United Democratic Movement leader Bantu Holomisa has dramatically raised the stakes in the competition for South Africa’s burgeoning ”smart-card” industry by directing a raft of allegations against one of the key local players, businessman Robert Gumede.
Smart-cards — plastic cards with a tiny embedded computer chip — are currently used mainly in the telecommunications industry (for SIM cards), but the government’s proposed tender for a smart-card based national identification system, expected later this year, represents a multibillion-rand new business opportunity.
The allegations against Gumede are contained in a May 6 letter from Holomisa to Minister of Trade and Industry Alec Erwin, which requests Erwin to institute a formal investigation into Gumede’s Gijima group of companies.
Holomisa has also referred allegations of tender irregularities involving Gijima Information Technologies Africa to the public protector.
The tender allegations relate to a number of state or parastatal bids won by Gijima, either on its own or as part of a consortium, including two contracts worth about R1,4-billion with the State Information Technology Agency (Sita) and a R500-million contract to produce phone cards for Telkom.
The Mail & Guardian first reported on the unusual circumstances of the Telkom tender award in February this year when it was revealed that Telkom awarded the contract to Gijima, despite doubts over Gijima’s solvency. In April the Financial Mail published a detailed story alleging Gijima used ”underhand tactics” to secure tenders — a claim Gumede vehemently denied.
Now Holomisa has added fuel to the fire by alleging to Erwin, among numerous other serious allegations, that Gumede:
Operated a Swiss bank account that he used to make a R3-million offshore payment;
Colluded with competitors of a company, Applied Card Technologies (ACT) — of which he was himself a director and minority shareholder — in a bid to take over the company and its smart-card facilities; and
Obtained confidential internal government tender documentation relating to the proposed ID card portion of the national identification system (known as Hanis).
Gumede this week firmly denied Holomisa’s allegations ”in their entirety”.
However, in a dramatic development, Holomisa on Thursday wrote to Scorpions boss Lennit McCarthy calling on him to intervene urgently to secure alleged evidence that he claimed suggested Gumede had obtained privileged information on Hanis.
In his letter Holomisa stated that on May 7 Gumede had obtained an urgent court order to search for and seize documentation at the home of former Gijima executive Tebogo Khaas.
Holomisa expressed concern that the search and seizure might result in the loss of evidence that might be needed during intended investigations.
Among the items seized, Holomisa alleges, is a computer disk containing confidential information on the ”whole architecture” of the Hanis system.
Holomisa states: ”It is particularly disturbing that this highly classified government information found its way into the hands of private individuals, especially a known potential bidder for the future contract relating to Hanis. An immediate investigation is necessary to determine how this occurred. Mr Khaas will testify that the CD was brought to him for safe keeping by Mr Gumede.”
Gumede this week disputed this saying, ”That is utter nonsense, if there is a CD it is one that Tebogo Khaas obtained.”
Gijima was part of a consortium subcontracted to work on the home affairs computerised fingerprint and documentation system (the first part of the Hanis tender) and it is not clear whether the company was not authorised to have access to information such as is claimed to be on the CD.
The items are currently in the hands of the Johannesburg sheriff, pending the finalisation of Gumede’s court application. Holomisa’s letter makes an urgent appeal to McCarthy to liaise with the court to secure the documents.
Gumede, in an affidavit prepared for the seizure application, alleged that Khaas had illegally obtained confidential information from the Gijima group while employed there, by hijacking e-mails. Khaas, he said, was fired for this in December 2002.
Meanwhile spokesperson for the public protector, Nicolette Teichman, confirmed to the M&G that the watchdog body had begun a ”preliminary investigation” of the allegations about tender irregularities.
”We have approached Sita for their response and been informed that government has already instructed the auditor general to audit certain tenders of Sita. We are waiting to hear from the AG.”
Apparently driving the focus on Gumede is his battle with the former majority shareholder of ACT, John Sterenborg. It appears that much of the information used by Holomisa has surfaced at a Companies Act investigation — known as a Section 417 inquiry — initiated by Sterenborg.
