GijimaAst puzzles analysts

Johannesburg, 11 Jul 2008

GijimaAst has reissued a cautionary announcement on the JSE news service that has market watchers puzzled whether the company is buying or selling.

The cautionary has been renewed three times since January.

Kaplan Equity Analysts MD Irnest Kaplan says GijimaAst is most likely buying. "When he took over the helm, Jonas Bogoshi said the company had gaps it needed to fill, which he decided to either grow organically or fill through acquisition."

Kaplan says the company may be interested in a networking company. "There is also a possibility that it is not even a listed company. It is more likely a small focused acquisition."

World Wide Worx MD Arthur Goldstuck says the often-renewed cautionary means it is "obviously a very large or a very complex negotiation".

Goldstuck says he is not sure whether the company is a buy or sell. "It is likely to be a major acquisition, whether it is GijimaAst being acquired or doing the acquiring.

"The share price is languishing, suggesting that investors have lost patience, but it is likely that if a major announcement does come soon, the price will leap. The reason people aren't buying it on speculation is that such long negotiations are not always a good sign: clearly there are major issues to be addressed; otherwise it would not be dragging on like this. In the end, if it does result in something, it points to consolidation in their sector of the market."

JSE rules prevent the company from commenting on the deal.

GijimaAst earlier this week finally inked what is said to be a R2.5 billion deal with the Department of Home Affairs to introduce new technology and business processes that will form the backbone of that department's turnaround programme. The deal, awarded to GijimaAst in October, has been dogged by controversy and delay.

Kaplan says the controversy is most likely the result of infighting. During the process of the deal, many people expressed concern that Bogoshi's three years with the State IT Agency (SITA) and close connections with many SITA executives gave GijimaAst an unfair advantage when competing for big government contracts.

A probe was also launched into the possibility of favouritism, which Kaplan says was instigated by current home affairs director-general Mavuso Msimang.

"Msimang has a fantastic industry reputation and has worked tirelessly to expose corruption in the department," says Kaplan. He suspects the infighting stems from those affected by his anti-corruption activities. "I have dealt with Robert Gumede, GijimaAst's executive chair, and Jonas. I have only the highest order of praise for the both of them. Neither of them can be suspected of foul play."