Procurement policies that support Social Responsibility Implementation report: Cell C & Boniswa Technology Solutions briefing

Small Business Development

11 November 2016
Chairperson: R Bhengu (ANC)
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Meeting Summary

Cell C presented its economic policies towards SMMEs and Cooperatives. Cell C was busy with a re-capitalisation of it’s business which will result in shareholder change, the majority of ownership will be in South Africa, and the black ownership will increase from 25% to 30%. Cell C spent over R550 million on Qualifying Small and Exempted Micro Enterprises during the 2015 Financial year. Its BBBEE status is currently sitting at level 3. Its procurement policies are favourable in terms of payment to SMMEs that are 30% black women owned or 50% black owned, payment is made within 14 days of invoice. Cell C established the community service terminals (CSTs) and was obligated to roll out 52 000 CSTs, the target was far exceeded, with over 100 000 CSTs deployed due to market changes (Reduction of retail mobile tariffs). This program has ceased to be commercialyl viable and as of end October 2016, there are only 7099 CST’s active. Current obligations have been amended to include connecting schools with tablets, routers, trolleys, projectors etc. so far the roll out to 400 schools to date, by the end this year 600 will be done at a cost of R78 Million and are planning another 300 by March 2017 at a cost of R39 Million.

Boniswa Corporate Solution presented its product and service portfolio, and the focus was on its national and international footprint, as a small company with about 160 employees and a turnover of R60 million per annum, it as grown rapidly since its inception in 2004. Boniswa also shared some light on the non-payment matter between Boniswa and Cell C or Brolaz or Huawei. Boniswa rendered services to Cell C last year for the Christmas coverage. Boniswa was offered 14 sites by Cell that amounted to over R4 million with a purchase order of about R4.7 million to roll out the 14 sites. However, purchase order was given through Brolaz, which would invoice Cell C and the Cell C will pay Brolaz and Brolaz will pay Boniswa. Unfortunately, Brolaz is now under liquidation, and Boniswa has not yet received its payment for the services it rendered to Cell C. Boniswa was able to build two sites which Cell C has been generating income from since last year, but somehow refuse to pay Boniswa the amount of R845 000 owed because Cell C claims it paid Brolaz an amount of R17 million. Boniswa is also under financially constrained and needs its payment.

Members asked about what Cell C has done to rectify this situation, and that Cell C has been aware of this for a long time, how come nothing has been done about it; procurement policies and economic transformation policies employed by Cell C towards SMMEs and Cooperatives; whether Boniswa has attempted to make contact with the liquidator appointed to administer the financial affairs of Brolaz; why Cell C employed an intermediary company which did not have the capacity to provide the sites and consequently sub-contracted to Boniswa; why Cell C has not been able to receive funding from the South African government and other institutions like the IDC that it had to flee off the country to acquire capital funding from the Chinese banks which impose terms and conditions that are detrimental to SA companies; whether the current model employed reduces Cell C’s competitiveness; the list of the companies that make up the R500 million procurement.

Cell C resorted to Chinese banks due to the fact that it was refused capital funding domestically, the appetite for risk at the time it went into the market to acquire funding was too low, because the then major shareholder, which was Telkom was also carrying a significant amount of debt. Additionally, the fact that many market players or lenders believed that there was no space in the SA market for a third network operator played a huge role in the difficulty to acquire funding. Cell C will look into the non-payment matter with Boniswa, and if the R17 million already paid to Brolaz is for a different service rendered, then Cell C will not hesitate to make payment to Boniswa for what its due, otherwise, Mr Kajee said he will have to consult the shareholders about this matter. 

Meeting report

Opening remarks
The Chairperson welcomed the members and the delegation present, and handed over to the Secretary to submit apologies.

The Committee Secretary duly read out the apologies.

The Chairperson then thanked all the members present as well as the delegation, and she asked Cell C to make its presentation first.

Briefing by Cell C on its economic transformation policies biased to SMMEs (Small Medium Enterprises) and Cooperatives
Mr Sherhaad Kajee, Chief Procurement Officer, Cell C stated that the company was currently busy with a re-capitalisation of it’s business which will result in a shareholder change - Cell C will be majority South African owned and the black ownership will increase from the current 25% to 30%. Furthermore, Cell C’s current BBBEE status is a level three and its current certificate is valid until 10 July 2017. Cell C spent R550 316 604 on Qualifying Small and Exempted Micro Enterprises during the 2015 financial year. With regards to procurement policies, he noted that Cell C has favourable payment terms for BBBEE EME (Exempted Micro Enterprises) and QSE (Qualifying Small Enterprises) Companies that are 30% Black woman owned and/or more than 50% black owned – they are paid within 14 days of invoice.

