South Africa: Special Investigating Unit On Microsoft Software Licences Procurement Contracts Awarded By Defence

press release

The Special Investigating Unit (SIU) investigations into the R250 million Microsoft Software Licences procurement contracts awarded by the Department of Defence (DoD) to EOH has uncovered irregularities relating to the procurement process and also overpricing of Microsoft Licenses amounting to more than R40 million. The SIU found that the contract entered into was irregular.

The SIU 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 AoD with the SIU to the value of R41 676 493.92, which is to be paid back to the DoD.

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

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 that may be subsequently uncovered by the ongoing investigation of SIU.

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 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 SIU Act, will be referred to 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 licenses via an intermediary being EOH without any valid procurement process having been followed. It was also alleged that DoD paid an inflated price to the intermediary for the licenses which could have been purchased for approximately one third of the price from Microsoft directly.

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.

The SIU is an independent statutory body with a primary mandate to investigate allegations of corruption, malpractice and maladministration in the affairs of government departments, municipalities and State Owned Entities, and to recover financial losses suffered by State institutions. The SIU was established in terms of the Special Investigating Units and Special Tribunal Act, Act No 74 of 1996 (SIU Act).

Fraud and corruption allegations may be reported via the following platforms: / Hotline: 0800 037 774

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