The Portfolio Committee on Small Business Development received a briefing on the elbowing of small enterprises by big companies in the telecommunication sector. The Chairperson referred to the absence of Cell C as an indication that they did not want to form part of the process of solving the issues between themselves, Brolaz and Boniswa, as well as being part of the collaboration between small and big businesses. Big businesses should not punish small businesses, because they did not have the capacity to withstand such treatment, and they should instead strive toward training, up-scaling and supporting them, because they received incentives to do so.
Three small companies addressed the Committee on the challenges they faced in dealing with big businesses. They said that small businesses did not intend to compete, but rather to complement; big businesses in their growth paths. The attitude that big businesses had of solving each dispute that arose between themselves and a small business through litigation was very detrimental. This approach was based on the knowledge that the small businesses could not afford the process of litigation. The result of this left the small businesses blacklisted and/or needing to retrench staff. Another challenge was that big companies received the bulk of their workforces from small businesses, which suffered as a result of this poaching. Most of the employees sitting in the corporate world had prior experience in small businesses.
A Member said that although there was an expectation that 90% of employment in South Africa would be generated from small businesses by the year 2030, the current situation indicated this projection was too optimistic. The reason why the country did not have enough businesses was that 80% of the population had been disadvantaged for many years. The majority had not had the capital, opportunity or the skill to start their own businesses. Access to finance and access to skill were major concerns. Not enough businesses were being created in the country, not enough were surviving, and not enough were growing. This Portfolio Committee had set out to level the playing field for all entrepreneurs in the country. Members also sought more information on the role of the unions in resolving disputes between big and small businesses.
The Chairperson suggested that as the Portfolio Committee was a legislative arm, legislation should be considered to regulate the relationship between big businesses and small businesses. All the Committee Members felt this was necessary and should be looked into.
The Committee thanked Vodacom for its engagement and willingness to develop and contribute to the socio-economic transformation of the country. Vodacom was invited to the proceedings and them responding with willingness to the invitation to engage on the matter, and had positively contributed to what the meeting had hoped to achieve. Ericsson’s decision to arbitrate and continue to bully small businesses using delaying tactics and elbowing was noted, and the Committee mentioned that this would not be an option available to big businesses for long. It was commented that small businesses had suffered at the hands of big businesses for far too long, and that legislation to amend these issues should be initiated.
The Chairperson said the purpose of the meeting was for the Committee to follow up on issues that had been dealt with previously. Issues brought to her attention involved small businesses who were complaining about the behaviour of big businesses. Members saw it as bullying and the “elbowing” of small businesses by big businesses – a terminology which came from big businesses, not the small businesses.
The companies that came forward were mainly in the telecommunications industry, but also from the construction industry. There had been cases brought to the Committee's attention by small businesses in the construction industry, which were subcontracted by big construction companies.
The reason that these matters had been brought forward was that the Portfolio Committee was a legislative arm of the state. If there were issues that affected small businesses but there was no form of legislation or protection, as well as no structure that handled those issues, the Committee had to discuss the matter to get a sense of whether there was a need to legislate or not. At the first meeting, when this matter was brought up, there had been different views amongst the Members of the Committee. Some felt the issues were contractual matters between the big and small companies, and that the Committee had nothing to do with them. The Chairperson said she had then educated the members who had been thinking along those lines.
She pointed out that a new department -- Small Business Development -- had been established in 2014 to deal with these matters.
The Committee was going to assess whether there were unfair practices that were impacting small businesses. As a result of the ways in which small businesses were being treated, legislation was being put in place to regulate unfair relationships so that they could be corrected. The Portfolio Committee had a responsibility to come up with a Bill. It was projected that 90% of the jobs in South Africa would be filled by small businesses by 2030.
The Chairperson urged big businesses not to punish small businesses, as the latter businesses did not have the capacity to endure this kind of treatment. Also, big businesses should train small businesses and upscale them, as they received funding to do this. There were people in the country who had ideas and who wanted to employ themselves, but they did not have the technology, finance or networks to do so. Big businesses were not transferring skills to small businesses as a gift. Small businesses received a rebate from the Government. The Government gave big businesses additional rebates when they spent on small businesses.
The Chairperson wanted everyone present to approach the meeting with two things in mind; to make the cases being analysed case studies for all small businesses, and to look at the prospect of initiating a Bill for Parliament to pass. The companies who were present at the meeting and who had come forward were working towards the development of a possible Bill. This should be an opportunity to educate both big and small businesses together so that they could upscale each other.
Mr M Mabaso (ANC) indicated that the Committee would want companies to note that it represented both the companies, as well as the poor. It was the duty of big businesses as well as government to try and help the small businesses to grow, so that as a country, South Africa could be like other global countries. He said the big companies should not compete with small businesses. Small companies did not intend to compete with big companies, but rather to complement the bigger companies in their growth paths.
Cell C/Brolaz/Bonsiwa issue
The Chairperson moved to clarify the matter between Cell C, Brolaz and Boniswa, where Bonsiwa had contracted to manufacture certain goods for Cell C. The issue was not merely the payment of Boniswa for services rendered, but Boniswa not being able to invoice Cell C directly for the business conducted between the two companies. There was a financial matter that needed to be addressed. There had been a difference between the amount given by Cell C to Brolaz to pay Boniswa, and the actual amount Boniswa had received in the end.
The Chairperson asked what the role of Brolaz had been in a transaction that involved only Cell C and Boniswa. Boniswa did not have a contract with Brolaz, and she wondered why Brolaz was involved in this matter. The main concern was the question of why Boniswa was not given the opportunity to invoice Cell C directly. Also, why had Boniswa to go through Brolaz to invoice Cell C? Cell C had informed the Committee that they would not be resolving the issue, because they had already paid the invoice to Brolaz, so their view was that this matter had accordingly been settled.
The Committee had reached a consensus that Cell C would not have paid Boniswa if Boniswa had not approached Parliament over the current matter of non-payment. It had already taken Cell C 15 months to resolve the matter, and it was only when Boniswa had decided to ask Parliament to intervene that Cell C had moved to resolve it. The remuneration paid to Boniswa had not included interest. The attitude that big businesses had of solving each dispute that arose between themselves and a small business through litigation was detrimental. This approach was because big businesses knew that the small businesses could not afford the process of litigation. This was the bullying tactic exercised by big businesses on small ones.
The Chairperson said that in all meetings that the Committee had held, there had always been a member missing who should have been present to explain the matters arising from the disputes. She emphasised that it should be noted Huawei was here today, but Cell C was not present although it had been clarified why they needed to attend.
The proceedings would begin with three companies – Screamer Electronic Services, Southtel Holdings and Digiwire Technology -- informing the Committee what their issues were. After that, Huawei, Telkom and Ericsson would respond to the matters raised. Boniswa would also be updating the Committee on how its relationship with Cell C had improved.
Screamer Electronic Services
Mr Essa Govender, Vice President: Screamer Electronic Services, began by describing the positive direction that the larger corporate industry was taking with respect to Screamer. Screamer had been able to make good strides, as there was more cooperation, interaction and consideration of the expertise that Screamer had as an organisation which dealt primarily with the electronic repair of telecommunications equipment.
Screamer was a 62% black female-owned company. It was a level 2 Broad-based Black Economic Empowerment (BBBEE) company, operating in a niche industry on the African continent in particular, with the repair of electronic equipment for all equipment telecommunication manufacturers. There was no other company on the African continent that was an independent company that had ownership by a black female such as Screamer. Mr Govender said that this should be sufficient to gain support from the broader telecommunications industry to make sure that it thrived.
