EOH Holdings has “proactively initiated” an internal investigation into subsidiary EOH Mthombo’s channel partner business unit after Microsoft served a notice of termination on two agreements with the company last Friday.

News of the termination, first reported by TechCentral on Monday evening, sent EOH shares down by as much as 34% in intraday trading on Tuesday as investors took fright. Microsoft served 30 days’ notice on EOH Mthombo, but when contacted by TechCentral the software giant declined to disclose reasons for the decision, citing confidentiality. EOH has also not explained what happened, adding to investor anxiety.

In a detailed statement to shareholders, issued through the JSE’s stock exchange news service on Friday, EOH said it is working with Microsoft “to better understand the concerns and rationale for the action”.

“Following a recent fruitful meeting between EOH and Microsoft leadership, Microsoft has advised that it is taking the EOH proposals under consideration and further review,” EOH said. It has still not explained, however, why Microsoft decided to terminate the agreements, which TechCentral understands came from Microsoft internationally rather than from its South African office.

In the statement, EOH said that in the past two years, it has “been the subject of numerous negative allegations. All these historical allegations have been proven unfounded through diligent efforts from EOH, disproving or securing the withdrawal of the stories.”

“Notwithstanding this, the EOH reputation was tarnished, causing significant harm to our people, shareholders, customers and partners over a protracted period — masking the true value of the EOH business,” it said. “As a result of the last two weeks’ allegations, the board and management are widening efforts to obtain clarity and deal with any issues in the interests of all stakeholders.”

‘Kept us strong’

“Despite all this, the business resilience kept us strong, carried through by the commitment of our great people, and the support of our customers, technology partners and shareholders.”

It said it is “committed to ensuring ethical leadership throughout the group”.

Among other initiatives, it has retained the services of ENSafrica to “perform an independent, ongoing risk-based monitoring and oversight role in all the group’s major public-sector bids, contracts and engagements”. The law firm has also “overseen EOH’s review of all material current public-sector contracts to ensure that governance relating to these contracts were adhered to”.

It is also working to enhancing and digitalise supplier and customer due diligence procedures.

“ENSafrica recently issued an ISO 37001 assessment report against the six principles contained in ISO 37001 (the international standard for anti-bribery management standards). On this assessment, ENS confirmed that most of the associated initiatives are already completed and others are well progressed. EOH is committed to completing and maintaining this alignment to the ISO standards.”

ENSafrica is also part of a “broadened review of large public-sector licensing agreements”, EOH said.

It has appointed two “highly qualified and experienced” independent nonexecutive board members, one to chair the audit committee and the other to chair the governance and risk committee. “EOH will shortly announce further changes to the board to closer align with King IV.”

Public sector

In addition, it is implementing recommendations from the University of Stellenbosch Centre for Corporate Governance in Africa report and refocusing its public-sector business away from complex and risky projects. “Lufuno Nevhutalu, with his vast experience and unique insights, has been appointed as executive head for public sector in the ICT business.” The public-sector business was previously led by Jehan Mackay.

The group said it is “committed to zero tolerance to any impropriety and upholds the highest levels of governance and ethical conduct”.

“In an organisation with 12 500 people in 270 entities across 50 countries, one must expect that there may be governance-related incidents. For cases like these, EOH has retained ENSafrica to conduct forensic investigations so that matters can be acted on swiftly and decisively.”