• Home
  • /
  • Telecoms
  • /
  • SIU wants clarity on state institutions after court loss

SIU wants clarity on state institutions after court loss

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 24 Jul 2023
Telkom won its court case, blocking the SIU’s probe into the company’s affairs.
Telkom won its court case, blocking the SIU’s probe into the company’s affairs.

The Special Investigating Unit (SIU) is considering its legal options following a High Court judgement that invalidated the unit’s authorisation to investigate Telkom’s affairs.

Telkom last week won its court case against president Cyril Ramaphosa over his directive that authorised a wide-ranging probe of possible maladministration in the disposal of Telkom’s assets – iWayAfrica, Africa Online Mauritius and Multi-Links Telecoms – during the telco’s sojourn in Africa.

The 2022 order gave the SIU the authority to investigate possible maladministration in the sale of these assets, which resulted in the telephony company losing millions of rands.

In a statement, the SIU says it was authorised through a proclamation by Ramaphosa to investigate allegations of “serious maladministration, malpractice and possible corruption” in the affairs of the telecommunications company.

According to the unit, the court’s Gauteng Division in Pretoria found Telkom is not a state institution and therefore, the SIU could not probe its affairs.

“The SIU has studied the judgement and is considering legal options available to it to clarify what constitutes a state institution. The judgement has considered the question of what constitutes a state institution.

“In terms of the Special Investigating Units and Special Tribunals Act 74 0f 1996, the SIU is empowered to investigate allegations of corruption and maladministration in the affairs of state institutions like government departments, municipalities and state-owned entities; to recover financial losses suffered by the state and prevent further losses,” the unit says.

The SIU adds that clarification is needed by the courts to thrash out what a state institution is.

Currently, government directly holds a 40.5% shareholding in Telkom, with a further 15.3% shareholding through the Public Investment Corporation.

“Considering the judgement, the SIU is of the view that a clarification on what constitutes a state institution is important and will further strengthen the work of the SIU in rooting out corruption and maladministration in the administration of all state institutions.

“We further believe there are grounds justifying an appeal and that the issue of the ‘state institution’ must be decided and settled by a higher court. If this is not clarified, it may create an unwelcomed precedent that some public institutions may inadvertently be shielded from investigation by the SIU,” the unit adds.

Huge losses

Telkom sold its CDMA business unit Multi-Links to HIP Oils in 2011 at a large loss after a long legal battle.

The telecommunications company bought 75% of the CDMA operator for $280 million in March 2007, and almost two years later, bought out the balance for another $130 million. It subsequently wrote down the unit for more than its initial investments before selling it.

It was not immediately clear how much Telkom had spent on legal fees, as the company did not disclose this amount.

As for the iWayAfrica and Africa Online Mauritius assets, Telkom offloaded the businesses through a private sale to Gondwana International Networks.

iWayAfrica was formed as the result of the amalgamation of MWeb Africa and Africa Online in 2007, when MWeb Africa was purchased by Telkom.

The iWayAfrica business operated in eight countries in Africa, offering terrestrial wireless and VSAT services to business and residential markets, as well as via its channel partners in many other countries on the continent.

Telkom struggled to drive growth and profitability in the iWayAfrica business, resulting in the sale.

“Several years of poor performance of the iWayAfrica Group has resulted in continued negative earnings before interest, taxes, depreciation and amortisation contribution to the Telkom group,” said Sipho Maseko, who was CEO at the time.