Recent court filings reveal how a looming deal to sell the Johannesburg Broadband Network (JBN) infrastructure and buy the attached services from the new owners raised red flags for former members of the board of the Metropolitan Trading Company (MTC).
A little-known municipal-owned entity, the MTC, manages the Johannesburg Broadband Network.
In 2010, Ericsson SA scooped the 15-year contract to build, operate, and then transfer the network to the City of Joburg. This as part of the city’s broader “smart city” aspirations. But the contract was later transferred to a company called CitiConnect Communications and wound up in dispute and, ultimately, terminated in 2014. The City of Joburg then took over and established the MTC to manage the network instead.
This June, a controversial late-night city council resolution saw the MTC repositioned from the ANC-run Economic Development Department to the PA-run Transport Department.
The DA has since accused the PA of “manoeuvring” and insiders have now also come forward with claims that the MTC has in fact been at the centre of political wranglings for years.
And just a week after it was repositioned, the former board was unceremoniously axed.
Eight of the former board members subsequently turned to the Johannesburg High Court with an urgent bid to be reinstated, arguing their termination was unlawful; effected with the ulterior motive to extend the executive teams’ contracts without following due process; and irrational.
The case wound up being struck from the urgent roll. But the court documents lay out how the nebulous deal pitted them against the MTC’s executive.
The court papers set out how the deal – meant as a lifeline for the financially embattled MTC – involved an “Enhanced Business Model” (EBM) strategy which would see a company called Digitalwave Length Investments (DWLI) buy the Johannesburg Broadband Network infrastructure for R950 million and then sell the attached services to the city for the next 12 years before ultimately returning the asset. This at a minimum cost of R150 million a year – R1.8 billion in total – according to documents provided to the former board and seen by the publication.
Former board member, Happyboy Molobye, said in the papers that they discussed the deal at their very first board meeting on 23 March this year.
“The new board had come across various reports relating to the tender and one had recommended that the rollout of the tender be placed in abeyance,” he said.
He also revealed that when the executive was questioned on it, an ugly exchange ensued.
Molobye said, though, that various reports had questioned the EBM process, “particularly that the tender was awarded to the successful bidder at over R1.3 billion yet the signed agreement reflected a purchase consideration of R950 million”.
He also pointed to questions around “critical documents” submitted by DWLI and the supply chain management process that was followed.
In the city’s papers, meanwhile, City Manager Floyd Brink insisted the deal had nothing to do with the removal of the board, saying it was a “legacy” issue.
He maintained the board was axed for failing to appoint a new executive before the then-incumbents’ contracts came to an end.
Said Brink: “If the applicants genuinely believed that the executives had misconducted themselves on the EBM issue, they should have replaced them with new executives at the earliest possible opportunity.”
DWLI, meanwhile, declined to comment, saying “this seems to be in essence a political agenda and Transport has asked us not to comment and to avail ourselves, with documents, at a press conference”.
-EWN
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