Cell C’s biggest supplier is Huawei which supplies network equipment, and this was because when Cell C received capital funding from the Chinese Bank it came with terms and conditions that made it incumbent on Cell C to employ Huawei as its biggest network equipment supplier. Other top suppliers include Samsung, Comm Equipment, and Apple which supply Cell C with handsets.

In light of community based work, Cell C established the community service terminals (CSTs) and was obligated to roll out 52 000 CSTs. Cell C far exceeded its target, with over 100 000 CSTs having been deployed due to market changes (Reduction of retail mobile tariffs). This programme has ceased to be commercially viable and as of end October 2016, there are only 7099 CST’s active. Current obligations have been amended to include connecting schools with tablets, routers, trolleys, projectors etc. To date, Cell C has rolled out infrastructure to 400 schools and by end of 2016 it will have covered 600 at a cost of R78 Million. It was planning another 300 schools by March 2017 at a cost of R39 Million.

35% of Cell C’s mobile revenue came from the informal sector and this is distributed through six wholesalers who in turn empower thousands of agents who are on average earning between R2000 and R3000 per month. Distributors also distribute to Spaza’s contributing to the spaza revenue stream, our distributors offer the agents full back office, IT Support, Marketing Support, Training and mentoring. In 2017, the company was looking at increasing its distributor base. 178 out of 195 Cell C shops are franchised, 39 Franchises were 42% white owned, and 58% black owned.

Briefing by Boniswa Corporate Solutions on its Product and Service Portfolio
Ms Lynnette Magasa, CEO, Boniswa Corporate Solutions, provided an overview product and service portfolio of the company including some of the equipment and services that it manufactures and supply. Furthermore, she highlighted that Boniswa was growing rapidly since its inception in 2004. The company expanded both its national and international footprint with offices in the Eastern Cape, KwaZulu Natal and Limpopo, and its international footprint included offices in Botswana, Zambia and Swaziland.

Services provided by Boniswa include the following; turnkey site building, site acquisition, construction, engineering, logistics, technology R&D innovation, project management, radio/mobile installation & maintenance, RF installation and maintenance. Boniswa is currently engaging with local municipalities to take advantage of the concept of an establishment of a Smart City, by providing RF (Radio Frequency technology) and network towers that are linked with the city street lights. We aiming at making use of the street lights, because the infrastructure within cities may not be suitable to build towers for operators in between building. Hence, we are looking at incorporating the technology in the towers in the street lights, basically we will be using the street light infrastructure instead of installing the towers. This will also be cost effective. The company has done a considerable amount of research in this concept, and hopes that operators will come on board and make use of our infrastructure and technology.

Non-Payment Matter (Huawei, Brolaz and Cell C)
The Chairperson asked Ms Magasa to enlighten the Committee on the non-payment situation with Cell C.

Ms Magasa stated that last year November, the Cell C Cape Town office invited Boniswa to implement a solution to build sites, and Cell C needed the solution implemented urgently as Boniswa normally rolls out for the Christmas coverage. Boniswa was offered 14 sites that amounted to over R4 million with a purchase order of about R4.7 million to roll out the 14 sites. The purchase order was given through Brolaz, which would invoice Cell C and then Cell C will pay Brolaz and Brolaz will pay Boniswa. Boniswa contested this arrangement, and it surfaced that this is how things are done, however, Boniswa was told by the Cape Town office that it will try to change this arrangement. The arrangement was that Boniswa will carry the work but payment will come from Brolaz to Boniswa, unfortunately, Brolaz filed for insolvency and was not able to deliver payment to Boniswa. At this point, Boniswa had already built two sites which Cell C is already generating income from, but no payment has been made yet. The two sites were brought up on air on 19 December 2015, and the amount for the two sites was R845 000. The remaining materials, we tried selling it to different companies and now we are only left with a few materials, we owed the suppliers and the suppliers were threatening to blacklist us. As it stands our finances are quite bad, and Boniswa has tried its utmost best to communicate with Cell C to assist it, hence, it called on the Portfolio Committee to intervene. The company employed about 160 employees and this non-payment issue had significant financial implications on the company, and might lead to loss employment.

