Hon Chairperson, members of the National Assembly and the people in the gallery, I'm very pleased to be able to introduce the debate on the Broadband Infraco Bill in the National Assembly.
In the modern industrial economy, the existence of high speed, high capacity telecommunications infrastructure is a major driver of economic growth and more accessible socioeconomic services such as health and education. In fact, there is little doubt that this is a strategic necessity for contemporary growth and development.
It is this understanding that led the government to decide to obtain a key fibre optic national network, developed originally by Transnet and Eskom, and put it in state hands. This will allow for a strategic investment programme to take place according to a clear timetable and with a clear intent to modernise our broadband infrastructure and lower the cost to the economy of such capacity.
This will be achieved not through some form of subsidy but by a long-term strategic investment by the state, where our pay-back periods are longer and the rate of return required, determined by a number of economic calculations rather than profit maximisation, is the prime determinant.
If these objectives of high speed, high capacity and internationally competitive telecommunications pricings are met in the medium to long-term, the state can then reconsider the need to retain total or partial ownership of such infrastructure.
The background to the decision to retain the long-range fibre optic assets of Eskom and Transnet in state hands spans some years and takes place after many complex negotiations. I think the difficulties that this presented in the processes related to consultation, licensing and scheduling in terms of the Public Finance Management Act are fairly commented on in the portfolio committee report on the Broadband Infraco Bill.
There is no doubt that everything could have been smoother. However, this is rather an unusual situation not fully envisaged in our legislation which is relatively youthful in implementation. Accordingly, I would like to thank the portfolio committee for the long hours and intense work they put into the processing of the Bill.
The fact that the Portfolio Committees on Communications and Finance were consulted on many matters and, in the case of Communications, participated actively, was additional testimony to both the complexity of the policy issues that arose and the amount of work this relatively short Bill entailed.
I would like to thank the former chairperson of the Portfolio Committee on Communications for the support he gave the DPE, the Department of Public Enterprises, and the Portfolio Committee on Public Enterprises.
Let me deal very briefly - I'm sure members of the committee will do so in some detail - with the key issues that have arisen in the inputs to the portfolio committee hearings.
Broadband Infraco is a precise intervention in our telecommunications sector. Whilst South Africa's telecommunications industry is well established with world-class companies, it is characterised by a limited number of incumbents who hold significant market power, and the size of our economy is likely to make this a relatively permanent feature of this economy.
This means that simply licensing additional players does not significantly alter the market structure, and global market forces may lead to an underinvestment in large-scale national infrastructure within such a compact market as ours. Accordingly, leaving such critical investment purely to market forces was too risky, given our urgent need for greater and more internationally competitive broadband capacity.
However, we are confident that the new Electronic Communications Act and licensing conditions now in progress will lead to active private sector development in the multiplicity of value-added services that utilise broadband.
It is important to note that Broadband Infraco will not enter these areas in competition with the private sector. It seeks to ensure long-range broadband capacity that will liberate such value-added services from the constraints of capacity and cost.
To this end, it will focus on intercity, national networks and undersea cables. In the latter case we will work with other players to ensure that a timely and large capacity broadband connection to the world is available. By making long-distance connectivity available to the private sector on a cost-plus basis, Infraco will commoditise long-distance infrastructure and will bring the South African telecommunications market in line with others worldwide.
There is general agreement that Broadband Infraco should be licensed as soon as is practical. Indeed, this is important if we are to achieve our objectives. Following the debate on possible options, I am certain that we should follow the processes preferred by the Department of Communications and Icasa.
From the side of the Department of Public Enterprises, we will work actively with the Department of Communications and Icasa to facilitate progress in this regard since, at the end of the day, the real strategic objective is to transform South Africa's telecommunications sector into a highly competitive player in the interests of our economy and society.
Other strategic projects such as the SKA, the Square Kilometre Array, Sanren, the SA National Research Network and the university network, will be almost impossible to achieve without the capacity we need - and of course we will need a great deal of capacity for 2010 in the form of broadband.
Let me say that many submissions made in the portfolio committee raised what I believe were legitimate interests, but I think that at the end of the day there was very clear consensus that this intervention was useful and was an important strategic intervention.
