Information technology services provider EOH, responding to media reports in April about its irregular legacy contracts, said issues raised in the media reports are largely as a result of EOH’s transformation strategy, which has been systematically and regularly reported to all stakeholders.
The review and re-evaluation of certain historical contracts, called legacy contracts, resulted in EOH having to terminate and/or regularise certain contracts and business relationships. Some stakeholders may be adversely affected by these decisions and the resulting actions, EOH said in a statement on April 30.
“These decisions, taken in our quest to become an ethically sound and sustainable business, have not been taken lightly, but have been necessary in the context of our obligations as a listed entity and in balancing the interests of all stakeholders. These steps have been required to rectify and safeguard against the type of legacy irregularities that EOH previously experienced,” said EOH CEO Stephen van Coller.
On April 22, EOH employees stationed in the offices of the City of Johannesburg (CoJ) to provide critical and essential enterprise resource planning system SAP support services to the municipality, wrote an open letter to the EOH board and leadership team lamenting that they will not be part of a new team that will provide SAP support services to CoJ.
The employees were employed to render services in relation to a 12-month fixed-term support services agreement concluded between EOH Mthombo and the CoJ that expires at the end of April 2021.
“The original agreement was for three years’ worth of support services with CoJ. The initial contract came to an end in 2015. This work has been extended multiple times over the years, the latest of which, and the resultant conclusion of the Support Services Agreement, took place with effect from May 1, 2020, in accordance with Regulation 36 of the Municipal Finance Management Act (MFMA) Supply Chain Management Regulations,” EOH said.
“When the service was renewed with a new contract in April 2020, EOH notified the CoJ simultaneously that it needed to re-tender the services in terms of the relevant MFMA regulations.”
In February 2021, EOH, in an attempt to clarify the way forward, sent a written communication to CoJ reminding them of the pending expiry of the contract, the company added.
“EOH’s early notification to the city was also aimed at providing the affected employees with a fair opportunity to seek alternative employment if that was their preference. EOH has followed the stipulated Section 189 process in accordance with the relevant legislation as part of the contract termination process. This process has now been completed and EOH has complied with all its statutory and other legal obligations relating to the employees.”
This CoJ contract is one of three remaining irregular legacy contracts that EOH said would be wholly concluded by the end of this year.
“The EOH employees involved in this matter are part of the initial contracted support project for the City. EOH has no ability to determine the CoJ tender process, but, in an effort to assist the employees, EOH has engaged the CoJ regarding the urgency required for timeous resolution of the matter,” the company said.
Furthermore, the city has initiated a closed tender process in which EOH is not a participant.
“EOH empathises with the employees’ current position and will continue to assist with the transition in compliance with all contractual and labour regulations.”
EOH and the CoJ had a contract for the implementation and upgrade of the City’s SAP enterprise resource planning system, which was terminated at the beginning of this year. EOH is in the process of executing its post termination obligations and the CoJ and EOH are in the process of agreeing an exit plan.
In November 2020, EOH presented the CoJ with various options, some of which are still being explored with the city to find a mutually agreeable solution, the company added.
Meanwhile, on April 29, economic pressure group Transform RSA and several other entities laid charges of corruption and money laundering against financial service organisations FNB and FirstRand Bank owing to the banks providing services to EOH.
This action “has pulled EOH into a dispute between digital services company Ayo Technology Solutions and certain financial institutions", EOH said.
According to media reports on April 29, Ayo Technology Solutions faces the possibility of losing banking services provided by FNB.
“EOH has been transparent with all the banks and has further cooperated with the authorities, including the Judicial Commission of Enquiry, while also laying criminal charges against the perpetrators of wrongdoing who are no longer employed by the EOH group," the company said.
“As a group we remain committed to good corporate citizenship and governance while maintaining a zero-tolerance approach towards corruption.
“It is in line with this commitment that EOH provided input to the Judicial Commission of Enquiry regarding identified irregularities. EOH also reported concerns to the Directorate for Priority Crime Investigations and the Financial Intelligence Centre, prior to the Group being approached by the Special Investigating Unit, and further initiated action in order to recover losses caused by perpetrators of wrongdoing," Van Coller said.
“EOH today is premised on transparent, ethical business practices. Through our actions over the past two years, we have shown the strength of that commitment and that we will continue to follow the highest standards of governance, risk and compliance," he concluded.