Mr Govender then described the challenges that Screamer had experienced, and continued to experience. At one point, the company had had 2 500 employees, but now it was down to just about 100 employees. He said that 70% of Screamer’s employee base were black South Africans, and asked what other box it had to tick. In many instances, he gets told that it was the company’s quality, but if it was a quality concern, then the Committee should provide support to improve the quality level. Screamer should not be dismissed because the company had quality issues. It had been servicing Telkom for 20 years, representatives of which were at the meeting. He asked how many issues Telkom had had with Screamer’s electronic repairs, and said that one in a thousand would be a high number.
Mr Govender explained why Screamer Electronic Services was considered a niche industry. There were certain pieces of equipment that were supported by the original equipment manufacturers, such as his colleagues in the room. A device would go under warranty, where there was an end of life, or out of support deadline, but the device still worked. This was where Screamer came in. The company ensured the company engineers could restore out-of-warranty equipment back to working condition, and brought it back into the industry. Screamer also gave a one-year warranty on all the devices that they restored. South Africa could manufacture good quality equipment and restore things to their original standard. His appeal to his colleagues present in the meeting was that they engage more with Screamer Electronic Services so that it could conduct the repairs they needed at a fraction of the cost.
If repairs were done offshore, then payment was due in American dollars. This affected the forex of the country. It also did not support the local industry or upscale the people of South Africa. Screamer was articulating the need to build and maintain the field of repair in telecommunications. His appeal in the engagement with stakeholders, was that Screamer received support.
Ms Ivy Matsepe-Casaburri, former Minister of Telecommunications, had launched the notion and pushed the thinking that “when it breaks in South Africa, it should be repaired in South Africa”. The Chairperson asked the Committee Members to keep this in mind, and to consider whether there was a need to legislate this statement initiated by Ms Matsepe-Casaburri. Other small businesses would be affected by this.
Mr Oscar Dube, Founder: Southtel Holdings, said he had founded the companyin 2005. It specialised in the deployment of fibre planting, and end to end deployment, and was currently doing a lot of work for Telkom. He was here to discuss an issue with Cell C that had been ongoing since August last year.
As a brief history on the matter, Cell C had given Southtel their first order in July 2016, which had been executed with no issues. The order had been for the deployment of operators by Southtel, and each operator had to deploy internet access to 1 500 schools. The purchase orders had been received and were in good order. In February 2017, a different contract had arisen, with two more orders. The equipment had been sourced and brought into the country, and then the company had waited to be informed on when to start with the installations. The invoices had become due in August 2017. Southtel had held the equipment that was sourced since August 2017. It had pressed Cell C for payment, and this was where the matter of non-payment had arisen. While it was holding the equipment, Cell C had then terminated the contract. The only way to proceed with the matter was through arbitration, which was very expensive. Southtel had tried this method until they acknowledged that taking on Cell C was not a viable option.
Cell C had only paid the arbitrator when the Portfolio Committee on Small Business Development had become aware of the matter. As the matter stood, Cell C had not put forward their statement of defence to the arbitrator. A figure of R13.794 million had accumulated interest since the commencement of the matter. This amount had accumulated interest of 10.52%.
Southtel Holdings had been a growing company before this issue with Cell C, and thanks to Telkom the company was being rebuilt.
The Chairperson said she was sure those present at the meeting were taking note of the issue. She commented that the equipment from Southtel Holdings should be bought, and that the funds would be allocated.
Ms Velosh Govender, Director: Digiwire Technology, said that Digiwire was a company that had introduced advanced technology into the South African market. It had started in 2010, when it had procured a system from North America to monitor all underground infrastructure, and she had realised at that point that South Africa’s infrastructure was not developed. Due to this, a civils division had been introduced to build and develop infrastructure. It had been created to understand the infrastructure to apply the technology concerned. Digiwire was now a registered contractor with the Construction Industry Development Board (CIDB). In 2015, Digiwire had been audited and vetted by Huawei Technologies, which had taken about six weeks to complete.
From September 2015, Digiwire had started building and developing sites for Telkom by sub-contracting to Huawei Technologies. The sites had been completed in the first week of May 2016. There had been numerous challenges that had contributed to delaying the process. As Digiwire began building the sites, there were numerous people including the Chinese being trained on our built sites. As a result, the sites had been damaged, and this had prolonged the process to finish the sites. She added that Digiwire had suffered late payments and outstanding invoices that had not been paid. The late payments varied from three weeks to three months.
In the process, and due to the late payments, the civils division had had to close. There had also been the matter of outstanding work completion certificates and CIDB upgrading. Ms Govender said that the issues Digiwire had been facing involved Telkom and Huawei. The Promotion of Access to Information Act (PAIA) route had also been considered regarding this matter. Telkom’s response had been that Digiwire needed to address Telkom as a private body, since Telkom was not a public body. Huawei’s head of procurement had stated in writing that Digiwire should apply through the courts. they had no knowledge of what a work completion certificate was. She had then had to explain this to Huawei. She had raised questions of how Telkom had awarded this contract, all construction tender must be advertised on the CIDB website. In 2016, Digiwire’s lawyers had met with Huawei. The matter for discussion had been that Huawei were under no obligation to promote BBBEE. Also, Digiwire had outstanding work completion certificates from Huawei.
Ms Govender said that she had lost all her trained staff since 2010, and that when she started, she had 165 employees in her team. Ms Govender added that Digiwire Technology worked very closely with the EPWP Program in empowering and transferring skills.
Boniswa Corporate Solutions
Ms Lynette Magasa, Chief Executive Officer (CEO): Boniswa, started by outlining a brief history of the company. It had started in 2004, and was currently sitting with 160 employees. It was a 100% women-owned small business. It had its own factory where it designed and manufactured cabinets.
She thanked the Portfolio Committee for their support during the matter that it had last year with Cell C regarding payment. Through their intervention, Boniswa had been able to receive their payment. She added that big companies received many of their employees from small businesses, which suffered because of this poaching by big businesses. Most of the employees sitting in corporate firms had experience in small businesses.
A major challenge with having a small company was the fact that they were unable to afford access to corporate lawyers. She was fortunate enough to have sat at the United Nations and had made note that it was very important for big players in the corporate world to partner with the small and medium enterprises so that no one died in the process. She spoke about the importance of enterprise development, and said that “small businesses walk through a journey, while small players walk the journey through”.
Mr Herman Kannenberg, Head of Legal Affairs: Huawei Technologies, apologised for not being present at the other meetings that had previously taken place. He had noted the issues raised by Digiwire in the last couple of months, and Huawei had taken a hard look at themselves and where they stood. Regarding the matter of the work completion certificates, he said that final acceptance certificates (FACs) had been issued for those sites that had been completed. He indicated that this may not be enough for Digiwire. The process would be finalised within a week.
The second point he addressed was the matter of outstanding payments, and said that this kind of business was not practiced by Huawei. It had invited Digiwire to engage, and would like to revisit that correspondence.
He clarified the mechanics of the relationship, and where Huawei was involved in the Boniswa issue. Huawei had entered into an agreement with Cell C, in terms of which Cell C consolidated the management of their sub-contractors through Huawei, so instead of Cell C having to take on the specific project deal with 100 sub-contractors, they had asked Huawei to take over those contracts. Part of that function was to take over a contract that Cell C had with Brolaz. His understanding was that Brolaz had then contracted with Boniswa, and that this may have happened prior to Huawei taking over the contract. After this contract entered into, Brolaz had gone into liquidation. Boniswa had then invoiced Brolaz and Brolaz was supposed to have invoiced Huawei and Cell C. The payment was then meant to go through to Boniswa. As far as he knows, the payment never made it to Boniswa and this was a direct result of the Brolaz liquidation. Huawei did not have a direct contractual relationship with Boniswa, and the first time Huawei became aware of this was at the previous Portfolio Committee that had taken place.
