R647m for Infraco

By Paul Vecchiatto, ITWeb Cape Town correspondent

Cape Town, 26 Oct 2006

Government`s proposed telecoms infrastructure company, Infraco, will receive R647 million funding from the state, finance minister Trevor Manuel announced yesterday.

In Manuel`s medium-term budget policy statement, presented in Parliament, he said Infraco and the pebble-bed modular reactor demonstration unit would receive combined funding of R1.4 billion. ITWeb has learnt that R647 million of that amount has been earmarked for Infraco.

A statement from public enterprises minister Alec Erwin, issued in reaction to the news that Infraco plans to lay its own undersea cable to compete with Telkom`s SAT-3 cable, said the "new Infraco would receive funds in this financial year to implement the required investments to service the needs of [second national operator] Neotel".

He said the budget allocation makes it possible for the establishment of a new state-owned enterprise, and to complete various contractual and regulatory negotiations. This will also allow more detailed planning with the large science projects dealt with in the budget policy statement that are the main drivers behind the state securing the key broadband capacity in the previous Eskom and Transnet systems.

"This is an important step in the ongoing preparation of the SKA [square kilometre array] bid and the development of the South African National Research Network," Erwin noted.

He said a more detailed announcement would be made toward the end of November, adding that it is necessary to dismiss inaccurate speculation about the meeting held between the deputy president and the ministers of communications, trade and industry, and public enterprises.

"This meeting was one of the many briefings convened by the deputy president to get reports on progress in key sectors. The meeting, therefore, covered a very wide range of issues in the whole of the ICT sector. It was the case that SA`s undersea cable capacity was discussed. This includes SA`s full support for the Eassy [East African Submarine System] cable and the requirements that will be needed for the SKA and the 2010 World Cup," Erwin said.

Ministers must agree

A high level source within the Department of Communications says the funding approval was based on the premise that there was concurrence between Manuel, Erwin and communications minister Ivy Matsepe-Casaburri.

"All three ministers have to agree on the arrangements for Infraco. This includes how it will be structured and that it should eventually fall under the Department of Communications as it is the department responsible for government`s ICT state-owned enterprises," the source says.

The source also says Infraco must be licensed under the Electronic Communications Act and this means the regulator, the Independent Communications Authority of SA, would have to issue an invitation to apply.

"The minister of communications cannot issue such an invitation, only the regulator can."

The source goes on to say that Erwin, in his capacity as minister for public enterprises, is perfectly within his rights to form a state-owned enterprise as he sees fit.

New telephone minister

Dene Smuts, spokesperson for the official opposition Democratic Alliance, called on Erwin to present the Infraco case to the Parliamentary Portfolio Committee on Communications.

"Finance minister Trevor Manuel`s announcement under the medium-term expenditure framework of R1.4 billion or portion thereof for minister Alec Erwin`s Infraco needs to be taken to public hearings by the Portfolio Committee on Communication and Public Enterprises. I do not blame minister Erwin for setting himself up as telephone minister number two, given communications minister number one`s shortcomings," she notes.

Smuts also says the sector cannot function without certainty and asks how today`s announcement relates to the deputy president`s announcement at the start of this year of R1 billion for broadband roll-out by Sentech.

She also asks how Infraco would sit alongside the Electronic Communications Act that Parliament drafted last year into a coherent framework for liberalisation of the sector.

"Is minister Erwin taking us back to a giant state telco (part-owned by Tata?), or does he just want to offer cheap wholesale capacity to all players?" Smuts asks.