JSE-listed Gijima went to the high court to have IT firm
For months last year, the venture pocketed what was due to the high-tech services group, Gijima, as its own wallet had seemingly gone flat. When asked to pay up, AL Indigo pleaded poverty, pushing Gijima, a cash-strapped creditor, to the high court to have the former placed under liquidation.
That it's now folding – thanks to the "cash constraints" the chairperson Mashudu Tshivhase conceded to in a letter to the JSE-listed Gijima – raises questions. Central to the riddle is that AL Indigo was valued at R800-million a year at the time of its launch in 2006.
A few years later, it was discussing expansion into Africa and trebling its value. Instead, the firm has now gone into provisional liquidation as ordered by the high court in February.
How does an R800-million empire, become so broke that a debt of no more than R5.5-million can cause it to crash? Its sole director, Tshivhase, now media shy, is not taking questions from the Mail & Guardian.
Events leading to the liquidation were scripted two years ago when AL Indigo sold Gijima a healthy BMC Software business for R10-million. Subsequent to the sale, AL Indigo continued to pocket payments it received for services rendered by the BMC business. By this, AL Indigo breached a sale agreement in terms of which it was to remit payments from clients to Gijima.
Running to the high court
Although AL Indigo refused to comment, Gijima claimed that, when it took over the former's debtors' book, the old owners "undertook to pay across any monies that they collected [on Gijima's behalf]," according to Lunice Johnston of the group's PR office.
It's these funds, including R1.9-million from the Western Cape provincial government and almost R1-million from MTN Uganda and T-Systems, that AL Indigo didn't transfer, which saw Gijima running to the high court late last year.
"This is a commercial transaction, whereby Gijima is following standard procedure to collect monies due and payable to us," asserted its chief financial officer, Carlos Ferreira.
Although Gijima lodged a claim for R5.5-million, AL Indigo is said to put the debt at no more than R2.8-million. Gijima took the legal route after it tired of AL Indigo's "empty promises", as Gijima's legal adviser, Anja Schirmer, subsequently put it in her affidavit.
"We haven't honoured the agreement to pay the monthly instalments. Attached, please find our humble request to extend our payment terms [of R280 000 over a 10-month period to March 2013]," pleaded AL Indigo manager Lynette Smith in a letter to Gijima's lawyers LindsayKeller last year. "We're 100% committed to settle our debt and we're attempting everything possible to meet our obligations, of which moving to smaller offices is one of the main expenses we're cutting." The letter conceded there were "cash constraints". AL Indigo, Tshivhase wrote, was "in a process of securing large projects that will put us in a position to honour the payments".
Gijima ignored "our intention to liquidate the debt as soon as possible", as one of AL Indigo's letter preceding the litigation alleges.
Every cent counts
Gijima, itself in the throes of a multimillion-rand settlement and dizzying layoffs, badly needs every cent it can find. A combination of ever-sliding stock and red-inked interim results, released at the end of March, speaks volumes. Whoever replaces the departed Jonas Bogoshi as chief executive will have an uphill battle to turn the company around. After being told that Tshivhase was unavailable for an interview due to ill health, the M&G received a letter from AL Indigo's lawyer, C Bekker & Associates' Cherise Hansen, who said her client wasn't aware of "a long-running tussle with Gijima".
She then added, "If there is such a tussle … [AL Indigo] will certainly not use the press to resolve it".
So questions remain. What transpired at AL Indigo? Why did all bar one of the directors jump ship and what of the company's growth plans? Critically, what happened to the R10-million AL Indigo earned from the sale of the BMC business? This and other questions were put to Hansen, but no response was forthcoming.
Given BMC's solid pipeline from a long list of clients, the price tag looks discounted. Notably, Nedbank, arguably BMC's single-largest local customer, has forked out almost R20-million for software services since 2009. The business boasted an impressive clientele, including the national treasury, the Independent Electoral Commission, the SABC, JSE, the Mauritius Commercial Bank, Engen, MultiChoice, Neotel, PetroSA and provincial governments, and the blue chips Investec, Shoprite, Standard Bank and Woolworths.
But whatever the reasons behind the sale of the prized BMC business, it's what's drove AL Indigo to its end.