Mr Mabaso (ANC) said that he just wanted to note that when small businesses went into business relations with big businesses, poor communication like this did not occur.
Mr Siyabonga Mahlangu, Group Executive : Regulatory Affairs, Telkom, said he wanted to reiterate Telkom’s commitment to social upliftment and the improvement of small businesses. In this respect, Telkom had broadly three initiatives that it was currently running, through which it tried to improve small businesses.
He highlighted some of the activities that were placed under a programme called the “Future Makers Programme.” Up to date, this programme had established 24 internet cafes, three hubs where Telkom provided work space, and technical back-up and business workshops for small companies. Telkom had since contributed R381 million to support emerging businesses, and this had translated into 1 600 jobs. Small businesses had access to over R200 million of Telkom’s procurement spend.
In the initiative called “We Think Code,” Telkom was admitting 120 students from the ages of 20 to 35. For this initiative, a matric certificate was not really needed. Persons involved just needed a brain that was wired to code, because the basis of the programme was to teach coding.
He then spoke about supply work being given to small businesses to assist them. Small businesses would meet and network on Telkom’s platform and at Telkom’s cost in order to possibly do business together.
In order to improve the skills that Telkom needs, it had in the past financial year, assisted 9 970 learners from disadvantaged groups with supplementary instructions. It has also trained 4 140 teachers in education, and had so far allocated R85 million in an attempt to try to meet these challenges.
Telkom as a company was invested in the South African economy and would like to see small businesses grow, particularly in the tech space, where he thought that most of the growth was going to come from.
Mr Mahlangu then addressed the matters relating to Digiwire and the presentation by Screamer. Referring to the Screamer Solutions presentation, he said that Telkom was caught between a rock and a hard place because Telkom was modernizing its network. It was a company that had been around for over 140 years. It was currently in a very robust and aggressive campaign to modernise its network in both the fixed and mobile space. Right now, it was aggressively looking at wireless solutions, and it was a consequence of that modernisation and migration that Telkom had to think about how some of these matters may be resolved. It agreed with the point raised by Screamer about having discussions with the original equipment manufacturers (OEMs). The BBBEE and all other transformative programmes needed to apply equally to the OEMs because of the contractual industry that had to come to the party.
Similar to the questions raised by Digiwire, Telkom took comfort that Huawei was attending to the matters raised, so Telkom would not be able to comment on them at this stage. Telkom would be keen to facilitate any resolution where the company could assist.
Mr R Chance (DA) said that there was an expectation that 90% of employment in South Africa would be generated from small businesses by the year 2030. Unfortunately, this figure had proven to be widely optimistic. He commented that small to medium enterprises contributed only about 30% of formal jobs in the country, and that around 56% of jobs were from fewer than 1 000 businesses in the country. South Africa was a distorted economy -- “not enough businesses were being created in the country, not enough were surviving and not enough were growing”. Looking at the demographics in South Africa, where 80% of the population was black, the reason why the country did not have enough businesses was because 80% of the population had been disadvantaged for many years. The majority had not had the capital, opportunity or the skill to start their own businesses. Access to finance and access to skill were major concerns. This Portfolio Committee had set out to level the playing field for all entrepreneurs in the country. The problems expressed today and in previous meetings also related to an uneven playing field between big businesses and small businesses, which were greatly affected, among other things, by the late payment of invoices. There was also a general neglect of contractual relationships.
He said there was a problem in the country because instead of collaboration through the supply chain, which was what should be happening, there was a strange situation where these collaborations were not cared for because another business relationship could be built elsewhere. What happened was big businesses dismissing relationships and neglecting contractual obligations in the hope that money would be saved. Big businesses further had the attitude that if a small business had an issue with them, then they would advise the small businesses to sue them. There needed to be a more collaborative relationship between businesses, and this was what the Committee was trying to achieve. The problem was that small businesses could not just sue big businesses -- they did not have the money or the time.
Rev K Meshoe (ACDP) asked Screamer what the main reason for the drastic drop in employees could be. He also asked about Screamer’s quality. Had it been able to compare its quality to competitors, and what was it doing to improve its quality? Addressing Digiwire, he said that a statement had been made that Huawei had indicated they had no obligation to meet BEE requirements. He wanted to find out if this was true, because with all companies it was a requirement that disadvantaged people had to be uplifted and that opportunities were given to the people of South Africa. One of the ways to ensure this was for BEE requirements to be met.
He went on to state that Boniswa had said big companies were poaching employees from smaller businesses. One could appeal to the bigger companies and suggest that rather that poaching, why not train their own employees. He asked whether big businesses were poaching from small businesses as a means to kill small businesses.
He said the country knew well enough that the cell phone industry was dominated by foreign nationals. Locals being a part of this industry were just a drop in the ocean. He wanted to know what big businesses were doing to level this field for local people. He particularly asked Telkom what it was doing to train and uplift the youth.
Mr X Mabasa (ANC) asked if there were continual communications with the Departments of Higher Education and Labour. He asked what the relationship between the companies and the schools in very poor areas was, and whether these companies made an input in assisting schools to produce the right products, as the appropriate matriculants would fit into the corporate world and business.
He asked what the big businesses thought about the notion that when a product broke in South Africa, it must be restored in South Africa. Regarding Cell C, he proposed that a meeting be held, and that Cell C be encouraged to attend. Big businesses that did not want to honour their contractual obligations and did not want to make payments immediately, talked about lawyers. These bullying tactics should be stopped. Big businesses made their money from both the poor and the rich of the country.
The Chairperson said that the practice of taking small businesses to court to avoid paying them the amount due to them was a practice that needed to stop. She asked whether big businesses had a problem of upscaling small companies so that they could avoid contractual obligations, and start new contracts with another small business.
Mr B Bongo (ANC) suggested a quick solution through a symposium, where the discussion would not be limited to the networks that had been called today, but would involve all the bigger businesses. As stated earlier, the NDP envisaged that 11 million just must have been created by 2030. 80% of the population was black, and radical economic transformation had been introduced to deal with matters such as this. Radical economic transformation sought to change the entire economic structure, and big businesses needed to support this initiative.
At a strategic level, the Portfolio Committee should call big businesses in and encourage them to partner up with small businesses and the government. This should be done to ensure that Vision 2030 was realised.
Mr Bhongo said that the issue of if a product breaks in South Africa, it must be fixed in South Africa, was a matter that needed to be legislated. He thanked Telkom for the positive response that it had communicated in the meeting, as well as its willingness to be involved in these matters. However, he was sensing that when they turned around and said that they wanted to switch to wireless it meant that there would be no engagement with other parties to discuss how it would change to wireless.
Mr H Kruger (DA) congratulated Screamer for staying afloat so long while everyone tried to sink them. He raised a question about the 2 500 employees who had been reduced to 200. He wondered where the unions had been during such a time. He had never heard of any union saying anything about this matter, and he did not recall hearing about it on any social or news platform. This showed the amount of disrespect displayed to small businesses. He pointed out that in the rural areas, people were paying their cell phone bills with the last money that they had to spend, and should be made aware of what was taking place between the big and small businesses. If this was how big businesses were treating small businesses, then the time to stop using cell phones associated with a bullying company should be now.
