South Africa: EOH to Pay Back Over R40 Million to Department of Defence

The Special Investigating Unit (SIU) has uncovered irregularities of more than R40 million in the Microsoft software licences procurement contracts awarded by the Department of Defence (DoD) to EOH.

These irregularities relate to the procurement process and the overpricing of R250 million Microsoft licences contracts. The SIU found that the contract entered into was irregular.

The SIU has conducted an intensive investigation, which revealed the procurement irregularities and overpricing by EOH arising from the 2016 and 2017 procurement of Microsoft licenses.

"With specific reference to the overpricing of the Microsoft licenses, EOH was confronted and acknowledged the said overpricing. EOH agreed to sign an acknowledgement of debt (AoD) and has since signed an AoD with the SIU to the value of R41 676 493.92, which is to be paid back to the DoD," the SIU said on Wednesday.

The JSE-listed company has agreed to pay back the money over a period of three years, with interest.

"The signing or acceptance of the above mentioned AoD by EOH does not mean that EOH is exonerated from paying any further amounts due to the DoD, which may be subsequently uncovered by the ongoing SIU investigation.

"With regard to the irregular contract, SIU will institute civil proceedings in the Special Tribunal to cancel the contract and determine any further monies that DoD may have lost and recover such monies lost to be paid back to DoD," the SIU said.

The DoD officials involved and implicated in this irregularities have been identified and referrals of evidence will be made to DoD to institute disciplinary action.

"The investigation has also uncovered evidence pointing to criminal action. This evidence, as required by the SIU Act, will be referred to National Prosecuting Authority (NPA) and also to the Directorate for Priority Crimes Investigation (DPCI) for further attention.

"The signed AoD does not exonerate any person or official involved from being disciplined or held criminally liable for any criminal conduct that may be revealed by the ongoing investigation of the SIU."

On 12 July 2019, the SIU was directed, in terms of Proclamation R 41 of 2019, to investigate the procurement of or contracting for Microsoft software licences by the DoD and payments that were made in respect thereof, to EOH, which is a supplier to the department.

"The allegations that the SIU is investigating are that DoD procured Microsoft software licences via an intermediary, being EOH, without any valid procurement process having been followed. It was also alleged that the DoD paid an inflated price to the intermediary for the licences, which could have been purchased for approximately one third of the price from Microsoft directly," the SIU said.

Furthermore, the SIU is also investigating an allegation that EOH was contractually obligated to provide 20 035 Microsoft licenses to DoD but only provided 15 108.

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