Mr T Chance (DA) stated that Boniswa’s presentation touched upon key things with regards to the development of SMMEs in the country, and one of those is demonstrating innovation by taking advantage of the Smart City concept. Furthermore, the current financial issue with Cell C will certainly leave the company in a dire financial position, and that is a problem. He asked on a scale of one to ten, ten being the worst financial position and one being an excellent one, how would Ms Magasa rate her company right now.

Ms Magasa replied that cash flow was the core and most important tool for the viability of the company, and its life line. At the current moment, she would give the company a score of nine. It was in a dire financial position and could not afford to forgo the Cell C payment.

Mr Chance asked Ms Magasa about her qualifications, background and experience in the field in which Boniswa operated. On the basis of what’s been shared in the presentation, he did not think that the company was a small company any more considering that it had about 160 employees.
Ms Magasa said that she started as a receptionist at Denel in 1995, and moved from that position because she got a promotion to work in Human Resources. She then furthered her education, and received a master’s degree in Informatics and Advanced Management programme from Wits University. She was currently finishing up her MBA from Regenesys Business School. The company was established in 2004, with only five employees, her journey had been very amazing. One of the competitive advantages were that the employees she started with were still employed in the company to this day and most of the employees were also partners in the company – the company had an open plan system, where everybody understood that they were a piece of the puzzle and the books were open to the employees. The company started with an investment capital of R700 000, and being the only player in the industry – it started as a small company that did RF under Siemens, which is just putting up antennas and the company consequently grew its vision. So in order to grow the confidence of the client, the company had to deliver before time and whatever proceeds it received from the clients were ploughed back to the company so that it could grow. The company also did research as a key strategic plan to grow, with a turnover of R60 million per annum. Due to challenges in the country, the company grew outside the country to expand its footprint and to look for work in the neighbouring countries like Botswana and others, consequently, it was better placed in a position to supply some other major key global players like MTN and others.

Mr Chance asked the Boniswa delegation to tell the Committee a bit about its five year plan as a rapidly growing company, and what assistance the company would need from other organisations in order to help it get to a point in which Boniswa became an established global company with a R3 billion per annum turnover.

Ms Magasa said as part of its growth strategic plan, the first thing is establishing its own factory to manufacture and build its own towers that could be shared by operators. She wanted the operators to be able to save, and supply the operators with containers next to these towers. Boniswa would also like to participate within the smart city concept, where the company could make use of the city street lights and use them as gap fillers, because operators face the challenge of not being able to build towers within the cities due to infrastructure and buildings. Boniswa had sat down with the planners, as well as the operators and the planners from Cell C, last year in 2015, but the only challenge is that there is a gap between us small players and the big players, because we plan with the planners and come up with designs and then people start looking the other way when time comes to work with the small players and if we get that, it will provide a significant amount of job creation. Boniswa is also looking at a strategy to say, at the World Trade Organisation, that we need companies that are going to be paired (big players with smaller players) – if these big companies receive a lot work, that work can be split between the small and big players on a 20:80 ratio, respectively. In this way companies will be able to partner to create jobs, whilst also advancing the SMMEs, and assisting in skills development.

Mr Chance asked the Cell C delegation, whether it had been able to investigate the problem outlined by Boniswa, and explain its side of the story and why Cell C had to go through an intermediary to effect the supply of these services.

Mr Kajee replied that he became aware of the problem yesterday, and the reason that Cell C went through the intermediary is because of cash flow and related matters. Upon being aware of the issue, he and Mr Moela contacted the CTO (Chief Technician Officer) to request more information about this issue. When Cell C took on bigger projects, it approached the Chinese government for funding which is paid over a period of seven years with a grace period of four years. The Chinese then placed an order and with our planners Cell C decided where it would build the base stations. In this case it was in Cape Town and Cell C gave Huawei the order to build the base station in Cape Town, Cell C then had a tripartite agreement with the sub-contractors. Cell C placed an order with Huawei, and Huawei placed its order with Brolaz which is a similar company to Boniswa, and Brolaz then placed an order to Boniswa (tripartite agreement), and payment was made to Brolaz of about R17 million last year. Brolaz subsequently went insolvent due to cash flow problems because they were owed about R16 million by MTN through Huawei. Brolaz was currently under liquidation at the moment.

