‘It takes two to corrupt’: Corporate SA needs to adopt zero tolerance on corruption, says EOH CEO

23 Nov 2020

State officials often take the brunt of criticism for corruption, but it takes both state actors and corporate bidders to distort procurement processes. CEO Stephen van Coller has described how he led the cleanup at IT giant EOH and why he rejects claims that corruption is just how business is done in SA.

EOH Holdings CEO Stephen van Coller has called on corporate South Africa to acknowledge its role in corruption and take a zero-tolerance approach to graft or risk losing the gains made during the democratic era and sacrificing the fight for equality.

“In some cases that I’ve found quite disappointing, people say, ‘Well, we have to do it, it’s the way that we do business, otherwise you don’t get [the contract].’ I think that’s nonsense,” Van Coller told the Zondo Commission of Inquiry on Monday.

Van Coller, a chartered accountant whose CV includes executive positions at MTN and Barclays Africa, joined the IT giant in September 2018 and led the charge against corruption after he realised what was happening at the company.

“I really want to get South African corporates to make this a big priority because otherwise we’re going to lose the essence of everything we’ve done. We need to have zero tolerance,” he told the commission chairperson, Deputy Chief Justice Raymond Zondo.

https://www.dailymaverick.co.za/article/2020-11-23-zondo-gets-hardcore-on-zuma-throws-every-legal-lasso-including-urgent-approach-to-constitutional-court/

Zondo, who earlier on Monday announced he would institute criminal charges against former president Jacob Zuma for leaving the commission without permission, is hearing testimony this week from the evidence leaders’ flow of funds stream, which ties together a number of issues that don’t relate to a specific government department or state-owned entity.

We’ve seen the effect of corruption in this country over the last decade and it really has an effect on the masses. It steals the very essence of what a lot of people in this country fought for for so long. They fought for equality, and corruption steals this equality from their fingertips.

EOH is one of many large corporations implicated in corruption in recent years and evidence leader Matthew Chaskalson said the commission must look at the issue from both sides to address the problem.

Van Coller said, “We’ve seen the effect of corruption in this country over the last decade and it really has an effect on the masses. It steals the very essence of what a lot of people in this country fought for so long. They fought for equality, and corruption steals this equality from their fingertips.”

Soon after Van Coller was appointed he realised EOH was in financial trouble. The company was using a recent R3.2-billion loan from banks to cover its debts and there was a startling lack of checks and balances over the company’s 272 subsidiaries.

EOH’s executive committee didn’t effectively exist and the company had only one compliance officer for its 10,000 employees.

News reports had questioned the company’s deal to provide services to the Department of Water and Sanitation. Questions were also raised over a contract with the Department of Defence.

In February 2019, Microsoft suddenly cancelled its partnership with EOH, which, Van Coller found out from journalist Duncan McLeod, was due to allegations it had charged the government for more Microsoft licences than it delivered.

“It was clear very quickly that there was a problem.”

Van Coller appointed ENS Forensics to investigate the company’s deals with government entities over the previous five years. ENS found widespread irregularities amounting to about R1.2-billion.

It found serious governance and control failures, collusion with equipment manufacturers and software owners, tender irregularities, inappropriate gifting, sponsorships and donations, and suspect payments, the type where round sums are paid to middlemen.

ENS head of forensics Steven Powell will testify on details of the deals on Wednesday, but Van Coller mentioned some of the findings.

EOH had charged the Department of Defence for 20,000 software licences when it only provided 15,000. It also overcharged the department, which had bypassed the government provider Sita that offered the licences at a lower rate.

Van Coller said employees at some of the company’s subsidiaries had access to confidential tender information and, in some cases, were even writing tenders.

Middlemen were paid significant slices of contracts. EOH made official political donations only to the ANC, unusual for a listed company, while also making unofficial donations to the party through dubious invoices from subcontractors.

In hindsight now, this group of rogue former individuals and the directors at the time nearly destroyed 10,000 people’s jobs and that I think, personally, is unforgivable.

The company identified R1.2-billion in questionable deals and lost R935-million, mostly through dodgy loans it had to write off, ghost contracts and invoices for no work done.

“That money is gone,” said Van Coller.

“It just got out of control and if there had just been some process and policies in place you would have controlled it and it would have been able to be, you know, managed.

“In hindsight now, this group of rogue former individuals and the directors at the time nearly destroyed 10,000 people’s jobs and that I think, personally, is unforgivable.”

Under Van Coller’s leadership, EOH has provided information to the SAPS, the Hawks, the NPA and the Special Investigating Unit (SIU) and is already paying back some of its ill-gotten gains and is in talks with the SIU about repaying benefits from other corrupt contracts.

Van Coller replaced his financial director, appointed a chief risk officer, ensured more independent directors were appointed to the board and initiated anti-corruption training programmes.

The company has introduced systems to ensure oversight on contracts and encouraged whistle-blowing by developing an app for anonymous tip-offs. Entertainment and gift expense claims over R1,000 must now go through rigorous approval processes, said the CEO.

“It’s quite interesting that a few rogue employees can make such a difference in people’s lives. The problem is they take the money and run off and maybe this is a problem with capitalism or the way corporate structure works.

“The legal entity remains with all the problems, even though the money’s gone, so the people working in that entity have to repay all the money all the others stole,” he said.

“To corporate South Africa, it does take two to corrupt,” he added.

Van Coller listed the lessons he’s learnt while tackling corruption at EOH, which he has written about previously. Most of them are basic lessons in implementing a corporate culture to confront graft and ensuring companies have systems of accountability to prevent corruption.

https://www.dailymaverick.co.za/opinionista/2020-01-15-what-i-learnt-from-eoh-about-preventing-corruption/

The question is, why do so many large corporations still need to learn the basics? DM

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