The Johannesburg mayoral committee has instituted an independent forensic investigation into the city’s decision to buy a 900km fibre broadband network for R1.3bn, mayor Herman Mashaba announced on Friday.
However, the decision to investigate would not affect Johannesburg’s existing free Wi-Fi programme and the intention to expand it, he said.
The purchase was done through the creation of a municipal-owned entity, the Metropolitan Trade Company (MTC), which Mashaba said possessed neither a viable business plan nor the requisite capacity to run a broadband operation of this size.
“I have discussed this investigation with the MTC board chairperson and there is appreciation for the steps the city is taking,” Mashaba said. “The chairperson also indicated that the board has been requesting an investigation of this nature for some time, to no avail.”
The aim of the Johannesburg broadband network project was to provide access to broadband services, which would improve the city’s service delivery, realise ICT cost-related savings and provide communities and businesses across Johannesburg with more affordable access to internet, the mayor said. “Despite the astronomical cost, few of these benefits have been realised, necessitating a thorough investigation of the decision.”
Under the initial agreement, the city would have paid an annual fee for the building and operation of the network. After 15 years the city would have taken over ownership of the network, he explained. “Importantly, the initial agreement entered into by the city would have come with minimal risk and maintained the city’s financial stability,” Mashaba said. “Instead, the city chose to buy out the agreement at a cost of R1.3bn, without any viable business plans, placing the city’s financial stability at risk.”
The tender for the construction of the network and ICT infrastructure was originally awarded in December 2008 but in July 2014 the city terminated the agreement so that it could operate the network itself through the MTV.
Operation commenced in September 2015 and the MTC ended the 2015-16 financial year with a net loss of R54m, Mashaba said.
He said the auditor-general had recently raised a number of concerns with MTC’s financial performance.
Mashaba has asked that the city manager interrogate the business of the MTC and subject it to the forensic investigation and determine the financial stability of the MTC and its return on investment.
He also wants a “situational analysis” from the dissolution of the MTC if it is found to be unviable and explore alternative models which the city can use to deliver broadband.