Telkom sues Ramaphosa in bid to halt SIU probe

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Telkom has filed papers at the North Gauteng High Court to halt a probe into the company’s dealings in its African operations dating back to 2006.

The court application follows president Cyril Ramaphosa in January authorising a wide-ranging probe of possible maladministration in the disposal of Telkom’s assets – iWayAfrica, Africa Online Mauritius and Multi-Links Telecoms – during the telco’s sojourn in Africa.

The order gives the Special Investigating Unit (SIU) authority to investigate possible maladministration in the sale of these assets, which resulted in the telephony company losing millions of rands.

Listed as the defendants in the papers are president Cyril Ramaphosa, communications minister Khumbudzo Ntshavheni, the SIU and Edward Scott, director of Phutuma Networks.

The defendants have 15 days to respond as to whether they will oppose the motion.

According to the founding affidavit seen by ITWeb, the genesis of the allegations referred by the president to the SIU are complaints made by Scott about two tenders put out by Telkom in 2005 and 2007.

However, Telkom argues that neither of the tenders was awarded by the telco.

Unconstitutional investigation

In the affidavit, Telkom says its application is in two parts – Part A, which seeks to interdict the SIU from continuing with investigation pending finalisation of part B.

Part B seeks to declare unconstitutional, invalid and of no force or effect the proclamation issued by the president which instructs the SIU to investigate allegations of maladministration and impropriety at Telkom, says Chris Teurlinckx, the company’s acting group executive for legal services, in the affidavit.

Teurlinckx adds that in Part A, Telkom submits it has established prima facie that the SIU’s investigation is unconstitutional because the president acted unconstitutionally and unlawfully when he issued the proclamation to the unit to investigate Telkom’s affairs.

“Telkom will suffer irreparable harm should the SIU commence and/or continue its investigation pending the review of Part B,” says the company.

In Part B, Telkom submits it can show clearly the president acted unconstitutionally and unlawfully when he issued the proclamation authorising the investigation.

“The president can only instruct the SIU, and may only refer the matter to the SIU, if he deems it necessary to do so on the grounds contemplated in section 2 (2) of the SIU Act,” Teurlinckx says.

He adds the proclamation is ultra vires because the allegations contained in the proclamation fall outside the purview of section 2 (2) of the SIU Act in that:

  • Telkom does not fall under any grounds listed in section 2 (2) of the SIU Act. Telkom is not a state institution, it does not use public money or control state assets or public property as contemplated in the SIU Act.
  • The allegations referred by the president to the SIU lack the particulars which are mandatory in terms of section 2 (2) (g) of the SIU Act.

Telkom further submits that the president acted without grounds, irrationally, arbitrarily and for the purposes not authorised by the SIU Act by authorising investigations into vague allegations, formulated and cast in the widest possible terms, covering a period of some 15 years.

“He also failed to take into consideration that some of these allegations have been fully investigated before and there is plainly no rational purpose to a fresh investigation,” Teurlinckx argues.

Exit strategy

Telkom sold Multi-Links, its CDMA unit, to HIP Oils in 2011 at a large loss after a painstakingly-long legal battle.

The telecommunications company bought 75% of the CDMA operator for $280 million in March 2007, and almost two years later, bought out the balance for another $130 million. It subsequently wrote down the unit for more than its initial investments before selling it.

It was not immediately clear how much Telkom had spent on legal fees, as the company did not disclose this amount.

As for the iWayAfrica and Africa Online Mauritius assets, Telkom offloaded the businesses through a private sale to Gondwana International Networks.

iWayAfrica was formed as the result of the amalgamation of MWeb Africa and Africa Online in 2007, when MWeb Africa was purchased by Telkom.

The iWayAfrica business operated in eight countries in Africa, offering terrestrial wireless and VSAT services to business and residential markets, as well as via its channel partners in many other countries on the continent.

Telkom struggled to drive growth and profitability in the iWayAfrica business, resulting in the sale.

“Several years of poor performance of the iWayAfrica Group has resulted in continued negative earnings before interest, taxes, depreciation and amortisation contribution to the Telkom group,” said Sipho Maseko, who was CEO at the time.

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