Government rakes in billions from Telkom - TechCentral

Government rakes in billions from Telkom

Pravin Gordhan delivers the national budget in parliament on Wednesday

Pravin Gordhan delivered the national budget in parliament on Wednesday

The department of communications received R3,9bn in extraordinary proceeds from Telkom following the sale of its shares in Vodacom, according to the communications budget vote published alongside finance minister Pravin Gordhan’s national budget on Wednesday.

Total receipts increased significantly, from R3,4bn in the 2006/07 financial year, to R5,4bn in 2009/10. The R5,4bn consists of the Telkom/Vodacom proceeds, as well as special dividends of R538,3m and R33,9m in ordinary dividends.

Government owns a 39% stake in Telkom, which was the principal source of the all the dividend money received.

The department also collected hundreds of millions of rand in administration and licensing fees from the Independent Communications Authority of SA (Icasa), the Universal Service Fund and the Post Office.

However, the department doesn’t keep any of the revenue. It hands all of it to the National Revenue Fund.

The receipts are expected to drop off substantially in the new financial year. Receipts are expected to stabilise at R925m in 2010/11, R959,4m in 2011/12 and R993,4m in 2012/13.

Despite the billions it has collected on behalf of government in recent years, the communications department’s budget is set to be slashed over the next three years. Its budget allocation will be cut from R2,1bn in the 2010/11 financial year to R1,6bn in 2012/13, representing an annual average decrease of 12,9%.

The annual reductions represent a return to more normal expenditure levels by the department after three years of heavy investment to get the country ready for the 2010 soccer World Cup, as well as allocations for Sentech to build a digital television network and a wireless broadband network. A reduction in subsidies paid to the Post Office will also help reduce the communications department’s expenditure over the medium term.

The department’s spending grew significantly in the past three years, from R1,3bn in 2006/07 to R2,5bn in 2009/10 — an average annual rate of 23,2%. This was due mainly to:

  • R500m awarded to Sentech in 2007/08 to build a national wireless network — the company still has not spent this money;
  • R600m awarded in 2009/09 and R450m in 2009/10 to Telkom for communications upgrades at stadiums and other key points for the World Cup;
  • R200m awarded in 2008/09 and R100m in 2009/10 to Sentech to fund the satellite backup infrastructure for the World Cup.

The department will give Telkom an additional R150m in 2010/11 to finish its work around the World Cup.

In total, it will transfer R1,5bn to public entities to develop the necessary communications infrastructure for the soccer showcase. R1,2bn of this money has been allocated to Telkom for access network infrastructure; R300m to Sentech for satellite services; and another R80m to the City of Johannesburg as contribution to the upgrade of the international broadcasting centre at Nasrec.  — Duncan McLeod, TechCentral

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