Hearing continues into R600m tender scandal

By Damaria Senne for Telkom
Johannesburg, 11 Jul 2006

An investigation held under Section 417 of the Companies Act into Telkom`s awarding of a tender to GijimaAst for the manufacturing of telephone smart cards, continues today before a commission of enquiry.

Robert Gumede, executive deputy chairman of GijimaAst, is expected to give testimony about the circumstances surrounding the tender that was awarded to his company in 2002.

The contract is estimated to be worth some R600 million.

The investigation, which forms part of a bankruptcy hearing into the affairs of Applied Card Technologies (ACT), was requested by former ACT CEO John Sterenborg.

He alleged the tender was unlawfully diverted from ACT to GijimaAst, which owned a 26% stake in ACT at the time. It is alleged that GijimaAst was not pre-qualified to bid at the time.

<B>Sequence of events</B>

August 2000 - Gijima purchases 26% of ACT for R30 million.
August 2001 - Gijima purchases remaining 74% of ACT
August 2001 - ACT served with liquidation papers from Brait Merchant Bank (for R17 million debt)
October 2001 - ACT applies for pre-qualification for Telkom smart card tender
November 2001 - ACT is provisionally liquidated
February 2002 - Final liquidation of ACT
February 2002 - Telkom tender for smart card supply tender opens
March 2002 - Telkom`s tender closes

Gumede earlier said there was never a possibility that ACT could have won the Telkom smart card contract, pointing out that ACT was finally liquidated in February 2002, while the Telkom tender closed at the end of March 2002.

In addition, ACT did not have the technical know-how to do a complete end-to-end production of telephone smart cards, he claimed. Cards would have had to be shipped to an international partner to be made "intelligent and operational", he said.

Gumede`s position is supported by Nazir Wehbi, who was contracts manager at Cell C at the time. He testified before a commission of enquiry in 2003 that when Cell C sought to contract SIM card manufacturers at the launch of the company, ACT was eliminated at the beginning due to its technical short-comings.

Telkom mum

Other parties who were summoned to testify at earlier hearings before the commissioner were Telkom chairman Nomasizi Mtshotshisa and CEO Papi Molotsane. The fixed-line operator has, however, refused to comment on the matter.

However, in 2003, Eunice Mosomane, who was a Telkom sourcing consultant at the time of the tender, said even though ACT was initially short-listed, it could not be awarded the contract while it was being liquidated.

Thabo Petje, Telkom`s head of corporate affairs, said GijimaAst was allowed to tender because ACT came in as a subsidiary of GijimaAst right at the beginning.

Related story:
Telkom mum on phone card tender summons