ROB ROSE: Telkom’s short straw
For reasons yet to be properly explained, Telkom froze payments to a small Pretoria supplier — and the owner sold his home to stay afloat
If 2018 has brought home one brutal truth, it’s that the behavioural gap between the private sector and public sector isn’t as vast as people used to think. Corruption? Sure, you can find that in Nkandla, but you can just as easily find it in Steinhoff’s accounts. Lying liars? Again, you can pick Malusi Gigaba or Bathabile Dlamini, or you could look at the KPMG accountants who "audited" VBS Mutual Bank.
Another charge is routinely levelled at the government: refusing to pay what it owes, and stomping on small businesses in the process.
Again, it isn’t just the government doing this. Take Telkom, which, court papers allege, folded its arms and refused to pay the final chunk of a R41.2m contract it struck with Pretoria business owner Nico Oosthuizen. Telkom apparently still owes more than R6m.
Oosthuizen has been around the block, having begun his career 48 years ago as a technical support engineer at Control Data Corp. But his fortunes took a turn for the worse in July 2016, when his company NetXcom ICT Solutions did a deal with Telkom to provide hardware and software to manage bandwidth use. The SA Police Service (SAPS) needed the tech, so it asked Telkom, which subcontracted to NetXcom.
For a while, all went well. NetXcom provided the service, and Telkom paid up. Then the cheques dried up. Oosthuizen’s lawyers wrote to Telkom, asking what had happened. But, they say, Telkom ignored them.
The failure to pay in full was a blow to Oosthuizen, whose business took a dive. "I had to sell my house, as well as a property I owned at the Vaal Dam, to keep the company afloat. When you get a big opportunity like this, it affects you badly when they don’t pay."
Noma Faku, Telkom’s spokesperson, says that as a matter of principle the company "does not withhold payment to its vendors" and even has preferential payment terms for small suppliers. But Faku says last year Telkom conducted a "supplier review", which led to "certain actions" including "the withholding of payments where vendors were suspected to be in breach of contractual or legal provisions".
It’s not as if Telkom did anything — it subcontracted the actual work and added on a 37% mark-up
Quite what Telkom is saying, she didn’t clarify. Asked about the NetXcom case, Faku said she "is not in a position to respond" given the legal action.
But there is another curious dimension to this story. Within months of Oosthuizen’s company being appointed, Telkom hired another company called AppCentrix to provide similar services. As Daily Maverick put it a few weeks ago, the R497m contract awarded to AppCentrix was "opaque and apparently convoluted" and, rather alarmingly, "did not go out to tender" as it should have. Bloomberg reported that this meant Telkom was billing the police "for two contracts that cover virtually the same work".
AppCentrix CEO Graeme Allcock denies this: "I find it quite funny. What we do is not related in any form or fashion to what the other subcontractors do."
And he says that when it comes to AppCentrix’s contract with Telkom, everything was above board.
Either way, the Hawks are now investigating a whole range of Telkom projects, including the AppCentrix deal. Allcock welcomes this probe: "We’re very excited to have this investigation happen, because we’re a small company and we’ve been dragged through the mud on this."
So did Telkom, alerted to anomalies, freeze up and cut payments to all suppliers, damn the consequences?
Perhaps. But what infuriates Oosthuizen most is that Telkom has been paid for the work by the police, yet has not paid this money over to the subcontractors. "It’s not as if Telkom did anything anyway. It subcontracted the actual work, invoiced the SAPS every month and added on a 37% mark-up," he says.
The courts haven’t been much help either. Oosthuizen launched his legal action against Telkom in January, but now it is only due to be heard in the high court in Pretoria in January 2020.
You could argue that it’s understandable that Telkom, as a clunky former state-owned monopoly, is prone to bureaucratic tendencies. It is still 40.5% owned by the government, after all. But under CEO Sipho Maseko it has shown a desire to compete in the real commercial world. If so, it needs to do much, much better.
Not many small companies can afford to absorb the losses when a blundering corporation decides it won’t pay. For Oosthuizen, it’s also a matter of principle. "Somebody else would have thrown in the towel a long time ago, but I’m not willing to. If I have to live on the beach to make this case happen, I’ll live on the beach. Telkom has to pay for this," he says.