Nepad Protocol: Department and Deputy Minister’s briefing

COMMUNICATIONS PORTFOLIO COMMITTEE
12 June 2007
NEPAD PROTOCOL: DEPARTMENT BRIEFING

Acting Chairperson: Mr G Oliphant (ANC)

Documents Handed Out:
Protocol on the NEPAD ICT Broadband Infrastructure Network: Department briefing

Audio Recording of the Meeting Part1 and Part2

SUMMARY
The Department of Communications briefed the Committee about the Protocol that set out the policy and regulatory framework for the NEPAD Information and Communication Technologies (ICT) Broadband Infrastructure Network for Eastern and Southern Africa. The briefing provided a comprehensive outline of NEPAD’s objectives regarding ICT development in Africa. The background and importance of the Protocol was provided. These points emphasised the need for affordable and efficient ICT development in Africa. It was noted that the participation of many Southern and East African countries was crucial for the NEPAD network to succeed.

Members were concerned about the ratification process within South Africa and in neighbouring states. The harmonisation of policy among various stakeholders within the participating countries had to be carried out efficiently for the Protocol to be successful. Members questioned the capacity of the NEPAD network to effectively deal with Africa’s ICT problems. The Committee stressed that profit making should not be the motive behind the involvement of local and international companies. The Protocol should rather address the high costs and accessibility problems many Africans faced. The Deputy Minister noted that it was an important departure for business in the telecommunication sector. The aim was to reduce costs without a profit motive and improve access for a wide range of African countries.

MINUTES
New Economic Partnership for Africa Development (NEPAD) ICT Network Protocol: Department of Communications (DOC) Briefing:
Ms Lyndall Shope-Mafole, Director General, Department of Communications, briefed the Committee about the Protocol on the policy and regulatory framework for the NEPAD ICT broadband infrastructure network for Eastern and Southern Africa. The briefing focussed on developments regarding the NEPAD ICT broadband infrastructure network, public policy and developmental advantages, developments that led to the Protocol, the Protocol and developments since the signing of the Protocol.

The Protocol aimed to substantiate NEPAD’s objectives of placing Africa on a path of sustainable growth and development, eradicating poverty, halting the marginalisation of Africa in the globalisation process, enhancing its full and beneficial integration into the global economy, and accelerating the empowerment of woman. With regard to ICT specifically, the Protocol emphasised the principles of non-discriminatory access, open access, separation of ownership and use, regulated return on investment and the requirement that all companies invest the same irrespective of their wealth and size.
 
The Protocol had stemmed from the regional organisation’s ambition to enjoin their Members States to work towards harmonisation of policies in the ICT sector and in particular to work towards improving connectivity amongst their members and the world. The NEPAD ICT Network had specific characteristics. It was predominantly African owned and led, that Special Purpose Vehicles (SPVs) must develop, own and maintain the networks, applied the principles of public private partnerships (PPPs), connected African countries to each other and the rest of the world, and consisted of both terrestrial and submarine components.

Senior Government officials, regulators and policy makers in the region were tasked in 2003 to develop the protocol to provide the policy and regulatory framework. Vital purposes included:
1) Establishment of a common framework across the region for cross border high-quality, high-speed and reliable electronic communications, at an affordable price to the end-user,
2) A design that would contribute towards the development and promotion of the economic, social and cultural integration of the African Continent.
3) African ownership of the Protocol that promoted security over the network with minimal non-African interference.
4) A private public partnership between the Governments of the region and the private African telecommunications companies.

5) The opportunity for Africa to develop and determine best practice.

To date, twelve countries had signed the Protocol. The layout and main terms of the Protocol were tabled and discussed in depth (see presentation). Chapter 3 stipulated the structure of the Special Purpose Vehicles, which could be either terrestrial or hybrid. Each SPV was to be governed by a shareholders’ agreement and Inter Governmental Assembly (IGA) would hold one seat on each board, and hold one “golden share” to be exercised if there was any deviation from the NEPAD principles. Chapter 4 set out the rights, obligations and operating principles of the operating entities. Chapter 5 contained the policy, regulatory and licensing principles. Signatory countries were required to ensure that their national policies and regulatory principles and licensing requirements fell in line, to ensure open access principles, and to allow for licensing of the SPVs. The licences were to be based on an initial 15-year term, administration fee-based, and have exemption from turnover-related licensing fees. Chapter 6 dealt with tariffs. Charges must be based on capacity, and be independent of distance. There were to be no transit charges for regional cross border traffic. Capital structures were set up of equity, debt and quasi-equity, to allow for companies to warehouse shares for later purchase if they were unable to purchase upfront. Chapter 7 dealt with access to cables. Chapter 8 required arbitration in accordance with the rules of the African Union in the event of disputes. Chapter 9 dealt with the IGA, and Chapter 10 dealt with miscellaneous provisions in relation to annexes, amendments, signature and ratification.

Since the signing, the Inter-Governmental Assembly (IGA) had met on two occasions to discuss the relationship between East African Submarine Cable System (EASSy) and African countries. After the first meeting governments were requested to submit the names of telecommunication companies that wished to participate. A group of African telecommunications companies, including Telkom SA, MTN (Uganda) and VSNL International signed a construction and maintenance agreements for the EASSy Cable. This Cable was not compliant with the protocol. The matter was discussed, and the South African telecommunications companies indicated that they were willing to work within the Protocol and participate in the NEPAD broadband infrastructure project.

