Altron scores court victory in Telkom, BCX BEE case
Altron has won a major court victory against Telkom and its subsidiary BCX in a tiff about the telecommunications company’s controversial black economic empowerment (BEE) status.
At the beginning of last year, Telkom applied to the then minister of trade and industry, Rob Davies, to declare Telkom as a BEE Facilitator.
The BEE legislation makes provision for organs of state to be declared BEE Facilitators, and the effect is that such an organ of state will then be regarded as 100% black-owned, even if it is not.
Altron and other businesses objected to this on the basis that Telkom, and more specifically, BCX, will obtain an uncompetitive edge over private businesses that compete with it if the application succeeds.
In spite of the objections, Davies approved the application and granted Telkom BEE Facilitator status at the beginning of May 2019.
Strangely, although Telkom brought the application, the final decision of the minister reads that the BEE Facilitator status is granted to government, represented by the Office of the Presidency, in respect of government’s 40.5% shareholding in Telkom.
Altron was of the view that the minister’s decision was flawed, both from a procedural and substantive perspective, and it decided to take the minister’s decision on review to the High Court.
MTN joined Altron in the application, with the minister, Telkom and BCX opposing the application.
Inappropriate public entity
In the same application, Altron sought a declaration that Telkom was not under the “ownership control” of the government, as that phrase is defined in the Public Finance Management Act in 1999 (PFMA) and is not a “public entity” in terms of the PFMA.
In the alternative, Altron sought a declarator that Telkom is an inappropriate public entity for the purpose of being granting Broad-Based Black Economic Empowerment Facilitator Status in terms of the ICT Sector Code published in terms of Section 9 (1) of Broad-Based Black Economic Empowerment Act 2003.
Altron relied on three main grounds of review, namely: the decision or the process leading to it was “procedurally unfair and irrational; the minister failed to furnish reasons for the decision; and the decision was substantively unreasonable, irrational and unlawful”.
The JSE-listed technology services company also argued that the whole decision-making process and reasoning for reaching the decision are not provided on oath as the decision-maker, Davies, failed to file an affidavit in these proceedings.
Altron suggested in its supplementary affidavit that there was no evidence to suggest the submissions made by the public (including Altron) had either been placed before the minister for consideration; and that the second submission to the minister did not even contain a summary or reference representations made.
It added that there was no record setting out the basis on which the minister dealt with the representations made, if he considered any at all.
The matter was formally heard during June 2020 and yesterday the High Court in Pretoria made its judgment.
Judge Colin Lamont found the minister’s decision was fatally flawed in several respects and that it was unlawful.
The court, accordingly, set the granting of the BEE Facilitator status aside and made a legal costs order against the minister, Telkom and BCX.
Lamont ordered as follows: “The decision of the minister taken on 5 April 2019 and published in the Government Gazette on 7 May 2019 under GN 262 of 2019 is reviewed and set aside.”
However, he said the order will not affect the B-BBEE status of Telkom and its subsidiaries for the purpose of any tender or contract awarded and/or concluded after 7 May 2019 and prior to the date of this order.
Against BEE Codes’ spirit
Says Chris Potgieter, Altron group executive for legal, following the ruling: “Altron took a decision to take this matter on review because we believe that the minister’s decision to grant the BEE Facilitator status was procedurally and substantively wrong and was contrary to the spirit of the BEE Codes.
“The result of the BEE Facilitator status approval was that Telkom and its BCX subsidiary obtained an unfair advantage over their business competitors through the resultant increase in Telkom’s and especially BCX’s BEE levels, without them having to take the corporate actions and having to incur the costs which other companies have to do in order to improve their BEE status.”
According to Potgieter, MTN joined Altron in the review application and Vodacom was mentioned as it, as a telco, had a vested interest in the matter.
“Altron welcomes the judgment as it shows that government is bound to follow fair and correct procedures and it takes away the unfair competitive advantage that Telkom and BCX obtained,” he says.
Meanwhile, Telkom tells ITWeb: “In compliance with the decision by the Gauteng High Court to set aside the minister of trade and industry’s decision to grant facilitator status to the government in respect of the government shares in Telkom SA, Telkom and certain of its subsidiaries have included the impact of the judgment in their revised B-BBEE certificates.”
Where required, it says, other subsidiaries have applied for re-verification of existing certificates.
“Telkom is pleased that the court’s decision will not be implemented retrospectively. In setting aside the minister’s decision, the court said the ruling will not affect the B-BBEE status of Telkom and its subsidiaries for the purposes of any tender or contract awarded and/or concluded after 7 May 2019 and before the judgment date (8 July 2020).”
According to Telkom, tenders and contracts concluded during this period will retain the facilitator status until the end of the terms of these contracts.