Saturday, February 4, 2012

Gijima in court to block termination of State contract

: Monique Vanek|03 February 2012 13:11
Gijima in court to block termination of State contract

UPDATE: Urgent application "stood down until Tuesday pending settlement discussions between Gijima and Sita".
JOHANNESBURG – IT service company, Gijima (JSE:GIJ) filed court papers on Wednesday to the North Gauteng High Court in a bid to prevent the “unlawful” cancellation by The State Information Technology Agency (Sita) of a R19m-a-month contract it has with the SA Police Service (SAPS).

In the court papers it claims the termination of the contract on January 31 is of “no force and effect” and that it is entitled to at “least one-month’s notice of termination of the contract”.

Nicqui Galaktiou, chief operating officer at Brian Kahn Incorporated Attorneys, which is representing Gijima, told Moneyweb that the urgent application heard on Friday "was stood down until Tuesday pending settlement discussions between Gijima and Sita".

Gijima was awarded the SAPS contract by Sita in September 2006, an addendum to the contract was signed by both parties in November 2011, extending the contract on a month-to-month basis at the sealing amount of R19.6m per month “until further notice for termination”.

Gijima was alerted to the termination of the 433 contract for the maintenance and support of SAPS hardware devices during a meeting at Sita’s offices on January 25 between its Business Unit executive: Distributed Computing Services Hannes Burger and Thenjiwe Mjoli, head of procurement at Sita.

At this meeting Gijima was told that Khauleza IT Solutions would “take-over” the contract on February 1 2012, Gijima was asked to attend a transition meeting on January 27.

Khauleza appears to be an unknown entity in the IT field.

According to Khauleza’s website, it is “a national information and communications technology company making use of global best practices to ensure delivery of quality services and systems by conforming to internationally accepted standards" and procures goods and services for clients.

A company search listed Raymond Elias Risk and Julius Siyabonga Maclean as Khauleza’s directors. Risk agreed to talk to Moneyweb but then failed to return our calls.

A termination letter followed the meeting. In the letter Gijima was asked to acknowledge receipt of the letter and confirm its acceptance of the contents of this letter. According to an e-mail in Moneyweb’s possession, Gijima responded by requesting a meeting with Sita’s management “to jointly seek a resolution to the issue” as it felt it had not been given sufficient time to “enable it to implement and execute an Exit Management Plan in terms of clause 6.3 of the 433 contract”:

It said Sita knew since 2009 that such an exit plan would take three months to execute.

In the e-mail Gijima described the termination as “unlawful” and warned that it could “severely compromise and prejudice the SAPS and therefore the citizens of the country” and the IT company's “more than 100 employees dedicated to executing the 433 contract”.

It also stated that Khauleza “has no other clients other than Sita and has no experience”.

From Gijima’s e-mail it appears the contract was put out for tender some time in 2011 for which Gijima put in a bid, which was expected to be awarded in May 2011. Gijima states that it was never told if this proposal was accepted or rejected.

In light of Sita’s failure to respond to Gijima’s request for a meeting it sought an urgent interdict from the North Gauteng High Court which was heard on Friday.

It claims that Khauleza does not have the required employees to take over the 433 contract and has thus tried to poach Gijima’s employees.
This is not the first contract that Gijima has clashed heads with government on.

In 2010 when Gijima failed to have key components of the Who Am I Online contract ready in time for the Fifa World Cup, the Department of Home Affairs approached the South African Revenue Services to develop a new movement control system.

It also informed Gijima that the contract was considered invalid, but the company disputed this. Home Affairs Minister Nkosazana Dlamini Zuma then opted for negotiations to avoid a legal battle and further delays.

Home Affairs settled out of court with Gijima for a loss of R389m over the cancellation of its contract.

In August its government contracts made up 36% of its business whilst the private sector made up the rest.

Gijima's share price fell 3c on Friday to close the day at 56c or -5%.

Gijima files urgent application against SITA
Written by ITWeb
Monday, 06 February 2012 15:36

Gijima's dispute with the State IT Agency is “confidential”, says Gijima CFO Carlos Ferreira. JSE-listed outsourcing company Gijima has filed papers against the State IT Agency (SITA), in a bid to stop it from cancelling a contract that has been running for more than five years.

Gijima wants SITA's cancellation of its contract to supply and maintain hardware for services to the South African Police Services (SAPS) put aside, as it is entitled to at least one month's notice. It also wants to stop SITA hiring another company to take over the contract “during the period of operation” of the deal, ITWeb reports.

Gijima says in its application for an urgent interdict, a copy of which is in ITWeb's possession, that the agency unlawfully cancelled a contract and prevented the company from providing services to the SAPS by revoking electronic access. The company alleges SITA binned the deal with only five days' notice, instead of the required one month. Gijima argues that this will cost it revenue of about R20 million, and is likely to damage its reputation in the public sector and cause its skilled staff to be poached by competitors.

The deal was entered into in September 2006, and came into effect the next month. In November last year, the R19.6 million a month contract was extended on a month-to-month basis, “until further notice for termination”.

However, on 25 January, SITA wrote to Gijima and gave the company five days' notice that the contract was being canned. Gijima responded, indicating this was not acceptable, but its access to the project was terminated on the evening of 31 January. Subsequent to Gijima lodging the urgent application with the North Gauteng High Court last Wednesday, the company still seemed to be providing services to SAPS. In a statement, Gijima says: “SITA together with SAPS are still Gijima clients.”

Ferreira confirms the application has been filed, but that “at this point in time, this is a confidential matter between the client and ourselves”. Ferreira notes Gijima has been working with SAPS for the past 10 years and has delivered in accordance with the contract in question. “Gijima has and will continue having a sound relationship with our client, the SAPS.”

Moneyweb reports that the application has been postponed pending settlement discussions between the parties, which ITWeb unsuccessfully attempted to confirm. Gijima would not provide any further information on the status of the urgent application, while SITA did not respond to repeated requests for comment.

Willem Hatting, Gijima's public sector: business management executive, argues in an affidavit accompanying the urgent application that cancelling the contract will undermine “the efficiency of the South African Police Services”. Gijima has about 100 “dedicated maintenance personnel” with the required security clearance working on the project.

The listed company argues it will lose out on a month's revenue and faces the loss of highly-skilled staff, which it had security-cleared. “Information technology staff is difficult to hire as there is a massive shortage of these skills in the country and the costs of retaining them to the applicant is of the order of R10 million a month.”

Hatting writes that, because of the cancellation of the contract, it is likely that this staff will be poached by a competitor. In addition, says Hatting, Gijima's reputation in the public sector will be “irreparably damaged by the summary termination” of the agreement. Gijima also alleges the contract was apparently awarded to an IT company called Khauleza “in secrecy”, Gijima's lawyers argue in a letter to SITA disputing the cancellation. Gijima's legal representative, Nicqui Galaktiou, COO of Brian Kahn Inc Attorneys, writes “rumours in the market are that the 433 contract was awarded to Khauleza, but this has never been confirmed by SITA”. Khauleza MD Raymond Risk would not comment as the matter is before the courts.
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