CAPE TOWN – ENSafrica has concluded its report into troubled technology firm EOH, and speculation is rife among insiders that the law firm has made damning findings against the company.
The report, which has made findings into governance irregularities in the technology giant, investigated instances of corruption in the company involving various government departments such as eThekwini Municipality, Department of Defence, Water and Sanitation, South African Police Services, among others.
A source, who spoke to Independent Media weeks before the finalisation of the ENSafrica report was finalised, alleged there was widespread corruption by EOH officials in eThekwini. Independent Media was reliably informed that the company and its subsidiaries had obtained several lucrative contracts, spanning several years, in the municipality through illicit means.
When questions were sent to the company around May 23, the group said it had engaged ENSafrica to conduct an independent investigation into all legacy public sector contracts. In response, the company said: “We expect these investigations to be concluded by 31 May 2019 and thereafter the Board will examine the findings. We are therefore unable to provide further detail regarding any public sector contract at this time.”
On Thursday, the company confirmed that it had received the report and was currently studying its contents before making public pronouncements.
In response to questions on Wednesday evening, the company said: “EOH can confirm that it is currently engaging ENSafrica regarding the findings of a report into governance irregularities. We have requested clarification and additional procedures from ENSafrica and as communicated, EOH is on track to share these findings in coming weeks. EOH remains bound by the confidentiality undertakings and cannot comment further on the report at this stage.”
EOH was being investigated for insider trading by the Financial Sector Conduct Authority (FSCA), which is part of its mandate, and in appropriate instances, take enforcement action in cases of market abuse on the financial markets.
The FSCA said three kinds of market abuse were prohibited in South Africa, namely insider trading, market manipulation and false reporting relating to the affairs of a public company. The FSCA said it was finalising the insider trading investigations.
The corruption claims coupled with the loss of its Microsoft contract, dealt a heavy blow to EOH’s share price, which has lost nearly two-thirds of its value so far this year, contracting by close to 90 percent over the last three years.
The company’s share price is hovering near five-year lows from nearly R180 in 2015 to about R10 this year.
Previous scandals that the company has been involved in include Microsoft terminating its contract with one of its subsidiaries, EOH Mthombo following investigations around its contract a government department.
At the time, reports emerged that an "anonymous whistle-blower filed a complaint with the United States Securities and Exchange Commission" regarding alleged corruption involving its R120 million contract with the Ministry of Defence. No sooner had this happened, EOH's shares tumbled significantly.
The current question among insiders close to the developments at EOH is, due to possibly gaining its profits through illicit means, will the company be put in a position to restate its financials in the markets?
Sinesipho Maninjwa, an independent investment analyst said the answer to that question lies in a whether the affected government departments or authorities would seek to recoup any monies lost the company as a result of corruption.
“It depends on the action that law enforcement takes. If they decide to recoup the funds then EOH would have to restate its financials,” she said.
Notably, the Public Investment Corporation (PIC) holds a 9.4 percent stake in EOH and none of its executives has yet appeared before PIC Commission of Inquiry.