Mr Chance asked Ms Magasa if Boniswa had communicated with the liquidator to receive a portion of the money owed.

Ms Magasa replied in the affirmative.

Mr Chance stated that contractually there is a problem, because Boniswa supplied Cell C but its invoice was issued to Brolaz. The situation had a cascading effect, if Huawei did not pay, Brolaz can’t pay Boniswa – this value chain is flawed, but contractually this is the picture. He then asked how Boniswa saw this being resolved.

The Chairperson said that she had a different view on this matter, the company that wanted the masks and the company that was now earning revenue is Cell C. The arrangement that Cell C made with its other stakeholders should not be an arrangement that affected other companies like Boniswa, in this case. The fact that Boniswa can not be dealt with directly by Cell C is not Boniswa’s problem but a cartel type of behaviour. She asked why Cell C had to go that route and not deal with Bonsiwa directly, or insert conditions on the relationship between Boniswa and Huawei for a contingency plan should a situation of this nature arise, and what role is played by Brolaz, a level five BEE company, if Boniswa (a level 1 BEE company) provides the very same services; how come Huawei did not deal directly with Boniswa or for Cell C to institute a relationship between Boniswa and Huawei instead of having a middle man who’s now under liquidation.

Mr Kajee clarified that Brolaz was a level two BEE company as far as the records provided to Cell C. The reason this had to be done was that Brolaz had a relationship with Huawei, if Cell C could, it would love to deal with sub-contractors directly but there was no cash flow for this. Cell C had approached the South African government, the IDC and DBSA to ask for equity support, but to no avail, which was why it was then forced to approach Chinese banks and this funding came with terms and conditions, which had to be abided through the payment period. Cell C had been around for 12 years and it only turned profit for the first time last year. The tri-party agreement between Huawei and Brolaz took 18 months to sign off, and he could not comment on why Boniswa does not have a relationship with Huawei. There was an official liquidator appointed to handle Brolaz’s financial affairs, and Cell C can not get involved in the process, he could not comment or furnish any information about the liquidation process because it was handled by the liquidator.

The Chairperson recalled that in her meeting the previous day with Mr Moela, he promised that Cell C would bring Huawei in today’s meeting, because without Huawei this matter could not be resolved. When a South African company approaches a company like Huawei which is backed up by the Chinese bank will not impose terms and conditions that are favourable towards South African companies, the Chinese will look out for their companies and this presents a challenge which is Chinese companies having more advantages than SA companies, in terms of supplying the equipments, services and technology.

The Chairperson asked why Huawei was not at the meeting.

Mr Moela said that after the meeting yesterday, he contacted the CTO, who had a relationship with Huawei to make contact with itto try and get the representatives to come this morning but they did not come, and no reasons were furnished to Cell C as to why.

The Chairperson replied that the same thing happened with Vodacom when they came to the Portfolio Committee, and so Cell C must be mindful that the Committee had powers as prescribed in the Constitution to summon anyone to come to the Committee (Parliament). It can not be so that Cell C gave Huawei a contract, a contract which iwa detrimental to South African companies and not make itself available when summoned by the Committee. This left Cell C equally responsible for this.

Mr X Mabasa (ANC) asked whether the terminology of Cooperatives existed in the policies of Cell C, in its attempt to contribute towards the growth of the SMME and Cooperative sector. Secondly, he was interested to know what the policy approach of Cell C was regarding rural development. Lastly, on the challenges facing Boniswa regarding the unpaid monies for services rendered, what possible solutions can be devised at this stage moving forward. In this matter, Cell C can not wash its hands. Basically, Cell C needed to take responsibility for this mess and devise a way forward that will be favourable to all parties especially Boniswa.

Mr Kajee replied there are Cooperatives in rural areas that are part of the shareholding, and that was where they fit in at Cell C at the moment. There were about 42 groupings that were shareholders and amongst them there were some Cooperatives within the rural consortium, Cell C has no policy regarding cooperatives. However, he said, the company used cooperatives and rural sales channels, from which Cell C makes a 30% mobile turnover. As a policy Cell C have no bias in favour of rural companies or rural subcontractors.

