BUSINESS REPORT Friday, February 24 2012 BUDGET REACTION 9

Analysts warnof service tariffhikes at SOEs❚❚ Parastatal profit to power upgrade plansLondiwe Buthelezi

FINANCE Minister PravinGordhan’s remarks that profitgenerated by state-owned en-terprises (SOEs) will be one ofthe core funding methods forthe government’s infrastruc-ture upgrade plans have raisedfears that prices of electricityand other services provided byparastatals could keep rising inthe next few years.

Speaking at Deloitte’s Bud-get debate yesterday, Ulrich Jou-bert, an economist at KrugerInternational, said there wereworries about how long Eskomwould keep its tariff increasesunder 25 percent if there waspressure for the company toraise more of its funding re-quirements from its profit.

“We are worried what it willdo to the whole cost structurethat consumers of servicesfrom Eskom, Transnet andother organisations will haveto bear,” Joubert said. He addedthat because SOEs providedtheir services to businesses,there were concern that tariffincreases would make localbusinesses less competitive.

The Budget Review pub-lished by the Treasury lists 43proposed major infrastructure

projects, estimated to cost up toR3.2 trillion. For the medium-term expenditure frameworkperiod, plans worth R845bnhave been approved, of whichjust under R300bn has been allo-cated for the energy sector andR262bn for transport and logis-tics projects.

Gordhan said public sectorborrowing requirements wereexpected to decline to 5 percentof gross domestic product(GDP) in 2014/15 and publicdebt would be kept stable atabout 38 percent of GDP.

Joubert said although thisshowed a positive response andrequired cautionary measuresfor South Africa not to head theroute of countries like Greeceand Japan, parastatals couldtake advantage of cheap moneyavailable at the moment to fundtheir mandates.

“Many organisations(SOEs) will have to borrow out-side. We have to avail ourselvesof the opportunities that arethere. Even if we go to levels of45 percent, we’d still be in con-trol because of the low interestrates at the moment,” he said.

Joubert also said that al-though the minister was veryprudent about cutting thebudget deficit to 3 percent of

GDP in 2014/15, the projectedrecovery of economic growthto 3.6 percent in 2013 and4.2 percent in 2014 needed a re-ality check as slow growth wasexpected in some of the coun-try’s major export destinations.

Anthea Scholtz, a director atDeloitte South Africa, said theR1.1 trillion expenditure out-lined in the Budget was ambi-tious and the mandate forfunding was clearly taxes. Shesaid the R9.5bn income tax re-lief was very little and wouldmostly benefit low incomeearners.

“The minister noted that fo-cus will continue to be on highincome earners. So from a taxperspective, the budget hasbeen very kind to low and mid-dle income earners and smallbusinesses. High income earn-ers brace yourselves becauseworse is yet to come,” she said.

Scholtz said companiesshould also be aware thattighter tax controls would closemost of the loopholes in the taxsystem.

Keith Engel, the chief direc-tor of legal tax design at theTreasury, said it was a questionof who could bear any raise intaxes better, but the ministerwas careful not to go too far.

Sentech gets cashfor digital migrationAsha Speckman

SENTECH plans to spend R1.3 bil-lion over the medium-termexpenditure framework periodto digitise the television broad-casting network by Decembernext year, according to theBudget Review.

The Treasury has allocatedR141 million for the 2013/14financial year for the state-owned distributor of radio andtelevision broadcasting signalsto roll out infrastructure for thenational digital terrestrialtelevision migration project.

Sentech will use the funds toprocure 30 television transmit-ters and 30 radio transmitters.

The transmitters would bespread across the country torelay broadcasting signals overthe varied terrain.

Sentech said in April lastyear that it aimed to reach92 percent of the populationwith digital signals by the endof next year.

Since 2008 about R650m hasbeen awarded to the companyfor the project, including R220mto improve its infrastructure.

The Department of Communi-cations will also receive a totalof R643m over the three yearsof the medium-term frameworkto begin switching on digitalbroadcasting across the coun-try. Analogue broadcasting willcontinue concurrently.

