the g spot
CEO Stephen van Coller tackles EOH fallout
The rehabilitation of IT group EOH is an arduous task, and the process kicked up a gear with an ENS probe. The FM asked CEO Stephen van Coller: why not just lay it all out?
The rehabilitation of IT group EOH is an arduous task, and the process kicked up a gear with an ENS probe, key details of which were given to the market recently. The FM asked CEO Stephen van Coller: why not just lay it all out?
There have probably been 10 presentations over a five-month period. ENS is now building civil and criminal cases and we’re creating charge sheets against the different layers of people. You’ve got people who [engaged in wrongdoing], people who were directors who didn’t do [anything wrong] and nondirectors, but senior managers who knew [what was going on] but didn’t do [anything]. So there are three layers that I have to go through and make sure are dealt with properly, whether it’s disciplinary [measures], more training or prosecuting people. We’ve been through over a million e-mails. That’d be a 1,000-page report and I don’t really know what that achieves.
Accountability is crucial. What are you doing to reclaim the R1.2bn of suspicious payments made by EOH?
That will be under the civil claims, for sure. It looks like there’s a bunch of people who actually just stole from EOH and so it’s going to be how you go after that. [But] it’s quite difficult for me to follow the money — I’m not the bank. I can only guess from some of the e-mail traffic what happened, but I can’t prove it, and so this is the discussion we’re having with the FIC at the moment — can they help us subpoena some of the bank stuff. I can bet that a lot of that [R1.2bn] was spent on the high life and [will be] very difficult to recover. I’m more interested, to be frank, in getting accountability, because that creates a new culture. For the 99% of the staff who are honest people, [to] feel confident that if they see something untoward they can report it and something will be done. Eight people nearly brought down 11,000 people’s jobs.
Does accountability include going after the directors who quit when you announced the major findings, like Zunaid Mayet?
It happened on their watch, someone’s got to take responsibility for this. To be fair, Pumeza [Bam] and Zunaid [Mayet] were in the meetings and when they saw it they said there’s no way EOH can go forward with us as directors.
What are the central lessons other companies could learn from EOH’s experience?
There are some obvious things: segregation of duty; you can’t have a CFO and CEO who are all-powerful, because then they’re making decisions on reactions, rather than on process. There was one compliance person for the whole company, which was crazy, and there was no internal audit. Eventually it gets out of control. You can actually see it: it starts in 2013 ... and suddenly it starts scaling up, and interestingly at the end of 2017, when they dismantled their unit for the public sector and put big controls in, all of a sudden it just stops. The King governance code is there for a reason. It’s there to create segregation and responsibility of the board.
It felt at times that the market just got caught up in Asher Bohbot and John King’s sales pitch ...
Obviously it takes a special type of person to build a company like this, but it takes a different type of person to corporatise it. [Entrepreneurs] don’t want to lose control, but they sort of need to. There are like five things that if they’d done [then], we wouldn’t be in this situation today. For example: they did acquisitions using debt instead of equity, so there were noncash-generative acquisitions that had a p:e of 30. And as the company got bigger, they didn’t put in the controls that were needed to manage it. Suddenly you’re doing 10-15 tenders a week and you can’t look at every single one and make sure everything is perfect, so you start cutting corners. Cutting a corner becomes the new norm because you can’t keep up.
Is EOH’s business model as we knew it fundamentally flawed?
There’s nothing wrong with it, it’s got fantastic businesses. What is saving it is that it was quite federated. But you can’t operate with 270 legal entities, that’s exactly how corruption happens. It’s just all over the place. Their failing was in the way they acquired businesses: they bought them and put them on a two-year profit warrant or earn-out, which means you can’t touch the business for two years but you’ve got all the risk on how they’re managing it. Actually you want to buy these businesses and put them into a vertical division immediately, so that you can have the governance, and controls over them.
Can you do clean business with the government?
Absolutely. What is interesting is that they are well aware of the issues and new people coming in, like me, are cleaning up the shop.