her years in office, telecoms remain extraordinarily expensive, and President Thabo Mbeki’s repeated calls for cost reductions have washed over her.

In May, Matsepe-Casaburri surprised everyone, including Sentech, by saying the state owned signal carrier would become the core of a national wireless broadband network to provide voice and data services, especially to rural areas. Little has happened since then.

Matsepe-Casaburri also decreed that bandwidth on the crucial Sat-3 undersea cable linking Africa to Europe should be sold to all operators at a cost based price. The industry is still waiting.

Cue Erwin, with plans of his own. His department’s direct intervention should significantly lower the cost of broadband by supplying long-distance and international networks, he said. What the communication department’s policy of “managed liberalisation” may achieve in a few years, Infraco would achieve by early next year, he claimed.

The creation of Infraco should bring much-needed competition to a market still shackled by Telkom’s dominance, although industry players are concerned that it is yet another government owned entity.

The lack of detail makes it difficult for the current players to comment. Telkom issued its usual bland statement that it welcomed competition and the expansion of broadband access to a broader section of society.

Telkom ’s new rival, Neotel , was also taciturn, saying the news “does not affect Neotel’s business and strategy model”. Neotel would continue to provide connectivity to internet service providers and other suppliers of voice and data services. If providing connectivity to its customers required Neotel to lean on the high-capacity network of Infraco, it would do so as it had full access to it, its statement said.

Democratic Alliance spokeswoman Dene Smuts believes the plans for Infraco must be debated at public hearings.

“I do not blame minister Erwin for setting up as telephone minister number two, given communication minister number one’s shortcomings,” she said. But the sector needed certainty, and it was unclear how Infraco related to government’s earlier move to budget R1bn for Sentech to roll out a broadband network.

“Is Erwin taking us back to a giant state telco or does he just want to offer cheap wholesale capacity to all players?” Smuts asked.

Clearly, one of Erwin’s aims is to help Neotel become a successful rival to Telkom. But that will demand careful regulations, otherwise Infraco could destroy Neotel’s business by stealing its customers. If SA’s hundred-or-so internet service providers can buy bandwidth from Infraco, Neotel’s plan to serve those customers itself will be scuttled.

Erwin said Infraco would make the necessary investments to serve the needs of Neotel and speed up the introduction of Neotel’s services.

That would have a positive effect on the availability and cost of broadband, he said.

Infraco will house the national fibre-optic networks built by Eskom and Transnet. It is not clear if that means reversing a deal that saw Neotel buy Transnet’s inner-city fibre-optic network for R256m.

However, the inner-city networks may remain within Neotel, with only the national networks folded into Infraco.

Neotel uses the network it bought from Sentech as the basis for its connectivity services, and also leases capacity on Eskom’s network. Government initially planned to sell Eskom’s R748m network to Neotel but changed its mind, apparently to save Neotel from having to inflate its fees to recoup an initial heavy outlay.

Now Neotel will access Eskom’s backbone through the new network wholesaler. 1bn radio telescope that SA is bidding to host.

Erwin has declined to give any further clarity, except to “dismiss inaccurate speculation” that Infraco would construct an undersea cable to compete with Sat-3.

There is still little clarity in whether Infraco is planning to lay a new submarine cable to rival the existing Sat-3 undersea cable around the west coast of Africa.

While Erwin appeared to scotch that rumour by saying he needed to “dismiss speculation ” (or whatever that quote siad) that it planned to do so, on Friday Department of Communications director-general Lyndall Shope-Mafole told Parliament that Infraco would lay its own submarine cable along the west coast, given the country’s expected surge in demand for broadband.

Telecoms analyst Richard Hurst of BMI-TechKnowledge says Infraco is “a laudable initiative” to curb the cost of telecommunications and broadband in particular. “This level of government intervention may be higher than anticipated, but highlights the fact that the incumbents have failed to deliver a cost-effective service to under serviced areas,” Hurst says.

Yet despite the best of intentions, Infraco would become a third fixed network operator and may end up stifling Neotel, he warns.

Infighting unearths incestuous deals

2006-10-30T07:09:00.000-08:00

Infighting at the SA Post Office has unearthed incestuous business relationships and conflicts of interest by the chief executive and the chairman of the board.

Khutso Mampeule, the chief executive of the Post Office, and Phuti Tsukudu, his chairman, are in hot water with communications minister Ivy Matsepe-Casaburri.

Matsepe-Casaburri is angry that Mampeule bypassed board chairman Tsukudu and called a board meeting to discuss selling insurance products through Postbank branches.

The implication of Tsukudu's appointment to the board of Mutual & Federal this month was on the agenda of the meeting.

Mampeule felt that by being a board member of the two companies, Tsukudu had a conflict of interest.

So certain was Mampeule of Post Sure going ahead that he requested for a professional opinion on Tsukudu's possible conflict of interest from Nigel Payne, an independent risk and corporate governance consultant.

Payne's opinion was that a conflict of interest arose.

Strangely enough, the agenda for the extraordinary meeting did not include the insurance business case, which topped the agenda.

But it did include the implications of Tsukudu's appointment to the board of Mutual & Federal.

This whole matter infuriated Matsepe-Casaburri, who has pointed out that as Tsukudu was a cabinet appointee, she should have been consulted.

The extraordinary board meeting on the insurance deal was also held in an extraordinary manner - telephonically - with Mampeule in Switzerland, where he was attending an International Postal Union meeting.

What did Manyatshe get?

2006-10-29T11:45:00.000-08:00

Did the contractor controversially paid R100-million by the Post Office to revamp its branches do private favours for executives of the parastatal -- including its then-CEO, Maanda Manyatshe?

Manyatshe, now boss of cellphone giant MTN, denies a "corrupt relationship" with the contractor, Vision Design House (VDH). But he admits that, at the time VDH worked for the Post Office, he discussed the state of his homes with a VDH director, who visited his Cape Town home and produced a “computer-generated schematic of suggestions”. This, he says, was “the extent” of his private involvement with VDH.

VDH also worked on design plans for Manyatshe’s Johannesburg home. This was days before Manyatshe signed the main contract between the Post Office and VDH.

VDH worked on the décor of a Lesotho restaurant co-owned by Francis Matabane, another former Post Office executive involved with the VDH contract. Matabane is now chief financial officer of the regional electricity distributor in Cape Town.

Evidence of the dubious relationship between VDH and Post Office executives came as a war of attrition between the Post Office’s past and present CEOs escalated dramatically.