The government had ear-marked about R200m for sub-sidies to provide decoders atlow cost to poor households.These decoders will convert adigital signal to analogue andwill allow the consumer tocontinue using older analoguetelevision sets.

The government aims to

switch off the national ana-logue broadcasting signal bythe end of next year.

The International Telecom-munications Union has said thatby the end of 2015 all countriesshould have switched over todigital broadcasting signals.

A portion of the grant willalso be allocated towards theestablishment of a “play-outcentre”and technology for adigital library to be accommo-dated at the SABC.

The library will ensure thatprogramming content in ana-logue format will be availablein digital format.

The SABC will receive R138mfor this project during theperiod as part of a total alloca-tion of R478.6m.

One of the benefits of digitalbroadcasting is that it requiresless radio frequency spectrum,which is considered a finiteresource.

The switchover is expectedto result in more broadcastingchannels becoming availableand provide opportunities fornew content providers andother entrants into the mediaenvironment.

Implementation of theproject has been delayed andthe manufacturing of decoderswill only take place from thethird quarter of this year.

Communications MinisterDina Pule said last month thatprospective manufacturerswould not be ready by April,which was the initial launchdate. The government envis-ages that about 23 500 directand indirect jobs will be cre-ated in manufacturing, contentproduction and other opportu-nities that will arise from thedigital migration.The Sentech tower in Auckland Park, Johannesburg.The parastatal will get a R141m cash injection. PHOTO: SIMPHIWE MBOKAZI

MARITIME piracy ishaving a growingimpact on theworld and its econ-

omy, including South Africa,and is being dealt with at thehighest global echelons.

International trade routesare being threatened and somegoods becoming more expen-sive as a result of maritimepiracy, according to HenriFouche, Professor at the Depart-ment of Criminology and Secu-rity Science at the University ofSouth Africa (UNISA), anddeputy chairperson of the Gaut-eng chapter of the MaritimeLaw Association (MLA) ofSouth Africa.

He says the total cost ofpiracy to the global economyhas been estimated at betweenUS$7-billion US$12-billion ayear and the estimated annualcost to regional economies atUS$1,25-billion.

“The losses to the fishingand tourism industries of theSeychelles, a member of theSouthern African Develop-ment Community (SADC), areestimated to be in the region ofUS$6-million per year, whilethe trade impact on Kenya isestimated at a loss of US$414-million.”

“It has also been calculatedthat around US$2-billion isspent each year on naval oper-ations (both by African and in-ternational forces) off thecoast of Somalia in order to de-ter and disrupt the pirates op-erating in the region.

“Over 750 Somali piracysuspects have been tried orare awaiting trial in more than11 countries. The cost of thesetrials and imprisonment in2010 was estimated to beUS$31-million.”

Fouche points out thatSouth Africa has not beenspared incurring costs due tothe pirate attacks alongAfrica’s eastern seaboard.

He says due to the southwardmovement of Somali piracy,

with an attack occurring in 2010as far south as the MozambiqueChannel, the South AfricanNavy has, since February 2011,been maintaining a naval pres-ence in the channel to conductanti-piracy patrols in order tointercept any pirates attempt-ing to operate in the area.

These patrols have been ex-tended to include joint patrolswith the navies of Mozambiqueand Tanzania in terms of a re-cently concluded memorandumof understanding with thesestates.

In April 2011 the SouthAfrican Police Service partici-pated in an Interpol maritimepiracy response team operationin the port of Durban. The inci-dent response team conductedan evidence collection exerciseon board a super tanker whichhad been hijacked by Somali pi-rates and released after the pay-ment of a ransom.

The purpose of the evidencecollection operation was togather evidence to identify andsubsequently prosecute, in thevessel’s flag state, the perpetra-tors of this specific act of piracy.

In October 2011 the Ministerof Finance for South Africa an-nounced in the South Africanparliament that an additionalamount of approximatelyUS$10-million had been allo-cated to the South African De-fence Force for conducting anti-

piracy patrols in the Mozam-bique Channel.