Sterenborg, a British citizen, founded and held 74% of ACT before selling out to Gumede, in August 2002. Gumede already held the other 26%.
He believes that Gumede violated his fiduciary duty towards ACT by plotting a take-over and by diverting orders away from ACT in order to weaken the company and persuade Sterenborg to sell. Gumede denies this.
Sterenborg has initiated legal proceedings against Gumede to overturn the sale.
Gumede, on the other hand, in evidence before the Section 417 inquiry, accused Sterenborg of misrepresenting the assets of ACT and of himself alienating potential customers, inter alia by making wild allegations of corruption in the marketplace. The inquiry, resuming next Friday, is by no means complete but so far the evidence looks bad for Gumede.
Sterenborg’s advocate has already indicated he is in possession of an affidavit by Khaas in which he confirms he and Gumede colluded to undermine an ACT bid to supply smart-cards to Cell C.
In the affidavit Khaas states that in about June 2001 Gumede advised Khaas he had decided to form an alliance with a French smart-card manufacturer, Oberthur, and that ”I should therefore ensure that Oberthur and not ACT got the Cell C tender.”
At the time Khaas and Gumede were supposed to be marketing ACT. Khaas states in his affidavit: ”I deliberately inflated the pricing in the ACT tender so as to ensure that ACT was not awarded the Cell C contract …
”Cell C awarded a portion of the tender to Oberthur, which paid approximately R700 000 to [Gijima] as a commission on the smart-cards supplied to Cell C by Oberthur.”
Neither Khaas nor Sterenborg has yet testified and this allegation has not yet been put to Gumede at the inquiry.
When he was asked about the commission from Oberthur, Gumede confirmed a figure of R400 000, but said he had only begun to lobby for Oberthur after ACT had already been excluded on technical grounds.
He later referred the M&G to a letter from Cell C to ACT which raised problems with its bid in virtually every department, not just price. Sterenborg himself backs up the other two allegations denied by Gumede. Sterenborg states that soon after agreeing to the sale of the initial 26% of ACT, Gumede had approached him about paying for part of the R30-million purchase price in ”cash”.
”We were a little anxious about this … The next approach by Gumede to myself in respect of payments was a few weeks later … He asked whether he could pay me from his Swiss bank account into my English bank. Accordingly I received into my bank in London approximately R3-million.”
Sterenborg also alleges he has personal experience of Gumede’s ability to source confidential documents relating to tenders.
”Gumede showed me in November or December 2000 an internal draft Request For Information from the Department of Home Affairs relating to the ID tender.”
Sterenborg said it appeared that Gumede had been given this document prior to its public release in order to make sure that the contents of the document were favourable to him.
Gumede this week replied: ”This makes no sense. A request for information is not specific — it cannot favour anyone.”
This is an edited version of a media statement issued by Gijima:
”The Gijima group has begun an aggressive legal process to curtail an orchestrated smear campaign conducted by a former employee and the former CEO and majority shareholder of ACT.
”On the 7th of May Gijima obtained an order from the Johannesburg High Court against the former employee, Tebogo Khaas, who was dismissed from the company in December 2002 after being found guilty of misconduct bordering on industrial espionage.
”Two carloads of documents belonging to Gijima were removed from Mr Khaas’s home by the Sheriff on the 8th of May 2003 along with computer equipment. In addition, Sterenborg has been subpoenaed by Gijima to appear before a 417 insolvency inquiry on the 26th of May.
”As the former CEO and majority shareholder, Sterenborg will be questioned inter alia on the alleged mismanagement of the company.
”The company has good reason to believe that Khaas and Sterenborg have also been in discussion with the United Democratic Movement and the media, and have selectively released company documents to suit their agenda.
”The UDM has subsequently made a number of allegations, continuing to manifest falsehoods and inaccuracies, which are defamatory.
”Gijima rejects these allegations in their entirety, and is considering further legal options.”