Ms N Mthembu (ANC) said that everyone was sharing the same sentiment. As the country advanced, people should be mindful that it was a developing state, and if the businesses needed to advance, they had to be considerate. Everyone needed to think about who they were working with, and had to start working together if they wanted to achieve anything for this country. She agreed with Mr Bongo’s idea of a symposium, because big businesses in other sectors needed to communicate the same suggestions that were being discussed here. In the near future, she hoped to hear a good story about Southel Holdings, as they still had not been paid and still had equipment in their store room.
Mr X Mabasa said that should have expanded on one question when he spoke about sub-contracting. If small businesses could not afford lawyers, it was even worse when ordinary people could not afford lawyers. He wanted big businesses to note that it did not end when small businesses were killed, but also killed ordinary members of society. The fact that equipment was being kept in storerooms meant that even though citizens may be told that their device or laptop was at repairs, it was actually sitting in a storeroom somewhere. The person would continue to seek their device, and they would be told the same story -- that it had not arrived. There was no way that an ordinary person could take on a big giant like Telkom.
Screamer Solutions response
Mr Govender responded about the demise of Screamer Solutions. He said technological changes had taken place. The repair portion of a device was not part of a separate portion of a contract in the way it used to be -- the repair portion of a device was not muddled up with the original contract. Equipment that used to be repaired by Screamer was now not being repaired by Screamer -- and it was not even being repaired in the country. This equipment was now bundled in a global agreement, and the company responsible for the repair was the original manufacturing company in the original agreement. He mentioned that it was possible that this company could be sub-contracted to another company here in South Africa. There were case studies of such matters. As a result, when operators looked at different contracts, they would find that they were contractually bound in the original contract and that the contract includes spares as well as repairs. Where Screamer came in was where out of warranty repairs took place. When a device went out of warranty, Screamer would fix the device and then the device went back into the market.
The Chairperson stated that “Happy Hills” was not present, so the next issue to be dealt with was going to be the matter around Miller Trading.
The Chairperson wanted to recap on where the last meeting held in 2017 ended, and what the situation was now. In an attempt to resolve these matters, she had engaged with Vodacom and Ericsson, and with Miller and Mobile during the constituency period, as well as Cell C.
Mr Mabaso interjected and suggested that the meeting should continue with the outstanding responses from the previous matter before a break took place.
Ms Govender replied that after the seven sites were completed for Huawei, Digiwire was not awarded any more projects going forward. She had a meeting with Huawei’s Project Director and Procurement Management. The mentioned persons from Huawei said the reason for terminating any form of business interaction with Digiwire or the reason why Digiwire was not given any more projects was based on the fact that they did not want to manage thirty contractors. It was easier for Huawei to manage five contractors. The company Huawei’s Project Director and Procurement Management then asked Ms Govender to sub-contract with SAAB Grintek. Ms Govender said that she is a level one woman empowered company and SAAB Grintek is a predominantly white, non construction company so she respectfully declined. As a result of this, there were no further projects awarded to Digiwire.
As a result of this, there were no further projects awarded to Digiwire.
With regards to Herman’s response on the PAC and the FAC regarding the work completion certificates, according to the Master Procurement Agreement with Huawei, the PAC is a preliminary acceptance certificate and the FAC is the Final Acceptance Certificate that’s based on Huawei’s financial definition so it is on a 90:10 scenario and this has nothing to do with the Work Completion Certificates.
She then referred to Telkom and said that it is now twenty-five months since the projects have been completed and Digiwire is still waiting for outstanding payment and Work Completion Certificates so she believes that Telkom is being enriched at Digiwire’s expense.
The Chairperson asked Ms Govender to repeat what she had just said and said that twenty-five months is two years and one month.
The Chairperson also said that she wants this on record.
Ms Govender said yes, twenty-five months. Digiwire started the sites in September 2015.
The Chairperson then said before Ms Govender continues she wants Committee Members to note that “if you owe a company, you will see on the invoice if you have not paid for one month, there will be an item called interest. Perhaps the Committee should also consider as Members of Parliament how to deal with those persons who do not pay invoices within a specific period of time. Each month it remains unpaid, the interest should be calculated and added to the outstanding amount. This is the method used, by many companies. He pointed out that Boniswa was paid the original amount it was claiming but no interest was added to this amount. However, Boniswa was only paid twenty-four months after issuing the invoice. If Boniswa had been adding interest to the invoice, the big companies would pay immediately to avoid the interest amount. The Chairperson said that in the absence of legislation perhaps this cannot be done but the Portfolio Committee is the legislative arm.
Ms Velosh Govender (Director of Digiwire) thanked the Chairperson and said that what she is indicating is that in that time frame, Digiwire has lost a lot so the company wants to be compensated for the losses incurred.
On the damages to the site, referring to Mr Mabaso's question, she said that it is two-fold, if Digiwire decided to put their tools down, Huawei would bring a roaming contractor and then it looked as if Digiwire abandoned the site.
She then asked if Christina Naidoo from Huawei would be in a position to answer the point about the hundreds and hundreds of Chinese people being deployed to many sites and not just Digiwire’s site. The Chinese people were being trained on the built sites and if Digiwire put their tools down and complained about this, Huawei would bring in their roaming contractor in order to make Digiwire look like they abandoned the site.
Ms Govender said that there is something else that needs to be taken into consideration when you are a CIBD graded contractor. In terms of being a CIBD graded contractor, Digiwire is a level four, and they are hoping to get to a level six due to the services rendered and in terms of the monetary value of what was built.
The larger companies should also take into consideration that you are engaging with a CIDB contractor with a grading. In Digiwire’s case it is a level four so Digiwire has been vetted on and audited in Huawei’s books so Digiwire was expecting to get projects to the value of four million because that is what the grading dictates.
As a result of not getting awarded any other contracts to build, Huawei has not terminated the contract so Huawei has breached in many areas in terms of their contract with Digiwire.
She said that an Master Procurement Agreement (MPA) and a Project Procurement Agreement (PPA) was signed with Huawei. The Project Procurement was mainly for Telkom.
She then read a clause from a letter that she said would answer Mr Mabaso's question. This came from the first set of lawyers that Digiwire engaged with and it said "our client has noted the BEE concerns and does not believe that Huawei is being entirely truthful. In light thereof they have asked us to forward a complaint to the Commission tasked with investigating contraventions of the BEE Act and Regulations. That is due to not awarding Digiwire anymore contracts.
Ms Govender then said that her question is: how does a construction contract get awarded to a non-construction company.
The response from Huawei lawyers states that Clause 22 - Black Economic Empowerment (BBBEE) of the Agreement does not provide for any obligation on Huawei, neither does it create an expectation for the awarding of any further projects". In our recent communication, we had a meeting with Huawei, with another lawyer. Our second set of lawyers wrote to them and said 'we would like to point out that our client already provided you with the necessary documentation, I've done seventeen pdf's for them to investigate. The lawyers also pointed out the CIDB legislation and regulation with regard to Work Completion Certificates. Huawei legal personnel responded Huawei is under no obligation to be registered with the CIDB.
Ms Christina Naidoo (Chief Operations Officer of Huawei Technologies), said that two years ago, the industry speculation was that all companies would decrease by at least two levels because of stringent requirements that were implemented. Prior to this Huawei was a level 3, after this Huawei is now a level 4. The reason Huawei is so aggressive is because of these stringent level requirements, currently Huawei has gone back to a level 3. She said that Huawei is 31% black female owned.