The Protocol took into account that there was an uneven balance of forces in international connectivity, which did not favour Africa. The Protocol would allow South Africa to prioritise the NEPAD network and other South African cables and would ensure that the bulk of money generated by African traffic remained on the African continent. The protocol was to be ratified by 30 June 2007 and all national ICT policies and regulations to the Protocol must be aligned by 30 March 2008.

Discussion
The Acting Chairperson requested that the ratification process be clarified.

The Director-General apologised for the late introduction of the Protocol into Parliament. This was due to the lengthy consultation process that had taken place with companies. She noted that the procedure would go through the correct channels.

Adv P Swart (DA) noted that the Protocol had not been put forward to parliament and questioned the purpose of the briefing.

He questioned Telkom’s motive behind signing with EASSy having known that it was not compliant with the NEPAD system. He asked whether there had been discussions between Parliament and Telkom about the Protocol prior to the signing.

The Chairperson responded that the matter could not be dealt with at the time and that ratification would take place on the 19^th June 2007. The purpose of the briefing was to inform the Committee about the Protocol.

Ms Shope-Mafole responded that companies such as Telkom, Vodacom and MTN had all had discussions with Government. Other companies were absent from the discussions because they did not agree with certain principles. Telkom had signed with EASSy without informing the Department. She noted that a meeting had taken place to inform Telkom that the EASSy cable could not land on South African soil. The Protocol’s main aim was to prevent profiteering off Africa’s poor.

Mr R Pieterse (ANC) asked whether countries could sign the Protocol in the absence of large commercial companies and vice versa.

Ms Shope-Mafole replied that the harmonisation process had taken place with the Department of Foreign Affairs. She noted that companies were only allowed to sign if their countries permitted them to, however countries were allowed to sign without companies’ consent or participation.

Mr M Mohlalonga (ANC) questioned why only twelve out of the twenty-three countries had signed. He wanted to know whether there were difficulties in the other countries, and asked what the level of ratification by the twelve countries was.

Mr Mohlalonga asked whether the goal of minimal non-African interference was viable, due to EASSy cable and subsequent compliance issues. He wanted to know what incentives were provided for investors to provide non-discriminatory access.

Ms Shope-Mafole responded that some countries had taken longer to sign because of a clash of interests with internal investors and government programmes, and this had been the case in Mozambique. The goal was to reduce the disadvantages to landlocked countries in having cable access compared to coastal countries. Countries were allowed to accede but substantial policy harmonisation had to take place. She noted that by the end of June the Protocol should be operational.

She noted that non-compliance issues with the EASSy cable were not critical as non-African countries could also enter into discussions to sign up with the NEPAD protocol.  The headquarters of the NEPAD ICT Network were to be in Rwanda as it had shown that landlocked countries could also have reliable access to telecommunications.

She noted that everyone had belonged to Special Purpose Vehicles (SPV) with regard to incentives. Competition could therefore take place regarding minimal costs. South African companies wanted to invest in African countries but had to be part of the NEPAD framework to legitimate their intentions.

The Chairperson wanted to know whether NEPAD could take over the EASSy cable.

The Director-General responded that this was not advisable as it was important to build a cable. The Protocol was developed to bridge the gap. The inclusion of the EASSy network was viable but there was a need to prioritise the NEPAD Protocol. Counties were not forced to join one network.

Ms S Vos (IFP) asked which other countries were on track to operationalise the Protocol by 2008. She was sceptical that policies would be harmonized by 2008. She wanted to know what the implications would be for countries that did not operationalise. She queried the laying of the EASSy cable on South African land and whether there were any laws that forbid this.

The Director General noted that harmonisation would take place around certain issues such as policies. She noted that it would not be too difficult for countries to harmonise as regional regulators could cooperate with each other. She noted that even though the process was not fully complete, the NEPAD network would be able to function.

The landing of the EASSy cable had appeared in many laws with regard to non-South African companies conducting business on South African shores.

Dr Keith Shongwe, Deputy Director General, DOC, added that the East-Africa Commission had offered assistance to countries that needed help with harmonisation.

Ms L Yengeni (ANC) questioned the role of governments and African telecommunication shareholders.

Ms Shope-Mafole responded that the governments of the region were represented by the IGA.

Mr R Pieterse (ANC) questioned the duplication of participation with the EASSy cable. He asked whether the involvement of companies would negatively affect the good intention of the Protocol.

Ms Shope-Mafole noted that the Protocol provided for representation of different regions but there was no cost of ownership because access was to be the same for everyone. She noted that the decisions that the Board made did not have to do with cost.

Mr M Kholwane (ANC) asked whether there was reluctance by some African states to ratify the Protocol due to international trade forces and internal disruptions. He asked whether the Committee could get a legal opinion on the landing of the cable. He asked whether Sentech had a stake in the framework.

The Director General noted that international groups such as the World Bank and the United States had an influence regarding financing and security.

She noted that Sentech had not signed the Protocol.

Mr Radhakrishna Padayachie, Deputy Minister of Communications noted that the Protocol was an important departure for business in the telecommunication sector. The aim was to reduce costs without a profit motive and improve access for a wide range of African countries.

The meeting was adjourned.