State-owned fibre-optic telecommunications infrastructure provider Broadband Infraco has been directed by government to undertake a valuation exercise in preparation for its possible sale, the department of telecoms & postal services has said in documents tabled in parliament.

In documents sent to MPs, the department reveals that it has had engagements with Broadband Infraco with a view to the company “preserving its value” in preparation for a broader rationalisation of state-owned enterprises (SOEs).

“Broadband Infraco is currently reviewing its business and financial plans,” the department said. “Engagements are taking place between government and the [Industrial Development Corp] as the 26% shareholder in Broadband Infraco [to] share views on the future of the company.”

It’s not clear whether government intends fully privatising Infraco, selling it to another SOE, or offloading it to Telkom, which is partially owned by the state.

Infraco had been vying against Telkom to implement government’s South Africa Connect broadband project, but President Jacob Zuma announced earlier this year in his state-of-the-nation address that Telkom will be the lead agency for the roll-out. The decision placed a big question mark over the future role of Infraco in South Africa’s telecoms industry.

In its presentation documents, the telecoms department has revealed that there is significant duplication with SOEs and a need to “imbue” them with a “developmental agenda”.

But most SOEs are characterised by poor governance and a lack of understanding of their mandates in context of a developmental state, according to the presentation. “The funding mechanisms of SOEs are very weak, leading to poor performance in the execution of their socioeconomic mandates.”

In addition, duplication of functions has led to inefficiencies and lack of effectiveness and wastage of scarce financial resources, the presentation says. “There is serious lack of coordination among SOEs that should complement each other.”

Rationalisation of SOEs under the telecoms department is one of government’s “flagship projects”, the presentation says.

SOEs that report into the department include Infraco, broadcasting signal distributor Sentech, the Post Office and universal access agency Usaasa. Government also has a significant stake in Telkom (39,8% directly held, with a further 12% owned by the PIC). It also owns 13,9% of mobile operator Vodacom.

“In the context of a slow rate of economic growth, it is crucial that state resources are effectively and efficiently used,” the presentation says. “The overlapping mandates of SOEs in the ICT sector represent an unnecessary duplication.”

Telkom, Infraco, Sentech, the State IT Agency, Usaasa and the Post Office are all capable of playing a role in delivering broadband, the department will tell MPs.

The objectives of rationalisation are to ensure that the ICT sector is “fundamentally transformed and placed in its rightful position to support economic growth”.

Also, the roles and responsibilities of SOEs in the roll-out of various aspects of the broadband capabilities must be defined as part of the process. And the administrative bottlenecks that constrain the roll-out of network infrastructure must also be removed and unnecessary duplication of infrastructure must be avoided.

The telecoms department says government wants to avoid undue competition between SOEs and minimise the number involved in the implementation of broadband to improve coordination.

The telecoms department has established an SOE rationalisation steering committee chaired by director-general Rosey Sekese. Infraco, Sentech, Sita, Usaasa and the Post Office are represented on the committee.

The committee’s main roles are the identification of relevant issues, including policy, regulatory, legal, economic, business, technology, financial and operational issues that may be impacted by the rationalisation. Government sees the Post Office using its “unmatched network of points of presence through the country, most of which are in rural areas and townships, which are underserved”.

“It is the intention of government to utilise this extensive reach of the Post Office to bring broadband closer to these communities,” the presentation says.

“Having completed and obtained cabinet approval of its turnaround plan, the Post Office is now hard at work finalising the implementation plan, which includes work on its role in the implementation of South Africa Connect.”