The issue of the scheduling of the Public Finance Management Act for Broadband Infraco did bring to light many different viewpoints and I value the process adopted by the portfolio committee to inform themselves on the issues and indeed to come to some clear views on their part.
However, as the portfolio committee indicates in its report, the executive have to give the lead on the matter. This matter has now been resolved through a consultation process in the executive and Broadband Infraco will be a Schedule 2 entity with specific reporting and monitoring requirements.
The completion of this legislative process will allow for the establishment of a company that we believe is set to revolutionise the ICT sector and move us one step closer to making more affordable broadband access a reality.
I would like to thank the leadership of Neotel, Violesh Sanchar Nigam Limited, VSNL and the Tata Group for their farsightedness and support for South Africa's long-term strategic interests in telecommunications. In doing this, they have often been prepared to accommodate us rather than insist on immediate commercial requirements. Such an approach is highly valued and we have undertaken to continue to work together to meet these strategic needs.
I have a very high regard for the work of the Portfolio Committee on Public Enterprises. The debates in the hearings on the Bill have been rigorous and engaging and the DPE has learnt and benefited from the vigilance and full commitment to this process on the part of the committee members.
All the stakeholders I have talked to have expressed their respect for the committee and the process. Accordingly, I would like to express my thanks and admiration to the portfolio committee for a job well done and for putting up with some of the unusual circumstances I referred to earlier.
In particular, I would like to express a special word of thanks to the outgoing portfolio committee chairperson, Yunus Carrim. We will indeed miss you but we know that you will add value wherever you'll be. I know that I will still turn to you for advice from time to time, not only on political matters.
I would like to welcome hon Fatima Chohan-Khota as the new chairperson, and she is rapidly informing herself on the intricacies of this new challenge. The manner in which these two experienced comrades have handled the changeover has been excellent. I'm sure that this very strong portfolio committee will continue to go from strength to strength as we deal with the interesting and important challenges ahead in Asgisa. With the support of the portfolio committee, I commend this Bill to the House. I thank you. [Applause.]
Hon Chairperson, hon Minister, members and the public, I've promised that I would deliver this speech in English. IT has always been my passion. So today I just want to convince you why this Broadband Infraco Bill is important by outlining the problems and challenges in our telecommunications industry.
The monopoly of infrastructure by Telkom has been there for years. It's an example of privatisation gone wrong. Privatisation has made Telkom very efficient at exploiting our public in terms of its pricing and services. This has been confirmed by many studies and reports.
For example, while we are getting excited about getting more ADSL, in Japan and China one already gets fibre optic cables directly to one's home. While we worry about our monthly data capturing in South Africa, for many years, we have been joined by foreigners enjoying unlimited data transfer. These are exactly some of the reasons why state intervention through Infraco is important; it's exactly to correct this market failure.
Infraco also provides for capital investment at the expense of the public good, while improving and modernising our infrastructure. Now Infraco can act as a competition enabler to level the playing field to provide competitive broadband access both on cost and capacity. It will be a growth enabler for our economy and will particularly assist in youth development. South African youths are both fortunate and unfortunate. They are fortunate in being able to join the global market with advanced technology. At the same time, they are unfortunate not to have the cheap resources available as well as access to information and knowledge, despite the available technology.
Now, Infraco will enable a true information highway for our youth as knowledge workers. Imagine Thapelo, from a rural town in Mpumalanga, accessing our national archive through broadband, or delivering design projects for contract work in Beijing via high-resolution video streaming.
This knowledge empowerment is what we have yet to realise. Currently, Thapelo is limited to the local library with its limited resources and limited archives. Should he attempt to make telephonic contact with his clients in Beijing, they probably would not be able to understand him because Thapelo would try to minimise the cost of the international call by speaking 10 times faster than usual.
So, hon members, we ask you to support this Bill and mark our first step towards a healthier telecommunications industry in South African.
Lastly, on behalf of the committee, I would like to thank our former chairperson, the hon Yunus Carrim, for the leadership and guidance he provided during the processing of this particular Bill. Thank you.
