Johannesburg may face ZAR1.2bn bill for termination of broadband contract

5 Jan 2015

City of Johannesburg councillors will reportedly decide this month whether to pay a ZAR1.2 billion (USD102.25 million) settlement for cancelling the broadband agreement with CitiConnect Communications, The Times reports. According to unnamed sources, Johannesburg’s mayor Parks Tau, who is in favour of paying the settlement, is reportedly at odds with other council members, who ‘want an explanation before coming to a decision’. The paper also reported that settling the matter now would absolve the city from paying ZAR3.348 billion over the twelve years that the contract was meant to have run.

As previously noted by CommsUpdate, in August 2014 the local government of Johannesburg terminated the build, operate and transfer (BOT) agreement with CitiConnect Communications, which had been tasked with running and commercialising Johannesburg’s broadband project via start-up operator BWired. Johannesburg’s broadband infrastructure project was part of the local government’s plan to connect all of its main offices and branch sites and to roll out a thousand Wi-Fi hotspots by the end of 2016. The network was scheduled to go live on 1 July 2013, but CitiConnect failed to honour its obligations. The local government claimed that CitiConnect created intermediary companies to sell capacity on the network, and allowed – without consent – one of its companies to create a second network. For its part, CitiConnect said at the time of the cancellation that the agreement was terminated unlawfully.

South Africa