The Post Office under Manyatshe improperly awarded the branch revamp contract to VDH, and that VDH fraudulently inflated costs.

Manyatshe’s successor, Khutso Mampeule, had laid a criminal complaint against VDH, Manyatshe, Matabane and a third former Post Office executive, Geoffrey Mabote.

Mampeule alleged in two affidavits — one prepared for the police commercial branch and the other answering a civil claim by VDH — that the Post Office put the project out to tender in 2003, but cancelled as the process neared completion.

Manyatshe, Matabane and Mabote then put forward VDH, which had not participated in the tender process, to refurbish branches on an ad hoc basis. By May 2004 it had been paid about R12-million for refurbishments approved by Manyatshe.

The situation was “regularised” in June 2004 when a contract was signed between the Post Office, represented by Manyatshe, and VDH.

The Post Office board approved the contract on condition that business cases be made for each individual project, but this was not done. Manyatshe left for MTN in 2004. Matabane and Mabote were charged internally late last year. Matabane resigned and Mabote was fired. By the time Mampeule cancelled the contract last year, VDH had been paid close to R100-million.

Manyatshe, Mabote and Matabane have denied wrongdoing. Manyatshe denied involvement with the cancellation of the original tender or driving VDH’s appointment, and claimed the tender deviation was regular.

Evidence that VDH did favours for Manyatshe and Matabane, however, raises new questions.

Answering on Manyatshe’s behalf, consultant Bart Henderson said: “My client acknowledges discussing with Mr Joseph Ynclan, an interior designer and director of VDH, months after the commencement of the work by VDH at [the Post Office] the fact that he was impressed with VDH’s work. My client states that he told Mr Ynclan that his homes needed some attention. Mr Ynclan suggested he could give Mr Manyatshe some ideas in regard to this.

“Mr Ynclan duly visited Mr Manyatshe’s home in Cape Town and supplied a three dimensional computer generated schematic of suggestions he had ... Mr Manyatshe states that this is the extent of his involvement with VDH in regard to the allegations made against him.”

Henderson also said Manyatshe had “communicated with numerous members of the Excom at the time of this discussion with Ynclan and also advised the members of the Excom that they were not to use VDH for any private work even if this work was at face value … This is not the conduct of someone building and sustaining a corrupt relationship.”

There is no evidence of physical renovations at the Cape Town home.

A fax, dated June 18 2004, sent by VDH to Manyatshe and his then secretary at the Post Office. It reads: “Regarding the progress at the CEO’s house at Kyalami estate [in Johannesburg] … We are unable to gain access to the premises but are busy off site with design preparation and attaining various quotations from the relative contractors. The landscaping plan and pool designs are almost complete but final measurements need to be made on site …”

While the fax does not suggest VDH ultimately did any refurbishment at Manyatshe’s Johannesburg property, it shows design work was done. Manyatshe met the VDH design team in this regard. This evidence flies in the face of Henderson’s assurance that Ynclan’s Cape Town design “suggestions” represented “the extent” of Manyatshe’s involvement with VDH.

The fax was dated four days before Manyatshe signed the contract between the Post Office and VDH.

With regard to work done for Matabane, he and McQueen Matabane, thought to be his wife, co-own Good Times, a restaurant and entertainment venue in Maseru, Lesotho.

An M&G reporter, concealing his identity, spoke to a shift manager and McQueen Matabane about the décor at Good Times. Both confirmed that the work had been done by VDH 18 months to two years ago, but could not give the cost.

This was while Matabane was still at the Post Office and VDH still worked for it.

VDH sued the Post Office last year over Mampeule’s cancellation of the contract. The matter was subsequently referred to a private arbitrator, who will also examine a Post Office’s counter-claim.

Communications Minister Ivy Matsepe-Casaburri has become embroiled in an extraordinary battle between Post Office CEO Khutso Mampeule and his predecessor, Maanda Manyatshe.

A war of attrition between camps headed by the two men spilled into the open after allegations that Mampeule had made against Manyatshe, now boss of MTN South Africa.

The allegations, relating to a R100-million Post Office branch revamp deal, were contained in an affidavit Mampeule submitted earlier this year to police in support of a criminal complaint against Manyatshe and others. Manyatshe has denied impropriety.

After failing in a bid to gag the M&G, Manyatshe launched a public campaign against Mampeule, using the services of “certified fraud examiner” Bart Henderson.

Henderson purported to refute the allegations against Manyatshe, and has distributed a barrage of counter-allegations against Mampeule, sending them to journalists, Post Office board members and MPs.

In a letter to the Post Office, Henderson gave notice that Manyatshe intended to sue the parastatal for R100-million as a result of Mampeule’s allegations against him.

Matsepe-Casaburri this week wrote a tough letter to the Post Office, seemingly weighing in on Manyatshe’s side.

She raised two issues emphasised by Henderson in his releases — the departure of senior executives under Mampeule and Manyatshe’s threat of litigation against the Post Office.

She states: “I have been receiving numerous letters from staff regarding work relations that have caused numerous resignations at the Post Office … What are the implications for [the Post Office] if any?

“Kindly also advise on an affidavit by the CEO [Mampeule] that is the basis of litigation against [the Post Office] if any by Mr Manyatshe.”

Another issue raised by Matsepe-Casaburri indicates that a new battle front has been opened around the person of Phuti Tsukudu, the Post Office chair.

Manyatshe appears to have made common cause with Tsukudu, who served on the board during his tenure. In an affidavit for his gag bid against the M&G, Manyatshe cited discussions with Tsukudu in which she allegedly agreed there was nothing untoward about the branch revamp deal.

Mampeule, in turn, appears to be gunning for Tsukudu. He called an extraordinary board meeting for last Saturday, from which Tsukudu was excluded, to discuss an alleged conflict of interest.

It emerged that Tsukudu had been appointed to the board of Mutual & Federal — as Mampeule presented a proposal to the board outlining a plan for the Post Office to enter the insurance market.

Company secretary Hennie van Staden told the board that according to expert opinion, Tsukudu could not serve on both boards.

Tsukudu apparently reacted by calling on Matsepe-Casaburri, who appears to have sided with her. The minister said Mampeule’s call for an extraordinary board meeting without Tsukudu’s approval seemed “highly irregular”. She asked why the Post Office had apparently shortlisted a partner for the insurance plan without consulting her, and why the Post Bank MD had been excluded from deliberations.

