Why EOH walked away from City of Jo’burg SAP contract

The City of Johannesburg has reassured residents that the end of an SAP support contract with EOH Holdings will not affect the city’s billing system or its other IT infrastructure.

This is after JSE-listed IT services group EOH, through its EOH Mthombo subsidiary, gave the city forewarning that it would not allow the contract to be extended again without a new tender being issued.

That’s according to EOH CEO Stephen van Coller, who said in an interview with TechCentral that the contract with the City of Johannesburg had already been renewed “a few times” by the time he was appointed to lead the company in mid-2018.

Van Coller’s remarks come after a group of EOH employees wrote to the company’s board and management team last month with a “sincere” and “desperate” plea to save their jobs. The EOH contract with the city ended on 30 April, with nearly 60 jobs potentially at risk.

According to the letter, the details of which were published by various media outlets last month, the aggrieved employees accuse EOH of failing to leverage its “competitive advantage” to ensure the contract was renewed again. EOH initiated a retrenchment programme earlier this year over uncertainty about the Johannesburg contract.

‘Under control’

The city’s head of technology, Aubrey Mochela, said in a brief text message in response to questions from TechCentral that “the matter is under control”. He declined to comment further. However, TechCentral understands that the city has asked EOH to continue providing services for another 14 days — from 1 May — pending the appointment of a new supplier. Any potential problems with the city’s IT systems will serve as a painful reminder to residents of past problems where the city struggled with accurate and timely billing.

Van Coller said EOH chose not to respond to the employees’ letter in the media but reached out to the staff affected by the retrenchments. He said EOH was uncomfortable about extending the contract again – it was first awarded in 2012 – without it going out on a fresh tender.

The city was given 12 months’ notice by EOH. Van Coller said he told the city that he “doesn’t mind if we tender and win” the contract again but it “needs to be a transparent tender”.

“This has been a good contract. It’s well documented, there are no issues around it and the city pays us,” he said. But he doesn’t want fingers pointed at EOH accusing it of abusing “emergency” rules in tendering procedures to keep extending the business.

Van Coller, who spoke to TechCentral on Friday – the last day of the City of Johannesburg contract – said EOH has been given no insight into what is happening with the contract or whether its employees will be hired by the city.

“I am told there’s a closed tender that is going on, but we haven’t been party to it,” he said, adding that EOH is not a participant in the new tender process.

In a statement to TechCentral, sent on Friday, EOH said the original agreement with the city was for three years of support services. The initial contract came to an end in 2015, with the work then extended multiple times over the years, the latest of which took place with effect from 1 May 2020, in accordance with Municipal Finance Management Act regulations.

“When the service was renewed with a new contract in April 2020, EOH notified the city, at the same time, that they needed to re-tender the services in terms of the relevant MFMA regulations.”

‘Fair opportunity’

“In February 2021, EOH, in an additional attempt to clarify the way forward, sent a written communication to the city, reminding them of the pending expiry of the contract.

“EOH’s early notification to the city was also aimed at providing the affected employees with a fair opportunity to seek alternative employment if that was their preference. EOH has followed the stipulated section 189 process (retrenchments) in accordance with the relevant legislation as part of the contract termination process. This process has now been completed and EOH has complied with all its statutory and other legal obligations relating to the employees.”

“EOH deeply empathises with the employees’ current position and will continue to assist with the transition in compliance with all contractual and labour regulations.” — © 2021 NewsCentral Media