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LABOUR AND PUBLIC ENTERPRISE SELECT COMMITTEE
7 March 2006
SENTECH: REVIEW AND STRATEGIC PLANS FOR 2006/7
Documents handed out:
Sentech Annual Report 2004/05 on Sentech website
Square Kilometre Array Radio Telescope
Sentech gave a presentation to the Committee on the achievements, challenges and the way forward for the organisation. Highlighting their commitments made in 2004. Which included explaining Sentechs preparations for a fast track digitisation of the TV network. They emphasised their commitment to continue as a state delivery partner.
The representatives of Sentech talked the Committee through various multi media projects including MyWireless. which had recently been launched in Nelspruit as well as the Biz NET fixed wireless project and the Vsat Project. The Sentech CFO presented the financials, explaining the cash flows for the 2005 Financial Year. The bottom of the jay curve of a financial low point for Sentech had been reached last year.
Sentech's focus would be on the implementation of EASSY, but it was crucial funds were found quickly.
Members sought clarity on issues of funding and finance for the ESSAY project. Questions were raised regarding private funding. Members questioned Sentech about the degree of disruption recent caused by the recent power outages. The Committee requested Sentech to elaborate on a number of initiatives mentioned in their presentation.
Mr Dingane Dube, Sentech: Government and Regulatory Affairs, told the Committee that it was vital that South Africa did not miss the "information superhighway". He outlined Sentech’s commitments that it had set itself in 2004: to grow the multimedia business, increase broadcasting coverage, continue as the State's delivery partner in Education, Health and e-Government. It had already created crucial infrastructure and was preparing the company for digitalisation. He stressed Sentech's commitment to the growth of the Second Economy.
Mr Dube highlighted progress in their multimedia business, specifically My Wireless, BizNet and Vsat projects. He also discussed broadcasting developments with digitisation and regional TV and Sentech's infrastructure projects such as EASSY, SKA and the National Broadband Network. He explained that they would be able to digitalise completely by the end of 2006 and would be able to meet South Africa’s 2010 obligations to FIFA. It had won the BBQ Corporate Social Investment Award because of its upliftment efforts.
Mr Marc D’Oliveira, Manager in the Office of the CFO, explained that Sentech had managed their cash flow tightly without any additional funding from Government. Revenue was growing steadily and growth profit margins were starting to widen although operating profits had reached a low point in 2005 but the bottom of the expenditure J-curve had been reached by early 2006.
Mr Johann Raath (Office of COO Executive) talked on the preparations and challenges for the year ahead. Sentech would fast track digitalisation of the TV network. It would expand the work of the e-Government project to create mobile Home Affairs offices that would reach people all over the country. These would operate by satellite connection. It would focus on the implementation of EASSY. A memorandum of understanding has been signed by all the relevant parties. It was crucial that funds now begin to flow if the time-scale of 2008 was to be met.
Mr Raath said Sentech was excited about the opportunity of bringing broadband wireless access to all South Africans. Although the project had publicly been given the go-ahead in a ministerial media briefings in February, there had as yet not been any budget allocation for the project. He emphasised that Sentech would move fast as soon as the funding was secured. Job creation would be key to the plan.
Mr Raath explained that once there was universal broadband access, there would be an expansion of micro enterprises in related fields. Cheaper communication costs were needed to stimulate business growth in South Africa.
Mr J Sibiya (ANC Limpopo Province) was excited by the indication made by Mr Dube that Sentech would be ready for digitalisation by 2010. He asked what immediate benefits would digitalisation be expected to bring to the second economy.
Mr Raath said he believed the benefits of the digitalisation process to the second economy were very exiting. There were 7 million homes in South Africa that had television sets. Once you looked at a converged environment, you could have digitalised signals going through to each home. There would be the possibility of placing the electronics for access to broadband inside digital boxes without great additional expense. It would be possible for people to access internet through there TV sets. He felt that the affordability of computers had been a major barrier to universal internet access.
Mr Sibaya asked what the contributions of other African countries involved in the EASSY project, would be.
Mr Marumo said that every country benefiting from the EASSY project would be contributing to its cost, the World Bank had also indicated its willingness to offer funding.
Mr Sibaya commented that he had noticed that this project only benefited Eastern African countries. He wondered what the attitude of the francophone African states was. Many of the francophone countries, he felt, did not have a very positive attitude towards South Africa.
Mr Marumo replied that he had not picked up on any negative vibes towards the project.
Mr Raath explained that many of the francophone countries could benefit from the EASSY routing project by fibre backbone connections. Plans were currently under way, as part of a NEPAD project for landlocked countries to interconnect. Many of the francophone countries he explained, relied on telecommunication cable that ran the other way around Africa.
