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Oracle insists Eskom must cough up in contract tiff

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The Oracle SA building in Woodmead, Johannesburg.
The Oracle SA building in Woodmead, Johannesburg.

Debt-ridden power utility Eskom is scrambling to ensure minimal disruption to SA’s power supply, with US-based software giant Oracle sticking to its guns, saying the state-owned company must pay up its dues, as the contract dispute between the organisations rages on.

This after Eskom confirmed this week it is involved in a contractual dispute with the South African arm of Oracle Corporation, which is contracted to provide a number of technical services to the state-owned company.

Sunday World first reported the dispute will see almost the whole of South Africa at risk of being plunged into total darkness, “potentially endangering the life, personal safety, or health of the whole or part of the population”, as the country faces a real possibility of coming to a standstill.

The report says this is according to Eskom, which, on Thursday, lost a court battle to stop Oracle from withdrawing its crucial services over a dispute relating to billions of rands owed by the power utility.

Mounting pressure

In an e-mail to ITWeb, Gaurav Bhatnagar, Oracle senior director of corporate communications for Middle East and Africa, says: “Eskom’s application for an interdict against Oracle was dismissed, with costs, by the High Court. Eskom should pay the pending dues for the Oracle software that they use.”

The embattled Eskom is facing mounting pressure from creditors and struggling to keep the lights on in SA, and has had to resort to crippling load-shedding from time to time.

Eskom, which provides about 95% of the electricity used in SA, is saddled with debt of over R460 billion.

According to the power utility, Oracle first claimed it had been underpaid by an amount of approximately R7.3 billion, which underpayment is disputed by Eskom.

Eskom says eventually the amount claimed by Oracle was reduced to just under R400 million.

As far as Eskom is concerned, the amount due to Oracle is approximately R166 million in total, the state-owned company says.

Eskom claims it offered to settle the R166 million, and proposed a verification and court process in order to legally and sustainably resolve the dispute.

When Oracle rejected this approach, threatening to terminate its services, Eskom approached the High Court to compel Oracle, in essence, to continue providing the technical support services for the duration of the agreement until April 2022.

Overuse of services

Speaking on SABC’s Morning Live today, Eskom spokesperson Sikonathi Mantshantsha said there is a contractual dispute in which Oracle first claimed it was owed R7.3 billion by Eskom.

“They [Oracle] claimed Eskom had overused the software and technical support services provided by Oracle. When Eskom disputed the amount, it dropped to R800 million; and after further disputes, it dropped again to the current R400 million.

“Eskom only admits it owes in total R166 million to Oracle, which it will pay as soon as it receives an invoice. Eskom is willing to pay this and challenged Oracle to appoint a third-party or auditor to investigate and check the veracity of the claim of R400 million and subject that to a test. Once an amount has been confirmed by a third-party, then both parties will make it an order of court in order to create a legal basis for Eskom to pay whatever might be outstanding at that point.”

According to Mantshantsha, the amount in dispute between Oracle and the state-owned company is R220 million.

However, he stressed this is not as a result of non-payment on the part of Eskom but arises from a dispute on the usage of the licence.

Mantshantsha explained that among other services, Oracle provides software that Eskom relies on to maintain its power stations.

“We also rely on Oracle’s software for services such as online vending for people at home to buy their electricity online. We rely on Oracle also on the distribution of electricity, particularly in areas where people rely on prepaid meters. There are quite a lot of services but these are just a few.”

Readying risk reduction

He added Eskom has now put in place contingency measures to reduce the risks in the event that Oracle pulls the plug on its services.

In its statement this week, the parastatal said as far as the technical support services are concerned, Eskom has assessed the risks in the event of Oracle withdrawing technical services support.

It said Eskom has interim risk mitigating processes in place to reduce the risk of its operations being disrupted.

“Oracle has a binding contract with Eskom all the way up to March 2022 and should they decide to pull out, Eskom has internal teams that can take over. These have been brought up to speed in order to withstand or fill the void that might be left in the absence of Oracle experts,” said Mantshantsha.

He added Eskom has also entered into an urgent procurement process to find the technical ability or experts “now that we cannot absolutely rely on Oracle to meet its obligations”.

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