While certain areas of the City of Johannesburg's spending will be negatively affected by the global economic downturn, mayor Amos Masondo has assured that the city's broadband plans remain in place.
In his budget speech this morning, Masondo stated the construction of the broadband network will be allocated R20 million. The budget also revealed the city had estimated another R15 million for the project for the 2010/11 financial year, while an estimate of R10 million was allocated for 2011/12. All the funding for the broadband project will be sourced from external loans.
Earlier this year, Ericsson was awarded an estimated R1 billion contract to build and operate the city's municipal broadband network. The proposed infrastructure and core network layout are based on fibre-optic technology and will cover all areas of the city.
The aim of the network is to increase the penetration of broadband ICT access in under-serviced areas, such as Diepsloot and Alexandra, and reduce the digital divide, the city states.
Ericsson is conducting an audit of the existing network infrastructure in the city to determine the scope and cost of the project. The city estimated that if no infrastructure was in place, the project would cost between an estimated R700 million and R1 billion.
However, project managers say the city's allocation of only R45 million over three years is no cause for concern.
“The project is self-funding. The funding for the project will be generated from commercial funding institutions and, as the network generates money, it will begin to fund itself,” says Michael Aitken, MD of Centratel, a member of the Ericsson-led consortium.
Spending dips
While the broadband project will escape unscathed, other key projects have been badly affected by economic concerns and a resultant decrease in spending. Masondo said the current scarcity of credit will affect the city's expenditure.
“It will be expensive for the city to borrow to fund its capital expenditure, and it might be difficult to raise funds to the required scale. Accordingly, borrowing has decreased substantially. This scarcity of credit is a serious challenge considering the investment plans of the city. The other option to fund capital expenditure is through substantial increases of service charges, which is also not attractive under the current circumstances,” he noted.
The city has also allocated R17 million to the Johannesburg Roads Agency (JRA) for its Intelligent Transport System (ITS) for 2010. This funding will be sourced from an external loan. The city has allocated a further R2.5 million for the ITS system as part of its core administration budget, which it will source from a national grant.
ITS is one of the major IT projects to feel the pinch of the city's declining credit. In his 2008/9 budget, Masondo allocated R332 million towards the transport system and further stated that transportation spending would increase by 31.7%. Spending has, however, drastically decreased, according to the latest budget.
The system forms part of the JRA's plans to radically expand and upgrade the road network and the system is being extended to add additional functionality. Technology systems will be used to improve efficiency, monitor the growth of traffic and revamp the road network, as well as improve public transport systems.
Masondo added that the city has made a number of infrastructure investments, which will ensure Joburg will successfully host the 2010 World Cup. The city has allocated R979 million in this budget for 2010. World Cup operations have been allocated R110 million, while the International Broadcast Centre has received R80 million - a decrease from allocation estimates in the previous year.
In 2008, Masondo said the city would make an investment of R120 million in the IBC and emphasised the important role the centre would play in the provision of telecommunications and broadcasting services for the 2010 event.
Masondo said some decreases in spending were “government's policy response to the global economic crisis over the medium-term”. These policy responses include protecting the poor, sustaining employment creation, investing in infrastructure, promoting competitiveness and fiscal discipline.
Related stories:
Broadband network a priority
Joburg kicks off digital project
Share