Industry demands clarity

2006-10-29T11:31:00.000-08:00

News that the government-owned Infrastructure Company (Infraco) would be allocated R647 million received a muted reception from the telecommunications industry, with many players demanding clarity on the company's operations.

Finance minister Trevor Manuel said government would allocate R1.4 billion to Infraco and the pebble bed modular reactor. Geoff Rehmet, manager for new business at Internet Solutions, said there was a conflict of interest with the state having a stake in telecommunications operators.

Government owns a 38 percent stake in JSE-listed Telkom and, through Eskom and Transtel, it has a 30 percent stake in Neotel.

"There should be clarity on how Infraco will work, its pricing structure and also the benefits to ISPs… and other service providers," Rehmet said.

Online technology news service ITWeb previously reported that the department of public enterprise (DPE) planned to build a submarine cable from SA to Europe to compete with Telkom's Sat3.

The department of communications has a stake in the Eastern Africa Submarine System undersea cable, which will link South Africa and east African countries.

Rudolf Muller of MyADSL said that if DPE was investing in a submarine cable then government departments - DPE and the department of communications - would be competing with each other.

"If the department of public enterprises establishes their own network and undersea cable it will effectively mean that they are in competition with Telkom and hence also the department of communications which is a majority shareholder in Telkom. It would be far more advantageous for government to license a second and a third national operator to create competition in the fixed-line telecoms arena to drive prices down and improve service delivery."

Dobek Pater, a telecoms analyst at Africa Analysis, said government was giving industry a sense that telecommunications was a strategic asset for it and wanted to control it as much as it could.

Erwin said he planned to set up Infraco using the long-distance fibreoptic network created by Eskom and Transnet. This was despite minister of communications Ivy Matsepe-Casaburri saying earlier this year that the department would use Sentech to roll out wireless broadband services.

It is not clear whether Infraco will require an infrastructure licence from the Independent Communications Authority of SA or whether it will use Eskom's private telecommunications network licence.

Frothing at the mouth

2006-10-23T10:57:00.000-07:00

Listen to SABC CE Dali Mpofu, raging against critics who have suggested he may have been a little economical with the truth when he tried to whitewash the Sisulu-Marcus report into blacklisting at the national broadcaster.

“The current SABC ‘blacklisting’ controversy is a storm in a teacup. It is a lot of noise about virtually nothing. It can only serve to detract from the real issues, the ideological battle of ideas and the ill-fated attempts to hijack our democratic values of ubuntu and human dignity on which our Constitution is premised."

“As the only person who initiated and appointed the Sisulu Commission, let me state that my intention was never to satisfy the bloodlust of the right-wing lobby (read white) and its fellow travellers (read black) in the mass media. That would have been trying to do the impossible."

“These people will never find anything positive done by someone (black) like me. Short of returning to the caves, some of us will never do right in the eyes of the spoilt South African right wing and its media. In SA, the right wing is wrongly referred to as ‘liberal’.”

The intellectual poverty of the above extract (and the rest of the article) helps you understand why a lawyer like Mpofu might instead seek sheltered employment from the state.

Here’s another piece of awesome analysis: “Let me state clearly that people who think the Mail & Guardian was motivated (to publish a leaked copy of the final Sisulu report after Mpofu had tried to snow-job it) by ‘the public interest’ needs (sic) their heads examined.

“It should be patently clear that it was a combination of commercial motives, headline-grabbing one-upmanship against other newspapers and the pervasive anti- establishment hatred of anything connected to the democratically elected black-dominated government of the day, pandering to the basest instincts of the South African mainly racist political right wing as evidenced by its selective reporting when it had the full report.”

The impression that there might be a level-headed chap in charge at the SABC can now safely be discarded.

Don’t call Mpofu a liar, though. Only a right-wing racist so-called liberals out to trash anything black would do that. Remember who once wrote, after a long and intimate relationship with Mpofu and who therefore can be reckoned to have known him well, that he was a “compulsive, sophisticated liar”.

It was Winnie Mandela, Mother of the Nation, way back in 1992.

Gagged and bound

2006-10-22T11:10:00.000-07:00

SABC CEO Dali Mpofu is having an awful year. Not only is he having to deal with one scandal after another at the state broadcaster, he is having to backtrack on his own commitments to transparency and corporate governance.

After his appointment last year, Mpofu expressed determination to fight for his independence from board interference. He is losing that battle and, in the process, destroying his own reputation.

"When I was interviewed I made it clear I would act independently," Mpofu said at the time. "So if the board did not want somebody who was independent, it would not have hired me."

But for the second time in a year, Mpofu has come out in defence of the SABC's head of news and current affairs, Snuki Zikalala, for apparently disregarding the mandate of the public broadcaster to provide fair and balanced coverage.

Mpofu's defence of Zikalala - this time in the wake of the blacklisting scandal - is probably against his better judgment. However, if he were to tackle Zikalala, Mpofu would be the one likely to come off second best. Zikalala enjoys strong support from the board and particularly from chairman Eddie Funde and deputy chair Christine Qunta. All three seem to believe that a critical mandate of the SABC is to protect and advance the interests of the ruling ANC.

For Mpofu, this has meant he has had to resort to two commissions of inquiry since he took over the reins.

The first commission, last year, investigated why the SABC's main TV news bulletins did not cover a "booing" incident involving supporters of ANC deputy president Jacob Zuma at a function addressed by deputy president Phumzile Mlambo-Ngcuka. Zikalala and his team were cleared of any wrongdoing.

Last week, Zikalala come under attack again for banning commentators believed to be critical of government and President Thabo Mbeki. Despite being fingered by the commission, led by former SABC CEO Zwelakhe Sisulu, as being a key player in the banning of political analysts, Zikalala is unlikely to face any action.

Mpofu's hands are tied by the board's statement, which voices support for Zikalala. This flies in the face of Mpofu's earlier statements that "heads would roll" if someone was found to have contravened the SABC's editorial policies. Mpofu had hoped to use the outcome of the Sisulu commission to deal a blow to Zikalala.

As one source says, the findings of the Sisulu commission presented Mpofu with strong evidence to show that Zikalala deliberately infringed editorial policy. But Mpofu has instead committed hara-kiri, and made one fatal error. He didn't get his board on side before appointing the commission.

Though the commission found Zikalala guilty as charged, the board balked, and refused to release the report. Mpofu went out to defend Zikalala and in the process misled the public by suggesting that the commission had exonerated Zikalala. Any superficial reading of the commission's report leaves no doubt about its findings.