Chairperson, Transnet and Eskom's telecommunication assets, which were originally promised to second fixed-line operator Neotel, have been transferred to Infraco. Infraco will now, under contract, sell bandwidth wholesale to Neotel, which in turn will make capacity available to other telecommunications players who were formerly dependent on Telkom.
The government wrote the Electronic Communications Act specifically to deregulate the industry. Now, however, the state is becoming more involved at all levels of the industry. The Minister needs to tell Parliament why Infraco will now be 100% state-owned when, according to the way it was presented to your own Cabinet, it would only be 72% state-owned. Was this a further attempt to crowd out private sector investment?
Proposed changes to the Electronic Communications Act will give the government the power to create a second Telkom monopoly, with consequences that are potentially catastrophic. Why does the state want to own broadband infrastructure communication facilities? Infraco now also wants to lay a cable along the east coast of Africa as well as two other cables along the west coast of Africa. This can be done by the private sector.
Secondly, the state also wants to take up 50% ownership of the two cables, SEACOM and EASSY, that are to be laid along the east coast of Africa. These two cables were already initiated by the private sector in 2000. The private sector has long been denied opportunities in this market because of red tape, rules, regulations and policies that are hostile to private investment in this sector.
New entrants to the telecommunications market have to wait up to three years for licences from Icasa. To expedite the licensing of Infraco, though, the state initiated an amendment to the Electronic Communications Act.
The Minister must inform Parliament about the following: Has Infraco paid Eskom for the infrastructure it acquired from the state power utility? Secondly, what has happened to the R627 million of taxpayers' money that was awarded to Infraco for the 2006-07 financial year, and why has Parliament not been informed of this yet?
Hon Carrim, please listen for a change. The Minister, and you as well, must also explain to Parliament why, in terms of the Public Finance Management Act, Infraco is being listed as a Schedule 2 instead of a Schedule 3(b) entity. Being listed as a Schedule 3(b) entity means that Treasury does not have to be consulted should Infraco want to obtain finance on the open market.
Furthermore, it also means that no Minister will have any control over how much private finance Infraco may obtain. As we have seen, the result is often that when public enterprises get into financial trouble, they come to the taxpayer for help.
A Schedule 2 listing will also allow Infraco to determine the salaries it pays to its management and board members. In other words, we may soon read of yet another public entity that pays its management and board members huge, so-called "performance bonuses" and "payment packages". Furthermore, Treasury must have a say in the agreement between Infraco and Neotel.
In accordance with the Municipal Systems Act, municipalities are forced to make available, for public comment, agreements entered into with private service providers. Why does there have to be a difference between the first and third tiers of government?
Finally, Parliament has the right to force the executive - in this case, the Minister - to make public the details of the agreement between his department and Neotel. This will allow Parliament to decide whether it is in the best interest of the public and whether it is a worthy manner in which to spend public funds.
The DA supports the Bill. Thank you.
Chairperson, Minister and colleagues, the 21st century is the speed competition area and if we South Africans are not able to speed up our activities to compete with other countries then we will be out of the race. Schedule 2 of the Public Finance Management Act will swiftly and flexibly give Infraco access to financial support. This is very important for today's business entities.
Broadband costs in South Africa are extremely high. The IFP expects that Infraco, with the government's backing, will be the platform to support all industries across the board in our country to compete internationally through lower broadband costs.
The IFP further hopes that Infraco will be successful and be an example of how state-owned enterprises, with the proper support from government, can contribute to other industries to compete on the world stage. The IFP supports the Bill.
I would like to use my ten seconds to quote what Madiba once said: 'our common humanity is more important than our differences'. On behalf of my party, I would like to thank the former chairperson, hon Yunus Carrim. I thank him for his sterling work in the Portfolio Committee on Public Enterprises, not forgetting his jokes and embarrassing me in a polite way. We know you will do justice to Justice. Thank you. [Applause.]
Chairperson, the aim of this Bill is to expand the availability and affordability of access to electronic communications. The ACDP welcomes this expansion to the people, particularly in underdeveloped and underserviced areas of our nation, and we are pleased to note that this will also increase the affordability of these services.
Whilst we appreciate the concerns of certain people in the private sector, in view of the urgent need for low-cost broadband access, the ACDP will support this Bill.
