BEE withdrawal kills academy

Johannesburg, 04 Dec 2008

The Oracle-backed e-Skills Academy collapsed due to its BEE partner pulling the rug from under its feet, and employees of the academy have been left in the lurch.

ITWeb yesterday broke the news that the academy, an initiative conceived at the Presidential International Advisory Council on the Information Society and Development, in August last year, shut its doors after less than a year of operation.

Former Oracle executive and e-Skills Academy CEO Dan Ellappa this morning revealed that, after a 12-month involvement with a BEE partner, the empowerment consortium pulled out, unwilling to fulfil the requirements to secure funding for the academy.

“The BEE partner approached several financial institutions for the funding and everything was on track. However, it then decided to pull out and we had to close the academy.”

A letter sent by the e-Skills Academy board of directors to employees and stakeholders explains the academy had to cease trading, “as it is unable to meet its financial obligations”.

The academy closed its doors last Thursday, but Ellappa says all the students, who had already registered for courses, had been accommodated by being transferred to ICT training services provider Torque-IT. “We have met all our obligations to our students.”

No pay

However, academy employees were told to vacate the premises and advised they would not receive any remuneration for December.

A former academy employee, who does not wish to be named, claims an Oracle executive informed staff last week that the academy was in “liquidation mode”, and liquidators would be appointed during last week.

“Up to now, no liquidators were appointed and Oracle is refusing to issue a letter confirming we lost our jobs; this is making our life difficult and we can't register to receive UIF payments.”

Oracle would not comment, as the company is in its annual “quiet” period and thus cannot make any public statements.

“Well, the staff had to be released and the company does not have the finances to pay salaries. There's not much that one can do,” Ellappa says.

A source close to the academy revealed that the sticking point, which led to the academy's demise, was a loan from the Industrial Development Corporation. This loan was granted to the Makeda Consortium, on condition that consortium shareholders sign personal surety for the loan.

“It appears the consortium was unwilling to do this and the deal fell through,” says the source. Attempts to secure other investment partners proved unsuccessful.

Seeking new investor

At start-up, in January, the academy was 40% funded by Oracle, which put R10 million towards the initiative, while another 45% (a further R13 million) was supposed to be funded by an empowerment partner. This money was needed to fund the first year of operations.

According to the letter from the academy's directors: “Majority ownership by a BEE investor was set as a condition for the establishment of the academy when the organisation was launched as an IT training and skills development vehicle to support the objectives of the Presidential International Advisory Council on Information Society and Development.

“The decision [to cease operating] has been prompted by the inability to secure an appropriate level of investment from a suitably qualified black economic empowerment partner.”

However, Ellappa is confident the academy can be reopened, as soon as a suitable investor is found. At this stage, he says, the BEE requirement does not apply. “It's about an investor. The BEE requirements are not important right now, we are just seeking someone to come on board.”

Regardless of the closure, Ellappa describes the academy's achievements as “awesome”. “It is a crying shame that the academy had to close down. We managed to train and place some 250 unemployed youths during the time the academy was operational.”

* Did too much emphasis on BEE ruin a good initiative? Give us your opinion via our feedback facility.