After 10 months of uncertainty surrounding the future of the controversial “Who Am I Online?” project, the department of home affairs and JSE-listed technology services group Gijima have finally come to an agreement.
But the deal reached will hit Gijima’s interim results, knocking headline earnings into the red in the six months to 31 December 2010. On Monday, investors reacted by sending the group’s share price up at first, then lower in early trade.
“It is a relief for us and I am sure for government as well that we have finally come to an agreement,” says Gijima CEO Jonas Bogoshi. “It was a complex negotiating process, but we feel the resolution is a good one.”
Gijima was awarded the R2,2bn tender in 2008 to overhaul the department’s technology infrastructure, which included the design, development, implementation and maintenance of the department’s core systems.
The system will link the Home Affairs National Identification System to systems operated by the SA Police Service, the national health-care service and emergency services.
Almost a year ago, the department cancelled its contract with Gijima, contending that the deal was invalid. However, Gijima consistently maintained that the contract was valid and enforceable.
The home affairs contract is Gijima’s largest deal with government and makes up 15% of the group’s annual revenue. In the past 10 months, the IT group’s share price has fallen 30,8% as doubt lingered about the contract.
Bogoshi says the home affairs project is now back on track. “Luckily, the design phase was already completed by the time the department made its decision to cancel the contract,” he says.
The first sign that government had reached a decision about the project came in the national budget delivered by finance minister Pravin Gordhan last month. Gordhan said national treasury had put aside R2,2bn over five years for the project. A second signal was when Gijima postponed its results presentation from two weeks ago to Wednesday this week.
According to Bogoshi, Gijima’s agreement with home affairs will result in the original objectives and cost estimates of the project being brought back into line. However, a new timeline and scope are to be negotiated with the department.
In terms of the settlement, Bogoshi says Gijima has agreed to take equal responsibility for any delays in the project’s planned timeline and has also agreed to share any “general economic losses”. More specifics on the financial impact will be revealed at Wednesday’s results presentation.
“It was a bitter pill for the board to swallow, but we believe that we have made the right decision,” says Bogoshi.
He says employees that were redeployed into other areas of the business will be brought back onto the contract. — Candice Jones, TechCentral