State-owned signal distributor Sentech is in dire straits. A submission from the company’s board to parliament reveals its auditors are concerned about its ability to continue as a going concern.
TechCentral is in possession of a strategic presentation the company was supposed to deliver to parliament on Tuesday this week in which it has revealed that its auditing firm — which it doesn’t name — has raised concerns about its financial standing.
The auditors have also raised an “emphasis of matter” based on the risk that government may refuse to bail it out if it runs into a cash-flow crisis.
The presentation to the parliamentary portfolio committee on communications did not go ahead on Tuesday after Sentech failed to deliver its turnaround strategy to MPs in written form ahead of the meeting.
Sentech’s strategic plan, in the form of a PowerPoint presentation, delves into the troubles affecting the company. They range from internal management and staff troubles to financial losses and “irregular transactions”.
In the damning presentation, Sentech’s board lists examples of “ irregular transactions” that have cost the company nearly R120m between 2009 and 2010.
The largest of these transactions allegedly involves a deal between Sentech and decoder manufacturer Altech UEC worth about R32m.
Sentech is also battling to get companies that owe it money to pay up. The presentation shows 79 of Sentech’s government and community customers owe the company a total of R27,4m.
Its product portfolio is not looking healthy either, with four of six business areas turning in losses in the 2010 financial year. Only its core business of broadcast signal distribution is profitable.
In the strategy document, the board suggests several measures to keep costs down and won’t rule out retrenchments. For now, the board wants a hiring freeze and a skills audit to find out which staff can be redeployed and retrained.
But by far the company’s biggest problem is its lack of leadership.
Former CEO Sebiletso Mokone-Matabane “resigned” in April after a damning report on Sentech was handed to communications minister Siphiwe Nyanda.
The report has not been made public, but Nyanda said recently that the task team that drafted it had recommended a turnaround strategy be implemented as a matter of urgency.
Nyanda said the report found that Sentech was “rudderless, inadequately funded and misdirected” and was an unsustainable business.
The task team urged drastic and immediate action if Sentech was to avoid lapsing into terminal decline.
Fixing the company is going to prove to be a big challenge for whoever is eventually appointed as CEO — the board is busy with a final round of interviews for the position.
Only once the CEO is appointed will the hunt begin for a full-time chief operating officer and a chief financial officer.
Sentech also needs to find a chief technical officer, a planning officer, a risk officer, a legal director and a human resources head. — Candice Jones, TechCentral