EOH among firms Cape Town warns over contracts

Cape Town has threatened to scrap contracts with companies including EOH Holdings, EY and Nedbank Group after the firms were named in a judicial probe on alleged graft relating to business done with the national government.

In a letter to the companies, the city asked them to explain why the contracts should not be cancelled after they were mentioned in reports compiled by the Judicial Commission of Inquiry Into Allegations of State Capture. The investigation probed corruption involving the government during former President Jacob Zuma’s administration that the state estimates cost the country R500-billion.

The City of Cape Town, which is run by the Democratic Alliance “urgently requires your response to those” allegations, the letter said. “On receipt of your response, the city will consider whether or not it should” cancel the contract, it said.

The inquiry by a panel overseen by acting chief justice Raymond Zondo is a key plank of President Cyril Ramaphosa’s plan to implement his pledge to crack down on corruption. Ramaphosa has until the end of June to respond to the panel’s findings and say what action will be taken.

Both EY and Nedbank denied malfeasance. News24, a website that reported on the letter earlier, said that it was also sent to companies including PwC and a unit of Bidvest Group.

A spokesman for the city wasn’t immediately able to comment.

The “letter from the city makes incorrect statements about EY in that the Zondo report makes no findings of any malfeasance and/or corruption on the part of EY”, the company said in a response to questions.

‘No adverse findings’

Nedbank said it was engaging with the city and “no adverse findings” had been made against the bank. The inquiry said that some transactions between Nedbank and the state-owned Airports Company South Africa were “disturbing”.

The lender worked on those transactions with Regiments Capital, a company linked to the Gupta family, whose members are alleged to have leveraged their relationship with Zuma to win deals with state companies. The Guptas and Zuma have denied wrongdoing.

PwC said it hadn’t received the letter and was contacting the city. EOH* and Bidvest didn’t respond to requests for comment.

KPMG and McKinsey & Co saw their South African units lose business after they were linked to questionable contracts or practices with state companies and bodies. Both companies apologised and returned money.  — Antony Sguazzin and Paul Vecchiatto, (c) 2022 Bloomberg LP

Update: Subsequent to the publication of this article from the Bloomberg newswire, EOH has provided the following statement to TechCentral:

As part of our standard practice with all our stakeholders and because of the now well-documented history of EOH and the issues it has experienced, EOH provides stakeholders with regular updates as and when requested. The updates relate to the findings from the ENSafrica forensic investigation (of which there are none that are new and have not already been widely disclosed to the appropriate authorities), the remediation efforts (which have all been implemented) and commentary around the unfortunate adverse media that is published involving EOH. We have provided this same feedback to the City of Cape Town in response to their request.

As part of our response, EOH also advised the City of Cape Town that those implicated in alleged irregularities as informed about from the ENSafrica investigation have already been exited from the business. This is again in line with EOH’s much publicised communications in this regard.

In terms of the contracts with the City of Cape Town, EOH is effectively delivering against its service-level agreements related to these. EOH also believes that given the extent to which EOH has made voluntary disclosure to not only the relevant law enforcement agencies, but also to the commission on state capture as well as the various remedial efforts that have been implemented, that EOH’s contracts with the City of Cape Town should not be at risk.

EOH awaits the formal outcome of the clarification process undertaken by the City of Cape Town.