Loss-making Transnet has again failed to avoid extra costs, with a judge ruling it cannot return to court to force Gijima to hand over management of its core enterprise IT systems under a R1.5 billion deal.
In the latest of several court cases, the state-owned entity was this month refused leave to appeal an October North Gauteng High Court ruling by Acting Judge AJ Minnaar. Transnet had sought permission to appeal either to the High Court in Pretoria – where Minnaar previously ruled against it – or to the Bloemfontein-based Supreme Court of Appeal.
Among its arguments as to why it should be allowed to appeal, Transnet argued that it “ought not to be exposed to unbudgeted financialexpenditure in respect of continuing services, as a result of Gijima’s own refusal to co-operate with Transnet to bring about the completion of disengagement services”.
In the year to March 2025, Transnet reported that it had narrowed its loss to R1.9 billion from R7.3 billion. By its interim results in September, Transnet had reduced its loss to R1.8 billion year-on-year.
In its annual report, Auditor-General Tsakani Maluleke flagged concerns that there was “a material uncertainty” that could “cast significant doubt on the entity’s ability to continue as a going concern”. Although the directors concurred, they noted that key issues had been mitigated.
No prospects of success
In the decision regarding its request for leave to appeal, Acting Judge AJ Minnaar ruled that Transnet failed to meet the legal requirements for a favourable ruling as there was no likelihood of it being successful in an appeal.
“Applying the test for leave to appeal, I am not convinced that a court of appeal could reasonably conclude differently from the conclusion reached by me. I cannot find that Transnet has prospects of success that would lead another court to reach a different conclusion, or that the case raises issues of significant importance,” the ruling reads.
Transnet’s legal wrangle kicked off in June when it argued before Minnaar that Gijima must hand over its IT environment because the master service agreement (MSA) had ended.
The logistics provider sought to force Gijima to separate from its IT environment – including migrating data centre services, SAP workloads and the company’s Active Directory. Gijima’s counter argument was that Transnet couldn’t disengage because the state-owned entity doesn’t have the systems in place to enable it to do so.
No plans
Minnaar concurred with Gijima in an October ruling, noting that the state-owned enterprise “had no transition plan, no technical readiness, and no clarity on how the most critical component (the mainframe) was to be migrated”.
Transnet’s R1.5 billion contract with Gijima was set to run between December 2019 to end-November 2024, a period that was then extended to 28 February 2025. According to the October ruling, Transnet successfully obtained approval for Gijima to be paid up to the end of June this year.
Gijima was responsible for running Transnet’s data centre, hosting services, enterprise IT, and mainframe services – which the judge had indicated was critical.
The judge said that the absence of a transition plan “entitles Gijima to withhold performance until Transnet has fulfilled its reciprocal obligations under the MSA”. Without such a strategy, “it was and remains impossible for Gijima to perform” any disengagement.
Transnet said in November that it would appeal. In court documents in ITWeb’s possession, it argued that it and transition partner, Microsoft, “have the necessary technical capacity, infrastructure and equipment to immediately disengage, migrate and host the majority of the remaining services which were not mainframe services”.
Yet, the judge noted that Microsoft, set to be Transnet’s transition partner, “still had to conduct an essential assessment and predicted it would take six to eight weeks. Despite being aware of this crucial shortcoming, Transnet elected to proceed with its case.”
Skirmishes
This is not the first time the disputed contract has made headlines. In 2018, German IT firm T-Systems South Africa withdrew from a R1.5 billion deal, paving the way for local company Gijima to take over the five-year deal.
The move ended a lengthy court battle after Transnet’s new board, appointed by the late public enterprises minister Pravin Gordhan, sought to reverse the earlier award.
Gijima, which offered to deliver the services, hailed the outcome as a major victory and pledged to modernise Transnet’s IT systems. Gijima subsequently acquired T-Systems South Africa in 2020.
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