The no-action stance also deals a heavy blow to what was left of Mpofu's reputation as the public broadcaster's editor-in-chief, given that he had no broadcast or journalism experience to begin with. Nothing commended him to Africa's most powerful media position.

He was always going to be up against it. Zikalala had already seen off Peter Matlare, Mpofu's predecessor. He had been brought back from government by the SABC board to head the news division against Matlare's wishes.

Nothing prepared Mpofu for the snakepit that is the SABC and he has now been hung out to dry, his credibility shattered.

If Mpofu is to continue working for the SABC, it's not likely to be the last time that he will have to backtrack on his commitments.

More power to the minister

2006-10-20T13:41:00.000-07:00

Communications Minister Ivy Matsepe-Casaburri defended her powers against opposition attack in Parliament during a debate on the second reading of the Postal Services Amendment Bill.

The bill is largely technical, and brings the principal act in line with the Electronic Communications Act and the Independent Communications Authority of SA (Icasa) Act but also confirms the power of the minister to create policy for the postal industry.

Matsepe-Casaburri said the bill would ensure postal regulation was transferred from the department to Icasa, the independent institution with powers of regulation over telecommunications and broadcasting as well.

But Democratic Alliance communications spokeswoman Dene Smuts said prior legislative amendments had already achieved this transfer of regulation to Icasa. Smuts said the bill would reassign to the minister the power to decide when reserved, nonelectronic services would be opened up for competition, whereas this power should reside with Icasa.

In terms of the bill, the minister will be able to review the exclusivity of the Post Office every five years instead of the current three years. The memorandum to the bill stated that the minister should have the authority to extend the exclusivity period of the Post Office as long as this was required to achieve universal access to postal services, especially in underserviced areas.

“I don’t know why the minister is always fighting legislative battles with us to expand her policy-setting powers, because she does not produce policy,” Smuts said.

Inkatha Freedom Party communications spokeswoman Suzanne Vos also said she found the powers assigned to the minister “problematic”.

But Matsepe-Casaburri said she found the preoccupation with ministerial powers “very, very strange” seeing that they had never been abused.

Director general's report card

2006-10-20T03:31:00.000-07:00

In a sector where success can be measured against two key indicators -- affordability and accessibility -- the Department of Communications under the stewardship of Lyndall Shope-Mafole is having no real impact. The pledge of more affordable telecommunication and broadband services is a distant promise. We may have new legislation in the form of the Electronic Communications Act and a second national operator in the form of Neotel, but there still remain far too many bottlenecks to creating competition and bringing down prices.

South Africans are still stuck with some of the highest telecommunications prices in the world. There is a need for increased funding and independence for the Independent Communications Authority of South Africa (Icasa). But the Icasa Amendment Act has also been a bone of contention in the sector, with the department standing accused of trying to strong-arm changes, which would allow Communications Minister Ivy Matsepe-Casaburri to select Icasa councillors.

President Thabo Mbeki rejected the Bill as unconstitutional and sent it back to be altered again. The department came up with plan B where two department officials were nominated to stand as Icasa councillors.

Although stakeholders agree that Shope-Mafole has a very good relationship with them and has strong links with the international communications world, they point out that the policy vacuum at the department is hampering efforts to slash prices and stimulate competition.

Shope-Mafole says she thinks her department has performed well, as opposed to very well, and would rate her performance as a C.

It's not okay to suppress information

2006-10-15T10:02:00.000-07:00

Just after midnight, in the early hours of Sunday morning, Johannesburg High Court Judge Zukiswa Tshiqi dismissed with costs the SABC's application to have the Mail & Guardian Online remove a report on the blacklisting of certain analysts and commentators by the broadcaster.

"I don't believe that it is okay to suppress information or to hide information written in the report," she told the court.

Tshiqi said the content of the report was of extreme importance to the public as the SABC was a public broadcaster.

She said she was not handing down judgement but merely expressing her thoughts on the case. Arguments by the SABC's lawyers that the report could cause harm to employees were not persuasive, she added.

They had argued that if the report was not removed from the M&G Online, the broadcaster would suffer irrevocable harm as employees would resign, and they would lose good talent.

SABC chief legal officer Sihlali Mafika was made aware of the M&G Online's publication of the report early on Saturday. The website was served with a summons at 2pm. The case was dismissed around 1am on Sunday.

It is probably the first time that an interdict has been brought against a major online news site in South Africa.

The letter says what I was doing

2006-10-15T09:48:00.000-07:00

ANC treasurer-general Mendi Msimang has defended the government’s decision to endorse one of the country’s biggest empowerment deals.

Msimang confirmed that he wrote a letter that ensured that the ANC’s head of the Presidency, Smuts Ngonyama, and former government Telecommunications director-general Andile Ngcaba got government backing for the purchase of a 15.1% stake in Telkom.

When asked why the ANC’s head office became involved in a private business deal, Msimang said: “The letter says what I was doing ... It was very specific and why shouldn’t I have done that [written the letter]? There’s nothing else I can say on the matter.”

He declined to state what his role was in the controversial Telkom transaction and why President Thabo Mbeki had been called upon to endorse the deal.

Msimang refused to answer further questions and asked that these be faxed to his office.

Mbeki’s spokesman Mukoni Ratshitanga could not be reached for comment. However, Joel Netshitenzhe, who heads the presidential policy unit, said he was unaware of the role played by Mbeki in the Telkom deal.

Ngonyama has emerged as a central figure in the secret sale of a large chunk of Elephant’s Telkom shares. Ngonyama controlled more than a million shares held in two private companies, listed as beneficiaries of the deal, Clidet 531 and Clidet 532.

Other stakeholders had waived their rights to shares held by Clidet532 earlier this year to pave the way for their sale to an outside party.

Strangely, one of the stakeholders in Ngonyama’s Leopard group, Blue Label Investments, yesterday said that it had taken over “additional shareholding” which had “been the subject of recent speculation in the press”, claiming it was always part of its initial allocation.

Mark Levy of Blue Label said his company owned the shares held via Clidet 532.

However, it has been established Blue Label Investments was one of eight stakeholders in Ngonyama’s Leopard group which were asked to waive their pre-emptive rights when Clidet 532 — the company linked to Ngonyama — wanted to sell its stake to another entity earlier this year.

