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Gauteng e-Gov coughs up R142m after Altron blackout threat

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The Gauteng Department of e-Government has paid Altron Nexus R142 million for broadband network services after the company threatened to shut down services earlier this week.

The department has, however, promised not to pay for new sites, pledging to only cough up for maintenance up until October.

The development comes amid growing fallout between the State Information Technology Agency (SITA) and the department over the management of the Gauteng Broadband Network (GBN) project.

The parties have been feuding over financial management of the project after ITWeb broke the news that Altron wanted to discontinue offering broadband services over non-payment.

Mark Harris, Altron Nexus managing director, told ITWeb that several attempts to resolve payment issues between SITA and the department had not been successful and his company was still owed over a hundred million rand.

The suspension of services by Altron would have crippled the provincial government, which is relying on broadband to deliver critical services, as Gauteng grapples with rising numbers of COVID-19 infections.

Now, the department has confirmed paying R142 million to SITA and not the R154 million that was demanded.

“We are encouraged by the signs of progress evidenced by payment of invoices by e-Gov and we remain optimistic that the outstanding balance will also be settled soon,” says Luvuyo Keyise, SITA executive caretaker.

Financial anomalies

Commenting on the latest development, Cyril Baloyi, head of department (HOD) at e-Gov, says the delay in payment was to curb continuous unauthorised expenditure on GBN and regularise financial management of the project.

Financial anomalies on the project have also been flagged by the auditor-general (AG), who declared the GBN contract as irregular in the 2019/20 financial year report.

The AG states: “The department’s overall irregular expenditure has increased from R35 million to R389 million in the current year due to the irregular expenditure incurred through phase two of the GBN contract. This is due to the substantive conditions that were not met in terms of the contract. The contract was signed, is effective and service are received. The contract is currently under investigation.”

Cyril Baloyi, head of department at Gauteng e-Gov.
Cyril Baloyi, head of department at Gauteng e-Gov.

According to Baloyi, when matters have been declared irregular or improper by the organs of State, especially the AG, “there are processes that must be followed to regularise such matters, and that’s the process that we agreed with SITA to follow; it’s just unfortunate that there is denial now”.

He adds: “We have written to SITA on 2 June 2021, clearly on our standpoint on the GBN payment dispute. We have also written to both SITA and Altron in terms of their threats to switch off services.

“I’m fully aware that as the current HOD, I’m seen as a stumbling block; however, I will exercise my duties without fear or favour, despite the threats on my life, which the South African Police Services are investigating. No matter the consequences, I will ensure the prescript of the law is adhered to and correct all the irregularities that have been happening.”

Business prudence

Furthermore, Baloyi says, during monthly service level agreement meetings with SITA, “it was clear there were financial and contractual issues on the GBN contract. To mention but a few, SITA was doing work without purchase orders.

“SITA even confirmed on the letter sent to me on 27 May 2021; the Excel spreadsheet attached with the letter was clear that they have done work which they can’t bill because of no purchase order. This is against the PFMA [Public Financial Management Act] and the signed contract between SITA and e-Gov on Section 11 of the contract.

“[There has been] financial mismanagement of the entire GBN contract, which, based on our current calculations, is on an over-expenditure of plus or minus R216 million (unauthorised expenditure). For example, on Monday, 31 May at 19:23, SITA asked me to indicate if there is an intention to top-up the budget for the services – how do you just top-up a budget?”

On Wednesday, Keyise laid into Baloyi for failing to pay for services rendered, saying the e-Gov HOD is in breach of the PFMA.

He also claimed SITA had “received full condonation of anything that has to deal with the procurement process of the GBN contract. Full condonation, not partial. We confirm that Treasury has fully condoned anything that has to do with procurement processes for the GBN contract.”

On the contrary, Baloyi insists SITA had only received a partial condonation to the contract, resulting in e-Gov exiting the financial year of 20/21 with a potential irregular expenditure of approximately R778 million.

He explains further: “The letter dated 5 May from the National Treasury to SITA for the condonation of GBN only condones the amount of R734 million. It should be noted that on 31 May, we received an e-mail from SITA advising us that Treasury has written an e-mail advising them that the entire contract is condoned.

“At this point, we asked for the confirmation letter, as we are of the opinion that an e-mail will not be sufficient, as the only proof for condonation given was the value of the contract in question. In consulting with Gauteng Provincial Treasury, they made it clear that they will not condone this contract until proof of National Treasury condonation is provided in writing.”

Undefeated

In response, SITA’s Keyise confirms the GBN irregular expenditure but cautioned that it had “no impact on e-Gov but on SITA as the contracting party”.

He explains: “SITA is satisfied with the National Treasury condonation received, which also clears all future expenditure under the contract between SITA and the service provider. The source of e-Gov’s irregular expenditure pertains to outstanding suspensive conditions of its own events that are independent from the AG’s findings on SITA’s GBN irregular expenditure.”

It is for this reason, Keyise says, that e-Gov’s irregular expenditure could not be cleared by National Treasury condonation that was granted to SITA.

“Our view is that e-Gov should be pursuing its own condonation application considering that its irregular expenditure emerges from a different contravention that is independent from SITA’s condonation. Similarly, the cited e-Gov potential irregular expenditure for FY2020/21 cannot be associated with SITA’s condonation,” he says.

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