Mr Moela said that operators should fulfil their role in terms of providing access to mobile services to rural areas. Whilst on the operational side Cell C did not have a policy on rural areas, it was licensed and obligated to roll out in those areas.

Mr Mabasa said that most cooperatives were players in the SMME sector – the Committee’s objective and interest in cooperatives was informed by the fact that as government assisted companies to grow as well as the private sector played its part, it was important that it was done with an aim to broaden those that will benefit, hence, it was important that Members ask companies if they were aware of cooperatives. He asked Cell C to provide the Committee with the details of those cooperatives that it had interacted with, so that the Committee can identify them.

Mr Kajee replied that he knew that they were in the shareholding, and all the wealth generated by Cell C, that wealth was be distributed accordingly, and furthermore, he had never met cooperative companies in the ICT sector, and would like to engage with them if they existed.

The Chairperson said that Cell C was generating income from services rendered by Boniswa and the fact that Boniswa has not been paid for the service it provided to position Cell C to generate income out of it, makes her cringe. And Boniswa has brought this up to the attention of Cell C several times, so Cell C was aware of this issue, but yet it was not doing anything about it but continued enjoying profits.

Mr Kajee replied that Cell C can speak to the liquidator but it can not intervene in the process. Furthermore, Brolaz has been paid for the services.

The Chairperson interjected and said that it did not matter, because the most important thing here was that Boniswa was not paid for a service that it rendered which Cell C was enjoying the fruits thereof.

Mr Kajee said this is something that needs to be looked at because Brolaz can also sit here and say the same thing that it has not been paid by Huawei, it’s a risk one takes as a business person. Due to Cell C’s constraints, there was the agreement with the Chinese bank through Huawei, it was a business decision Cell C was not saying it was not going to help Boniswa in this matter. He could not go to his shareholders and tell them that he had paid Brolaz and now the company needed to pay Boniswa because Brolaz failed to pay Boniswa. If only Cell C was receiving funding from government or South African banks, these things would not be happening. Cell C had approached government to ask for funding but government did not want to fund it. Cell C understood that it was a flawed system but there was no other way, unless it shut its operations down, which will consequently lead to a massive loss of employment. Cell C did not have a choice but to branch out of the country to seek funding, if the Chairperson believed there was a better commercial model that it could employ, Cell C would be willing to listen to it and take cognisance of it. However, right now this was the only model that kept Cell C in operation.

Mr Mabasa suggested that it was important that Cell C admit to employing a flawed middle company. In addition, it was worrisome to think about how many other companies (SMMEs) that were in the same position as Boniswa. It was Cell C’s responsibility to rectify this.

Mr Kajee said that he did not like the term flawed, because any company could go through insolvency. Furthermore, he said that there was no cash viability to pay the sub-contractors directly unless they were going to give a seven year payment plan. Cell C could only engage with Boniswa through Huawei. They needed to go back to the office and confer with the legal people. Cell C would look at all the solutions at its disposal to assist in resolving this matter.

Mr Mabasa said if you speak about the seven year contract, what impression was the Committee supposed to get from this, because some of these sub-contractors are SMMEs who cannot afford to be under that payment term. This would ultimately lead to the death of SMMEs, unless you can say the seven year was a word that came out mistakenly, but it took away every positive thing Mr Kajee had just said.

Mr Kajee said at the moment Cell C had a seven year payment period, and that was the only mechanism that Cell C employed to pay off its debt from a cash flow perspective. Of course this would not work for SMMEs. He was referring to a capital funding.

Mr Mabasa sought clarity that when Cell C said seven years it meant that what was owed to the companies will take it seven years to settle, and if that’s not what was meant, he gladly forfeited his statement. 

Mr Kajee replied that when Cell C went to Huawei it received a capital funding, and the last funding received from the Chinese Bank was $400 million and that was to finance the roll out in the next four years, and Cell C gets a payment holiday of four years with this funding. As a result, Cell C must ensure that revenue will be greater than the cost of capital.

Mr Moela said that this vendor financing model that Cell C employed was not perfect and ideal. There were alternatives, the company had explored some but they have not been fruitful. This vendor funding limited how Cell C could spend the money, and that’s the biggest challenge it faced now. It would be ideal for Cell C to contract companies like Boniswa directly but unfortunately – exclusive rights to roll out the network must be supplied by Huawei.

