A battle has erupted between the State Information Technology Agency (SITA) and the Eastern Cape government over a broadband project.
Recent reports in the Daily Dispatch stated that the Eastern Cape government “piggybacked” on a Western Cape broadband tender, despite National Treasury and SITA rejecting a request for it to do so.
The Eastern Cape government reportedly went against their wishes and appointed Liquid Telecom to roll out broadband services to over 7,000 sites across the province.
Based on the report, Liquid Telecom is already laying fibre between Port Elizabeth and King William’s Town.
This follows Liquid Telecom securing a contract to roll out fibre in the Western Cape after it acquired Neotel. Western Cape Premier Helen Zille announced the project in 2014, revealing Neotel and SITA as its partners.
It is this tender the Eastern Cape “piggybacked” on, and which SITA contends was a flouting of correct procedure.
The Eastern Cape’s director-general, Marion Mbina-Mthembu, hit back at SITA – stating that they were empowered to appoint Liquid Telecom by invoking Treasury Regulation 16A6.6
The regulation states an accounting officer may appoint a service provider who has been appointed by an organ of state, through a competitive bidding process, provided that both the service provider and the organ of state consent, Mbina-Mthembu told MyBroadband.
Mbina-Mthembu said as government, it is not in their interest to air dirty laundry in public, but as SITA has chosen that route, she has to set the record straight.
“After knocking on SITA’s door for a year for assistance with the rollout of broadband, we embarked on seeking ways to implement it ourselves,” said Mbina-Mthembu.
“It should be noted that it was SITA who informed us that, so far, the best practice for implementation [of a provincial broadband network] was the Western Cape.”
As the Western Cape is the only government rolling out a province-wide network, and have procured services rather than infrastructure, Mbina-Mthembu said they identified the Western Cape contract as the best to piggyback on.
“We arranged for our own teams to visit the Western Cape,” she said.
The Eastern Cape government first approached SITA in February 2016 and, after sensing delays, approached SITA to participate in the Western Cape tender in December 2016.
By May 2017, no progress had been made.
Mbina-Mthembu said she then met with Liquid Telecom on 10 May 2017 to get its approval to use the Western Cape tender.
On the same day, the head of the Eastern Cape’s provincial broadband unit, Dayalan Padayachy, met with SITA to follow up on the projects. All indications were that the project would proceed by existing lines being upgraded under SITA’s Master Service Agreement with Telkom.
On 26 June 2017, SITA delivered a proposal based on its existing agreement with Telkom that would see it pay R5 million per month over 60 months to upgrade 160 provincial government sites that were already connected.
The Eastern Cape rejected the proposal, stating it was 10-times the market-related cost and reaffirmed it wanted to piggyback on the Western Cape’s tender.
It gave SITA five working days to respond from 7 August 2017.
SITA failed to respond and the province wrote to it on 21 August to request help with amending the Western Cape contract to include the Eastern Cape.
On 18 September 2017, SITA responded.
In a letter from SITA CEO Setumo Mohapi to Mbina-Mthembu, the agency proposed that all non-connected sites be executed through a combination of RFB 1161 and an open bidding process. RFB 1161 refers to the Western Cape broadband tender.
Already-connected sites would have to be upgraded under SITA’s existing agreement with Telkom, said Mohapi.
“SITA failed us”
The Eastern Cape accepted SITA’s approval to use the Western Cape contract in combination with an open tender, but rejected the terms that stipulated the use of the Telkom Master Service Agreement (MSA).
Mbina-Mthembu maintained the MSA was never designed with broadband in mind and cost 10-times the market rate.
“I would also want to state categorically that we did a cost-benefit analysis of SITA’s proposal, compared to the Western Cape contract,” said Mbina-Mthembu.
It was significantly cheaper to use Liquid Telecom as opposed to the Telkom MSA.
“SITA failed us… [and] unfortunately is on a drive to rubbish the process, despite the CEO having agreed,” she said, referring to reports quoting SITA’s executive for multi-stakeholder projects, Sithembele Senti.
“As Mr. Senti has the personal crusade, it is going to be interesting to see how this will pan out as he is supposed to be the main liaison.”
SITA disputed suggestions it was in any way responsible for the Eastern Cape’s decision making on its broadband project.
It said it put options on the table for consideration, as was appropriate given the magnitude of the project.
“Throughout this process, SITA’s insistence has been that the Eastern Cape broadband project complies with the SITA Act, the PFMA, and National Treasury Regulations,” SITA told MyBroadband.
While SITA did not directly respond to questions on how long the process took, its feedback to MyBroadband suggested that timeframes were not its primary concern.
The correct process must be followed, and it will take as long as it needs to.
It is worth noting that the Western Cape broadband contract took four years to put together, according to a report from BMIT.
The project also had to contend with several missteps from SITA, including failing to extend the deadline for the tender.
“We don’t need permission”
The Eastern Cape had also been communicating with National Treasury about its broadband project, and on 20 September 2017 it asked the Treasury to facilitate the province’s participation in the Western Cape broadband contract.
“National Treasury’s correspondence stated clearly that they were concerned about the SITA delays,” said Mbina-Mthembu.
The Treasury’s response was not completely aligned to her request, she said, and further clarity was requested.
“In my opinion, the Treasury Regulation itself is not clear and cannot be interpreted as instructing accounting officers to seek Treasury permission,” she said.
The Treasury confirmed that it and Mbina-Mthembu met on 19 December 2017. The meeting was attended by the Eastern Cape and SITA.
It also confirmed that Treasury Regulation 16A6.6 provides conditions under which piggybacking can take place.
The Treasury said it did not discuss the issue of piggybacking at the meeting in December, however.
“Piggybacking did not even feature as the main discussion point as the Treasury had already advised in writing on its position in November 2017,” it said.
It was reported that the Eastern Cape government paid Liquid Telecom R228 million to piggyback on the Western Cape’s project, but Mbina-Mthembu said this was incorrect.
“It is inaccurate that the cost is R228 million. However, our planned expenditure for 2017/18 is R228 million,” she said.
It is also not true that the province has paid R228 million to date, she said.
Liquid Telecom declined to comment on the matter.