May I also wish the hon Chohan-Khota well as she leaves to chair the Portfolio Committee on Public Enterprises. We will miss your gracious chairing of the Portfolio Committee on Justice but we welcome her successor, Mr Yunus Carrim, who is obviously not as good-looking as her but we do welcome him. Thank you very much. [Laughter.]
Sihlalo, malunga lahloniphekile, Ndvuna kanye netivakashi tetfu ... [Chairperson, hon members, Minister and our guests ...]
... indeed across the political spectrum we all are in agreement that the cost of telecommunication services in our country is too high. The President has said many times that we need to do something about these costs as they become a hindrance to our economic development.
We therefore welcome the initiative and the intervention by the Department of Public Enterprises to ensure that you come in, intervene and act where the market has failed to do so. In my understanding, you don't crowd out the private sector where they are failing to do what they are supposed to do. We, therefore, as a portfolio committee, are fully behind and in support of that intervention.
We have received a number of submissions during the public hearings. Some of those were from the Department of Communications and also from the Independent Communications Authority of South Africa. We have tried to address their concerns.
One of the concerns which was raised by Icasa was the manner in which the Bill suggested that Infraco should be licensed. We acceded, as a portfolio committee, after considering quite a number of factors, that indeed Infraco should be licensed through the normal processes of the Electronic Communications Act.
However, we noted that this process would take time and this might delay the intervention which the state requires. We then said that we must exempt Infraco and deal with the amendments to the Electronic Communications Act to ensure that the licensing of Infraco is done in a speedy way rather than following the normal processes.
As a committee, we thought that both the Ministry of Communications and the Ministry of Public Enterprises need to ensure that they come up with policy directives to ensure that we don't have a duplication of functions between Sentech and Infraco. We think that is going to assist so that we don't duplicate state resources because, indeed, they might take a decision in terms of business interests where they decide to use broadband or to follow the other line and so on.
On behalf of the committee, I would like to wish the outgoing chairperson well. We thank you for your leadership and stewardship. Indeed, for the first time in the committee I was given a chance to co-chair a public hearing and that was a wonderful experience. [Applause.] As the ANC we support the Bill. Thank you. [Applause.]
Chairperson, as a new democracy trying to rejuvenate, mobilise and enhance its economy, we need to open pathways of opportunity for our people. However, as poverty tends to be our greatest challenge and the growth of small and medium enterprises is slow, the state has to constantly come up with ways to overcome the challenges and push us forward as a competitive global entity rich in potential as a country for investment.
However, one avenue that we cannot slow down is the fast advancement of technological development. Broadband has become a common means for the operation of businesses but it is well known that Telkom's exorbitant charges impede growth.
We believe that broadband is a major advancement for the operation of business and a necessity in this era. With respect to our determination to advance our economy we are supportive of this Bill that serves to make broadband more accessible and legally operative.
We believe that many remain ignorant of broadband facilities and that education on broadband would really facilitate effective and efficient business running. The MF supports the Infraco Bill.
To hon Carrim, thank you very much for being in the chair and we wish you well, sir. Thank you.
Chairperson, broadband infrastructure that creates seamless connectivity and especially affordable and speedy Internet access is a much- needed resource in a modern South African society and the FD commends the Minister on the introduction of this Bill.
One of the aims of this Bill is to make broadband services available to underdeveloped areas and to do so, the state intends to acquire broadband Infraco and its electronic communications network to provide this service. South Africa's fixed-line and cellular costs are among the highest in the world and Telkom and the cellular network companies do not offer competitive pricing infrastructure that increases meaningful public access to a wide range of communication services. Although millions may own a cell phone, they interact with one another mainly through the short message service which can hardly pass as an affordable communication service.
The government identified a gap for affordable broadband services and will, through Infraco, attain a huge stake in the electronic communications network services. Private enterprises should be more robust when it comes to competing in their market of choice. They should create an environment that makes it nonviable for the state to interfere in market processes but as this Bill proves, the role of government has necessitated a speedier response to an increased demand for cost-saving communication services.
We will support this Bill as a transitional strategy of the state towards achieving access and affordability for the benefit of all the citizens of this country and in light of the fact that we are still a developing nation with specific challenges.
