Cabinet rejection of Telkom deal will cost jobs
The claim by the Department of Communications that it rejected the R3.3 billion Telkom deal because it ran counter to its plan to ‘improve access to information and communications technology services' does not stand up to scrutiny.
Cabinet, and indeed Minister of Communications Dina Pule, must stop pussyfooting around. She must show that there was sound business reasoning behind the decision not to support the sale of a 20% stake in Telkom to South Korean telecommunications giant, KT Corp.
The fact is that neither the government nor Telkom have the necessary funding and know-how to support critical expansions in communications infrastructure. The broadband rollout alone requires roughly R89 billion. In addition, it is common cause that insufficient funding has been allocated for the migration to Digital Terrestrial Television (DTT), which was meant to free up considerable spectrum for business and service delivery applications.
Most importantly, business expansion, economic growth and, ultimately, job creation are significantly constrained by Telkom's poor management of the ‘last-mile' of communications between exchanges and end-users in South Africa. If this government is serious about creating jobs, it needs to do all it can to grow the economy by attracting international investment and rolling out a world-class ICT infrastructure.
An experienced international partner could have gone a long way toward getting Telkom out of its innovation rut.
The fact is that government was not prepared to dilute its shareholding when it entered into negotiations with KT Corp. At the time it was expected that either a dilution of shareholding or some other mechanism would be devised to bring these investors on board.
If government had no intention of diluting or selling its shareholding, why were the negotiations encouraged to proceed so far? A more pertinent question perhaps is why the major shareholder has suddenly become an unwilling seller?
I have already submitted parliamentary questions to Minister Pule seeking clarity on the matter. In addition, I believe that the Minister should appear before the Portfolio Committee on Communications to explain why government has chosen to forego this opportunity to attract investment to the ICT sector.
The Minister is expected to give feedback to Cabinet on new options and strategies for Telkom in the next three months. I am not convinced that new solutions to address the sluggish performance of the company will materialise from this "turnaround" strategy that is to be developed by its major shareholder.
Telkom desperately needs an investment injection to revitalise the company so it can play a productive role in an increasingly dynamic market.
Cabinet's rejection of the KT Corp offer indicates that our government doesn't have the stomach to make the tough business decisions that are sometimes necessary to regenerate companies and ultimately contribute to economic growth and job creation.
Statement issued by Marian Shinn MP, DA Shadow Minister of Communications, June 4 2012
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