JSE-listed technology group Gijima has lost half of its desktop outsourcing project with Absa, with about 50% of a long-running desktop services contract to be “in-sourced” to the banking group.

Absa is one Gijima’s biggest clients and the deal was worth about R200m/year to the IT group.

“The company has rendered several outsource services to Absa for the past 10 years and has delivered in accordance with the relevant contracts,” Gijima says in a statement to shareholders. “A portion – approximately 50% – of the desktop services contract with Absa is being in-sourced,” it says. “The company will continue delivering services on the remainder of this contract.”

Gijima says of the more than 200 of its employees dedicated to the contract, a “significant number” will undergo a section 197 process under the Labour Relations Act that will result in them being transferred to Absa as permanent employees of the bank.

“Gijima will continue working with Absa and we look forward to tendering for new business with Absa.”

Irnest Kaplan, MD of Kaplan Equity Analysts, says it’s no surprise that Gijima has lost a portion of the deal as the contract’s renewal has been under negotiation for some time. “Gijima knew about it and has been planning around this for some months,” he says.

“The short-term effect on Gijima will be negative, but it’s not catastrophic for the company,” Kaplan says, adding that Absa’s decision does not appear to be as a result of poor service from Gijima but rather because a change in strategic approach led by its parent, Barclays.

Gijima’s share price was trading unchanged against yesterday’s close at 54c shortly after midday on Monday. — Staff reporter, TechCentral