Monday, February 1, 2010

Sentech loss could be R214m

Published in: Business Report
February 1, 2010
By Thabiso Mochiko

WITH the imminent sacking of the chief executive and the entire board of Sentech, it has emerged that the struggling signal distributor is budgeting for a net loss of R123 million for the 2009/10 financial year as a result of discontinued operations such as MyWireless.

This is according to a scathing report compiled by the task team Communications Minister Siphiwe Nyanda appointed last year to investigate turnaround strategies for ailing state-owned broadcast entities Sentech and the SABC.

Sentech's loss could increase to R214m if losses of R91m by broadband services MyWireless, BizNet and Vsat are included. This amount was not disclosed to the Department of Communications by Sentech in its corporate plan.

Sentech is discontinuing its failed broadband services.

Sentech reported a net loss of R24m for the 2008/09 financial year, compared with a budgeted loss of R59.1m.

According to the report by the task team, not everybody on Sentech's management had signed the exit strategy for MyWireless, creating doubt that the decision carried every director's approval.

The task team is recommending that the entire board of Sentech, including chief executive Sebiletso Mokone-Matabane, be fired.

Sources said the board would be fired this week.

The task team found that the chief executive failed to create the correct environment to monitor performance and compliance. The report also found a "lack of adequate leadership and oversight" at the parastatal.

There was also a failure to promote ethical behaviour, because Mokone-Matabane demonstrated favouritism to company secretary Rachel Ramokhofi, the report states.

Ramokhofi was appointed as general manager, a move that angered employees.

"All the staff that we interviewed and documents that we reviewed indicate that the chief executive has delegated all her duties to the general manager. The general manager is effectively running Sentech," the report states.

"Staff morale is very low because the company secretary is bulldozing everybody."

A source said Sentech chairman Colin Hickling met with Nyanda on Monday last week and was asked for his and the board's resignation. Hickling confirmed the meeting but refused to elaborate further.

Mokone-Matabane has already indicated that she would not renew her contract, which expires in September.

The task team stated that Sentech's financial performance had been negative over the past two years, yet the board had approved salary increases for executives.

"The executives have been rewarded for poor performance. This poor performance has also been supported by the board. They attribute all the problems to a lack of funding, yet the money is being wasted on irregular expenditures."

Team's damning findings include:

Sentech appointed eight suppliers that were paid a total of R13.6 million without following correct procurement processes.

The auditors reported wasteful and irregular expenditure relating to the interest on a finance lease of R8.2m on the basis that Treasury approval was not obtained. The management's response was that expert advice had been obtained, which said such approval was not required.

The absence of a formal process flow linking the billing, legal and sales and marketing departments resulted in clients not being billed for services they received. At the time of the audit the unbilled services were worth R30.8m.

Six tubes valued at R2m were stolen at the Meyerton site due to poor security. Security cameras were purchased for the site but not installed.

The chief executive and two board members, including the chairman, took a trip to Sweden in 2008 at a cost of R1.2m. The task team was not provided with a business plan for the trip.

The board approved bodyguard services for the chief executive, although a signed contract could not be provided. A bodyguard was employed full time, and cost R262 126 a year.

A service provider was paid R945 844 for services not rendered and was not appointed through the proper procurement processes.