ANC bigwigs jostled for Telkom

2006-10-15T09:31:00.000-07:00

In one of the country’s biggest empowerment deals, two powerful groups landed a slice of Telkom with what appears to have been the backing of President Thabo Mbeki. The making of the deal was mired in controversy from the moment politicians began scrambling to own a piece of the fixed-line operator.

TWO years ago, US-based Thintana Communications announced its intention to sell a 15.1% stake in Telkom. The company, based in San Antonio, Texas, which had bought 30% of Telkom for R5.5-billion in May 1997, was reducing its stakes in phone companies worldwide.

Thintana, a foreign-investment consortium comprising SBC Communications and Telkom Malaysia, had already disposed of 14.9% of its Telkom stake on the open market in June 2004 and was now cashing in its remaining shares.

The announcement of the sale of the 15.1% stake, now worth R9-billion, sent several former senior civil servants, politicians and businessmen scrambling to secure the deal.

The frontrunners were ANC head of Presidency Smuts Ngonyama’s Leopard group and former telecommunications director-general Andile Ngcaba’s Lion group.

The stakes were high, since Thintana had raked in R15-billion profit in seven years, comprising share sales and management fees, and the two men went up against each other to claim this lucrative stake in the parastatal.

As a former senior public servant — and in the department concerned with telecommunications — Ngcaba was seen to have an inappropriate inside track on the deal.

It’s been established that, although he resigned in December 2003, Ngcaba had started making inquiries about the sale of the Telkom shares in October that year, a fact that made the US company uncomfortable.

Ngonyama, who had also begun to make headway in his bid, travelled to the US twice in a period of two months in 2004. At one of these meetings with the US company, he was told that Ngcaba had already obtained written support from the government.

On September 28 2004, Thintana managing director Rick Moore told Ngonyama that he needed a letter showing that he, too, had government support.

Within 24 hours, he contacted Minister of Communications Ivy Matsepe-Cassaburi.

He wrote: “It is clear from the feedback we received from SBC Communications that they view our group as ... the one most likely to make a firm offer. SBC therefore agreed to enter into an exclusivity agreement with our consortium. We understand, that another group has requested a similar endorsement and we feel it is best not to send mixed signals to SBC.”

However, the minister had already issued such a letter to Ngcaba’s group and was not interested in dishing out another.

The rejection sent Ngonyama racing further up the political ranks to ANC treasurer-general Mendi Msimang, who then approached the US group on his behalf.

That same day, in a letter dated September 29 2004, Msimang told James Kahan, vice-president of US-based SBC Communications, that the Telkom deal was supported by President Thabo Mbeki and had earlier been presented to the ANC’s National Executive Committee.

“In our meeting, which was attended by Mr Ngonyama, the President indicated that the government had already been approached for support by a group led by Mr Andile Ngcaba. The President then expressed ... that the two consortia should co-operate,” Msimang wrote.

Ngonyama and Ngcaba were made to sort out their differences and establish a single group, Elephant Consortium, that would acquire the 15.1% Telkom stake.

The newly formed grouping was running out of time as Thintana was eager to dispose of the Telkom stake and take advantage of the share’s rise in price. The US consortium had set a tight deadline of November 15 to finalise the deal.

When the Elephant consortium couldn’t get its structure in place before the deadline, the Public Investment Corporation (PIC), which manages R600-billion of public servants’ pension funds, bought the shares in a controversial deal.

The PIC bought the stake on behalf of the consortium and agreed to warehouse the shares for six months until Elephant Consortium managed to raise the cash to buy them back.

But industry analysts, trade unions and opposition parties criticised the lack of transparency surrounding the deal.

PIC chief executive Brian Molefe said the decision to warehouse the shares was influenced by Telkom’s prospects of being able to continue to deliver value to its shareholders.

Determined to make a commercial success out of its investment, the PIC retained dividends from the Telkom shares. By May last year, the PIC boasted a R1.5-billion return.

But the embattled consortium had only managed to raise a fraction of the money to buy back the shares from the PIC, following intense funding negotiations with the Industrial Development Corporation, Nedcor and Absa. In a revised deal the PIC held on to 5% of the shares, retained another 3.37% for broad-based empowerment and the Elephant Consortium walked off with only 6.7%, now worth over R6-billion.

Some shares acquired in the Elephant deal have landed up with mystery shareholders, and as a result some beneficiaries have initiated legal action to unmask them and establish if anyone has secretly cashed in or ceded shares.

Silence is golden

2006-10-13T05:49:00.000-07:00

There is no reasonable explanation for the failure thus far of the board of the SABC to release the report of the Sisulu commission of inquiry into the blacklisting of certain commentators by its news division.

The board has had the report, written by respected former journalist and SABC CE Zwelakhe Sisulu and advocate Gilbert Marcus, for more than a week. It was commissioned by current SABC boss Dali Mpofu in the wake of reports that SABC news head Snuki Zikalala had banned his programmes from using at least eight independent commentators.

The report finds that Zikalala on at least eight occasions broke the broadcaster’s code of conduct by banning commentators his editors and producers wanted to use.

Mpofu is on record as saying that heads would roll if the inquiry found precisely what has been found. We won’t hold our breath waiting for him to keep that promise.

Somehow, Zikalala will survive. He is the journalistic handmaiden of the Presidency in the most powerful editorial job in the country. He serves Mbeki and Mbeki acolytes like Essop Pahad well and the board of the SABC, particularly its powerful news subcommittee, is appointed by the president to prop up Zikalala in his mission. The board is fabulously uninterested in balanced political coverage.

For the moment, the commission’s report is in the hands of another subcommittee whose job it is, apparently, to decide whether the report is “accurate”. It is a ruse to buy time and that it signals the beginning of an attempt to spin Zikalala out of trouble and to protect him from the full consequences of his behaviour.

So the Sisulu report sits there, credible but inconvenient for the Mbeki folk on the board. There is talk that they may release only a summary of it to the public.

First, though, a story must be concocted to justify why it cannot be published in full.

Post still important despite technology

2006-10-10T10:11:00.000-07:00

Here is another profound insight from the regime. Communications Minister Ivy Matsepe-Casaburri says postal services remain an important communication tool, despite electronic methods of exchanging mail.

"In the past, mail used to be transferred on horse-back. Now with modern technology, mail is transferred much faster. However the post office still remains relevant," the minister said.