Any tender that is issued by any of their customers has very stringent BEE requirements and for Huawei to comply to that, Huawei has to have policies, processes and procedures to ensure that Huawei can maintain their BEE level. In addition, Ms Naidoo said that there is a lot of pressure being placed on Huawei to maintain that standard and improve as a company. If Huawei does not, there are financial penalties and the possibility of losing their contract. From this perspective, Huawei makes sure that they take BEE requirements extremely seriously. Taking a look at Huawei and what the company does in terms of equipment, it is involved in local and foreign supply. All local purchases are done by a local supplier, all installations are done by a local supplier.
The Chairperson said she would like to say something before Ms Naidoo continues. That is that the Portfolio Committees understanding is that the training is targeted at South African youth that is unemployed youth. She asked Huawei to explain why the company is employing Chinese people when there are unemployed youth in South Africa that the company is supposed to be uplifting and giving opportunities to. She said that Telkom is a South African company.
The Chairperson asked that when Telkom outsources and sub-contracts; does the company enforce or see to it that development policies of the Country are not violated by the contractors.
The Chairperson said that Telkom is the main client and that Huawei are the contractors, below Huawei; there is a small company of South Africa.
Ms Christina Naidoo (Chief Operations Officer: Hauwei Technologies) said that in addition to what was said above, Huawei’s customers put a lot of pressure on us to ensure that we maintain that standard. If Huawei does not maintain their standard, there are financial penalties associated to this. As far as equipment is concerned, Huawei brings in foreign and local equipment. Local equipment is also needed in completing the full solution task. All local purchases are done by local suppliers and all installations are done by local providers. Huawei only brings in the foreign equipment and all other work is outsourced to local subcontractors.
She then dealt with how Huawei ensures sub-contractors deliver efficient work. Huawei determines the gaps in the local suppliers. The subcontractors are then taken through a very rigorous program. Huawei also looks at very stringent employee health and safety requirements. Huawei provides this training to all of their sub-contractors. She said that once the sub-contractors begin working, there are weekly checks that Huawei does while the sub-contractors are working in order to ensure compliance.
If a subcontractor is not compliant, Huawei will call in the sub-contractor and inform them of the gaps identified by Huawei.
Huawei then tells the sub-contractor about the training that Huawei will provide to them to ensure compliance. In addition to this, Christina Naidoo said that Huawei does a quarterly supplier assessment in order to ensure that the sub-contractors are working in accordance with the requirements that were agreed on in terms of performance. If there is a gap here, the gap is again dealt with by Huawei. A GAP analysis is then done with all the sub-contractors.
Ms Naidoo then asked what is preventing the subcontractors from doing the best that they can, is it an equipment issue? Huawei then looks at the equipment needed by the subcontractors.
She said that Huawei also goes as far as looking at the transportation system of the sub-contractors to assess whether any developments need to be made. Ms Naidoo said that Huawei builds long term business relationships with their subcontractors so they would rather go through a lengthy process of developing and upscaling their sub-contractors to ensure efficiency.
She said that this is done to ensure the sub-contractors success, because if the subcontractor does not succeed then Huawei does not succeed. Ms Naidoo then spoke about skills development and how Huawei transfers skills in the organization.
Huawei looks at the technology required.
If there is an upscale in technology, the same employees are trained and developed in order to use technology. In 2017, Huawei invested 1, 4 billion in a Huawei Campus in Woodmead in Johannesburg. Ms Naidoo then said that if there is anything that Huawei needs to comply with, they do so and make sure that the company complies one hundred percent. She asked to go further and to speak to about the Huawei Experience Stores seen in malls.
She said that these stores are not owned by Huawei, they are owned by individuals that are trained by Huawei.
Huawei also provides the stores with equipment. Huawei also intends to open up an innovation hub at the Woodmead campus.
Ms Naidoo said that even though Huawei does not deliver at all times for example, as witnessed in the issue of non-payment to Digiwire, she said that Huawei is committed to coming to Parliament, listening in the meetings and ensuring compliance with regards to the matter concerned as well as assisting in finding a solution for the matter. Ms Naidoo said that Huawei’s intentions are not to come to Parliament to address an issue of non-payment, it is to come to Parliament and make sure that Huawei can progress and develop itself in order to know where Huawei can move on from here.
Mr Mabaso said that he liked the inputs, but now the challenge was whether the inputs went hand in hand with reality. He asked where the inputs provided by Ms Naidoo took Huawei in respect of resolving the issues being raised at the meeting.
Commenting that small businesses were not well resourced financially, he asked if Huawei assisted in funding them when it wanted to train and upscale them. He said that if there were issues of non-payment, this would frustrate the small businesses even in these instances of training, as big businesses had this issue of non-payment. What would happen would be the small businesses not being able to prioritise the training to upscale to the level that Huawei wanted them to be.
Rev Meshoe said that he wanted to read a sentence that had been mentioned before: “Clause 22 of the Black Economic Empowerment does not pose any obligation on Huawei.” He said that this had obviously been stated by Huawei’s legal counsel at the time. He wanted to know how factual this statement was, as what was being said by Ms Naidoo and what was being said in this Clause 22 did not go hand in hand, so he would like to know the truth.
Secondly, regarding the Woodmead campus, he wanted to know the percentage of locals and Chinese people at the campus, because when the Committee was being told about Chinese people being trained at this meeting, nothing had been mentioned about South African locals being trained.
Mr Chance said what had been stated by Huawei was pretty much what would be read from an annual report. It sounded great and it was fantastic rhetoric, but the problem was that it did not square up with what was being said on the ground and by the people at this table. The problem that the Committee was trying to address was the uneven playing field and the fact that the rhetoric actually did not match reality. He assured everyone that the Portfolio Committee would be taking these matters forward, and that it was unanimous in this decision. The Committee would find a way in which these issues could be resolved. The prospects of nothing being done because of small businesses being treated unfairly, was not going to last forever. Legislation had to have a purpose and also had to take into consideration the unintended consequences, such as overburdening red tape.
He wanted to know what processes Huawei had gone through to get visas for the Chinese people being trained.
Ms Mthembu referred to Huawei’s upscaling of young people and the training of companies, but said, sometimes there were stories involving Huawei where shops were closed down and people lost their jobs. She said that when this happened, those skills were then transferred elsewhere -- for example, to India. The issue was not that people were not working, but one would find that workers were actually being retrenched.
Regarding the 30% black women’s ownership being spoken about by Huawei, she asked who they were and what background they were from, and requested a report on this for the Portfolio Committee.
Mr Kannenberg said that he would like to respond in brief to the sentence from Clause 22 that had been quoted and was being thrown around. It was important for the Portfolio Committee to understand that this sentence had been paraphrased and that the whole letter and paragraph needed to be read in context. He would like to work through this, as this was quite a serious allegation that seemed to have been moulded by just taking a sentence and reading it.
This paragraph had been drafted by Huawei’s legal counsel in response to a legal letter received from Digiwire’s attorneys.
The paragraph in question started off by saying; “For the avoidance of doubt the agreement as defined; which was the master purchase agreement and the project procurement agreement, provides for the following.” Mr Kannenberg interjected, and said the first sub-clause was clause (a), which was irrelevant to the discussion. However, the second one referred to clause 22, which was the Black Economic Empowerment clause which was in Huawei’s agreement with Digiwire. What this stated was that the clause did not provide for an obligation on Huawei, nor did it create an expectation on further employment. What was important was to understand what that specific clause said.
He read the actual clause from the contract, Article 22 as it stood. The heading was “Black Economic Empowerment.” Clause 22.1 stated the following; “the contractor, Huawei reserves the right with a reasonable or electronic written notice to request any additional information and to conduct a standard BEE Audit that it may deem necessary to verify the sub-contractors; Digiwire’s status at any time during the subsistence of the agreement.” He said that this was the first sub-clause.
