Mark Barnes. Picture: SUPPLIED
Mark Barnes. Picture: SUPPLIED

The department of telecommunications & postal services will have its budget slashed over coming years, following a one-off allocation of R3.7bn to recapitalise the SA Post Office (Sapo).

The department’s annual budget more than doubled in 2017/2018 because of the Sapo injection, going from R2.1bn in 2016/2017 to R5.2bn in 2017/2018. However, the budget has been cut to R923m in 2018/2019. This is expected to rise to R1.1bn in 2020/2021.

Budgets were cut for broadband projects and others related to the migration to digital broadcasting, according to documents.

"Cabinet approved budget reductions over the medium term of R1.7bn to the SA Connect broadband project, and R764m to the Universal Service & Access Fund for the broadcasting digital migration project," said one.

Sapo’s equity injection was necessary to keep it afloat, according to CEO Mark Barnes and the auditor-general.

Craig Pheiffer, chief investment strategist at Absa Stockbrokers & Portfolio Management, says Sapo is considered critical to service delivery, particularly for the distribution of social grants and provision of basic banking services.

While it has been "modestly" reducing losses, the R85bn expenditure cuts announced in the national budget would be achieved only if Sapo and other state companies "can bring about the efficiencies that have been pencilled in".

Pheiffer says: "Sapo has to reinvent itself, diversify its income streams and become more efficient, and that may take some time."

Sapo hopes to secure a banking licence for its Postbank unit and finalise its transition into a commercial bank by March next year. This will help it facilitate the payment of social grants.

Expenditure on the Postbank programme is expected to nearly double, from R302m in 2016/2017 to R573m in 2020/2021.

Finance minister Malusi Gigaba said in his budget speech that the competition commission would complete its investigation into data prices by the end of August.

Victor von Reiche, portfolio manager at Citadel Investment Services, says the inquiry "is a big positive" since information and communications technology (ICT) is a key enabler of business.

Referring to the white paper on national integrated ICT policy, Gigaba said the investigation would "support the work by government to improve competition in the telecommunications sector".

To enable legislative changes, he said the department expected to spend R271.2m on the policy, research and capacity development programme over the medium term.

Among other initiatives, the department planned to establish a state information technology company and a state ICT infrastructure company by 2020. This would involve merging different functions of the State Information Technology Agency, Sentech and Broadband Infraco.

Draft legislation would be developed for these companies. Allocations to the ICT enterprise development and public entities oversight programme were expected to amount to R797.4m over the medium term.

Owing to the reduced broadband connection budget, funds would be reprioritised to Sentech in 2018/2019 for costs related to "dual illumination" – running analogue and digital broadcast signals at the same time.

The much-delayed shift to digital broadcasting will unlock much-needed spectrum for the telecommunications sector. Citadel portfolio manager Nishlen Govender says though the budget commits to a speedy resolution to the spectrum impasse, "there was no detail on how this would be done".

He adds: "This has been an issue for some time and [a solution] is crucial if SA is to move alongside its global peers in terms of the availability of next-generation LTE [long-term evolution for wireless communications], 4G and 5G data."

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