31 Mar 2006

Tender scandal brews at Telkom

Adriaan Basson

Johannesburg - A controversial multimillion rand tender for the distribution of all Telkom's products throughout the country was awarded last year to a company that has ties with Telkom's corporate head, Mandla Ngcobo.

In addition, Value SA - the company to which the tender worth at least R10m a year was awarded - only came fourth in the final evaluation of tenders by Telkom.

But, though the tender has since been cancelled by Telkom, Ngcobo's connection with Sello Paulos Mahlangu, the chief shareholder and owner of Value SA, is not disclosed in Telkom's official comment.

Technical irregularities, which according to a senior Telkom source are actually standard practice, are given as the reason for the cancellation.

A Beeld investigation found that Ngcobo, who was previously head of Telkom's legal services and was promoted to corporate head on September 1 last year, is a business partner of Mahlangu.

Both are currently directors of Bush Hill Risk Management 9. They formerly served together on the boards of Robow Investments No 110 and Phomase Holdings.

Mahlangu is also part of Representative, an empowerment group that acquired 5% of financial services group Brait in 2004 under the leadership of Ngcobo.

Telkom's code of conduct states clearly under "conflict of interests" that no Telkom employee may have any interest in any supplier. "That includes the provision of non-public information, support with the planning and design of products or active involvement in marketing and sales," the code states.

Beeld's investigation resulted from an anonymous letter written last year by a "concerned shareholder, investor and client", which contained serious allegations of fraud, corruption and bribery by senior Telkom officials.

The letter was addressed to Telkom CEO Papi Molotsane. Copies were apparently sent to Telkom chairperson Nomazizi Mtshotshisa, Vodacom CEO Alan Knott-Craig, Telkom head of operations Reuben September and others.

The letter states that the distribution contract was awarded to Value SA because Mahlangu is this company's empowerment partner.

It alleges further that Value SA's tender was nearly R2m a year more expensive than that of the company that should've been given the contract and that Value SA came fourth in the evaluation process.

Beeld, sister publication of FIN24, confirmed independently that Mahlangu is indeed Value SA's empowerment partner, that Value SA's tender was R1.8m a year more than that of Stuart's Transport, and that Value SA indeed came fourth after the evaluation by Telkom's team of experts (SME).

Confidential documents in Beeld's possession show that Benhaul JV was the SME's first choice, Stuart's Transport second, Teltrans third and Value SA fourth.

A 30% share of Value SA is owned by the well-known listed Value Group and the rest by Ace of Hearts. Mahlangu owns 62% of Ace of Hearts and therefore 43.4% of Value SA.

Telkom and Value SA pointed out to Beeld that the contract had been cancelled because of technical errors by Telkom.

A High Court will soon be approached to set the contract aside.