Fouche reports that in Octo-ber 2011 at an InternationalConference on Piracy at Sea(ICOPAS 2011) held at the WorldMaritime University (WMU) inMalmo, Sweden, Kaija Hurl-burt, from the organization,Oceans Beyond Piracy, pointedout that according to officiallyreported data in 2010 4 185 sea-farers were attacked by pirateswith firearms; 1 432 seafarerswere on vessels boarded by pi-rates and 1 090 seafarers weretaken hostage.

Hurlburt says data from un-official news and media sourcesindicate that 59 percent of theseafarers held hostage were ei-ther abused or used as humanshields. The remaining 41 per-cent were either not mistreatedor did not report any mistreat-ment.

These seafarers held in cap-tivity by the pirates resulted intheir families experiencing fearand uncertainty, psychologicaltrauma and long-term negativeimpacts such as post traumaticstress.

Hurlburt also stated thatthere is no reporting system toidentify the number of childrenrecruited into piracy and thatthere is evidence of coercionand exploitation of Somaliyouth in this regard with manyof the pirates arrested by the pa-

trolling navies being below theage of 15 years.

Fouche says that on the 19October 2011 the World Mar-itime University (WMU) issueda declaration in Malmo inwhich the participants of ICO-PAS 2011 agreed that the eco-nomic and humanitarian costsof piracy at sea and on land areunacceptable.

The declaration calls on theinternational community as awhole to enhance co-operationamong national, regional andinternational law enforcementagencies and institutions.

The declaration urgesstates to co-operate with rele-vant international organisa-tions to develop the infrastruc-ture for prosecution andincarceration in affected statesand to co-ordinate with rele-vant human rights organisa-tions in dealing with the issueof juvenile pirates.

The declaration calls on com-panies and individuals to facili-tate prosecutions by assistingInterpol’s response teams,where possible, in preservingevidence at the scene of crime.

“The declaration also callsfor the implementing of ‘goodpractice’ guides for companiesand welfare associations forthe humanitarian support ofseafarers and their families,”says Fouche.

“It also appeals to companiesand individuals to recognise thehigh level of anxiety that piracyincidents cause in seafarers andtheir families, to conduct fur-ther research into the true hu-man cost of piracy and to en-sure that the psycho socialsupport provided meets thehighest standards of qualityand efficiency.”

The secretary-general ofthe International MaritimeOrganization (IMO), which isthe United Nations (UN) spe-cialized agency with responsi-bility for the safety and secu-rity of shipping and theprevention of marine pollu-

tion by ships, Koji Sekimizumet UN secretary-general BanKi-moon in January 2012, atUN headquarters in New York,to discuss cooperation be-tween the UN and the IMO tocombat Somalia-based piracy.

The meeting followed the re-cent report in which the UNsecretary-general encouragedUN member states and multi-national organizations to con-sider how they could con-tribute further to address theroot causes of piracy, includingthrough developing land-based

initiatives to strengthen Somaliand regional maritime and lawenforcement capacity.

Ban agreed with the viewof Sekimizu that capacitybuilding in Somalia andneighbouring countriesshould be enhanced throughcooperation between IMO andUN, UN specialized agenciesand other relevant interna-tional organizations, whichwill build on IMO’s existingcapacity-building activitiesunder the Djibouti Code ofConduct, funded by the Dji-

bouti Code Trust Fund.Sekimizu informed the UN

secretary-general about plansto organize a counter-piracycapacity-building Conferenceon 15 May at IMO headquar-ters, as well as a high-level pol-icy debate on arms on board totake place on the first day ofthe 90th session of the Mar-itime Safety Committee on 16May. Sekimizu encouragedhigh-level participation tothese events from the UN.

On the 22 November 2011the UN Security Council is-

sued Resolution 2020 (2011) thatexpressed grave concern at theongoing threat that piracy andarmed robbery at sea againstvessels pose to the prompt, safeand effective delivery of hu-manitarian aid to Somalia andthe region and to the safety ofseafarers and of commercialmaritime routes.

Fouche says maritimepiracy not only affects the shipowners and crew involved buthas far reaching influence onthe international communityas a whole.

SPECIAL PROJECTS SALES REPRESENTATIVE:LANCEDICKSON

WRITER:ALF JAMESPublished in The Star, Pretoria News, The Mercury & Cape Times

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