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Ramaphosa orders probe of Telkom’s Africa asset sale deals

By , Africa editor
Africa , South Africa , 26 Jan 2022

President Cyril Ramaphosa has authorised a wide-ranging probe of possible maladministration in the disposal of Telkom’s assets – iWayAfrica, Africa Online Mauritius and Multi-Links Telecoms – during the telco’s sojourn in Africa.

The investigation, announced yesterday, gives the Special Investigating Unit (SIU) authority to investigate possible maladministration in the sale of these assets, which resulted in the telephony company losing millions of rands.

With the order, the SIU is to investigate any alleged “serious maladministration in connection with the affairs of Telkom; improper or unlawful conduct by employees, officials or agents of Telkom; unlawful appropriation or expenditure of public money or property; and unlawful, irregular or unapproved acquisitive act, transaction, measure or practice having a bearing upon state property”.

The crime-busting unit must also establish if there was “intentional or negligent loss of public money or damage to public property; offence referred to in Parts 1 to 4, or section 17, 20 or 21 (in so far as it relates to the aforementioned offences) of Chapter 2 of the Prevention and Combating of Corrupt Activities Act, 2004 (Act No 12 of 2004), and which offences were committed in connection with the affairs of Telkom; or unlawful or improper conduct by any person, which has caused or may cause serious harm to the interests of the public or any category thereof.”

Telkom sold Multi-Links, its CDMA unit, to HIP Oils in 2011 at a large loss after a painstakingly-long legal battle.

Telkom bought 75% of the CDMA operator for $280 million in March 2007, and almost two years later, bought out the balance for another $130 million. It subsequently wrote down the unit for more than its initial investments before selling it.

It was not immediately clear how much Telkom had spent on legal fees, as the company did not disclose this amount.

As for the iWayAfrica and Africa Online Mauritius assets, Telkom offloaded the two businesses through a private sale to Gondwana International Networks.

iWayAfrica was formed as the result of the amalgamation of MWeb Africa and Africa Online in 2007, when MWeb Africa was purchased by Telkom.

The iWayAfrica business operated in eight countries in Africa, offering terrestrial wireless and VSAT services to business and residential markets, as well as via its channel partners in many other countries on the continent.

Telkom struggled to drive growth and profitability in the iWayAfrica business, resulting in the sale.

“Several years of poor performance of the iWayAfrica Group has resulted in continued negative earnings before interest, taxes, depreciation and amortisation contribution to the Telkom group,” said Sipho Maseko, who was CEO at the time.

Reacting to the president’s order, Telkom issued a short statement noting Government Gazette no 11385, published yesterday, giving the SIU instruction to probe possible impropriety in the telephony company’s asset deals.

“Telkom follows robust corporate governance principles,” it said.

“All matters relating to these transactions are on the public record. Telkom’s own investigation flagged possible cases of wrongdoing by two employees in one of these transactions and declared this in terms of the Prevention and Combatting of Corrupt Activities Act.

“Telkom issued civil summons against an employee with an eye to recovering losses amounting to $5 million relating to activities incidental to the transaction.

“As the matter is the subject of a criminal and civil nature, Telkom will deal with the case on its merits in the appropriate forum, in the appropriate manner, at the appropriate time.”

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