ANC chief in get-rich-quick deal

2006-10-08T09:07:00.000-07:00

SMUTS Ngonyama, the ANC’s Head of the Presidency, has emerged as a central figure in the secret sale of a large chunk of Telkom shares. The shares are part of a R9-billion stake that the Elephant Consortium bought from a US-based company last year in one of the country’s biggest empowerment deals.

When the deal was announced, Elephant’s purchase sparked an outcry and was billed as a get-rich-quick scheme for a select few. The consortium included Ngonyama, former government Telecommunications director-general Andile Ngcaba, Gloria Serobe of women’s empowerment group Wiphold, and a string of former civil servants and businessmen.

Ngonyama and the consortium bought a 15.1% stake in Telkom from US-based Thintana, but the deal became mired in controversy when it emerged that the Public Investment Corporation (PIC), which manages R600-billion in civil servants’ pension savings, had warehoused the shares to allow them time to raise cash.

Ngonyama has consistently denied making money from the deal, maintaining that he is yet to be “rewarded” for his role.

The latest revelation comes as the ANC’s National Executive Committee (NEC) was this week finalising recommendations on dealing with the issue of its members’ business ethics.

Ngonyama, through an adviser, controlled about one million shares, held via two private companies.

One of the companies, Clidet 532 was run by a former banker, Alan Norman, the man who represented Ngonyama at several meetings of the consortium.

Tshepo Mahloele, who previously handled the deal for the PIC, confirmed that his office issued documents for permission to allow Clidet 532 to sell in June this year.

This company had a 5% stake, worth more than R50-million.

It is not clear how this deal was structured as the agreement with the PIC stipulates that no one is allowed to sell for another four years.

PIC chief executive Brian Molefe confirmed that the terms of the original agreement with the Elephant Consortium, stipulated that no trading may take place until May 2010.

The deal has been fraught with controversy since the outset, when Ngcaba’s Lion group went up against Ngonyama’s Buffalo consortium.

Ngcaba had secured the backing of President Thabo Mbeki before Ngonyama.

But when the competition between the two groups heated up, ANC treasurer-general Mendi Msimang stepped in to keep the peace.

In a letter, dated September 29 2004, Msimang told James Khan, vice-president of US-based SBC Communications, a member of the Thintana consortium, which owned the 15% stake in the fixed-line phone operator, that the Telkom deal had been presented to Mbeki.

“In our meeting, which was attended by Mr Ngonyama, the President indicated that the government had already been approached for support by a group led by Mr Andile Ngcaba. The President then expressed ... that the two consortia should co-operate,” Msimang wrote in the letter.

The Elephant consortium then secured the deal as a joint venture between the two groups.

Today the consortium comprises:

•The Leopard Group, comprising Gloria Serobe’s Wiphold, Blue Label Investments, local businessmen Barend Hendricks, Dali Mpofu, US businessman Jim Myers, former government adviser Rafique Bagus, and Clidet 532 and Clidet 531. Documents list “Smuts & Co” as another beneficiary;

•Other than Ngcaba, the other beneficiaries in the Lion group are not known; and

•A third, broad-based empowerment group, managed by the PIC.

Some of these beneficiaries have instructed lawyers to unmask secret shareholders and investigate if anyone who participated in the R9-billion deal had cashed in their shares. They had consulted their lawyers to conduct an assessment of the shares and shareholders, mainly held via trusts registered with the Master of the High Court in Pretoria. The move was sparked by concerns that some beneficiaries had secretly sold or ceded a portion of the consortium’s Telkom shares to raise cash.

Poorest cellphone users pay the most

2006-09-24T10:02:00.000-07:00

International survey finds South Africa’s call rates are the highest in the world. The cost of making a call is not based on the cost to the network, and the networks are making a massive profit.

SOUTH Africa’s poorest cellphone users are forking out the most to chat on the country’s biggest networks.

And, for the second year running, an international telecoms cost survey has found South Africa to have the most expensive cellphone call rates in the world.

In Australia a three minute domestic call during peak time costs R1.50. The same call in SA costs R5.24.

A separate study by technology research company, World Wide Worx, found that pre-paid cellphone users, who make up 80% of the country’s 30-million customers, also pay the highest rates for their packages — as much as four times more than contract users.

About three million South Africans spend an average of more than R700 a month on their cellphone bill. Of these, only about 600000 earn more than R20000 a month.

The research, sponsored by new entrant to SA’s cellphone market Virgin Mobile, First National Bank and Verizon Business, a telecoms company, also found that the country’s lowest earning cellphone users are also those most likely to migrate to competing networks.

About 19 million South Africans subscribe to Vodacom, 10.4 million to MTN and 2.7 million to Cell C.

Arthur Goldstuck, lead researcher for the study, said the study sampled more than 1000 cellphone users and that the breakdown of spend was based on the average monthly cellphone bill of participants across the country.

Goldstuck said: “The cost of making a call is not based on the cost to the network, and the networks are making a massive profit on calls.

“Pre-paid airtime is the most expensive cellular deal on the market and it gives you an indication that the whole structure of the market is against the interest of the people at the lowest rungs of the economic ladder.”

The country’s three cellphone operators make about R40-billion in profit a year.

Goldstuck said although contract users contribute more to these profits — about R13-billion — the very lowest earners are not far behind, contributing more than R9-billion.

Naidoo said people on low incomes use their cellphones for convenience, spending about R100 a month on airtime, but getting “fairly little use of their phone”.

“People are definitely not using their phones as much as they would want to,” he said.

Meanwhile, the international telecoms survey conducted by a multi-national cost management firm, NUS Consulting, found that a three minute national call on a Telkom line during peak time costs R2.40, while the same call costs around 65 cents in the UK, 56 cents in Sweden and 74 cents in Italy.

Alan Levin, the chairman of the Internet Society of SA, said the reason for this was simple: “Overseas, most telephone companies are privatised, and open to more free-market competition.”

He added that red tape in the South African market was a major factor: “There are dozens of laws and a number of Acts which telecoms operators need to comply with, and that inhibits competition, which in turn keeps the prices up.”

Get out of the telecoms business

2006-09-23T07:42:00.000-07:00

Once more, the South African regime is getting it hopelessly wrong. In line with its two step to the left, it is expanding its involvement in the telecom sector.

South Africa is being left behind in the hi-tech world because it can’t get the basics right. Our politicians recognise the importance of cheap, ubiquitous communications networks but, steeped in leftist ideology, they are setting the country up to fail. South Africans constantly complain about the high cost of telecommunications.

