Government moves forward with plans for two ICT companies

Budget 2020: The Department of Communications and Digital Technologies (DCDT) is looking to submit Bills for the state-owned ICT companies to Cabinet for approval by March 2021.

This is according to National Treasury’s Estimates of National Expenditure (ENE) document, which provides an overview of the country’s economy over the medium-term. The document forms part of the National Budget Speech presented by finance minister Tito Mboweni.

The South African government has been mulling establishing the two companies, an IT company and ICT infrastructure company, through the merger of the different functions of the State IT Agency (SITA), Sentech and Broadband Infraco.

According to the ENE document, the DCDT envisages that a number of Bills required for the implementation of the 2016 National Integrated ICT Policy White Paper will be developed and submitted to Parliament over the medium-term.

The Bills allow for, among other things, the rationalisation of state‐owned ICT companies for greater efficiency, and ensure that communities and individuals have access to ICT services and skills for the digital economy.

“To achieve this, expenditure in the ICT policy development and research programme is expected to increase from R48.6 million in 2019/20 to R64.7 million in 2022/23 at an average annual rate of 10%.”

Over the medium-term, SITA has earmarked an estimated 65% (R15 billion) of total expenditure for spending on goods and services, mostly for the provision of IT services, notes the Treasury document.

“Total expenditure is projected to increase from R6.8 billion in 2019/20 to R8.1 billion in 2022/23 at an average annual rate of 6.1%. As the agency is dependent on skilled personnel to provide its services, expenditure on compensation of employees accounts for an estimated R6.7 billion (28.9%) of total expenditure over the period ahead.

“The entity generates its revenue by providing ICT infrastructure and services to government departments and organs of state. Total revenue is projected to increase from R7 billion in 2019/20 to R8.3 billion in 2022/23 at an average annual rate of 6%.”

Turning to signal distributor Sentech, the ENE document notes that over the medium-term, the entity will focus on creating new revenue streams through acquisitions and the formation of strategic partnerships.

Furthermore, the government entity aims to build a wireless broadband business, and invest in technologies to enhance the performance of its connectivity services to existing and future clients.

The Treasury document highlights that Sentech considers these investments key to enhancing connectivity. As a result, it has set aside R445.8 million over the medium-term for the acquisition of assets.

“Total expenditure is set to increase from R1.2 billion in 2019/20 to R1.3 billion in 2022/23 at an average annual rate of 3.6%. Spending on goods and services, mostly for satellite rental and other operating costs, accounts for an estimated 45.6% (R1.7 billion) of total expenditure over the medium-term.

“As the entity employs many skilled technical personnel, expenditure on compensation of employees constitutes an estimated 40.9% (R1.6 billion) of total spending over this period. The entity expects to generate 98.1% (R4 billion) of its revenue over the MTEF period through services rendered to customers, mostly for the provision of signal for television and radio broadcasting services, and the rest from the department through project‐specific funding for dual illumination.”