Troubled IT services firm EOH has suspended officials implicated in corruption and is looking at possible prosecutions.
JSE-listed EOH recently confirmed Microsoft had given notice of its intention to terminate its channel partner agreement with EOH Mthombo, one of its subsidiaries, with 30 days' notice.
It said the termination could potentially result in profit impact of approximately R10 million in the current financial year.
Microsoft terminated the contract 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 SA's Department of Defence.
EOH has since proactively initiated an internal investigation, supported by ENSafrica, into EOH Mthombo's channel partner business unit.
In an e-mail sent to employees, EOH CEO Stephen van Coller says: "During the past week significant and symbolic change took place at the most senior level of EOH, the board. About a year ago, the board decided it required significant change to the organisation as EOH had grown very quickly in the prior three years and the systems were no longer relevant for a company that size.
"Given the allegations in the media, this was urgent - not only to save more than 11 500 jobs in South Africa, and another 1 000 outside of South Africa, but also because EOH is systemic to some 15 000 customers, and therefore GDP growth."
Van Coller adds this was a bold move as it meant some senior executives would lose the roles they had held for some time, in the name of progress and to ensure compliance with King IV.
"Wednesday (20 February 2019) was the end of a two-decade chapter. It is the pivotal, and final, piece in the new governance structure the board required, as the two founders (including the chairman) stepped down from the board after 20 years at the company. Never easy.
"These board positions will need to be filled as soon as possible. EOH is relatively advanced with this process and confident of bringing fresh, independent members with a diverse skill set together to take EOH forward."
He points out the allegations and investigations are isolated to a few people and largely in a public sector business unit in EOH.
According to Van Coller, the implicated division represents less than 12% of EOH's total turnover. "We have either suspended or received resignations from involved employees, resulting in none of the employees currently implicated remaining in the business.
"EOH continues to improve its financial controls that prevent ad hoc payments to individuals or companies, and we have already created a 'blacklist' of companies, no longer accepted by the group. We are able to make available, as appropriate, the ongoing process of bid reviews including the screening process of EDPs. ENSafrica reviews between eight and 10 bids per week.
"We have made significant progress on the various investigations. We have provided ENSafrica with the documentation and files to support its investigation, numerous interviews with related parties are under way, and the forensic accounting teams have started work investigating flows of funds and the role of third-parties in public sector transactions.
"Obviously, this process will take time, especially as ENSafrica will also be co-operating with the SIU as well as other law enforcement agencies and will continue pursuing perpetrators and ensure justice can run its course.
"I am committed to dealing with any findings including prosecution. We will also continue to communicate with all stakeholders, but under the ambit of legal confidentiality and process.
"We are reaching out to our partners and customers to ask them to allow the ENSafrica investigation to run its course, given our commitment to taking decisive action. Due legal process must take place and we can then revert with feedback on specific allegations, as permissible. We are appealing to you to allow us to continue to work with you and support you in the furthering of your business needs as we resolve this very endemic problem in our country in a sustainable and responsible manner."
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