And rightly so. Telkom has taken full advantage of the protection it has enjoyed and has been cheerfully ripping off its customers for years with tariffs it would never have got away with in a competitive market. Telkom is behaving as any company would in its circumstances. It is maximising monetary returns for its shareholders.

Looking for someone to blame for the high cost of your broadband service and your telephone calls? Don’t blame Telkom. Instead, you should be pointing an accusatory finger at government. Over the years, the state has doggedly protected Telkom in the mistaken belief that in a fully competitive market, telecom operators would have no incentive to provide services to poorer communities. It’s an idea that looks nice on paper; in practice, it has achieved the opposite of the desired outcome.

Yes, Telkom met the obligations government set it to provide communications to people who previously had no access to telephony. But it promptly disconnected most of these customers because they couldn’t afford the inflated tariffs the company soon began charging by virtue of its state-sanctioned monopoly. Telkom chose to concentrate on the rich pickings to be had in the country’s wealthier (mostly white) areas. The poor (mostly black) communities be damned.

So, South Africa today has about the same number of fixed-line telephones in service as it did 10 years ago — about 10% penetration. The policy of “managed liberalisation” has failed. It always was going to fail.

The decision to privatise Telkom partially in 1997 was the right call. Where government erred was in agreeing to protect Telkom from competition in return for a multibillion-rand investment from SBC of the US and Telekom Malaysia What was it thinking? The foreign partners, naturally, sought to maximise the return on their investment by taking full advantage of Telkom’s protected status. That government didn’t anticipate this demonstrates incredible naiveté.

Of course, government won’t own up that managed liberalisation has failed. Politicians never admit to their mistakes. The closest government has come to conceding failure is a recent admission by communications minister Ivy Matsepe-Casaburri that managed liberalisation needs to be accelerated.

Sadly, government is still getting it hopelessly wrong. In line with its two-step to the left, it is expanding its involvement in the telecom sector. It has promised to fund the construction of a national broadband network, to be built by state-owned broadcasting company Sentech, which will compete head on with private-sector players, including second network operator Neotel.

On past performance, there’s little reason to believe that Sentech is capable of providing a competitive offering. Yet, it’s to be given hundreds of millions of rand in taxpayers’ money to build this rival network. Government thinks the sector won’t develop properly without its direct investment and participation. In reality, and based on experience, its intervention is doomed to fail.

Taking the I out of ICASA

2006-09-15T01:19:00.000-07:00

Pretty soon the Independent Communications Authority of South Africa will not be so independent anymore. Not it has ever done anything about assist the way in which the telecommuncations giants of South Africa fleeces the consumer.

Opposition parties have objected to the inclusion of two Department of Communications officials shortlisted for appointment to the country's independent communications regulator, saying it allowed the minister control through the back door.

The independence of the Independent Communications Authority of SA (Icasa) has been steeped in controversy since last year when a Bill dealing with the appointment of its councillors was sent back to the National Assembly by President Thabo Mbeki after concerns about its constitutionality.

The National Assembly, with its ANC majority, voted in favour of the eight councillors short-listed. Communications Minister Ivy Matsepe-Casaburri must now choose five out of the eight.

They include Mashila Matlala, a senior manager of telecommunications policy, and Brenda Ntombela, a chief director in the department.

Democratic Alliance (DA) MP Dene Smuts said Icasa was a Chapter 9 constitutional body and had to be independent from government "in general" and the department "in particular".

"The minister throughout last year tried to remove the regulator's independence and subvert the declared intentions of the National Assembly at that time to retain and respect that independence," said Smuts.

She also questioned the independence of one of the candidates, saying she had defied the National Assembly at each stage of the legislative process. Yet she had still been nominated by the ANC, "notwithstanding the fact that the President sent the Icasa Amendment Bill back to the National Assembly for unconstitutionality after she had worked with the National Council of Provinces (NCOP)". The Bill was changed during the NCOP phase, allowing for the minister to have control over the appointment of councillors, which had been rejected by the National Assembly.

The Inkatha Freedom Party's Suzanne Vos said the party was opposed to the inclusion of the two officials and that the candidates fell short of the required expertise. Freedom Front Plus MP Pieter Mulder said he was opposed to the two officials' inclusion and that Parliament had become a rubberstamp to accept what the minister wanted.

Your phone line will be installed in about 200 years to go

2006-09-11T14:46:00.000-07:00

Service delivery in South Africa is phenomenal. Phenomenally slow and expensive.

THE government agency set up to take telecommunications services to poor parts of SA will need 222 years to achieve its aim of setting up 4000 community telecentres at its current pace.

But that would be positively speedy compared to the 1500 years needed to hit its growth target for the number of fixed line phones in use, given the shackles of its tiny budget, says telecoms consultant Paul Cole.

Overall, the Universal Service and Access Agency of SA is failing to provide services to the poor and has done little to make voice and data facilities more affordable. The damning study by Cole, the MD of Cole and Associates, was commissioned by the agency as a study of its progress. The findings are far from reassuring. “The digital divide has deepened in SA since the agency began its operations,” Cole says.

After the agency was created, the cost of a local Telkom call rose 300% while the number of phone lines fell. There is also very little access to the internet, and only 33 of the 65 community centres the agency set up have proved sustainable.

Its goal of opening 4000 community centres with telephones and internet access would take 222 years at its current pace, Cole told a conference hosted by the agency this week.

An ambitious target set by the communications department to take fixed lines to 20% of the population would cost R80bn. Given the agency’s meagre budget, that would take 1500 years.

Telkom operates 4,7-million fixed lines, serving about 10% of the population. Moreover, 75% of the lines it installs in poor areas are later disconnected for non payment. Telkom has missed its roll-out targets for fixed lines by a massive 2,1-million.

Fixed lines are massively overshadowed by cellphones, yet the quality of service remains low because of inadequate competition, Schofield says.

The agency subsidises services in rural areas through the Universal Service Fund, which collects a levy from each company licensed to provide telecommunications services.

In 2002, one of the years covered by Cole’s study, the operators handed over R280m of their total revenue of R56bn. Yet Communications Minister Ivy Matsepe-Casaburri capped the fund at R50m.

A lack of clarity in the agency’s mandate and a lack of clear goals set by the communications department means it is basically told to “go forth and do good works”. But when it tries to do that, it is shackled by a lack of cash.

It is calculated that communication services in SA are 440 times too expensive, soaking up an average of 3% of people’s monthly income, compared to a global benchmark of under 1%.

