Telkom “trusts” that the Financial Services Board and the JSE will “respond as necessary” in the wake of an allegation by Democratic Alliance leader Helen Zille on Tuesday that “those on the inside track” about government’s plan to name the company as its “lead agency” for broadband benefited unduly from the recent surge in its share price.
In his state of the nation address, President Jacob Zuma named Telkom as the lead agency for government’s project to roll out broadband in underserviced parts of the country, prompting Zille to slam the decision to give the company what she calls a “monopoly” over the provision of these services.
She said in her newsletter, SA Today, that the decision to give Telkom the government business had been on the table for a long time. Indeed, it was “long enough”, she said, for “those in the know to buy Telkom shares at R12 each and see them surge to a five-year high of R78,39/share last week”.
“As usual, those on the inside track would have seen their investments soar more than six times in value. It is easy to make a killing when you decide how to allocate government tenders while eliminating any competition in the name of the ‘developmental state’,” Zille said.
“The Telkom deal is yet another example of how so many ‘connected cadres’ win government contracts. They were given an inside track, sheltered from competition, and had a clear run to a guaranteed outcome, so that a lot of ANC insiders could [have] made a lot of money in the process.”
But Telkom has hit back, saying the strong movement in its share price is the result of management decisions taken over the past two years. “Our share price is indicating the market’s appreciation of the positive actions taken by management and the board over these two years,” said managing executive of group communication Jacqui O’Sullivan. “These actions include cleaning up the balance sheet, settling Competition Commission cases and articulating [Telkom’s] stance on regulatory issues.”
She said the company continues to address its cost base and that “anticipated positive outcomes” of “revenue-enhancing transactions” — including the proposed acquisition of Business Connexion and a cooperation deal being negotiated with MTN in mobile — have “added to the positive sentiment”.
“The Financial Services Board and the JSE would be the accountable bodies to respond to [Zille’s] claims and we trust they will respond as necessary,” O’Sullivan said.
In her statement, Zille criticised Zuma’s decision to designate Telkom as the lead agency for the broadband project for other reasons, which the company has not responded to.
“Telkom, a company in which the government owns 40% directly and 13% indirectly, has been given the monopoly to roll out broadband across the county,” she said. “Telkom did not win this lucrative contract through an open tender as required in clause 217 (1) of the constitution, which reads: ‘When an organ of state in the national, provincial or local sphere of government or any other institution identified in national legislation contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.’
“The story of how Telkom ‘won the bid’ is so brazen that it demonstrates just how complacent the Zuma administration is about placing itself above the constitution and the law,” Zille said.
She labelled Telkom CEO Sipho Maseko as a “Zuma crony” and said he received an “exclusive invitation” to attend a forum of government directors-general in January.
“He was given the sole right to lobby the directors-general … as well as the provinces, motivating for the broadband tender to be given to Telkom,” she said. “Shortly afterwards, at the cabinet lekgotla, attended by the full cabinet and provincial premiers, Telkom’s monopoly was announced as a fait accompli.” — © 2015 NewsCentral Media