Finally, the FD would like to wish the outgoing chairperson, Mr Carrim, well in his future endeavours and we want to commend him on his hard work while he was the chairperson of this committee. I thank you. [Applause.]
Chairperson, friends, whatever reservations we express in our report about aspects of the processing of this Bill by the department, we must be utterly clear: The committee welcomes the formation of Broadband Infraco and congratulates the Minister and the department on this novel and far-sighted intervention in the telecommunications sector.
The Minister has just presented a clear, lucid case for Infraco - though I must say that it fell on deaf ears when it comes to Manie van Dyk, but the Minister will speak for himself. It would certainly help if what the Minister said was communicated to the widest possible range of stakeholders so that the role of Infraco would be better understood and its considerable potential appreciated.
The committee's report on the Bill is carried in today's ATCs - if it is not, it will be in tomorrow's ATCs - and previous speakers have already dealt with some of the issues. I will just focus on a few aspects.
Obviously, finding the right balance between the role of the state and the market in economic growth and development is never easy and, of course, this relationship between market and state changes over time. Through our deliberations on this Bill, two key issues emerged.
Firstly, as far as possible, we should keep open in the Bills that we adopt in Parliament the option of the state being involved in key sectors of the economy, even if that option is not to be exercised at the time the Bill is finalised. For example, with hindsight - I notice the Chairperson of the Portfolio Committee on Communications and the Deputy Minister in the House - it is clear to us, at least, that the Electronic Communications Act of 2005 has a lacuna. It did not consider the possibility that a new state- owned entity might be created in the telecommunications sector.
Secondly, regarding SOEs that serve the national interest, we believe, as a committee, that they are entitled to rights over and above those granted to private sector role-players in the same industry. And this can be provided for in a way that is consistent with a mixed economy. It is certainly a characteristic of social democratic societies and it can be done without driving the private sector away. In fact, properly managed, the private sector can also benefit from state involvement.
In the submissions we received from private sector role-players on this Bill we didn't get a sense of this vision. We felt that most of these role- players felt unduly threatened by Infraco and we think the Ministry and the department might, at an appropriate stage, want to respond further to this even if what has emerged is much greater consensus, as he rightly said a moment ago, in respect of the role that Infraco could play. We know that much work has been done in this regard, but perhaps a bit more might be necessary.
In respect of the department's processing of the Bill before it was brought to Parliament, our report refers to certain inadequacies. But we accept there were certain unique circumstances that applied to this particular Bill. We are aware, too, that the department put in a lot of work and the comments in our report are not directed at any particular individual or indeed ultimately at the Department of Public Enterprises.
Let me refer to the salient part in our report which reads:
Our experience of this Bill raises a more general issue that parliamentary committees have referred to every now and again. The need for the executive ...
The executive generally, mind you -
... to consult effectively ...
Where am I? I am lost!
... to consult effectively with relevant stakeholders before a Bill is brought to Parliament ...
[Interjections.] I am only human - unlike the DA! [Interjections.] The report goes on to say:
What, after all, is the point of the executive gazetting Bills for public comment? It cannot just be a nominal process. Effective and widespread consultation can certainly contribute to improving the quality of a Bill and creating greater support for it even before it reaches Parliament. This will serve to ease the burden on committees which simply do not have the technical resources available that the executive has.
I would like, as I reluctantly leave this committee, to express my sincerest appreciation to all those who co-operated so helpfully with me and made it such a pleasure to chair this committee. Mostly, I want to thank the lively, engaging activistic ANC study group of this committee which found, I think, the right balance between taking our work seriously and also having a sense of fun.
In particular, I want to thank Comrade Ncumisa Kondlo, the senior chief whip of our study group, and Comrade Peter Hendrickse, the senior backbencher, as we teasingly refer to them, but all the members of the study group really.
I also express appreciation to members of the opposition parties for their constructive contribution, particularly Martin Stephens, Pierre Rabie and Eugenia Chang - and in the case of the latter, for holding her ground but seeking, in her unique way, friendships across the political and ideological divides.
I express appreciation to our committee secretary, Vhonani Ramaano, not just for his commitment but for his very pleasant manner as well, and to our two researchers including Eric Boskati.