There was another which read: “Contractor Huawei has the right to terminate this sub-contract in the event of self-alteration of the sub-contractor’s status in the information provided in the documents. We have the right from time to time to evaluate the sub-contractor’s BEE status. Also, the contract would terminate in the event of any falsification of documents.” He said that this was not an allegation against Digiwire, but was just standard procedure.
He said that he thought reading a clause from a letter created somewhat of a misunderstanding of the intention of what had been agreed upon by the parties when the parties signed the contract. The contract did not in any way or form state that Huawei did not comply with BEE obligations.
He offered to place the reading on the screen for everyone, and asked if this would be possible. He also said that the contract could be shown to everyone.
Mr Mabaso said that while it was the Portfolio Committee’s intention to listen to all the inputs to enhance the quality of the meeting, it also did not want to pretend that it had litigation capabilities. This meant that the meeting should not stray into this area. He would advise that the matter had to be seen in context, but he was not sure to what extent. Once the meeting went there, legal skills would be challenged. The Committee was not a court of law, but that did not mean that those present should not make the appropriate comment.
Mr Mahlangu (Group Executive: Regulatory Affairs: Telkom); said that he would like to refer to the questions on the collaboration between the operators and the Department of Education. There was a lot of collaboration and there were interventions that came from different operators. Telkom had has re-evaluated its strategy of assisting schools. It had found that school principals and teachers had locked equipment in store rooms, and were not delivering the efficiency to the schools, or enhancing the learning, in a manner that Telkom would like to observe.
Telkom had up with a new strategy with a more holistic intervention, where it adopted seven schools where they improved the infrastructure and tidied up the school. They painted the schools and trained the teachers with the equipment provided by Telkom. They were improving the IT side of the schools and ensuring that teachers were educated in IT.
As Telkom contracted with the original equipment manufacturers, these contracts had to be in line with the legislation that applied as far as possible. This was not because Telkom wantedto tick boxes. Telkom believed in the effort in improving the economy.
A representative from Huawei said that he was representing Huawei and the Chinese. He wanted to refer to the matter of Chinese people being said to be trained on site. He said it was not easy to get a South African visa. He wanted to give an example of how a Huawei employee had to get South African visa. One had to have the necessary qualifications, as well as three to four years’ experience. This was clearly stated in the Immigration Act. Furthermore, there were certificates that one needed to have. Then there was the skills transfer that one needed to apply. What was needed was education, experience and documentation, and then one could apply for a South African visa. He had never seen the on-site training that had been spoken about by Digiwire.
Rev Meshoe asked for an answer to his question about the composition of employees at Huawei headquarters. He also asked that the Portfolio Committee be given a copy of the agreement with Digiwire.
The Huawei Representation said that the local people involved with Huawei represented over 60%, and the Chinese people who had been brought in were about 40%.
Regarding the documentation required, Huawei had the documentation and was willing to hand it over.
The Chairperson said that she would like to provide some background regarding NEELA Trading, Mobile Ericsson and Vodacom. It had been stated at the previous meeting that these companies should go out and address their issues, and also that the Chairperson should be present at the meetings between these companies and should follow up with the members concerned. She said that nothing much had happened until this matter appeared on the programme of the Portfolio Committee.
The matters discussed had been the cases and the broader perspective that South Africa required more investment, more jobs needed to be created and that if there were arguments between big and small companies, investors were scared away if they were not resolved.
Meetings had been held. The first meeting had been with Ericsson and Vodacom, as NEELA Trading had been absent. Mobile Diesel and Miller Trading had then then briefed on the meeting.
The next meeting went over two days, with the first meeting being spent on Miller Trading and the second on NEELA Trading.
In the meetings, Ericsson had a legal representative, but Vodacom did not have a legal representative. NEELA Trading had always had their legal representative, while Mobile Diesel had a special advisor with them.
The NEELA Trading matter involved an issue where Ericsson alleged there was no issue to be discussed. NEELA Trading said the matters to be discussed emanated from what had been agreed upon previously in Parliament, which had resulted in them being contracted again and also expanding the scope of their work to include passive maintenance.
The issue raised by Miller was around the specification in the contract had not been complied with by Ericsson to cover the loss of income that had been signed and contracted to be covered here in Parliament.
In the case of Mobile Diesel, it had been decided that at the end of the day there no resolution. The Chairperson said she would like to be blunt, and said that Ericsson held the stance that there was no issue, and that if there was a matter, that company could take Ericsson to court.
With Mobile Diesel, it emerged that there had been engagements that had resulted from the arbitration process. The matters had been discussed, but with the view that both parties would be going to arbitration. The Chairperson would like to know the progress in this matter.
Mr. Kruger thanked the Chairperson and said that they would like add that on the day in question, 11 July, Ericsson had acted like bullies who were set on bullying the smaller companies in the meeting.
During the discussion, he had witnessed the Ericsson lawyer write something down on paper and then hand it over to someone. It read, “We are in arbitration”. It was then stated that an agreement to this effect had been signed the previous night. Mr. Kruger said that put a damper on the discussions. He later found out that the arbitration agreement had been signed only on 17 July, which meant that Ericsson as a matter of fact lying to Parliament, and was also bullying Parliament.
The Chairperson said that she was going to start with NEELA Trading, and hear from them if matters had been resolved.
Mr Anthony Walther, of Walter Attorneys, said that he had prepared specific feedback given by NEELA Trading. He had prepared general submissions based on practicing corporate law for 25 years, and 18 months of appearances before this Committee. The major causes of complaint by NEELA against Ericsson and Vodacom were more or less as follows;
During April 2016, NEELA felt that their services had been unduly terminated by Vodacom; alternatively that their services had been unjustly discontinued by Ericsson when Ericsson took over as the sub-contractor to Vodacom at that time. Against Ericsson, NEELA said that Ericsson had materially breached and failed to comply with their written contractual undertaking entered into and recorded before this very Portfolio Committee in December 2016, whereby Ericsson undertook to allocate the increased scope of work of passive site maintenance to NEELA Trading on a gradual and consistent basis, but which they had completely failed to do in any manner whatsoever from the period December 2016 to February 2018, when their sub-contract was then in itself terminated by Vodacom.
The respected responses from Vodacom and Ericsson to the above complaints were more or less as follows:
Vodacom had disavowed any and all liability for either the cancellations or the lack of continuation of the services of NEELA for the period April 2016 to November 2016, when NEELA was reengaged; denying that certain alleged and untested defamatory statements were the cause of such cancellation or discontinuation. That said, Vodacom seemed to have taken these Portfolio Committee meetings seriously, and NEELA had to concede that they had made concerted efforts to foster a better and rather more conducive working relationship with NEELA. If he may give some credit, it would appear that matters were moving upward between NEELA and Vodacom.
NEELA would also like to take this opportunity to thank the Portfolio Committee for their intervention in 2016, which had essentially led to NEELA being reengaged in November 2016.
Regarding the second complaint, Ericsson had disavowed any and all liability towards NEELA, and had chosen to rely on the assertion of their legal team that NEELA did not have any lawful grounds to claim against them due to the fact that Vodacom had terminated their sub-contractor agreement in February 2018.
In the meeting which the Chairperson had referred to, despite repeated prompting my himself as a legal advisor of NEELA, the legal representative of Ericsson had refused and completely avoided giving any explanation for Ericsson’s total failure to implement the written clause which they had agreed to before this Portfolio Committee in December 2016 for the additional work that was to be allocated. As the Chairperson also pointed out, the terse response from the Ericsson legal team was quite simply, “sue us”.
