JSE-listed EOH has reached a R177 million settlement agreement with the Special Investigating Unit (SIU) that the technology services firm will pay back for its dodgy tenders with the Department of Water and Sanitation(DWS).
In August last year, the SIU launched an investigation into tenders worth R470 million issued to the company by the DWS.
The investigation focused on the procurement, contracting and implementation of four IT contracts awarded by the department to the technology group and its subsidiaries.
The probe by the state came on the back of increased efforts by the Stephen van Coller-led management’s efforts to rehabilitate the company, which for years had been linked to impropriety.
EOH had set itself a November deadline to settle the issue with the state. The company had initially made a settlement fee of R52 million, but the SIU rebuffed the offer, demanding R236 million instead.
EOH is the second IT company to face a hefty penalty from the SIU over tainted public sector contracts with the water affairs department.
In September, German software firm SAP agreed to settle its long-running dispute with the department, paying a further R82 million to put the matter to bed.
SAP was initially ordered to pay the department R263 million, with the remainder of the amount to be determined at a later stage.
In a statement today, the technology services firm says the new EOH board and management has, over the last four years since its appointment, taken its investigation into allegations of corruption and irregularities concerning it seriously.
In this regard, it adds, the EOH Group has transparently and publicly implemented robust actions to identify wrongdoings and has provided extensive co-operation with law enforcement and regulatory agencies, including the SIU.
Says the firm: “Upon learning, in February 2019, of certain transgressions of several previous employees and board members of EOH between 2015 and 2017, the new board and management of EOH instructed independent law firm ENSafrica to significantly extend the scope of the forensic investigation into the suspected wrongdoing covering a period from 2012 to 2018.”
From inception of the ENSafrica forensics investigation, EOH says it has transparently and proactively reported wrongdoing to the authorities, having submitted eight section 34 reports to the SIU between May 2019 and June 2020, and made detailed submissions to National Treasury and the State Information Technology Agency, as well as the Financial Intelligence Centre.
On 31 May 2019, it adds, EOH reported the wrongdoing to National Treasury and proposed to compensate the state for identified irregularities regarding the DWS contract.
“As part of this process, and after having concluded the full detailed analysis, EOH proactively made contact with the SIU in July 2020 to discuss, firstly, what the analysis uncovered; secondly, what work was done for value; and thirdly, to discuss compensation for aspects of the contract where no value was derived in respect of the DWS contract.”
EOH notes that on 5 August 2021, there was a government announcement regarding the SIU’s proclamation for an investigation focusing on the procurement of, or contracting and implementation of four IT contracts that were awarded between 2012 and 2017 by the DWS to EOH Mthombo, (a wholly-owned subsidiary of EOH), to the value of R474 million.
According to the firm, EOH and the SIU engaged over several meetings and discussions with a view to unpacking the details of the analysis and as outlined above, to agree a quantum for the portion of the contract where EOH Mthombo received undue benefit for the aforementioned DWS contract.
After further engagements, the SIU, DWS and EOH reached agreement on an amount which all parties believed to be fair and equitable. The terms of the agreement are:
• An initial upfront payment of R65 million which relates to duplicated software licences which will be refunded; and
• The remainder of an amount of R112 million to be paid over a period of 36 months commencing in January 2023.
As disclosed in previous communications, SENS and results announcements, EOH has fully provided for this settlement in its financial accounts and confirms it will have no impact on the company’s income statement, says the firm.
Says CEO Van Coller: “The EOH board and executive leadership express their gratitude to the SIU and DWS for their professional engagement and in working with EOH to reach a settlement agreement, and in so doing, concluding the legacy contract issues related to the ENSafrica forensic investigation and the DWS matter in particular.”
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