I also want to thank Minister Alec Erwin. Of course, he's a tough Minister in his own way but he is also very accessible and amenable. It may be an odd thing for the chairperson of a portfolio committee that takes its oversight role seriously to say but it's true.
The Minister has, with his considerable understanding and experience of the economy, played a unique educational role for many of us in the committee and we express our sincere appreciation for this. He has commended the committee, but the committee has been able to be effective partly because he takes us so seriously and I thank him for that.
As I've said before, you are a very young and exciting department, lead by Portia Molefe, and I think it has enormous potential and will cope with the many tasks that it has.
I also want to acknowledge the parliamentary liaison officer, Reneva Fourie, and thank her - she is quite the best in her job that I've dealt with until now. She's not just efficient but easy to work with.
I also wish the new chairperson of the portfolio committee, Fatima Chohan- Khota all the best in her new role.
Finally, I want to stress that this Infraco project is too big and too important not to succeed. As a portfolio committee, we very much want it to work. The committee will monitor developments closely and offer whatever support it can, consistent with its oversight role. But for Infraco to succeed, all role-players have to play their full part and co-operate effectively. We urge that they do so. We will certainly play our full part.
In conclusion, I appreciate the many words of appreciation by members who have never actually come to the committee, but I do appreciate it nevertheless. What I want to say to the members, and I want to urge this House to understand, is: I am not dying, I am not moving. They ask: "Where are you going?" I say: "Just down the road." So, actually, I will very much be part of this House and very much a part of another committee but I will certainly be here and I will speak as long as I normally do. Thank you very much. [Applause.]
Thank you very much, Chairperson and the hon Yunus Carrim. Let me just briefly deal with some of the specific issues that have been raised. The hon Van Dyk asked about the change in shareholding. This was brought about by some very specific aspects of the agreements between VSNL and its other shareholders and we were obliged to change our approach to that. However, it would be the intention for us to seek the same component of shareholding in another form as we move forward.
Secondly, with regard to cables, what the hon Van Dyk said about our being involved in cables all over the place is not correct. The specific proposals are the following: We would take responsibility to lead the process for a west coast cable. This would be a very large capacity cable and quite certainly bigger than the private sector itself would be prepared to invest in.
The reasons for this are as I indicated. We need a very large capacity for the Square Kilometre Array project and we are increasing our capacity for science and research in this country, which is, as the hon Chris Wang said, very important. So this is the kind of investment that is very unlikely to be made by the private sector.
On the east coast, the Minister of Communications has made it clear that we don't have principle objections to private sector participation but the precise role the state plays in those processes is very important and in line with the rest of the world. These are always strategic assets in which the state plays a role. Let me just say that the comments made about the Public Finance Management Act - hon Van Dyk, you do know better - are absolutely wrong. Just read the Public Finance Management Act. The Act is very clear on what is required of a Schedule 2 project. It has to put forward a business plan and a borrowing plan to the Treasury. Section 54 of the Act requires you to take certain actions. I will give you a lesson one day, because you are clearly abysmally ignorant about this matter.
On the question of Infraco and Sentech, the two departments are very clear on the role these two institutions will play. Hon Kholwane, I think it is correct. Maybe we will clarify that more in public but definitely these are complementary processes. They are in no way competing. And the point you made, that you don't want to get drift across these two areas, is an important point as it is also important that Infraco itself should not drift into the value-added services that are the domain of the private sector.
Hon Green indicates that we do need to explain the position on Infraco. We will continue to do that and I think our experience has been that as we have interacted with the major players and explained to them exactly what Infraco has been doing, there is a great deal of support for it. It is the kind of intervention that I think is, as you have indicated, the classic realm of public good type intervention and infrastructure.
But, as I indicated in my opening address, if our objectives are fully met in the foreseeable future, at some point, obviously, we have no particular requirement that this would automatically always stay in public hands but the objectives of getting affordable price-competitive broadband must be met and retained at all costs.
I thank members for their support and despite some of the critical remarks, I am very pleased indeed that all parties have supported this Bill. I think it is an important step forward for telecommunications in South Africa. I thank you. [Applause.]
Debate concluded.
Bill read a second time.
Business suspended at 14:45 and resumed at 15:03.