Disposed-of EOH unit in tender row in Zimbabwe

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 26 Nov 2019

Twenty Third Century Systems (TTCS), a former business unit of EOH, is accused of providing a now-dysfunctional IT system to Zimbabwean government entity, the National Social Security Authority (NSSA).

Responding to the allegations, an EOH spokesperson told ITWeb: “EOH can confirm that it has sold TTCS.

“We have not been involved in the day-to-day management of the business since 1 May 2019. We are, therefore, not able to comment further.”

The spokesperson adds that EOH only ever owned 49% of TTCS.

According to a report by The Herald newspaper, NSSA spent $10.4 million on a new ICT system that worked for just two years and now lies idle, and it could be forced to spend another $10 million if potential arbitration goes against the authority.

It adds the system was supplied by TTCS, when owned by South African EOH Holdings, a company listed on the Johannesburg Stock Exchange.

The new system was used only from August 2015 to 31 December 2017, when the agreement was terminated as new bills and invoices continued to flood in, says The Herald, noting the system is now lying idle at the NSSA headquarters in Harare.

It points out that although the ICT system is not functional, NSSA is sitting on additional bills of up to $10 million from TTCS, and the board is reluctant to pay, citing the unclear circumstances under which they have been filed.

The paper also alleges that while the tender for the ICT system is said to have been subjected to the normal NSSA procurement processes, “reliable sources said TTCS was selected although it did not meet one of the criteria, that of having supplied a similar system to at least three other companies or organisations”.

In August, EOH said it was looking to cut its debt load and was selling off its stake in TTCS and its subsidiaries for R122 million.

TTCS has offices in Zimbabwe, Zambia, Malawi, Kenya, Uganda, Rwanda, Botswana and Nigeria, and projects in several other countries, including Ghana, Namibia, Tanzania and Cameroon.

The company, which was founded by Zimbabwean-born businessman Ellman Chanakira in 1996, focuses on implementing business solutions (as well as IT infrastructure) across Africa and the Middle East.

It operates in both the private and public sectors, including the social security, tax and revenue collecting agencies.

The debt-saddled EOH says it plans to use the proceeds of the TTCS sale to reduce its leverage and strengthen its balance sheet.

EOH’s problems surfaced after software giant Microsoft in February terminated its contract with the IT services company after an anonymous whistle-blower filed a complaint with the United States Securities and Exchange Commission about alleged malfeasance to do with a R120 million contract with the SA Department of Defence.

It then appointed ENSafrica, which conducted a forensic investigation that discovered R1.2 billion-worth of shady deals at the company.

CEO Stephen Van Coller has been trying to clean up the mess since his appointment. In July, he indicated EOH will “ring-fence” problematic contracts into a single entity.

In October, EOH blacklisted and suspended payments to 50 enterprise development partners that it says were involved in shady dealings.

At the half year, EOH set a target to raise R1 billion from the sale of non-core assets for the next 12 months.

It said it had made good progress towards this target, having already realised approximately R523 million in sales in the 2019 financial year; the most significant of these being the sale of 70% of CCS to a strategic partner, RIB, for a consideration of R444 million.