CWU Statement on current crisis at Telkom

18 June 2012

The Communications Workers Union (CWU) would like to congratulate Cabinet for its decision not to mortgage Telkom further to the Koreans.  Telecommunications is a strategic sector that should be firmly under state ownership and control, and the country still lags far behind in terms of telecommunications development indicators. 

We would also like to congratulate Minister Dina Pule for her firm progressive stance, which is in line with building the capacity of the democratic developmental state in the ICT sector.  We are concerned that there are some neo-liberal individual Ministers who fancy themselves above the Cabinet collective, and openly oppose the decision of Cabinet.  We condemn this un-comradely behaviour in the strongest possible terms. 

We want to set the record straight that Telkom management agitated for the Koreans to buy a stake in Telkom because they were of the view that the Koreans will turn Telkom around by coming in with management expertise, will bring money to facilitate Telkom's investment programmes and will facilitate the transfer of technology to modernise Telkom. 

Telkom management has come out openly to challenge Cabinet's correct decision on refusing to sell a stake of Telkom to Koreans. Five points have to be made in this regard.

Firstly, the fact that current management is dismally failing to turn around Telkom and instead focuses on retrenching workers to create artificial profitability.  This strategy, which was introduced by the Malaysians and the Americans who bought a stake in Telkom in 1997, has gutted Telkom to the bone. 

It has failed and has left Telkom even weaker than it has ever been.  CWU therefore calls for the Minister and Cabinet to review Telkom's management with a view to get a new, competent management that puts the perspective of building a democratic, anti-imperialist, developmental state at the front. South Africans have more than enough talent to manage their assets. In addition we do not have to mortgage our country in return for management expertise.

Secondly, the scale of the financial mess that management has plunged Telkom in will not be resolved by getting money injected by Koreans.  Management plunged Telkom in a risky deal in Nigeria, and it has put Telkom in a mess for anti-competitive conduct. 

Together these deals are worth more than the proposed amount of money that the Koreans were promising to put in.  In any event, we do not think the Koreans would agree to face litigation for matters in which they were not part.  Once again, the fundamental problem in Telkom is management, which we urge the Minister to move with speed to tackle.

Thirdly, we are of the view that since Telkom is a national asset ahead of which there are massive developmental priorities that it must fulfil, government must come with innovative ways to increase national ownership of this asset.  Specifically, government must consider engaging the PIC and it must consider digging into its coffers to acquire a greater stake in Telkom, so that Telkom is once again state controlled to fulfil developmental priorities. 

The crisis in Telkom is a perfect opportunity for government to take this asset back, and use it to drive a developmental agenda such as rolling out broadband to schools, households, and government facilities, skills development and training, ICT research and development to boost innovation, locally procure inputs and thus support local ICT manufacturing sector.  Selling a stake to the private sector, foreign or local, will not assist in building state capacity for development.

Fourth, Telkom management has historically blundered when they sold the Vodacom stake.  As CWU we call for Cabinet to consider the option of re-acquiring a stake in Vodafone.  We are firm that without a strong presence in the ICT sector, both mobile and landline, this country will suffer the twin crises of massive exploitation through tariff manipulation and the drain of resources when foreign owners take their profits out. 

Government must acquire a stake in Vodafone and use the boom in the mobile market to boost the expansion of broad-band access by Telkom.

Fourthly, Telkom is so strategic that to allow the dominance of private ownership, domestic or foreign, poses serious security risks. The entire financial system runs on a Telkom platform. The payment system of the Reserve Bank relies on Telkom, and so is the financial system, including the Johannesburg Securities Exchange.  It would be highly risky to allow such a strategic asset to be owned and controlled by private persons.

CWU calls for an urgent review of the Telecommunications regulatory regime.  The current situation of full-blown liberalisation entrenches profiteering over development.  Government must set appropriate economic conditions to ensure that Telkom is able to fulfil its developmental priorities, especially because the vast majority of our people do not have high incomes and a significant number of them are unemployed and depend on social grants.  This vast majority have a right to access to ICT services as well. 

Fifthly, the current Telkom management seems not to have learnt the lessons of the 1997 Thintana deal.  That deal destroyed Telkom's capabilities and increased the costs of production across the economy.  Telkom failed to meet its universal access obligations because of the dominance of profit-motive.  As we speak Telkom customer service is poor, especially to households in middle-income and poor communities, because of Telkom's focus on profitable segments.

The Thintana deal also had foreign management running Telkom, they destroyed almost 50 000 jobs in 5 years, incapacitated Telkom from meeting its universal access obligations, charged huge management fees in foreign currency and took our hard earned foreign exchange out of the country.  We do not want the same experience.  That is why CWU calls for Cabinet to review the current Telkom management, because it fails to learn from history and it does not have a developmental perspective. 

Statement issued by Matankana Mothapo, CWU National Spokesperson, June 18 2012

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