Broadcast needs
A little over a decade ago, Sentech was a technical department of the South African Broadcasting Corporation. Since then, it’s had to become a fully fledged, stand-alone enterprise and rise to the challenges posed by government’s 2002 decision to grant it two new licences: one allowing it to offer multimedia services like internet and broadband, the other to route international calls for other operators.
The licences were part of government’s bid to liberalise the telecommunications sector. The broad aims of its liberalisation policy include growing the economy, increasing access to communications, attracting foreign direct investment and boosting competition. If the policy works as it’s supposed to, telecommunications prices will fall — a key element of government’s new growth strategy. The strategy also aims to accelerate this process by getting Sentech to deliver a wireless broadband network by next year.
Given Telkom’s lengthy monopoly over the market, there have been some fairly big steps taken recently towards opening up the market. Cellular companies can now use fixed lines to provide voice and data transmissions, value added networks can carry voice over the internet and a second national phone operator has been licensed.
Government has effectively carved out a little space for Sentech in the rough and tumble of a more competitive market — and it got a long lead time to get its house in order. But Sentech continues to struggle, and has largely failed to take advantage of the opportunities offered by its licences. This it attributes to a lack of funding.
Just this week, its senior executives warned Parliament that SA would not be ready to broadcast the 2010 Soccer World Cup to a global audience unless the state helps it with funding to invest in infrastructure. It has previously warned of a television blackout as its broadcasting signal distribution is so old. Sentech asked for R913m last year to help fund the upgrade and digitisation of its broadcast network, and argues that it has committed funders to borrow a further R1,5bn — it just needs government’s go-ahead.
Sentech’s top team no doubt decided to make its funding woes public after seeing its additional allocation for infrastructure in the budget, which amounts to R205m over three years, a fraction of what the organisation believes it needs.
The question is why Sentech’s pleas have consistently fallen on deaf ears, particularly given the big plans for the entity under the new growth strategy. And government cannot claim to be unaware of Sentech’s funding limitations — this has been a consistent refrain in every annual report, and discussions have been under way since 2002.
The national treasury tends to balk at big cash injections for state companies, rightly pushing for them to rather get their balance sheets in order, develop a workable business plan and fund their investment needs through cash flows or borrowings. The fact that government overhauled Sentech’s board last year, replacing all but one nonexecutive director, suggests that it is beefing up the organisation.
But the new board seems to concur that Sentech is undercapitalised and that more state funding is needed. The stakes are high: not only will SA suffer huge embarrassment if it is unable to broadcast the World Cup, but one of the key legs of government’s growth plan — a wireless broadband network — may well fall by the wayside.
But if the board gets its way, it will have to ensure that management sticks to a workable business plan and delivers the goods.
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