Treasury ‘ignored watchdog guidance’ in multibillion-rand Vodacom tender
The commission is investigating Vodacom’s abuse of dominance in relation to the contract
The Competition Commission said it advised the Treasury against awarding a multibillion-rand tender to Vodacom as the exclusive deal would distort competition and further entrench Vodacom’s position.
But the Treasury went on to award the contract in September 2016 despite the advice. The contract, estimated at R5bn over four years, is for the supply of enterprise voice, data and all mobility services.
The commission said on Wednesday it was investigating Vodacom’s abuse of dominance in relation to the contract.
The Treasury sought advice from the commission on competition issues that could arise from the deal before awarding it to Vodacom.
The commission said the Treasury had requested clarity on whether the four-year period for the contract was acceptable in relation to the competition regulations.
The commission’s spokesman, Sipho Ngwema, said the Treasury had "insisted that we confine the advice to the duration of the contract. "We disagreed with this confinement and elected to give a comprehensive opinion. Essentially, we advised the contract raised competition concerns as it would distort competition. We advised against it."
Treasury spokesman Mayihlome Tshwete said on Thursday, the "advice, as explained by the commission was nonbinding, the objective by government was to use economies of scale for cost reduction, even then departments were allowed to review their decisions … ultimately, Treasury was in discussion with the commission prior to awarding the contract and will continue to co-operate with the investigation now".
According to an e-mail seen by the Business Day sent in July 2016 by a Treasury official to the commission seeking advice in terms of the "probable impact on competition" the contract might have in the industry, the Treasury said it was of the view that its "spend of R1bn will not significantly impact a market estimated at a value of R200bn".
In response, the commission said the request would require a "comprehensive analysis of the competitive dynamics in relation to the different customer segments in which the mobile network operators may potentially compete".
"In addition, such an analysis would require an assessment of the extent to which the competitive dynamics in these customer segments may have implications for competition in the broader mobile telephony market."
The Treasury said on Wednesday it was surprised by the commission’s decision.
It said "based on the value proposition, the award was made to a single bidder in the absence of other solid value propositions that met with the tender requirements".
The commission said it had reasonable grounds to suspect the exclusive contract may constitute an exclusionary abuse of dominance by Vodacom in contravention of the Competition Act. According to the commission, there are 20 government departments that will be subjected to the new Vodacom contract. Other departments, state-owned entities and municipalities will be incentivised to adopt the new plan.