New Dawn Holdings has blamed its recent financial woes on fraud committed by seven key former employees, and late payments from customers - particularly government departments.
CEO Elijah Mahlangu says New Dawn is taking legal action to reclaim the money lost through staff fraud - he has sent letters of demand to seven individuals.
"I trusted certain people to do certain jobs," he says. Mahlangu notes that inflated consultants' invoices were authorised for payment, some staff were paid double at times, and salaries were altered.
He cites one example of a secretary who joined the company on a salary of R84 000 per annum, and was later found to be earning R240 000. Standard HR policy, adds Mahlangu, is not to raise a salary by more than 15% to 20%.
"These are some of the things that are costing the company a lot of money."
Mahlangu owns 69% of the unlisted New Dawn Holdings - which records average annual revenue of between R164 million and R168 million. New Dawn director Tebogo Makamela (with whom Mahlangu owns another, non-operational company registered as Mahlangu le Makamela) owns 20%.
Non-payment woes
The late payment and non-payment of accounts by New Dawn's customers also contributed to salaries and bonuses being delayed. New Dawn has 350 staff members on the payroll at a monthly cost of over R6 million.
He states that New Dawn is owed over R24 million in unpaid debt, from as far back as four months ago. It owes creditors R7.8 million.
"The public sector tends to be sympathetic to BEE companies like ourselves, so we do a lot of business with them, but they often don't pay on time. This means we can't always pay our creditors on time, and certain payments are delayed."
The employees' provident fund, the GG Umbrella Provident Fund, has been short-paid by R3 million, states a letter from the previous fund manager. The fund has recently been transferred to a new manager.
Mahlangu denies New Dawn owes any provident fund money, but says he has secured a payment settlement plan of R2 million, to be paid to the fund over a period of time.
New Dawn is also, he says, paying the revenue service over R900 000 each month in a "signed arrangement" that allows the company to pay off its tax debt over a period of months. He did not elaborate on how much is owed to SARS.
Exodus to Simeka BSG
Meanwhile, Mahlangu has confirmed reports that many of the disgruntled staff that left New Dawn's Oracle-focused Prophesy division have joined rival Simeka BSG. Sources allege up to 70 individuals have defected.
Mahlangu claims Simeka BSG attempted to buy Prophesy in September.
"About two years ago, [members of] Dimension Data's Oracle business, 38 people, resigned and came to us," he says, adding it is the same core group now moving to Simeka BSG.
He believes that as a result of the loss of key staff to Simeka BSG, New Dawn will lose a lucrative Vodacom account to supply Oracle solutions. Mahlangu would not comment on the value of this account, or the impact on the company's bottom line if New Dawn loses out to Simeka BSG.
"They [Simeka BSG] give the employees offers they can't refuse, you see - and they [the employees] exploit that."
By time of publication, Simeka BSG group CEO Mohammed Varachia had not returned calls concerning the New Dawn staff issue.
Local Oracle VP Nicky Sheridan this morning also declined to comment on how Oracle's relationship with New Dawn's Prophesy division will be affected by the staff loss.
Click here to read Mahlangu's full written response to ITWeb.
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Turmoil at New Dawn
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