As he makes progress in cleaning up the mess at EOH, CEO Stephen van Coller believes there is no reason to blacklist the firm, and has no sympathy for the perpetrators of corruption who left the company saddled with a R4 billion debt burden.
Van Coller spoke to ITWeb yesterday during a virtual interview, after State Information Technology Agency (SITA) executive caretaker Luvuyo Keyise last week told ITWeb that EOH must not be absolved from the possibility of being blacklisted, as it was the main beneficiary of unscrupulous government contracts.
According to Van Coller, despite the challenges of dealing with the government agency, EOH is still clinching lucrative deals with government.
After closing dodgy legacy public sector contracts that have bedevilled the technology group over the years, EOH confirmed it is suing a number of former executives − Asher Bohbot, founder and former CEO; John King, former CFO; Jehan Mackay, former head of public sector; and Ebrahim Laher, former head of EOH International − for a total of R6.4 billion in damages.
“Interestingly, with the shenanigans at SITA, we are still winning government business. So I want to sort that out in our favour, and it may force the hand of government to make a formal decision. This is because the decisions I have heard to date are sort of informal.
“The reality is this is where we are, and we now need to move forward. We have paid a lot of debt down, COVID has been very difficult and in some ways it was positive, and now we are no longer on banks’ bottom list but on their middle list.”
Earlier this year, there were calls for South African banks to sever ties with EOH because of its involvement in corruption.
Problematic contracts
As to whether EOH benefitted from the dodgy government contracts, he said: “There were two types of things going on. There were four contracts – two at Department of Water Affairs and two at Department of Defence – where we over-invoiced.
“So we obviously benefitted there and money was stolen. EOH actually benefitted theoretically, and that’s why we agreed with the DOD [Department of Defence] and the SIU [Special Investigating Unit] to pay that money back, even though we don’t have the money, because it’s very difficult for EOH to say we didn’t benefit.”
This, after the SIU’s investigation into the R250 million Microsoft software licence procurement contracts awarded by the DOD to EOH uncovered irregularities relating to the procurement process and also overpricing of Microsoft licences amounting to more than R40 million.
“So on those two [DOD contracts], we’ve done what we needed to do to avoid blacklisting. We have reported to them, as well as entered into an acknowledgement of debt with them.”
Van Coller also pointed out there was a string of contracts that show evidence of collusion between SITA and the former EOH execs.
“Unfortunately, in most of them, because they thought they were influencing the award of them, the contracts were very bad. If you look at the home affairs one specifically, where SITA was saying we benefitted, government actually benefitted more.
“This is because the next lowest tender was R200 million more than us. So even though SITA itself had colluded with EOH employees, when the adjudication happened at home affairs, we didn’t get any favours, as we did not know what was going on with the adjudication process. Had we known, we wouldn’t have tendered R400 million but R580 million. So, we clearly did not have insight into the actual final tender process. All we got was information from SITA officials to help us with our bid.”
He added that EOH delivered 51 of the 60 requirements of the home affairs contract, and the other nine were ceded within budget, so there is no additional contracting that happens with that.
“This obviously cost us a lot of money because if the next closest bidder was going to cost R600 million to complete the contract, then we clearly underbid. I can only think they underbid because they had inside knowledge that they can get change orders done and they can then inflate the contract.
“We have seen this modus operandi in some of the other contracts. We saw eight contracts that were very problematic, and we have now exited all eight of them.”
According to Van Coller, EOH has an arbitration process with one of the problematic contracts and settlement discussions with another.
EOH had to pay penalties of some kind in order to sort out most of the contracts, he noted.
“So, theoretically, in a way, I suppose if you win a contract, you do benefit, but the reality is that money was stolen out of EOH and that’s why we were sitting with about R4 billion worth of debt. EOH, in this whole process, has ended up in a very difficult position and it’s actually the new management, board, shareholders and existing employees who are suffering because of what happened. This is because we now have to pay someone else’s debt.
“It’s like if your father passes away and he has a big mortgage on the house and you have to repay that mortgage even if you don’t have any access to the house. That’s the situation we are in – we had to sell businesses, staff had to take pay cuts and they haven’t had proper bonuses for a while. It has taken us basically two years to turn around the business and make it more efficient and it’s pretty painful.”
Why shut us down?
Van Coller also noted that if EOH was flush with money and doing well, he could have sympathy with the perpetrators.
“But we are not. The reason why I don’t have sympathy for them and why I came out publicly hard against it was for two reasons. One is we are actually assisting government in stopping corruption and getting things better. So why would someone want to shut us down?
“Basically, this is what happens if you blacklist us; this is 20% of our business, so we will have to fire a whole lot of staff. Why now in the current climate – whether EOH benefitted or not – would you want to do something that leads to job losses in the economy and even put some of the government departments at risk because now we must just walk away?”
The second reason is that EOH has had conversations with business leaders and government, as well as SITA.
“SITA were the first people that we went to. When this thing broke in February 2019, we went to SITA in March 2019 and told them what was going on, what had happened and what the issues were. They were very happy not to blacklist us at that point because it was important. Had they said ‘well, tough luck, we are going to hold you accountable’, we would have put the company into business rescue and not wasted all this time and money to get where we are.
“So to suddenly – two-and-a-half years later – decide you want to change your mind for something that happened five years ago, it just doesn’t make sense to me.”
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