State-owned broadband provider Broadband Infraco has secured private sector partners for its Africa West Coast submarine cable, increasing its potential to secure further funding from National Treasury.
In a media statement issued today, the Department of Public Enterprises (DPE) says it signed a memorandum of understanding with 11 private sector players last month.
The shareholders' agreement will be signed on 15 April with financial close on the same day, the department says.
The statement was in response to reports that Infraco's West Coast cable project may be incorporated into the Nepad Broadband Infrastructure Project's $2 billion Uhurunet initiative, after National Treasury declined to fund the Infraco project due to lack of participation by private sector entities.
Yesterday, ITWeb reported that the DPE had requested R2.09 billion to fund Infraco's national long-distance and West Coast undersea cable project over the next three years.
National Treasury allocated R727 million towards the initiative, leaving Infraco with a deficit of R1.368 billion.
"Government does not want to build a cable alone; we believe there is opportunity for partnership with local, African and international players," a National Treasury official said.
DPE spokesman Lulu Bam says Infraco's 26% stake in the project is already fully funded from sources other than the fiscus.
"Broadband Infraco is expected to hold only a 26% stake in the submarine cable and its capacity, leaving 74% of the total capacity in private sector hands," she says.
Moving ahead
Bam says Infraco is on track with its submarine cable project from SA to the UK along the West Coast of Africa.
The system is scheduled to enter service during the first half of 2010, she says. Bids from suppliers to construct the system have already been evaluated by the consortium members, and supplier appointments are imminent, with contracts scheduled to be signed before the end of April, she says.
Bam concedes that, while there may have been talks with other players, including the Uhurunet project, this was merely to look at the different possible funding models.
Unique model
Bam says the West Coast submarine cable initiative is not a typical private equity project. The percentage of the total capital input costs in the project invested by a company will directly translate into the same percentage of the broadband capacity that it would get once the cable was operational, she says.
She notes the principles agreed to in the project leverage the lowering of the cost of broadband access. This is viewed as critical in stimulating investment in the country, and the undersea cables will lead to the rapid broadening of the international bandwidth supply base in SA, she says.
She adds that the DPE is encouraged by the progress made by the undersea cables that are being developed on the East Coast, which include the recently signed Seacom and the positive progress on Eassy, as these will augment connectivity to SA and the African continent.
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