Mystery surrounds Oracle-govt deal

Johannesburg, 11 Mar 2009

A major Oracle deal with government - possibly worth hundreds of millions of rands - seems to be shrouded in mystery and all attempts to obtain details about the state procurement transaction have failed.

While the Department of Trade and Industry (DTI) has admitted Oracle is required to carry out offset investments under government's National Industrial Participation Programme (NIPP), it has been reluctant, or unable, to say why.

Oracle, on the other hand, is refusing to comment on the grounds that it is in a “quiet” period. This means that, per company policy, it is unable to answer any questions concerning financial results or other developments during the closed communication period. It has failed, however, to explain why it refuses to give details concerning a deal that dates back to as early as 2004.

It is known that Oracle had established two offset projects under NIPP - namely the iFactory Mobile Obsession and the e-Skills Academy, the latter of which is now defunct.

According to government, the objective of the NIPP is to “leverage economic benefits and to support the development of South African industry by effectively utilising the instrument of government procurement. This is not an incentive, but an obligation created when contracting with the government.”

The DTI states the programme applies to all government and parastatal purchases or lease contracts with an imported content equal to or exceeding $10 million. Suppliers to government will be subject to an industrial participation obligation of 30% of the imported content.

ITWeb has been unable to establish the value of the original procurement deal, or how many NIPP credits Oracle would have to earn as part of its offset projects. No references to the original deal seem to exist anywhere on the Internet, including the DTI and Oracle Web sites.

What's outstanding?

DTI deputy director-general Sipho Zikode confirms Oracle has accumulated R33 million worth of NIPP credits, from both the e-Skills Academy and iFactory Mobile Obsession projects.

But because the e-Skills Academy ceased to function in December and is currently in the final stages of liquidation, Oracle will no longer be able to earn NIPP credits through this project.

Zikode states that, in relation to the academy, Oracle will forgo any future sales credits the project would have generated.

“If NIPP credits accumulated were not sufficient to fulfil Oracle's NIPP obligation, Oracle would have to embark on a new project until the NIPP obligation is fulfilled,” he says. However, he fails to mention whether this is indeed the case and what Oracle's entire obligation is in terms of the NIPP.

“The DTI has and will continue to engage Oracle until the project is formally withdrawn from the NIP programme,” Zikode concludes.

Further attempts to get more information yielded nothing. A DTI spokesman claims government could be reluctant to speak about the procurement deal, due to non-disclosure agreements it may have signed with Oracle. He also attempted to side-step the issue, by saying the matter is sub judice, as the e-Skills Academy is being liquidated, but was unable to explain how this would apply to the original procurement deal, which should be public record.

Meanwhile, sources say Oracle's iFactory Mobile Obsession offset project could be floundering as well. Speculation is that the project - the development of a wireless technology-based software solution that enables systems applications to be used in handheld terminals - has run into financial trouble.

Insiders say the company has recently been unable to pay senior staff or its landlord. Oracle's initial involvement in this project was to invest R6.5 million in R&D and product development.