Technology firm EOH will pay R40m to the government after an investigation by the Special Investigating Unit (SIU) into its contracts with the department of defence.
The SIU — an independent statutory body with a mandate to investigate allegations of corruption, malpractice and maladministration in government departments, municipalities and state owned entities — has been conducting investigations into Microsoft Software licence procurement contracts awarded by the department to EOH worth R250m.
On Wednesday, the SIU, which started its investigations in July 2019, said it has uncovered irregularities relating to the procurement process and also overpricing of Microsoft licenses amounting to more than R40m.
“The SIU found that the contract entered into was irregular,” the unit said.
As a result EOH has agreed to pay back the money over a period of three years with interest.
EOH’s management team has had to try to salvage the company’s reputation, after allegations of malpractice and tender irregularities. The group also had to deal with a mountain of debt accumulated under its previous leadership which was focused on acquisitions to expand the business especially in the public sector. It hired law firm ENSafrica to investigate the allegations.
The probe found R1.2bn worth of suspicious transactions, mostly involving public sector contracts, which ensnared the group in the state capture project.
When presenting EOH's interim earnings report last week, CEO Stephen van Coller told shareholders “with respect to the overbilling uncovered in the ENSafrica investigation, EOH has settled with the SIU on the department of defence contracts and has begun repayment”.
The final negotiations with the SIU on department of water & sanitation contracts are under way and it is anticipated that settlement will take place in the second half of 2021, he said. “This will bring to a conclusion the overbilling issues.”
The SIU says it will institute civil proceedings in the Special Tribunal to cancel the irregular contract and determine if “any further monies that the department of defence may have lost and recover such monies lost to be paid back to the department of defence”.
The defence department has its own set of sanctions as a result of the investigation.
The SIU said the department of defence officials involved and implicated in the irregularities have been identified and it will provide the department with evidence to institute disciplinary action.
The investigation also uncovered evidence pointing to criminal action and will be referred to the National Prosecuting Authority and the Directorate for Priority Crimes Investigation “for further attention”.
Despite EOH having to pay back the money as stated, the SIU says the company could face further sanctions or fines as the investigation was ongoing.
The signing or acceptance of an Acknowledgment of Debt by EOH “does not mean that EOH is exonerated from paying any further amounts due to the department of defence that may be subsequently uncovered by the ongoing investigation of SIU”, said the unit.
In addition, the SIU said it is also investigating an allegation that EOH was contractually obligated to provide about 20,000 Microsoft licences to the department of defence but only provided just over 15,000.
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