Mr Chance said that vendor funding had costs and benefits, and the benefits include receiving the capital funding that Cell C needed, but the disadvantages include anti-competitive factors which was precisely what Cell C is suffering from. So why had Cell C been unsuccessful in raising its own money both from the South African government and other sources.

Mr Moela replied that in the first year of operation the company was funded by the main shareholder which was Telkom for the following reason: there was no market share for a third operator, and the appetite for funding diminished significantly because the major shareholder had a lot of debt, so Cell C relied on the shareholders contribution which was not sustainable in the long term. So Cell C went back to the market to look for funding, but the major shareholder was carrying a lot of debt for Cell C to receive any funding in the South African market, as a result, it resorted to the current model. So it was not that Cell C fled to the Chinese banks, it made attempts to try and get the funding locally.

Mr Chance noted that Cell C was now going though a recapitalisation. What was the impact of this and would this assist the company in terms of going into the money market to raise the money it needed in becoming independent.

Mr Kajee replied it will. Once the recapitalisation happened the debt will drop down from R22 billion to R6 billion. However, it did not mean that Cell C would not go back to the Chinese banks because it still needed to roll out the 4G and 5G networks in the near future.  The company was also in discussion with Ericson and Nokia for funding and favourable terms. However, their risk appetite was far lesser than the Chinese bank. Cell C had one creditor which is Nedbank and the DBSA with just a debt of R2 billion. Furthermore, the team would look into the reasons why the IDC refused to grant Cell C funding, and that information would be provided to the Committee.

Mr Chance said that vendor financing was a major problem, take for instance the nuclear deal, the SA balance sheet won’t allow it to borrow R1 trillion in the open market, it will add 25% in the debt and the country did not have the balance sheet and credit worthiness to borrow in the open market, which was why the Russians were coming forward to show interest to borrow SA the money but that money had terms and conditions that may not be favourable to South Africa. This basically meant that the country will be owned by these people for however long it takes to repay the money, which was why a credit downgrade for this country will be disastrous, because it meant that the country can’t go to the bond market to borrow money. The cost of capital was essentially what stopped companies from growing. The Committee needed to ask what the structural impediments were within the economy which were preventing businesses from being risk averse and lowering the cost of capital and cut out the middle man so that the country can be able to grow businesses like Boniswa. One of the things that Boniswa has clearly achieved - it’s a business model based on innovation, and innovation invariably comes from small companies not big companies. With regards to the half a billion of procurement to small companies that Cell C has, he asked the delegation to provide a list of companies that this money was spent on as as well as the types of products and services they provided.  Secondly, Cell C had a level three rating, how was that achieved in terms of its scorecard? Further, was Cell C’s supplier development designed to tick the boxes to acquire the points or was it designed to seek out businesses such as Boniswa who can through innovation and customer service make your business more competitive? Lastly, did the relationship Cell C have with Huawei and ZTE constrict it from proper supplier development of its core business.

Mr Kajee said that he did not have the list of all the companies that make up the R500 million procurement list, but the list can be e-mailed to the Committee in due time. He will also e-mail the level three certificate as well. Cell C scored high on procurement except in skills development and staff development, but on CSI (Corporate Social Investment) and enterprise development on the sales aspect. When it came to supply development Cell did not have a programme and the arrangement with Huawei and ZTE constricted the company, both suppliers would ideally like Cell C to buy their materials, because they had the money and access to capital so they dictate how the money should be spent.

Mr Chance asked what Cell C had done with the 97 000 containers that were not being utilised.

Mr Kajee said it was not 97 000 containers, the figure was 130 terminals, the containers were about 22 000 and were spread out all over the country. Most of them were not being utilised for their initial purpose.

Mr Mabasa said that he would like to hear more about the reasons why the IDC could not assist Cell C for funding.

Mr Moela requested that this information be responded to in writing.

The Chairperson agreed to this request, and handed over to Ms Magasa.

