Telkom insists its deal with Bain is legit
The appointment of US-based consultants was ‘appropriately handled’ and ‘standard practice’
Telkom says it did not break any rules when it awarded an advisory contract to scandal-plagued consulting firm Bain & Co in 2013.
Bloomberg reported in 2014 that Bain secured the R91m contract without the fixed-line operator following an open bidding process. The Boston-based management consulting firm received the contract soon after Sipho Maseko took over as Telkom CEO.
The scope of work included advice on Telkom’s broadband and mobile strategies.
Telkom told Business Day this week it was "satisfied that the appointment of Bain in 2013 … was appropriately handled at the time in terms of the company’s delegation of authority and any other procedures that may have applied".
"As is standard practice, companies consider management consultancy services for various reasons including objectivity and as change catalysts…. Given the rate of change in the telecommunications sector, Telkom would consider the use of management consultancy services in the future," it said.
As a listed company with about 40% held by the government, Telkom was in a relatively unique position when it came to tendering, given that it contended with conflicting rules under JSE regulations and the Public Finance Management Act, a person close to the company said.
Telkom held discussions with government ministries aimed at resolving this issue and the finance minister at the time, Pravin Gordhan, granted it exemptions from certain provisions of the act so that it could comply with the JSE rules, the person said.
In its 2014 report, Bloomberg said Maseko regularly visited Bain’s Johannesburg offices in the 10-month period between leaving his previous employer, Vodacom, and joining Telkom.
While he also met McKinsey, Boston Consulting, Accenture and Delta Partners, Maseko did not seek formal proposals from other consultancies, people with knowledge of the matter told the news agency at the time.
Bain is one of several multinationals embroiled in SA’s state capture narrative. The company was contracted, allegedly through an irregular tender process, to overhaul the structure of the SA Revenue Service (Sars) under suspended commissioner Tom Moyane when he took over in 2014.
The commission of inquiry into governance and administration at Sars heard evidence that the Bain-led restructuring at Sars neutralised key units in the revenue service, such as enforcement, the large-business centre, and the litigation and compliance sections.
The consultancy conducted only 33 interviews over six days to conclude the work on restructuring the complex tax agency, which took two decades to build from scratch.
Those interviewed were handpicked by Moyane. In a submission to the inquiry, the Treasury said that Bain was awarded the Sars contract irregularly and the process was littered with red flags.
Bain has said it will pay back the R164m it earned from Sars. Its managing partner, Vittorio Massone, also stepped down as the head of Bain’s SA unit.