War over R3-billion broadband contract – Report

There is a war between senior National Treasury executives over a R3-billion contract to roll out broadband across the Eastern Cape.

The City Press reported that Treasury’s acting accountant-general, Zanele Mxunyelwa, approved the R3-billion Eastern Cape broadband tender.

According to the report, the Eastern Cape piggybacked on a contract that SITA signed with Liquid Telecom to roll out broadband in the Western Cape.

Treasury allows piggybacking to save time and money, but two senior Treasury procurement executives argued that proper tender processes should be followed for this tender.

The City Press quoted a senior IT executive, who said piggybacking does not make sense in this case as the two contracts are very different.

“The Eastern Cape is paying R1 billion more than the Western Cape for what are essentially far poorer services,” he said.

He added that the Western Cape contract includes telephony, while the one in the Eastern cape does not.

“Their (Western Cape) Internet will be quite fast. It starts at 100Mbps, increasing to [1Gbps]. This will start at 10Mbps per second, increasing to 100Mbps,” he said.

Eastern Cape explains

This report follows a battle between SITA and the Eastern Cape government over the broadband project.

The Eastern Cape reportedly went against SITA’s wishes and appointed Liquid Telecom to roll out broadband services to over 7,000 sites across the province.

The Eastern Cape’s director-general, Marion Mbina-Mthembu, said 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.

“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 the best practice for implementation [of a provincial broadband network] was the Western Cape.”

SITA wanted to use Telkom

Mbina-Mthembu said she 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.

SITA responds

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 suggested that timeframes were not its primary concern.

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.

Now read: SITA wanted us to use Telkom for broadband upgrades at R5 million per month

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War over R3-billion broadband contract – Report