Ms Magasa said that her understanding was that the delegation present only became aware of the matter with Brolaz last night, but she would like to share the e-mail she sent to the CTO (on 25 July 2016) pleading with him to consider paying Boniswa on the basis that a similar company that was in the same position as Boniswa was paid the money that was owed to it, but the conditions were that; the company will pay Cell C back as soon as Huawei pays that company its money. Furthermore, she said that she will forward that e-mail to Mr Kajee and Mr Moela to peruse it and perhaps it could convince Cell C using that situation as precedent.

Mr Kajee in response stated that if that R17 million was not allocated to the two sites, then Cell C will take responsibility and pay Boniswa what was due to it. However, if that is not the case, he can not make that call right now without consulting the shareholders.

Mr Chance said that surely Cell C can look at the invoice to determine what the money was paid for.

Mr Kajee said that this will have to be done on Monday, and latest on Tuesday, there was a bit of admin involved but, he said attend to the matter.

Mr Chance asked why has this had taken over a year to get to this point, and not resolved earlier. The CTO had been sitting on this for months and nothing was done. He asked what payment terms were negotiated between Boniswa and Brolaz.

Ms Magasa said that the payment terms were that after Brolaz had received payment from Cell C, Brolaz would settle its payment to Boniswa within three days. Cell C would take 45 days to settle its payment to Brolaz, and thereafter, Brolaz would make payment to Boniswa.

Mr Chance asked whether Boniswa had any means to determine whether Brolaz had been paid by Cell C.

Ms Magasa said that yes. Boniswa contacted Brolaz and the owner said that he did not receive payment. She said she will provide an e-mail as evidence to this.

Mr Chance said that Boniswa was only taking the owner’s word for it, and had not seen any bank statements or proof of payment as yet.

Ms Magasa said that on that e-mail exchange between her and the owner of Brolaz, the owner of Brolaz had copied Cell C in that e-mail, which specifically stated that payment was not yet received from Cell C.

Mr Chance asked if Cell C responded.

Ms Magasa said that Boniswa did not receive any response in this regard, and the proof of payment was also requested but to no avail.

Mr Chance then asked when Brolaz was liquidated.

Ms Magasa said she believes around February or April, but she was unsure.

Mr Chance said this goes back to Cell C not paying Huawei, and Huawei not paying Brolaz and consequently Boniswa. So perhaps Huawei was unable to pay Brolaz, because Brolaz should have been paid by Huawei, but Huawei did not pay them, and then Brolaz came crawling to Cell C. So Cell C broke its agreement with Huawei, which trickled down to Boniswa not receiving its payment, he said somebody here is not telling the truth.

Mr Kajee replied that Cell C had proof of payment and this can be furnished to the Committee, they wanted R19 million but Cell C could only release R17 million at the time. So what Brolaz did with the money is information that was unknown to Cell C

Mr Chance said only the liquidator can resolve this problem.

Mr Kajee said that if it turns out that money has not been allocated to it and Cell C did not pay for those two sites, he can only make that call on Monday or Tuesday.

Mr Chance said that the liquidator was the only one who can release this information, whether payment was received or not.

The Chairperson came in to share her sentiments about the lack of substance in the presentation made by Cell C regarding economic transformation policies biased to SMMEs and Cooperatives. Furthermore, she said the letter that was sent to Cell C on 27 October 2016, which clearly stated that, the company was invited to come and brief the Portfolio Committee on its economic transformation policies biased towards SMMEs and Cooperatives, and the presentation should demonstrate the total number of SMMEs and Cooperatives developed or used in their locality, adherence to 30 days payment, adherence to procurement to policy and measures of reducing red tape, and all these things were not highlighted in the presentation made by Cell C  today. Furthermore, the letter specifically referenced the case study of Boniswa to be touched upon in the presentation, so it is not true that the delegation present was not aware of Boniswa’s situation.

Mr Moela replied that the Chairperson’s remarks were correct. He apologised for misreading the Boniswa case -the delegation understood the case study of Boniswa as mentioned in the letter as just a case study of a small business within the ICT sector. It was not interpreted as a complaint. He apologised again for this error.

Mr Kajee asked if in its policy the Committee inserts that the model of “once and SMME, always an SMME” be given reconsideration, because after a certain period of time these companies grow bigger and they start having bigger problems, and cross over the threshold of an SMME or EME or QSE.

The Chairperson thanked the delegation for their time, and submitted that the Committee Secretary will write to the delegation again for further engagement on some of the issues that were not covered in today’s meeting.

The meeting was adjourned.



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