NEELA would be doing that exactly. It would be seeking compensation from Ericsson. He said that Mr Shiletsi Makhofane, Head of Government Relations at Ericsson, who was tantamount to a government liaison officer with Ericsson, had missed the opportunity to engage with NEELA within the portfolio of his job, and had sought to rather rely on the terse legal response. This was where NEELA stood with the Vodacom and Ericsson claim.
Regarding the general submissions, Mr Walther said that since involvement in this matter in 2016, the Portfolio Committee had taken on the noble initiative of assessing and investigating the various test cases, not the least of which had been NEELA’s which, in the context, had been a mandate in assessing how this had impacted upon the often unsavoury business environment between big and small businesses, whereby small businesses were colloquially elbowed by big businesses.
He asked to reflect back to 2016, where this Portfolio Committee had debated if it was indeed even correct to gauge these businesses before this particular forum. At the time, the Chairperson had correctly noted that Parliament -- and within that context, this Portfolio Committee -- were a law making structure whose mandate and imperative history identified specific needs areas, and in this case, within the environment of small business development.
This Portfolio Committee had also expressed whether it was necessary to determine whether or not to go through the legislative route. He certainly believed that the Committee was on the correct path and that legislation in order to regulate this environment was an absolute necessity.
He said that NEELA’s specific case had taken a substantial amount of time and that incredible costs had been involved since 2016. Most small and medium enterprises simply could not afford the costs of a case like this -- litigation that involved taking a big business to court -- not only in terms of the prohibitive costs involved, but also in terms of downtime, trading time and the rest. A case like this could prove fatal to many small and medium enterprises. It had been admirable that this Portfolio Committee had reviewed the test cases and that they should come to the conclusion that there was a distinct need for a legislative framework to regulate this environment. However, as Mr. Mabaso had pointed out, the Portfolio Committee was a legislative body and not an arbitration forum
Unfortunately, NEELA’s case was not one of the rosier ones, and they still had to go through the lengthy process in the high court.
He hoped that what would come out of discussions like this was a Small Business Development Act. He would personally want to make comments about this possibly being introduced, with a system similar to that of the Commission for Conciliation, Mediation and Arbitration (CCMA) forum, where hearings could be heard speedily and resolutions could be handed down in a matter of two months.
Mr Hilton O’Dwyer, Representative of Mobile Diesel, said that he wants to firstly say “Amen” to what had been said by Mr Walther, word for word. In his one year investigation into the current matter, he had found many other small businesses in a similar position to NEELA and Mobile Diesel.
He said that everyone in this room had the right to administrative action that was lawful, reasonable and fair. This was a constitutional right that had been referred to in a recent Constitutional Court case.
It had been stated that administrative law benefited natural and juristic private persons.
Corporations were not always reasonable and fair. In a big company, everyone was looking
out for their own interests.
Mobile Diesel had started from nothing, and from an invitation of Vodacom, a business had been started 18 years ago. He said that Mobile Diesel had sacrificed the life of a family member in the service of Vodacom, as recently a family member had also experienced a stroke because of the situation and the pain it had caused. The company had lost its pension earnings and the building up of its name. The company’s goodwill had been lost -- everything that had been built up over the last 18 years.
This had all happened because of an administrative issue that could have been dealt with, in the best case, in two days and in the worst case, two weeks. It had now been 14 months, and the owners of the company had sold their property in order to stay afloat. Recently, pending the arbitration that was around the corner, the owners of Diesel Mobile had been told to put down a R600 000 deposit or else the company may not go to court. Mr O’Dwyer said that once a company had been bankrupt, asking for such an amount was not a nice thing to say -- that the company must put up R600 000 or the arbitration would not happen.
Arbitration forms were signed by Ericsson only on 20 July and were received Mobile Diesel on 24 July. Mobile Diesel had then signed on 25 July. After this, Ericsson had asked for another three weeks’ extension before proceedings could commence.
He said that what was heard today was that a middle man was used to get rid of 100 contractors, This was not a case of building the country, nor was hiding behind the courts.
Mobile Diesel appreciated what had happened here today for every small company out there. When the last invoice had been mentioned to Ericsson, it had responded and said that Mobile Diesel should go and see if they could go to the Portfolio Committee to get their invoice paid. He said that this was a challenge to the Committee
Mr Kruger wanted to make a point of observation, saying that Ericsson was here on both cases and that this should be noted.
The Chairperson said he wanted to find out why Ericsson had made the Portfolio Committee believe at the meetings held in July that the delay in arbitration proceedings was due to Mobile Diesel, and not Ericsson. What had been presented to the Portfolio Committee was that Ericsson was ready for arbitration and that if Mobile Diesel complied, the parties would go to arbitration within a day or two. The meeting where this had been said was on 11 July. She wanted the Committee to know that delaying tactics were also used to frustrate a company, so that by the time arbitration took place Mobile Diesel would not be able to take part. This was also seen as bullying.
The Chairperson gave Ericsson an opportunity to answer.
Mr Shiletsi Makhofane, Head: Government Relations, Ericsson said that Ericsson was a global company and operated with small businesses across the world, as they were part of the value chain. On the continent of Africa, the same was done. Ericsson took seriously the issue of making sure that the partners they dealt with contributed to the value chain.
Coming to the report that had been given by the Chairperson, he said that it had been a long journey for Ericsson, and they had made sure that they were present at every meeting held for this matter. Where clarity had been sought by the Portfolio Committee, Ericsson had willingly made this happen and has responded to it. Ericsson as a company also subscribed to the rules of the country and everything that the company was required to comply with, Ericsson had done.
He said that concerning the different matters raised, Ericsson had make it a point to meet up with the stakeholders of the various companies in order to bring the matters to a close. Obviously there were certain things that had not been highlighted that had come from the previous meeting. Since the matter of payment had been brought to Ericsson’s attention, it had taken steps, even though being a global company made facilitating payments a complex task to perform. The point that should have been raised here was that Ericsson had complied and was complying.
There had been matters that could not be closed, but he wanted to stress that the company had not walked away from these matters. These matters required further debate, and Ericsson made sure that they facilitated these meetings. It had arrived at a point where the relevant people were brought forward for each meeting, and even when the emphasis was on the lawyer part, he thought that Ericsson brought in everyone who was involved in order to help facilitate and resolve the matters.
Ericsson had done a lot to understand the matters. He understood that a point had been reached where both parties could not be satisfied with the outcome of the meetings, so an indication had been made that both parties should state what recourse was available for resolving the matter. The recourse available for both parties was to be able to take the matters within what the legal statutes in the country allowed.
Mr Mahomed Essof: Country Manager of Ericsson, gave feedback on the Mobile Diesel issue, and said that any arbitration agreement contained many issues to be formulated and agreed upon. A final stage had been reached at the meetings on 10 and 11 July, but an arbitrator needed to be found. There were certain candidates, but the main issues were appointing an arbitrator at the time. As the legal counsels were exchanging notes on the arbitrator, that was the time it took to sign the arbitration. In any event, the arbitration agreement had been signed and the parties would be going to arbitration very shortly.
Ms Taki Netshitenzhe, Chief Officer: Corporate Affairs, Vodacom, expressed special gratitude to the Chairperson for having got up from her sick bed in order to get all the parties around the table. She also thanked Mr Kruger for giving Vodacom an ear in order to ensure that these matters were resolved.