The lack of connectivity compounded by a lack of affordability makes “basic telephone services in SA among the most expensive in the world,” Cole says.

He firmly blames the “managed liberalisation” policy championed by Matsepe-Casaburri, allowing Telkom to maintain its monopoly and claw too much money out of the economy and into its coffers.

How to win friends and influence people

2006-09-11T14:33:00.000-07:00

The Independent Communications Authority of South Africa is supposed to be the watchdog of the communications industry, but the regime wants to keep things in check by appointing its own people. With five people to be appointed from a list of eight and three favorable candidates among them, its not hard to see that this will be a very tame watchdog.

Parliament's portfolio committee on communications has dwindled the list of candidate to fill senior positions at the telecommunications regulator - the Independent Communications Authority of SA - from 20 to eight, but the Democratic Alliance (DA) is worried that three of the nominees are not independent enough.

Two are department of communications (DOC) officials, while a third is related to a director at the second national operator, Neotel. Five vacancies to be filled "The very same DOC official who at each stage of the legislative process defied the NA, and who sat with the national council of provinces when it swept the NA version of the law off the table, has now been nominated by the same ANC MPs to the regulator," she said.

Smuts was referring to Mashila Matlala, who is a policy director at the DOC.

The other candidate, Brenda Ntombela, "serves directly under the director-general of the DOC, Lyndall Shope-Mafole, who drove the process to attempt to take I [which stands for independent] out of Icasa," said Smuts.

The list of eight nominees has been sent to the communications minister Ivy Matsepe-Casaburri, who will make the final selection for the five vacancies at Icasa.

Dr Marcia Socikwa is married to a cousin of SNO director Karl Socikwa and her sister reports directly to Socikwa at Transtel as legal counsel "on inter alia the SNO", making her an unwise choice".

The other candidates on the final list sent to be sent to the minister include former Icasa councillor Mamodupi Mohlala; Dr Andrew Barendse, a seasoned telecoms professional who holds a doctorate in regional telecom regulation; Kedibone Serero-Chiloane, Professor Kobus van Rooyen, head of the University of Pretoria's department of criminal law and chairperson of the Broadcasting Complaints Commission of SA; and Robert Nkuna, a former DOC spokesperson.

Your phone bill - $7billion!

2006-09-06T07:24:00.000-07:00

Leading economist Dawie Roodt said that the lack of competition and Telkom’s monopolistic behavior in the telecoms arena over the last five years cost the economy at least R 50-Billion (about $7 billion) in lost growth.

Roodt further said that the delays in the licensing and launching of the SNO were not only to the detriment of the economy, but will make it very tough for Neotel to compete effectively against Telkom.

Not only was the economic climate far more favourable for telecoms investment back in 2001/2002 when the SNO should have become operational, but the delays also gave Telkom a great opportunity to firmly establish a stranglehold on most areas of telecoms service delivery.

Roodt however does not directly blame Telkom for the very expensive services and low service levels in the fixed line telecoms arena, but rather places the blame at the feet of politicians who ‘think they know better’.

Telkom simply did what many other companies will do, namely misuse their status as a monopoly to bring higher profits and more value to its shareholders. Its major shareholder, incidentally, is the very government that gave Telkom its monopoly status.

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Second operator was fast tracked in only five years

2006-09-06T07:15:00.000-07:00

THE launch of the second network operator, Neotel, was a thoroughly over-the-top affair — as befits an event that has been five years in the making.

The guests were giggling as Communications Minister Ivy Matsepe-Casaburri made her welcome speech. Industry stalwarts who have followed the second network operator fiasco for the full five years were astonished to hear the minister thank the Independent Communications Authority of SA for helping “fast track” the process.

Insider struggles to see how the arrival of a competitor to Telkom more than four years after its monopoly ended can be described as a “fast” track, but just think where we’d be if government had taken its time.

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Mampara of the week

2006-09-06T07:03:00.000-07:00

19 Aug 2001

Like some Queen Midas in reverse, everything touched by our mampara, Communications Minister Ivy Matsepe-Casaburri, crumbles to dust.

First, she was tasked to get the SABC in order and . . . well, we won't go there. Then, they told her to get some order in the Free State. What happened? The province all but disappeared in a heap of its own ordure.

Ivy Mampara-Casaburri cost potential bidders for the phone licencee to rival Telkom untold millions.
Initially, there was to be only one. Then she allowed a second. But after whining from the industry, she did a triple mampara flip-flop back to her first decision.

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Meet the minister

2006-09-05T04:30:00.000-07:00

Ivy Matsepe-Casaburri

Personal

Date of Birth: 18 September 1937

Current Positions

Minister of Communications of the Republic of South Africa since 17 June 1999.
Founder member of the Board of the Women's Development Foundation.
Patron of the Maokeng Community Development Trust in the Free State.
Board member of the International Women's Forum of South Africa.
Patron of the Board of the International Marketing Council (IMC).

Academic Qualifications

Secondary education in Natal Province, South Africa.
University education at University of Fort Hare, Eastern Cape.
Postgraduate studies in the United States of America (USA) (Ph D).

Career/Positions/Memberships/Other Activities

Teacher for twelve years, two years in KwaZulu-Natal and ten years in Swaziland.
Lived in exile from her early working life and worked as Associate Professor at Rugters University in New Jersey, USA until she returned to South Africa in 1990.
Senior lecturer and Registrar at the United Nations Institute for Namibia based in Lusaka, Zambia until her return to South Africa.
Appointed Executive Director of the Education Development Trust (EDT) - active in the education movement and in policy development and fields of gender, education, economic development and local government - upon return from exile.
Activist on Education, Gender and Research areas.
First woman and black person to chair the South African Broadcasting Corporation.
First woman to be appointed to the Board of the Council for Scientific and Industrial Research (CSIR).
First woman and first black Chairperson of the Board of SENTECH (Ltd).
First female Premier of the Free State Provincial government (1996 - 1999).
Former member of Council, University of Durban-Westville.
Former member of the Research and Technology Foresight Board.
Former member of the Working Group of the National Forum on Science and Technology (NSTF).
Former member of the Board of Governors of International Development Research Centre (IDRC), Canada.
Former Chairperson of the Ministerial Oversight Committee of African Ministries (1999 - 2003).
Former Patron of Eskom/Sowetan Woman of the Year Award.
Former Patron of Shoprite/Checkers SABC Woman of the Year Award.

Source: Ministry of Communications