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Telkom defends single-sourcing practice

Martin Czernowalow
By Martin Czernowalow, Contributor.
Johannesburg, 31 Jul 2014
Telkom says it is exempt from certain provisions of the PFMA and thus there is nothing untoward about the contract awarded to Bain & Co by CEO Sipho Maseko.
Telkom says it is exempt from certain provisions of the PFMA and thus there is nothing untoward about the contract awarded to Bain & Co by CEO Sipho Maseko.

In an attempt to stave off some of the negative publicity surrounding its CEO, Sipho Maseko, Telkom has pointed out its "unique" position in the market and defended Maseko's decision to award a contentious contract via a process of single-sourcing.

Earlier this week, Bloomberg alleged the operator awarded a R91.1 million advisory contract to Bain & Co last year, "without following an open bidding process".

The report stated Maseko personally "hired Bain to advise on Telkom's broadband and mobile strategy", as the company aimed to stem revenue losses resulting from a contracting landline market. Telkom thus did not comply with the Public Finance Management Act (PFMA), which dictates how companies, in which government is a shareholder, should procure goods and services.

However, the company says there is nothing untoward about the awarding of the contract, since it finds itself in a "unique position" in the market.

"Due to Telkom's unique position, of being a public company listed on the JSE and being classified as a state-owned company for purposes of the Companies Act, [and] since Telkom is still listed in Schedule 2 of the PFMA, [the company] has since 2001 been granted exemption from various provisions of the PFMA and all the treasury regulations issued in terms of the PFMA," it says in a statement.

Telkom adds it "is comfortable that its internal governance processes and policies regarding the approval and conclusion of contracts with suppliers are robust and effective. The conclusion of contracts is done in accordance with Telkom's Delegation of Authority and Procurement Policy, including those agreements concluded by the CEO, Mr Sipho Maseko."

The company believes the Bloomberg article is "erroneously based on the premise that an 'open tender' process is the only procurement process available to Telkom when seeking to procure products or services".

Unhappy unions

Meanwhile, Maseko's involvement in another scandal - being accused of driving with cloned number plates - has drawn the ire of labour unions, at a time when Telkom and organised labour are locked in a process to facilitate retrenchments as the telco forges ahead with a restructuring process.

Last week, it emerged that Maseko allegedly racked up thousands in traffic fines while driving with another individual's number plates. He has reportedly presented himself to the authorities and the matter is under investigation. Telkom has distanced itself from the allegations, saying they relate to a personal matter involving Maseko, and are "in no way related to Telkom". As such, says the company, the CEO will deal with it in his personal capacity.

However, the South African Communication Workers Union (SACU) has called on Maseko to take a leave of absence while the investigation is under way. "While we appreciate that this is a personal matter that he must resolve with the relevant authorities, it does affect his integrity. While the cloned number plates can perhaps be explained, the fines are a problem. An individual in his position should at least be expected to abide by the traffic laws," says SACU president Michael Hare.

The Communications Workers Union (CWU) has expressed its "shock and disgust" at the allegation, saying it is "highly unacceptable" for those in high offices to purposely act in violation of the law. "The investigation must be carried without any delay and, if found guilty, Mr Maseko must face the music," CWU says in a statement.

The Solidarity trade union says it is currently focused on the retrenchment process and ensuring that its members' rights are upheld; however, it did express concern about the amount of negative publicity that Maseko has been receiving lately. "It reflects badly on Telkom. So much negative publicity is not good," says Solidarity spokesperson Marius Croucamp.

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