Another SOE begs for financial bailout

Another state-owned company is looking for a bailout - and this time it is crisis-hit Broadband Infraco.

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Johannesburg - Another state-owned company is looking for a bailout – and this time it is crisis-hit Broadband Infraco.

The company told Parliament yesterday that its finances were in such a mess that it needed a bailout from the government to avoid an adverse opinion from the company’s external auditors.

Broadband Infraco said it was trying to raise about R250 million from the Treasury before the end of the year.

The company will not be able to table its annual report in Parliament this month because of its dire financial situation.

Chairwoman of the portfolio committee on telecoms and postal services Nkhensani Kubayi said she had noted the Department of Telecoms’ submission that the firm would not be able to submit its annual report with its financial statements by the end of the month.

Government departments and their entities have until the end of this month to submit their annual reports to Parliament for processing.

Deputy director-general for state-owned entities (SOE) oversight in the Department of Telecoms Sbongile Mokopi said the firm was in a serious financial crisis.

Despite these challenges, the government was still committed to the roll-out of broadband as directed by President Jacob Zuma in his State of the Nation address.

Deputy Minister of Telecoms and Postal Services Hlengiwe Mkhize backed Mokopi that the government’s commitment for the broadband roll-out to rural districts was still on top of the agenda.

Mokopi said the business had been under-capitalised, and the company was now in deep trouble. It had on numerous occasions applied for government guarantees, but these were rejected.

Broadband Infraco first applied for a guarantee of R3.4 billion in 2012/13, but this was rejected. This was followed by another guarantee application of R2.59bn in 2013/14, which was also turned down.

In 2014/15, Broadband Infraco applied for guarantees of R170m and R528m respectively, but these were also refused by the Treasury.

External auditors

The cost of sales for the company had been higher than revenues, Mokopi said.

Mokopi added that the refusal of guarantees by the Treasury had led the firm to use money for operations for other things, which had affected its balance sheet.

“The problem is so serious the external auditors would give an adverse opinion on the year ended March 31,” he said.

He said funds had to be secured to ensure auditors issued a different opinion.

“We know the impact of the adverse opinion, it will attract the attention of creditors and suppliers who may refuse to extend credit and doing business respectively,” he said.

The Treasury will meet next week to decide on the request for a guarantee of R243m.

However, Othelia Groenewald of the Treasury said it would be up to Finance Minister Nhlanhla Nene to decide whether he approved the request for the guarantee.

Kubayi said she was concerned that the tabling of the report would be delayed.

She said all the parties had to reach an agreement on how to help Broadband Infraco.

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