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Telkom probes cable fraud allegations

With an expected shortage in copper by next year, the value of Telkom's cable will only skyrocket on the black market. Graphic by: Sam Thomas

Telkom has tasked a forensic investigator to look into allegations that high-level management staff colluded with security companies hired to protect Telkom's copper assets.

The nature of the accusations is unclear. However, it appears staffers have been accused of corruption and fraud, by paying security companies exceptionally high retainers, for services that have not been rendered, and possibly receiving kickbacks from the payments.

Telkom has already sustained massive losses from cable theft and the security associated with its increase, and can little afford to fork out more than is required.

The employees were subject to an internal investigation, which reportedly advised Telkom to file criminal charges against them. Telkom has now followed up with a forensic investigation, which it says is ongoing.

“As Telkom viewed the allegations contained in the memorandum in a serious light, the company immediately conducted an internal audit, which commenced in December 2009, and management is currently implementing the recommendations of this report. This includes the appointment of an independent forensic company to conduct an investigation,” says Telkom's group executive for legal services, Anton Klopper.

Telkom is not willing to disclose many details about the investigation, saying it can't make further comment until the process has been completed.

However, Klopper says that if the investigation turns up fraudulent dealings, Telkom will take action against the accused staff members.

Big bucks

Telkom spends a fortune to protect copper cables. In its 2009 annual report, it dedicates an entire chapter to the theft of copper, saying this cost Telkom outbound revenue losses estimated at R907 million.

The copper black market subsided five years ago, with metal prices at a reasonable low. By 2008, the price of copper skyrocketed to $8 685 per metric tonne on the London Metal Exchange, boosting the black market value.

The price more than doubled last year, as the economy recovered from the global recession. Now the value is only likely to jump even higher, with global analysts predicting a copper shortage by the end of next year.

Rio Tinto's copper unit expects to see prices climb, given that there is little investment in copper mines at the moment. However, the mining giant hopes to get a new mine up and running in Mongolia, which it hopes to start building in 2013.

Steady growth

While the price of copper has been up and down, Telkom has shown steadily increasing losses, thanks to copper theft.

The company lost more than R300 million to cable theft between April 2006 and March 2007, with hired security costing R130 million of that amount. In the 2007 financial year, it was hammered by a R571 million loss through cable theft.

In 2008, it lost R863 million, rising with the dramatic increase in the international price of the metal. In the same year, Telkom almost gave up on copper, and decided that, in places where theft was rampant, it would not install any new copper lines.

Instead, it turned to fibre and wireless technologies, but fibre theft has also been a problem, costing it R100 million in damages in 2008.

Telkom says it will comment on the possible involvement of its staff in increasing costs to security companies as soon as the investigation is complete.


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