Sentech blames government

Johannesburg, 03 Mar 2008

State-owned entity Sentech has hit back at government critics who have called the company's management to task.

In a four-page statement, headlined "The State of Sentech", the company disputed many of the issues surrounding the organisation that have recently attracted media attention. It also asserts it has been constrained by the lack of funding and clear direction from the shareholder.

Sentech's sole shareholder is government, through the Department of Communications.

Under pressure

Last month, ITWeb revealed the company would only receive R350 million for its infrastructure projects in the coming financial year. This was allocated to broadcast digitisation (R150 million) and the 2010 FIFA World Cup (R200 million).

This was a 44% decrease in the funding received in the 2007/8 financial year, in which it received R625 million.

Shortly after finance minister Trevor Manuel's budget speech, a National Treasury official explained the organisation's funding had been cut due to government's lack of confidence in Sentech's management structure.

"The budget slash is there to raise alarm bells in the organisation about its management. At this stage, we do not have the confidence that large sums of taxpayer money would be appropriately used," he said.

Another report in the Business Day newspaper suggested "job cuts [were] on the cards at Sentech if documents detailing its salary budget and business plans are put into action".

It pointed out that medium-term expenditure showed the organisation's salary obligations "diving" by R88 million in the coming year to R198 million. Sentech's salary bill in the 2007/8 financial year was expected to be R286 million.

Sentech promised to respond to these claims within seven to 10 working days.

'Not our fault'

The statement received this morning sees Sentech reject these claims.

"While the conduct and performance of the Sentech board, management and staff over the past five years is not necessarily beyond criticism, it can be said without fear of contradiction that the operating environment has been extraordinarily complex and volatile," it says.

It notes the board is "satisfied" that it continues to fulfil its fiduciary duties. This message has been reiterated in a letter written to communications minister Ivy Matsepe-Casaburri, it says.

"As a board, we wish to clearly indicate that we have carried our responsibility diligently and that our management has executed the board strategy. The only constraint has been the lack of funding and clear direction from the shareholder," the letter said.

However, Sentech notes it does face several challenges to its operations.

<B>Sentech's</B> <B>current funding position</B>

* Digital terrestrial television roll-out: National Treasury has so far allocated R200 million and committed a further R450 million to this project, despite Sentech applying for R955 million. It also requires a further R917 million for dual illumination costs.
* National wholesale broadband network: National Treasury has to date allocated only R500 million of the R3.1 billion requested by Sentech. No commitments for the balance have been given over the medium-term expenditure timeframe.
* FIFA 2010 World Cup: Sentech applied for total funding of R224 million in both capital and operating expenses. National Treasury has allocated R300 million over the next two years.
* Undersea cables: Sentech requested R140 million for its participation in undersea cable projects. To date R21 million has been allocated.

"While the current focus of attention is on the funding of the broadband roll-out, the board cautions that the challenges associated with digitisation of the television signal and delivery of backup services for 2010 remain significant. Furthermore, the board cautions that continued uncertainty regarding outstanding funding requirements, could compromise the 'going concern' status of the company," it says.

Under the circumstances, Sentech says it will seek a funding commitment from "the shareholder" and will ask for assurance from National Treasury that its status be adjusted to allow for the raising of private loan capital.

Sentech also concedes "the uncertainty regarding the strategic focus and financial security of Sentech over the past five years" resulted in an "understandable" reduction of confidence among its staff.

It notes that between 1 March 2007 and 27 February 2008, 107 staffers exited the company. This was made up of 83 resignations, five retrenchments, 14 retirements, three deceased and two dismissals. In the same period, 101 new appointments were made and "most of the vacant positions filled".

Nevertheless, the exit of skilled staff remains a concern.

"Given that the liberalisation of the ICT sector has resulted in new entrants in the market and fierce competition for skills, skills retention remains a key challenge for the board and management," it says.