One has to wonder if Eileen Wilton, the eminently likeable CEO of Gijima, rues the day she joined the company as chief operating officer in June 2012.
Within months of her taking on the role, Gijima’s then-CEO, Jonas Bogoshi, stepped aside and the full picture of just how much trouble the company was in started to become clear.
Wilton, who had joined Gijima from Old Mutual, where she was chief information officer, was asked to be interim CEO by the board. She later took on the role on a permanent basis.
It’s been a rough ride for Wilton.
In that time, the company has had to lead the business through two rights offers — the most recent of which shareholders are ruminating over right now — in effort to stave off financial collapse. In effect, she’s fighting to save the jobs of the 2 500 people Gijima employs.
Unsurprisingly, the share price has been in a downward spiral in the past few years. But on Wednesday morning this week, it went into freefall, collapsing by 89% to 1c/share shortly after markets opened, the lowest in can go technically, as investors bailed out.
Chief financial officer Ernst Röth downplays a suggestion that panic selling caused Wednesday’s fall. “If it had been panic selling, it would have been on heavy volumes; it wasn’t. If it was a panic, the share would have settled below 5c; it didn’t.”
Indeed, the share price quickly recovered during the trading day, but it remains under considerable pressure as shareholders deliberate over the rights offer.
On Thursday afternoon, after the share had recovered from rock bottom, the counter was still trading down by 90% year on year. Since 2010, the shares have fallen by more than 99%.
The company could still go the way of Faritec, the last large JSE-listed IT company that hit the skids, but Wilton is confident it won’t. Indeed, she seems confident Gijima could soon have put the worst behind it. Analysts seem less convinced, arguing that management could be underestimating just how much pain there could still be ahead.
But there are some reasons to be positive. Firstly, the latest rights offer is being fully underwritten by Guma Group, Gijima’s largest shareholder, which holds about 47% of the equity. Guma is owned and controlled by the controversial businessman Robert Gumede, who chairs Gijima’s board. Gumede can’t afford for Gijima to fail, but the fact that he’s underwriting the latest rights offer, to the tune of the full R100m sought, means he’s at least somewhat confident that it’s not going down the toilet. And other institutional investors have agreed to back the rights offer — of course, they may have little other choice.
Gijima’s most recent financial results are also looking quite a bit better, although they show it is far from out of the woods.
The company has also reached an agreement with its creditors. At the end of September, it warned it had failed to comply with financial covenants related to borrowings of R213m. Its auditors, KPMG, warned it could go out of business. But it has entered into a new agreement with financiers in terms of which the repayment terms of loans has been extended, which goes a long way to resolving its working capital challenges.
Gijima’s problems with government contracts raise worrying questions, though. Its disastrous deal with the home affairs department has been well documented.
More recently, it’s been in the headlines over Project Vulindlela, a major IT project undertaken by the department of rural development & land reform that has attracted the attention of the Special Investigating Unit. Gijima has strenuously denied involvement in any fraudulent activity. Indeed, it said earlier this year that its executive team “has at no time been implicated in any fraud or corruption activities at any level”.
“It is most unfortunate that because [Gumede] is a political donor, as are most corporate companies around the world, that he and Gijima should be smeared with any suspicion.”
Wilton says she has a plan to resolve the Project Vulindlela problem, but declines to say what it is. “I’m comfortably the Vulindlela issue is going to be resolved.”
Indeed, Vulindlela is arguably now the biggest headache Wilton is facing. If she tackles it successfully, which she says she will, Gijima could still pull itself back from the brink.
- Duncan McLeod is editor of TechCentral. Find him on Twitter
- This column was first published in the Sunday Times
