The founder of Brolaz South Africa, a company that specialised in the construction of infrastructure for cellular base stations, has accused Huawei of driving the company out of business by failing to make payments timeously for work done, in the process costing 232 permanent staff their jobs.

Ivo Lazic said Brolaz, which had built thousands of mobile sites in South Africa and elsewhere in Africa since its establishment in 1989 — it pioneered the towers disguised as palm trees for Vodacom — went to wall in 2016 “as a result of Huawei Technologies’ actions”.

“As a direct result of Huawei’s failure to timeously honour its payment commitments, Brolaz South Africa experienced cash-flow problems that finally forced it into voluntary liquidation on 11 March 2016,” Lazic said. This resulted in 232 permanent employees losing their jobs, along with “many hundreds” of contract employees and subcontractors.

The dispute with Huawei dates back to 2015, when the Chinese company was awarded a contract to supply base station equipment and site infrastructure to MTN. Huawei then entered into a formal contract with Brolaz South Africa to build the infrastructure.

“Implementation commenced in early 2015 and from the outset Huawei failed to honour the conditions of its contract with Brolaz … and as a result crippled Brolaz’s cash flow,” Lazic said.

He accused Huawei of late and incomplete delivery and non-delivery of infrastructure items needed by Brolaz to build into the sites. This, he said, prevented it from completing elements of the work to allow for progress payments to be made in terms of the contract. “Promises by Huawei to remedy their non-performance and to amend the contract to allow for payments to be made did not materialise.”

Delays

Furthermore, he said issuance of incomplete orders by Huawei to Brolaz resulted in variation orders to correct the initial orders. This “invariably took months to be issued by Huawei and prevented Brolaz from being paid for completed work”. There were also delays in issuing work completion inspection certificates by Huawei, in conflict with the terms of the contract, he said, again preventing Brolaz from being paid for work completed.

There was also late payment, non-payment and short payment of due invoices by Huawei “for no reason”, with Huawei internal follow-ups taking months, he said.

“Brolaz invoices delivered to Huawei under signature were claimed to be ‘lost’, resulting in new invoices having to be raised by Brolaz, which again delayed payment,” Lazic added. “Changes brought about to the contract by Huawei to compensate for Huawei non-performance resulted in extensive credit and re-invoice exercises for Brolaz which further delayed payments being made.”

He said that promises by Huawei to expedite payment of long-outstanding invoices did not materialise. “Formal requests by Brolaz for Huawei to comply with the agreed conditions of contract were disregarded. Huawei resorted to bullying tactics, threatening to cancel orders on Brolaz unless it continued to build sites for Huawei even though Huawei was in breach of contract.”

The matter has been the subject of arbitration between Brolaz’s liquidator and Huawei for the past three years. “Huawei has still not paid any portion of its outstanding debts and seems intent on delaying the arbitration process,” Lazic said. “It appears that Huawei are employing delaying tactics in order to drag out the matter and thereby deplete the financial reserves available to the liquidator.”

Huawei responds

In response to Brolaz’s allegations, a Huawei South Africa spokeswoman said in an e-mail to TechCentral that Huawei “had co-operated with Brolaz management and its liquidator in 2016 in an effort to reconcile discrepancies between Brolaz’s invoices and proof of work”.

“Brolaz opposed Huawei’s suggestion to work together to resolve the issue and opted to pursue a legal route.”