A tragedy in the making

Government seems to think it’s best placed to play an active role in Telkom's future. It said last week that nationalisation was indeed an option. But the only way to save the company and deliver broadband to more South Africans is to privatise it fully. By Duncan McLeod.

Public enterprises director-general Tshediso Matona said last week government had made no decision on the vexing question of Telkom. Ruling-party politicians are debating whether the company will remain listed on the JSE or whether government will buy out the shares it doesn’t own and once again turn Telkom into a state-owned enterprise.

That this conversation is happening at all is absurd and illustrates clearly just how far the ANC-led government has strayed from the liberalisation agenda of the Nelson Mandela administration and the extent to which it is now influenced by the left wing of the party and its socialist alliance partners.

The fact is the state should have sold its stake in Telkom years ago, when the company was riding high on the last days of its monopoly control of the sector and its shares were worth many times what they are today. The tens of billions of rand in profits it could have realised by selling its shares then would have been enough to fund the development of a national broadband network in underserviced areas or to pay private-sector operators to build that network.

Instead, it has foolishly clung on to its nearly 40% stake in the belief that Telkom is somehow of “strategic national importance”, whatever that means.

Instead of setting Telkom free to compete on an equal footing with Vodacom, MTN, Cell C, Neotel and the hundreds of licensed Internet service providers, successive communications ministers decided they needed to continue to exercise control over the company in the misguided belief they could convince it to extend telecommunications services to more South Africans.

The opposite has happened: while the cellular operators built services into the remoter parts of the country, an overstaffed and inefficient Telkom has chosen instead to cherry-pick customers in relatively wealthy urban areas. The state has achieved precisely none of its lofty goals of universal telecoms services by remaining a shareholder in the fixed-line operator.

Instead, political meddling in Telkom has put the company in a precarious position. Former communications minister Ivy Matsepe-Casaburri appointed a CEO in 2005 who had no experience in telecoms and who rushed Telkom into a series of bad decisions, including the acquisition of Nigeria’s Multi- Links, which have cost the company billions of rand. The destruction of shareholder value has been remarkable. It’s an indictment of a government that believes it knows best but clearly doesn’t have a clue what it’s doing.

In the past five years, the market has changed considerably, largely as a result of liberalisation forced through court action on a bungling administration. Now government appears intent on veering further to the left, taking an even more direct role in a company it has actively damaged for so many years.

The state seems to think it needs to become an even more active role player in ensuring all South Africans are given access to broadband. It appears to have learnt nothing from its disastrous attempt to establish Sentech as an alternative to Telkom.

As reformist African countries liberalise their markets, SA is moving in the other direction. Our politicians seem to think they can do better than companies operating in a free and competitive market in delivering affordable services to consumers. It’s woolly, leftist thinking that will condemn the country to sitting on the sidelines of the broadband revolution as smarter African nations free up their markets and leave us behind. — (c) 2012 NewsCentral Media

• Duncan McLeod is editor of TechCentral; this column is also published in Financial Mail