City’s smart move to the future
12-01-2015
Johannesburg’s migration towards Smart City status will take a giant leap at the end of this month when it starts the rollout of programmes under the Johannesburg Broadband Network’s Build, Operate and Transfer (BOT) Agreement.
Initiated in 2006, the move is aimed at integrating the City’s telecommunications systems, lowering the costs of doing business and increasing residents’ access to telecommunications services.
“The primary objectives of the overall project are to increase the competitive edge of doing business in Johannesburg and increase the usage and penetration of high-speed broadband connectivity while facilitating the growth and development of new and existing information and communications technology (ICT) businesses,” says Phindile Chauke, Communications Manager in Executive Mayor Councillor Parks Tau’s Office.
“The project is also designed to increase and accelerate access to the benefits of internet-based communication as well as to achieve digital inclusion by reducing costs while improving service delivery.”
To date, at least 900km of fibre optic cables have been designed and rolled out by leading ICT company, Ericsson.
Ericsson was awarded the contract in 2010 and later ceded it to CitiConnect Communications.
Chauke says it is now envisaged that the network will be operated over 12 years by BWired, the entity created to implement the project.
“Upon conclusion of the said termination and transition arrangements in the contract, the City will obtain full control of BWired which, according to the prescripts of the Municipal Finance Management Act (MFMA), becomes a municipal-owned entity (MoE). [The MoE route] has been chosen as the ideal mechanism to operate the network as it provides for enhanced private-sector participation whilst remaining focused on the delivery imperatives of the City,” says Chauke.
Based on the analysis of the cash flows of contracts concluded by BWired, revenue generation potential and validation of the invoices for infrastructure will see the City pay Ericsson a settlement amount of not more than R1.2 billion.
“Following speculation on the price of the work carried out thus far, a comprehensive independent determination of the value of the company to be transferred to the City, including the network asset, has been undertaken by market experts Mott MacDonald and confirmed by Deloitte. The City is now able to conclude the process, pay the termination amount to Ericsson and accept ownership of BWired and the underlying network,” she said.
Chauke says the City has at all times during this process ensured that it acted according to the highest standards of governance and has been advised by a team of legal experts, including two senior counsel.
“Now that the process is able to be concluded, the termination of the contract releases the City from the obligation to pay an amount of R279 million a year over 12 years. This allows it to realise an annual saving of over 20% on this amount as well as to deliver the platform for the City to achieve its socioeconomic objectives earlier than originally planned,” says Chauke.
She adds that following the termination of the contract with Ericsson, the City has deferred the matter to the next council meeting.