Ramaphosa orders wide-ranging probe into Telkom

Directed the SIU to investigate ‘serious maladministration in connection with the affairs of Telkom’ as well as improper or unlawful conduct by employees or agents of the company.
Image: Bloomberg

President Cyril Ramaphosa has issued a proclamation directing the Special Investing Unit (SIU) to probe various dealings that took place at Telkom going as far back as June 2006, among them an aborted foray into Nigeria that is estimated to have cost the company more than R10 billion.

The president has directed the SIU to investigate “serious maladministration in connection with the affairs of Telkom” as well as improper or unlawful conduct by employees or agents of the company. Among other things, the SIU must investigate the unlawful appropriation of expenditure of public money.

The president said the SIU must investigate:

  • Maladministration in the affairs of Telkom in relate to the sale or disposal of Multi-Links Telecommunications, a company it acquired in Nigeria in 2006 that failed, and iWayAfrica and Africa Online Mauritius.
  • The procurement of telegraph services (telex and telegrams);
  • Advisory services in respect of the broadband and mobile strategy of Telkom and payment made in a manner that was not fair, equitable, transparent or cost-effective, or contrary to applicable legislation or national treasury or Telkom rules.

It’s not clear what prompted the president to order the investigation now, many years after the fact.

Telkom’s Nigerian foray proved to be a disastrous attempt by the company to enter the lucrative West African market at a time when it was seen as the next big opportunity in telecommunications on the continent.

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It was widely reported at the time that the company erred by buying a CDMA operator in a market dominated by GSM technology. The decision to acquire Multi-Links was made by former Telkom CEO Papi Molotsane, who was later axed by the board..

Former Telkom CEO Nombulelo Moholi admitted in June 2012 that the telecoms group had made a hash of its investments elsewhere in Africa. “A lot of the investments we made we shouldn’t have made,” she said then.

The group’s investment in Multi-Links turned into a financial disaster. It has been estimated that the telecoms operator lost at least R10 billion through that investment, before being forced to cut its losses and run.

“Wrong decisions were taken. But Telkom continued to pump money into an area it shouldn’t have. It has happened and we have taken the beating from it,” she said, referring to Telkom’s share price at the time, which had collapsed.

Former communications minister Roy Padayachie told parliament a year earlier, in July 2011, that the the rapid expansion of the Multi-Links network that had to be implemented could not be supported by the underdeveloped distribution channels, thus affecting sales revenue.

Sapa quoted Padayachie at the time as saying that some contracts were entered into that did not deliver the anticipated benefits and incurred significant operating expenses.

Multi-Links did not have sufficient market share, pricing power or strategic and operational advantages to be successful in a tight economic environment, Padayachie told parliament.

Multi-Links reported an operating loss of R522 million for the financial year ended 31 March 2009 and R1 billion for the year ended 31 March 2010. Telkom wrote down goodwill and assets of R5.8 billion.

“Telkom underestimated the highly competitive nature of the Nigerian telecoms market and also failed to build and manage appropriate distribution channels,” the former minister added.

Former Telkom CEO Jeffrey Hedberg took the decision in 2010 to pull the plug on Multi-Links, a decision taken forward by Moholi, who succeeded him.

Telegraph services

Meanwhile, Ramaphosa’s instruction to the SIU to probe tenders related to telegraph services likely relates to a disputed tender first issued in 2007.

Phuthuma Networks, led by businessman Ed Scott, took Telkom to court and various regulatory bodies over the disputed tender, published in November 2007, for the outsourcing of Telkom’s telex services, including support for ship-to-shore telex. This tender was cancelled in June 2009, Telkom claimed at the time, after it discovered the tendering process was a “mess”.

Read: Telkom CEO Sipho Maseko to step down earlier than planned

But Scott claimed that another company that bid for the tender, Network Telex, had begun providing telex services for Telkom without the tender having been awarded. Scott claimed this was in breach of the law, as the service had to be provided by Telkom or outsourced to a third-party provider through a formal tender process.

Duncan McLeod is Editor of TechCentral on which this article was first published here.

(c) 2022 NewsCentral Media

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Ja no well fine !!
All the investigations and probes and reports in the world and no offenders in jail !!

Well with all these investigations that are supposedly happening can someone advise; where all the competent investigators will come from?

Just a quick tidy up!
Well with all these investigations that are supposedly happening can someone advise; where will all the competent investigators come from?

End of comments.

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