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R50m ‘botched contract’ stalls SA digital migration



R50m ‘botched contract’ stalls SA digital migration

Agency outlaid millions from public coffers for an ill-conceived software upgrade. Now they’re in the lurch

Senior reporter

A government agency central to SA’s digital migration has allegedly been left in the lurch by a botched R50m software contract.
A draft internal Universal Service and Access Agency of SA (USAASA) report dated March 1, and made final this week, says the government’s big plan for broadcast digital migration has been hamstrung by a software revamp by the company EOH Mthombo.
The beleaguered tech firm was fired by Microsoft amid a corruption scandal in February.
Furthermore, it was reported last week that Patrice Motsepe's African Rainbow Capital [ARC] would dispose of their shareholding in EOH. ARC spokesman Ainsley Moos told Times Select that the decision to sell their stake-holding had been months in the making, and had not been triggered by recent events. USAASA is an arm of the communication department that is supposed to provide infrastructure to the country’s poorest citizens and drive the broadcast digital migration.
The report, seen by Times Select, says “challenges” are preventing the software from running optimally – despite denials from the company that there were problems.
The migration from an analogue television broadcast system to a digital one has been in the works for several years.
The analogue television signal is a technological relic from the 1940s and uses a large proportion of radio spectrum and bandwidth to transmit the signal. Space on the spectrum is limited, and it also accommodates radio, TV, wifi and Bluetooth. Cellphone operators are desperate for more spectrum, with this lack of scope blamed for high data prices.
But software glitches mean USAASA is struggling to operate its own systems, the report states.
The software upgrade was intended to streamline USAASA’s internal business processes, from payroll to stock control – and specifically monitor the rollout of tens of thousands of set-top boxes.
These boxes convert the digital TV signal into an analogue one.
In 2015, EOH scored what was initially a R35m contract from USAASA. But a confidential audit of the contract, initiated by USAASA’s board, recommended it be probed by an independent forensic investigator. The audit found that support and maintenance had been included at the time of the initial procurement, but was then “ignored” when EOH was appointed.
Auditors also found that the contract price had soared by R20m to R55m. Of the price surge, auditors found the agreement had been concluded in three weeks, with EOH revising their costs months after the contract was awarded.
“There seem to be bigger problems that might require a detailed independent forensic investigation,” it reads.
EOH was also given special treatment when they bid for the contract, the report adds.
The mess at USAASA comes after Microsoft terminated longstanding partner agreements with EOH, a JSE-listed technology services group, after an anonymous whistleblower filed a complaint about alleged malfeasance involving a department of defence software procurement deal with the US Securities & Exchange Commission, according to a TechCentral report.
A R120m contract to provide Microsoft software licences, awarded to EOH in 2016, is at the heart of the divorce.
USAASA CEO Lumko Mtimde said EOH had already been paid nearly R47.5m and that “processes” were under way to fix the support and maintenance snag.
“The final contract did not include support and maintenance, as there was no agreement on this by both parties. On further consideration, resulting from the need of further funding for support and maintenance, USAASA subsequently probed the matter of whether the support and maintenance should have been included. We have a legal opinion on the matter,” he said.
Mtimde said the software system was in use after going live in April 2017.
He conceded that because of the glitch, accounting for set-top boxes was difficult with the agency unable to trace 21,000 units. EOH said the rise in the contract cost was because of “delays” by USAASA.
“We are not aware of any forensic investigation. As far as EOH Mthombo is aware, the system is operating optimally. We are busy reconciling the total amount invoiced and the final amount received, due to the changes and long history of the project,” the company said.

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