The Universal Services and Access Agency of SA (Usaasa) cannot be held liable for the losses incurred by set-top box suppliers following its decision to halt the procurement of the converters, Telecommunications and Postal Services Minister Siyabonga Cwele said on Tuesday.
The agency, which is in charge of procuring the set-top boxes required when digital migration occurs, decided in 2016 not to proceed with ordering the devices pending the conclusion of the legal battle over the non-encryption of the converters.
But three suppliers — Leratadima Marketing Solutions, CZ Electronics and BUA Africa — have, separately, declared a dispute for arbitration and could possibly head to court. The companies are unhappy after incurring losses worth millions of rand as a direct result of the Usaasa decision.
Leratadima, which could cut hundreds of jobs, is said to be sitting on millions of rands’ worth of components it ordered from overseas to manufacture the converters, which they now can’t use. CZ Electronics is reportedly sitting on tens of thousands of unsold set-top boxes, made for Usaasa in terms of the order and for which the agency has not paid.
In a written reply to a question in Parliament from the DA, Cwele said that, so far, only Leratadima and CZ Electronics have filed their claims with the Arbitration Foundation of Southern Africa. Usaasa has not yet received claims from the third service provider.
Cwele said Usaasa had informed him that Leratadima’s claim is in two parts. In the first part it seeks an order declaring that the agency is liable to pay the company for variations in the foreign exchange rate, which occurred during the subsistence of the purchase order which Leratadima was executing. The second part relates to the consequential loss it has suffered as a result of suspension of production.
CZ Electronics has also filed its statement of claim with the foundation for the exchange rate variance, suspension of manufacturing, outstanding invoices and consequential loss.
Usaasa, said Cwele, is not contractually liable to the service providers to pay for the variance in the exchange rate: "It was the responsibility of the service providers to hedge against fluctuations in the exchange rate. This was an express term of the purchase orders which are an integral and constitutive part of the agreements between Usaasa and the service providers." Furthermore, Usaasa did not commit to pay the service providers for the variance in the exchange rate.
"Usaasa could consider, and only on compassionate and benevolent grounds, partial assistance to the service providers provided it got additional funding from National Treasury for that purpose. National Treasury did not provide [the agency] with any additional funding to pay the service providers for the variance in the exchange rate."
"In so far as the claim for consequential loss is concerned, the supply and delivery agreements with service providers stipulate that neither party shall be liable for the special or consequential damages suffered by the other party arising out of the agreement, howsoever arising," said Cwele.
Usaasa said in 2016 that it had decided to "err on the side of caution" and suspend the manufacture and procurement of new set-top boxes until the Constitutional Court rules on the validity of an alteration to the Broadcasting Digital Migration Policy, which states that state-subsidised set-top boxes should not be capable of encrypting broadcasting signals.
Former communications minister Faith Muthambi approached the Constitutional Court to challenge the Supreme Court of Appeal judgment which found that the government was wrong not to allow set-top box encryption. The matter was heard by the Constitutional Court in February and judgment is yet to be handed down.
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