She would like to restate Vodacom’s commitment to socio-economic transformation. When Vodacom was preparing for this meeting, it had made a vow that it would not be coming back to discuss the matter in the manner in which it was currently being discussed. It wanted to contribute to the legislative programme that Members of Parliament were thinking about in order to ensure that these issues were resolved.
She asked Members of the Committee if they could remember, when Vodacom was here last year, that as part of its commitment in these matters and their involved in socio-economic transformation, it had established a transformation council. The objective of this council was to monitor the various transformative initiatives within Vodacom, and to ensure that it operated within the timelines they had set for themselves as a company. The activities included were socio-economic investment, monitoring employment equity, the transformation of retail stores and supply chain management.
Due to these meetings, Vodacom would continue with introspection of its company, and remain committed to socio-economic transformation. Measures would be put in place to ensure that when Vodacom dealt with small businesses and their stake holders, the matters would be conducted with mutual respect. When Vodacom had linked up with some of the small businesses they had done business with, they had indicated that they had picked up a disconnect with the Vodacom group at the head office in Midrand. As a result of this, Vodacom had decided to take all small and medium based enterprise development matters to a Committee that was chaired by the CEO of Vodacom, in order to facilitate these matters and to effectively engage those dealing with small and medium enterprise development.
Mr Walther responded that NEELA Trading has heard about Vodacom’s exemplary payment terms, but he wanted to know whether Vodacom made sure that their sub-contractors adhered to the same terms, because today there was a group called Mobax which was a sub-contractor to Vodacom, and then NEELA Trading was a sub-contractor to Mobax. He had been informed by his client that payment had not been made for the June and July invoices, and that it most certainly was not two to three days.
Mr Kevin Carliell, Vodacom Group Supply Chain Officer, responded and said that as a follow up to the previous meetings, Vodacom had started building this term into all of the contracts with their sub-contractors. As Mr Walther had mentioned, when Ericsson had terminated their contract with Vodacom, they had requested this and the parties had gone through procurement processes and elected Mobax as Vodacom’s future partner in this space. At that moment, Vodacom and Mobax had entered into a new agreement, and Vodacom had ensured that this specific term and obligation was put into it. This was further monitored by Vodacom -- it was not simply stated in the contract.
He indicated that Vodacom was aware that there had been problems in the handover between Ercisson and Mobax in a very short space of time and in a very complex situation with the termination matter. Vodacom and Mobax had acknowledged these problems and there were no doubts about them.
Mr Mabaso asked that everyone contextualise where this matter had started, and where the obligations of big businesses to small businesses had been addressed. By adhering to these obligations, a company was assisting in the eradication of poverty. When Vodacom spoke, the company should make sure that they were guided by those principles.
He then asked, based on Mr Carlliel saying that Vodacom had identified a number of problems and that the company had committed to working on them, if Vodacom could revisit those challenges and problems identified and also discuss the solutions related to these problems. What the Chairperson had said on the disconnect between big and small businesses should be addressed.
Mr Kruger said that Vodacom had dropped the ball with Mobile Diesel. The party that had got hurt the most was Mobile Diesel and in the absence of legislation, this company could not survive any more. 20 years of a company had been lost, probably because of a communication problem, and unfair businesses practices by Vodacom and Ericsson. He asked Vodacom what could be done for Mobile Diesel. He also asked Ericsson what they were doing to solve this matter, bearing in mind the emotional suffering the company had caused. He asked how the company was going to put Mobile Diesel back in the position they were in before all of this happened and the bullying had started.
Mr Chance wanted to get clarity from everyone who was involved as to what costs were involved in this arbitration process, and what official arbitration bodies were being used for this process.
Mr K Carlliel said that Vodacom had heard what the Committee had previously been asking for concerning the expectation of telecommunications companies assisting the country in developing. Vodacom had also ensured that they brought South African businesses into the economy in respect of small businesses. Vodacom had also ensured that they had an inclusion of black-owned and black female-owned companies in the industry. He said that this had been looked at in 2016, when the Portfolio Committee had brought it to the attention of Vodacom.
Mr Carlliel said that when Vodacom terminated their agreement with Ericsson, the company had looked at starting a new business relationship with a company that would contribute to this initiative. They had started their procurement activities to identify a new partner that Vodacom would want to work with, and one of the key criteria had been to find a suitable partner to work it. In searching for a company that was suitably transformed, Mobax had been identified because it was a purely South African company. Mobax was greater than 51% black-owned and greater than 50% black women-owned. Mobax was not one of the small business enterprises that Vodacom had grown over time. It had also looked at the companies’ capabilities, and they had ticked all the boxes. He was pleased by Mobax as a company and how Mobax had not hesitated to come to this meeting when Vodacom invited them.
Mr Kruger said that it seemed like the minute Ericsson took over the contract, miscommunication had occurred.
Mr Bekwa asked why Ericsson had told the Portfolio Committee that these issues had been resolved when they had not. Ericsson had clearly stated that this matter would be resolved, but now the company was talking about arbitration, and he wanted to why this was the case.
Ms Heidi- Anne Thuynsma, of Diesel Mobile, said that for the last four weeks Vodacom had led Diesel Mobile to believe that the company was actually doing something about this matter. Diesel Mobile believed Vodacom understood the unsettling business that was going on, but it had not seen anything yet. She would like Vodacom to adhere to their contractual obligations, just as Diesel Mobile had abided by theirs. Diesel Mobile had served Vodacom for 20 years, and she had personally lost her brother due to this matter. Clearly someone was to blame for the problem, and it was not Diesel Mobile. Diesel Mobile would arbitrate against Vodacom as well, as it had done nothing wrong in the matter.
Mr Mabaso said that he thought it would be appropriate for Vodacom to comment on the matter.
Mr Kinana Themba, Managing Executive: Corporate Affairs, said that ever since Vodacom had been invited to come to these discussions, it had done two things. Firstly, it had created a platform for engagement between Diesel Mobile, Ericsson and Vodacom. Secondly, what Vodacom had done after the Chairperson instructed them, was to give Diesel Mobile a hearing in order to engage on the matter.
He indicated that Vodacom had made it very clear that once the arbitration process had started, it would be difficult for Vodacom to be cited. Vodacom was a listed company. Vodacom’s advice in the meeting that took place on 10 and 11 July was that Vodacom would like to be excused even from the meeting once the arbitration took place. Vodacom was not running away from responsibility.
Mr O’Dwyer said that the arbitration process being spoken about was about Ericsson’s breach of contract with Diesel Mobile. He he wanted to make it clear that the arbitration was not with Vodacom,, so there was nothing that should be stopping Vodacom from re-engaging with the company. At the moment, Diesel Mobile was without a job.
The Chairperson made a comment of correction, and said that Vodacom was the principal contractor in the matter. She said that all the sites belong to Vodacom. The matter that had been brought forward to the Portfolio Committee was between Mobile Diesel and Ericsson. Vodacom had been invited because it had been the main contractor. Without Vodacom there would have been no work for Ericsson, and there would have been no work for Diesel Mobile.
MTN’s presentation was a response to the questions asked as part of the invitation sent to MTN. The first question related to MTN’s store breakdown. MTN’s response was that it had 42 stores that were MTN brand stores, and that 24% of them were owned by black people. A further percentage of 289 other stores were 100% black-owned stores. In terms of transformation, MTN aimed to reduce the amount of stores owned and operated by MTN by 70%. The opportunity here was that up to 70% of MTN stores in the next three years would be black-owned.They indicated that they knew this was not a great picture at the moment. It also highlighted its airtime distribution, comparing last year and the current year, as well as a comparison between 2016 and 2017.
The meeting was adjourned.
Download as PDF
You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.
See detailed instructions for your browser here.