EOH Holdings could soon be blacklisted by the State IT Agency (Sita) from doing business with government. This follows the public sector corruption scandals uncovered at the group in recent years.
EOH said that it has approached Sita about the developments. Its share price tanked almost 10% on Tuesday afternoon, to R6.50/share, after it published a statement to this effect on the JSE’s stock exchange news service.
The potential sanctions come despite determined moves by EOH and its CEO, Stephen van Coller, to clean up the rot at the IT services firm.
“EOH has to date been following the due process as set out by Sita and it is similar to other processes we have successfully completed with other stakeholders,” the group said in the statement to shareholders.
“We have made our representations and followed all the required guidelines in this regard. Sita must now follow due process and make its recommendations to national treasury.”
EOH has treated Sita “in the same transparent manner that it has engaged with all affected stakeholders during the ENSafrica forensic investigation”, it said. Steven Powell, who heads forensic investigations at ENSafrica (contracted by EOH to probe malfeasance in the group’s public sector business), “engaged actively with the Sita internal audit executive as well as the Sita governance risk & compliance executive” on several occasions in 2019 and 2020.
“In addition, correspondence was sent to the Sita caretaker, Luvuyo Keyise, on 5 March 2019 and again on 20 April 2021 explaining the extensive remediation and governance enhancement work implemented within EOH by the new EOH board and management.
“The receipt of these communications were acknowledged. EOH anticipated this action two years ago when the scandal broke and was the very reason why EOH approached Sita with the information just weeks after the start of the ENSafrica investigation in March 2019, and we have continued to keep them updated.
“EOH was therefore surprised to receive the letter from the Sita on 21 June 2021 (although dated 4 June 2021), which intimated that Sita would consider restricting EOH from doing business with the public sector based on Nexia SAB&T’s forensic audit report to parliament on the department of home affairs’ Abis project.”
- It gave gave its full co-operation to home affairs and the Nexia SAB&T forensic investigation. ENSafrica shared the e-mails accompanying Sita’s letter with Nexia SAB&T on behalf of EOH. These shared e-mails are the basis of Sita’s letter to EOH.
- ENSafrica also provided Sita with a compelling independent letter outlining why the new leadership of EOH should not be sanctioned. The letter outlined EOH’s remedial actions, which included the departure of and institution of criminal and civil proceedings against the previous EOH management and alleged perpetrators of wrongdoing.
Should Sita recommend that EOH should be restricted from doing business with the public sector for a period of time, the group said it will again make representations that:
- This is an issue that was perpetrated by the old management of EOH, all of whom have been “exited”.
- EOH and ENSafrica have suggested to Sita they should recommend that the old EOH management be blacklisted and not the new leadership.
- Sita’s only mandate with regards to the home affairs’ Abis award was that of a procurement agent.
- EOH’s pricing for the home affairs project was competitive as it was R200-million less than the next highest bidder.
- EOH substantially performed and delivered on 51 out of 60 milestones of the Abis project, before assigning the agreement to another entity at the request of home affairs and with the approval of national treasury. The agreement was assigned on the same terms and conditions that it was originally awarded in terms of the budget.
“It is also important to note that our legal counsel has advised that Sita can only recommend restricting EOH from doing business with the public sector, and this has been confirmed by national treasury. Should Sita recommend said restriction to national treasury, EOH has the right to representation as well as taking the matter on appeal. Given what EOH has achieved in the past two years, our legal counsel believes that we have a very strong case against any blacklisting.”
“Our current management team and board of directors have spent a significant amount of time rebuilding EOH’s credibility, driving transparency in the business, and ensuring the accuracy and reliability of the financial information disclosed to stakeholders, while continuing to resolve the remaining inherited legacy issues,” said CEO Stephen van Coller.
TechCentral last week broke the news that EOH was suing former top managers – including co-founder and former CEO Asher Bohbot – for R6.4 billion in damages over the corruption and governance failures that took place while they were leading the group.
Apart from Bohbot, who is being sued for almost R1.7 billion, EOH is also going after former chief financial officer John King (R1.7 billion), former public sector head Jehan Mackay (R1.5 billion) and former head of EOH International Ebrahim Laher (R1.6 billion).
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This article was first published on TechCentral here.