The department of home affairs settled out of court with IT company Gijima for a loss of R389m over the cancellation of its controversial contract, director-general Mkuseli Apleni said on Wednesday.

The department thus avoided a greater loss of R2,1bn had the contract run its course, he told parliament’s home affairs portfolio committee.

“The settlement represents a potential R2bn saving to government as against the R4,5bn estimated cost to complete the project,” Apleni said.

The sum refers to money already paid up to March 2010 to Gijima and subcontractors Hewlett-Packard and IBM for lease payments.

The contract with Gijima was signed in December 2007, but proved fraught from the start. The company failed to deliver an integrated electronic database for the department to improve security and speed up previously manual application processes.

The initial tender was awarded for R1,9bn two months earlier. Costs for the so-called “Who Am I Online” project however spiralled to R4,5bn over five years after items like software licences were included in the deal.

National treasury had only approved a business case for a contract of R2,2bn.

When the company failed to have key components of the project ready in time for 2010 Fifa World Cup, the department approached the SA Revenue Service to develop a new movement control system.

It also informed Gijima the contract was considered invalid, but the company disputed this. Home affairs minister Nkosazana Dlamini-Zuma then opted for negotiations to avoid a legal battle and further delays. — Sapa