Infraco grows teeth

By Paul Vecchiatto, ITWeb Cape Town correspondent

Cape Town, 15 May 2007

The Department of Public Enterprises has released the draft of the long-awaited Infraco Bill, which will become the law governing the state's new broadband supplier, ITWeb can exclusively report.

In terms of the proposed law, Infraco would be capitalised by the state to the tune of R975 million. It would also obtain the servitude rights that have been granted to Eskom and Transtel for the laying of infrastructure, and would have its own powers, in terms of the Public Finance Management Act, to raise its own funds.

State signal provider Sentech recently appealed to Parliament for its board to be governed by the Section 2 rules of the Public Finance Management Act, rather than the current Section 3(b) rules. This would give Sentech the flexibility to source finance to keep up with its commercial competition. The company currently may only receive funding from National Treasury, and has seen some of its projects delayed due to a lack of monetary allocation.

Public enterprises minister Alec Erwin stated earlier this year that his department would draft a Bill, as it is usual practice that all state-owned enterprises are governed by specific legislation such as those laws for Eskom and the SABC.

In keeping with Erwin's promise that such a Bill would be "short", it consists of only 15 pages and refers to a number of other pieces of legislation, such as the Electronic Communications Act and the Companies Act.

Provisions

The draft Bill provides for the acquisition of the shareholding in Infraco by the state, the transfer of the full spectrum networks (ie the fibre optic networks) of Transtel and Eskom to Infraco, and the conversion of Infraco into a public company with share capital.

During finance minister Trevor Manuel's budget speech this year, he stated Indian conglomerate Tata, through its VNSL telecommunications subsidiary, would have a 26% shareholding in Infraco.

Servitude, the right by a state-owned enterprise to appropriate land to build infrastructure, has been one of the main sticking points with regard to Infraco.

In terms of this Bill, Infraco - if it satisfies the minister - may appropriate land for public purposes or in the public interest, and "for the attainments of its objectives and if it is unable to acquire it on reasonable terms".

Should Infraco be converted to a public company, its servitude rights would not be affected by the conversion, according to the draft legislation.

Intervention

The Infraco Bill states the logic to establishing the broadband supplier was based on investigation into the high broadband costs in this country.

It says 80% of costs comprise those attributable to tier one, national backbone connectivity, and tier three, international connectivity, both of which are supplied by Telkom.

"The logical conclusion was to intervene to address these national backbone and international connectivity cost structures," the draft Bill says.

Public comment on the draft Infraco Bill must be submitted to the Department of Public Enterprises by 11 June.