The Special Investigating Unit (SIU) has found that a R250-million software procurement deal awarded to JSE-listed technology service company EOH was irregular.
According to an SIU statement, the contracts for Microsoft software licences acquired by the department of defence in 2016 and 2017 were inflated by more than R40-million.
In 2019, Microsoft terminated its agreement with EOH after a tip-off to the United States Securities and Exchange Commission about alleged wrongdoing regarding a software procurement deal between the company, the South African National Defence Force and the department of water and sanitation.
In July of that year, the SIU was directed to investigate the contracts. It was alleged that the department of defence paid an inflated price to EOH for the licences, which could have been purchased for about a third of the price from Microsoft directly.
The SIU is also investigating an allegation that EOH was contractually obligated to provide 20 035 licences to the department but only provided 15 108.
Last year, the company appeared before the Zondo commission of inquiry into state capture and provided evidence of irregular money flows at EOH, which was unearthed by law firm ENSafrica.
The forensic investigation, which was commissioned by the board of the company in 2019, identified R1.2-billion in suspicious contracts. It also found severe governance failings, tender irregularities, unsubstantiated payments among other unethical business dealings at the company.
EOH gave information relating to the questionable and unethical business practices dating back to 2014, which were brought to light by ENSafrica’s report.
At the commission, EOH group chief executive Stephen van Coller said the investigation found that payments were made to subcontractors in circumstances where there was no evidence that the subcontractors did the work.
According to the SIU statement, EOH acknowledged the overpricing of the Microsoft licences and signed an acknowledgement of debt with the SIU to the value of R41 676 493.92. This amount will be paid back to the department of defence over a period of three years — with interest.
The signing of the agreement does not mean that EOH is exonerated from paying any further amounts due to the department that may be subsequently uncovered by the SIU, the statement noted. The SIU plans to institute civil proceedings in the special tribunal to cancel the contract and to determine any further amounts that may be owed to the department.
Department officials involved and implicated in the irregular contracts have been identified and referrals of evidence will be made for disciplinary action, the SIU said. Evidence of criminal activity will be referred to the Hawks and the National Prosecuting Authority.