Ms N D Ntwanambi (ANC Western Cape), commented that most of the countries involved in the project appeared to be those which were English speaking. She asked what level of competition Sentech had experienced in the ICT Africa awards.
Mr Raath expressed his belief that there had been competition on the continent as a large number of companies had been put forward as potential candidates for the award. The Companies in Africa included Orascom, Eygpt Telecom, Econet, MTN, Vodacom and Telcom which had all been potential recipients. It had not been a one horse race.
Ms Ntwanambi requested clarity on Sentech's stated aim of having a commitment for uplifting the continent.
Mr Marumo said Sentech contributed to the upliftment of the African continent. Sentech was chair of the regional radio conference, and in this role had assisted other countries on the continent. They had recently provided consultancy services to Uganda's communications corporation on how to utilise their telecommunication frequencies. They had assisted Namibia with analysing the necessary requirements were for migration from analogue to digital. Kenya had received assistance with policy formation in 2001.
As a representative of Western Cape which was currently affected by a series of power outages, Ms Ntwanambi enquired what the effects of the recent power failures had been. Had there been losses and what was Sentech's mechanism for dealing with such occurrences?
Mr Raath explained that in the event of a power cut, they had stand-by generators. However, there was extra expense in using diesel generators. Extra time was required to ensure diesel tanks were full. If power were to remain down, they would possibly lose smaller stations. Regarding the situation in Cape Town, so far they had lost no services.
Ms Ntwaqnambi asked whether the E education project was still confined only to Gauteng or whether it had been implemented nationally.
Mr Marumo explained that Sentech wanted the Committee Members assistance in implementing E-education or similar projects across all provinces, in the same manner they had done with Gauteng online.
Mr D Mkono (ANC Eastern Cape) said that he noticed that Sentech was calling for a ring-fencing of national broadcasting assets. He understood private funding would not be welcomed. He asked what the disadvantages of private funding were thought to be, considering that funding was Sentech's priority in ensuring that South Africa was at the forefront of the process.
Mr Marumo explained that Sentech was not saying they did not want private funding. But because they were a state owned enterprise, Sentech is governed by the Public Finance Management Act and Treasury regulations. For Sentech to approach a private funder would require shareholder and Treasury approval. Sentech had been in constant negotiations with the Industrial Development Corporation (IDC) and Dimension Data South Africa (DDSA) and other possible funders. It was definitely looking at private funding but it had to be done within legal parameters.
Mr Raath explained that if you had private funding on a large scale, there may be certain conditions attached. Sentech would not encumber the broadcasting network with conditions from a private funder. The National Treasury and all relevant departments had agreed that in order to make digitalisation happen in South Africa, state funding for the broadcasting network would be necessary.
Mr Mkono referred to Sentech's financial highlights in the presentation and asked if it was comfortable that it would be able to sustain that position even if private funding were not forthcoming.
Mr D’Oliveira said signal distribution was not a business that could self fund. The reason Sentech had got a multimedia licence was to provide services that could subsidise the signal distribution, ensuring capital funding. Success depended on a national roll out. The company could sustain itself. It had been running profitably for the last few months, but needed significant cash flows to be able to re-invent Sentech.
Mr Hendricks (DA) asked if there were projections for the first, second and third years to recoup the cost of the EASSY cable. Who would regulate the pricing of the cost?
Mr D’Oliveira said Sentech had made projections for the next ten years. He explained that Sentech currently made use of a lot of satellite technology, with high operating costs. With the EASSY cable, Sentech could invest and actually own part of the network. There would be a fixed cost and no operating costs. Based on projections for ten years the repayment would be reached very early in the project - in about two years.
Mr Hendricks requested clarification of what the Square Kilometre Array (SKA) project was
Mr Raath explained that the Square Kilometre Array was a radio telescope which has a huge antenna. It listened to radio transmissions from space. It was of critical importance in the science field as everything in space transmitted frequencies that could be picked up. SKA needed to be implemented in a radio quiet area (one of low frequencies). There would be few suitable locations in the world. The Karoo / Northern Cape was however a possibility and South Africa was bidding for the opportunity. He believed that if South Africa was successful with its bid, this would have enormous benefits in the scientific realm and inevitably there would be the creation of jobs.
The Chair as Member for Mpumalanga Provience questioned when the My Wireless project had been launched in Nelspruit. She felt that it was important that Committee members be notified when Sentech launched such projects in their respective provinces.
Mr Dube assured members that Sentech would in future inform members when launching projects.
It would not repeat this error again.
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