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Oct 12, 2012

Cabinet decision perplexes satellite company, casts shadow over its future

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Engineering|Africa|Consulting|Information Systems|Sun Space|SunSpace|Systems|Testing|Africa|South Africa|Manufacturing|Manufacturing Capability|Systems|Systems Manufacturing|Western Cape|Bart Cilliers|Naledi Pandor|Gauteng
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The future of South Africa’s specialist microsatellite and related systems manufacturing company Sun Space and Information Systems (Sunspace) is now uncertain, following the publication, on the government information website on Thursday, of the Statement on the Cabinet meeting held the previous day, Wednesday October 10, 2012.

Recently, then Science and Technology (now Home Affairs) Minister Naledi Pandor confirmed that, back in March, the South African government had decided in principle to take a majority equity stake in the company. “This in-principle decision was subject to the presentation of a business case highlighting (i) the value proposition of the equity transaction to government and (ii) how Sunspace would be sustained over the long-term,” she explained. “For this purpose two studies were commissioned.”

The Cabinet meeting statement released on Thursday includes a short section entitled “Outcome of the investigation into the proposal for Government to acquire an equity stake in Sunspace (Pty) Ltd”. This passage reads, in full: “Cabinet received and accepted the outcomes of the investigation on government acquiring a majority equity stake in Sunspace. Cabinet approved that negotiations be entered into with South African National Space Agency (Sansa) – an entity owned by State – to explore the absorption of the core capability of Sunspace into Sansa. This will ensure the strengthening of satellite and manufacturing capability within Sansa.”

Sunspace has called for clarification of what this will mean in practice from the Department of Science and Technology (DST) and Sansa. “Does this decision imply that the Department is simply walking away from the 23 month salary arrears incurred by the personnel and the guarantees provided by the shareholders in keeping the capability intact while the government decision making process was being executed following the MoU [memorandum of understanding] Sunspace signed with DST on behalf of government and the positive Cabinet decisions in January 2010 and March 2011 as well as the assurances of sustaining Sunspace by the Minister in Parliament in March last year?” queried Sunspace MD Bart Cilliers. “What are the timescales for starting negotiations with the company for the implementation of the Cabinet decision?”

He also highlighted the issues of the intellectual property vested in the company, and that the country’s satellite manufacturing, integration and testing facilities are all in the Western Cape province while Sansa is based almost entirely in Gauteng province, nearly 1 500 km to the north.

“It took ten years plus and R5-billion with assistance from a foreign partner to establish Houwteq [satellite integration and test facility] which was shut down in 1994, and it took Sunspace 12 years since its inception in 2000 to get where the company is today, with a solid proven space operation satellite heritage,” Cilliers pointed out to Engineering News Online on Friday. “Sansa currently has zero satellite engineering capability, no track record  and also no satellite engineering processes and facilities. It will again take Sansa ten or more years to start again from scratch, even in the unlikely event that they would do so with existing Sunspace staff.”

He company is perplexed because, in October last year, the Sansa board unanimously recommended the proposed government purchase of Sunspace shares. Moreover, Savant Analytic – the consulting company engaged by Sansa to undertake a professional and expert evaluation of Sunspace – endorsed such a step.

“It is our view that the business case for the investment into Sunspace is sound and holds many direct economic and indirect socioeconomic and geopolitical benefits to the country,” stated Savant Analytic in its report. “The efficient structuring of the investment will ensure that the South African government gets excellent value for the investment without unfairly rewarding the existing shareholders in the short term and providing a range of beneficial exit mechanisms in the medium to long term.”

Edited by: Creamer Media Reporter
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