Choice Technologies is looking for a funder to help it buy out Dimension Data`s 49% shareholding and give the company a cash injection of about R10 million.
Semela Tseka, Choice Technologies CEO, denies recent media reports that his company is in dire financial straits. He says it does have the cash flow to pay staff salaries and confirms it is preparing for participation in several large projects.
"We are on track to find a funder that will help us buy the Dimension Data stake and help with a cash injection. No amount has been settled on and both parties have agreed they would not make the valuation of the stake public," he says.
On 3 July, national newspaper The Sunday Independent reported that Choice Technologies` financial situation had become so dire that it could not undertake its part in Project Merlot, the outsourcing and network management contract for financial services group Old Mutual. Choice is the minor partner, along with Telkom and Computer Sciences Corporation, in the R5 billion project.
"That report was based on confidential documents that were part of the negotiation process. In rolling out a large project we have to fund various items ourselves and that impacts on our cash flow. Since DiData stopped the R20 million overdraft facility a year ago, it has been a problem for us," Tseka says.
Media reports in April 2004 said Dimension Data had stopped underwriting Choice Technologies` overdraft facilities and had recalled its loans. However, both companies at the time refused to confirm or deny this and issued statements that they were willing to work with each other.
Choice Technologies` forecast turnover for this year is R160 million, unchanged from the previous financial year, but considerably down from the R226 million recorded two years ago. The company`s financial year ends on 31 October.
"Part of the problem has been the long project approval times, particularly from government," Tseka says.
Choice Technologies is involved in several government-related projects including an outsourcing contract with the South African Revenue Service that is a joint venture with arivia.kom, a Department of Home Affairs electronic document management system, and an infrastructure project with the Department of Water Affairs.
Tseka refuses to comment on Project Merlot, because all parties have signed a non-disclosure agreement.
It is believed that an agreement between Choice Technologies and the other two major players in Project Merlot, Telkom and Computer Sciences Corporation, will be signed this week. Final negotiations between the consortium and Old Mutual should be concluded by August.
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