Technology company EOH, which has been fighting to rebuild its reputation after a corporate governance scandal with government clients, intends to grow its public sector business, the group’s second-largest revenue earner.
EOH’s management team has been working hard to salvage the company’s reputation after allegations of malpractice and tender irregularities. It hired law firm ENSafrica to investigate the allegations. The probe found R1.2bn in suspicious transactions, mostly involving public sector contracts, which ensnared the group in the state capture project.
The group also had to deal with a mountain of debt accumulated under its previous leadership, which focused on acquisitions to expand the business, especially in the public sector.
Servicing the government has been an important part of EOH’s business for some time, accounting for a fifth of the group’s revenues.
Despite the company grappling with the controversies involving its public sector business, EOH sees opportunities for growth, group CEO Stephen van Coller told Business Day in an interview.
Digitisation
He said the government has been doing much good work behind the scenes.
“If you have a look at what home affairs have done with IDs and passports, trying to consolidate that with what Sars have done so we can get a single database for all citizens, they’re doing quite a good job.… This whole digitisation programme is quite exciting,” Van Coller said.
There are opportunities to offer services such as cloud computing, which could help government departments to be more efficient and save costs while increasing cybersecurity.
The government has been moving queries as well as rates, electricity and water services online, he said. Smart cities are becoming a reality, with Cape Town now using technology to monitor water systems to manage pressure and leaks.
“So there’s a lot going on. You just have to pick something that’s in your area of competence. EOH being one of the largest ICT providers in SA, we’ve got a role to play,” Van Coller said.
Having worked to turn the business around over the past two years, EOH is starting to win new business from private and public sector players as confidence is restored in the company.
Regarding the government, the company was recently awarded a R49m, three-year IT contract as well as a R273m provincial government app development project for a year.
Van Coller said that this time around the company is working carefully to ensure that all its contracts are above board to avoid issues that might land it in more hot water.
EOH was recently ordered to 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 to the value of R250m.
Some interference
Having started its investigations in July 2019, the SIU said it had uncovered irregularities relating to the procurement process and overpricing of Microsoft licences amounting to more than R40m. EOH is negotiating with the SIU about contracts with the department of water & sanitation, anticipated for settlement in the second half of 2021.
“The problem with these problematic or legacy contracts is that they weren’t acquired under, let’s say, ‘normal circumstances’. There was some interference,” said Van Coller.
“In most cases from what I can see — except for two: the Microsoft licence contracts with [the department of defence] and water — our bids were reasonable. In one case we were significantly the cheapest.”
He said issues arise if contracts are not awarded in the normal way because the contracts themselves can be vague and opaque.
“That’s created problems for us largely because when you want to do change orders — where the department or customers want things done differently — if you haven’t put that properly into your contract, then you’re just relying on goodwill.
“The people who did those contracts at EOH have been exited, and we’re finding that in most instances people who signed the contracts also aren’t there.”
Without the people who agreed to the terms, it is difficult to amend, fix or continue with the arrangement, said Van Coller.
“So when you want to move forward, it becomes a fight because the contract doesn’t really give guidance. The customer wants it for free and you want to be paid, so it becomes an argument.”
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