Eighteen months after President Cyril Ramaphosa ordered a wide-ranging probe into alleged corruption at Telkom, the high court has set the proclamation aside.

Ramaphosa issued a proclamation on 25 January 2022 in which he directed the Special Investigating Unit (SIU) to probe various dealings that took place at Telkom going as far back as June 2006. This included the partially state-owned operator’s aborted foray into Nigeria, which is estimated to have cost the company more than R10-billion.

Now the probe looks unlikely to proceed after the high court in Pretoria set aside the proclamation after Telkom took the matter on review.

“The allegations in the proclamation had already been addressed by the company through Telkom’s corporate governance processes and the outcomes are of public record,” said group CEO Serame Taukobong in a statement on Thursday.

The company said it approached the court “because it is of the view that left unchallenged, the proclamation would set a dangerous precedence on the role of the state in private enterprise”. The court found the decision to issue the proclamation was “unconstitutional, invalid and of no force or effect”.

“Telkom consistently upholds the principles of good corporate governance. It is unfortunate that Telkom needed to approach the courts on this matter, and we hope that this judgment brings it to finality,” Taukobong said.

Ramaphosa had directed the SIU to investigate “serious maladministration in connection with the affairs of Telkom” as well as improper or unlawful conduct by employees or agents of the company. Among other things, the SIU was asked to investigate the unlawful appropriation of expenditure of public money. Read the president’s proclamation (PDF).

‘Maladministration’

The president asked the SIU to investigate:

Maladministration in the affairs of Telkom in relation to the sale or disposal of Multi-Links Telecommunications, a company it acquired in Nigeria in 2006 that subsequently failed, and iWayAfrica and Africa Online Mauritius;
The procurement of telegraph services (telex and telegrams); and
Advisory services in respect of the broadband and mobile strategy of Telkom and payment made in a manner that was not fair, equitable, transparent or cost-effective, or contrary to applicable legislation or national treasury or Telkom rules.

It was not clear at the time what prompted the president to order the investigation, many years after the fact. However, it came at a time when tensions were running high between government and Telkom over the licensing of radio frequency spectrum.

Telkom’s Nigerian foray proved to be a disastrous attempt by the company to enter the lucrative West African market at a time when it was seen as the next big opportunity in telecoms on the continent.

It was widely reported at the time that the company erred in buying a CDMA operator in a market dominated by GSM technology. The decision to acquire Multi-Links was made by former Telkom CEO Papi Molotsane, who was later axed by the board.

Former Telkom CEO Nombulelo Moholi admitted in June 2012 that the telecoms group had made a hash of its investments elsewhere in Africa. “A lot of the investments we made we shouldn’t have made,” she said then.

The group’s investment in Multi-Links turned into a financial disaster. It was estimated that the operator lost at least R10-billion through that investment, before being forced to cut its losses and run.

Multi-Links reported an operating loss of R522-million for the financial year ended 31 March 2009 and R1-billion for the year ended 31 March 2010. Telkom wrote down goodwill and assets of R5.8-billion.

Meanwhile, Ramaphosa’s instruction to the SIU to probe tenders related to telegraph services likely related to a disputed tender first issued in 2007.

Read: Telkom goes after former boss

Phuthuma Networks, led by businessman Ed Scott, took Telkom to court and various regulatory bodies over the disputed tender, published in November 2007, for the outsourcing of Telkom’s telex services, including support for ship-to-shore telex. This tender was cancelled in June 2009, Telkom claimed at the time, after it discovered the tendering process was a “mess”.

But Scott claimed that another company that bid for the tender, Network Telex, had begun providing telex services for Telkom without the tender having been awarded. Scott claimed this was in breach of the law, as the service had to be provided by Telkom or outsourced to a third-party provider through a formal tender process.

Bain contract

Finally, an instruction by Ramaphosa to the SIU to probe advisory services provided in respect of Telkom’s broadband and mobile strategy appeared to relate to a contract signed with management consultancy Bain and Company in 2013.

Bloomberg News reported in July 2014 (paywall), citing a document in its possession, that Telkom awarded the R91.1-million advisory contract to Bain without following an open bidding process. Bain was contracted on the watch of former Telkom CEO Sipho Maseko, who stepped down at the end of last year.

Read: End of the line for Multi-Links

The 24 March 2014 letter cited by Bloomberg, which was a response by Telkom executive Anton Klopper to a request under South Africa’s Promotion of Access to Information Act, showed that there was no record of a published or archived competitive process that led to the selection of Bain, the news wire reported at the time.

Telkom rubbished the claims, saying the Bloomberg report was based on the incorrect premise that an open tender process was the only one available to Telkom when procuring products and services. It explained that it had exemptions from various aspects of the Public Finance Management Act due to its being a public company listed on the JSE. – © 2023 NewsCentral Media