What the SA government and tech industry can learn from EOH’s fall from grace
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EOH featured prominently at the Zondo Commission during testimony by Deputy Minister of Intelligence, Zizi Kodwa. This South African tech company which was once the darling of the Johannesburg Stock Exchange fell from grace due to a series of questionable contracts with the state.
This has also been revealed at the Zondo Commission during the appearance by the company CEO, Stephen van Coller. How did a company with a market cap close to R 1,18 billion ends up where it is today?
This company suffered what can now be described as “The EOH Problem” which is cancer facing other tech companies that do business with the state in South Africa.
Most of the SA tech companies that do business with the South African government do not have their own technology systems.
These companies tend to be resellers of technologies by multinational technology companies. In essence, they become middlemen between government and the multinational tech companies. This is how Jehan Mackay came into the picture at EOH. His company was acquired by EOH to lead the Public sector division at EOH. One such company was TSS, which EOH acquired in 2011 as part of its bid to increase its presence in the public sector. According to evidence in front of the Zondo Commission, the public sector division at EOH paid millions to politicians to secure its government contracts. This explains one of the reasons why EOH grew so quickly in the ICT sector to be one of the leading companies.
This is a picture from just one tech company in South Africa. The “The EOH Problem” is an issue for many tech companies that conduct business with the state. One, most of them do not own what they sell to the state and this leads to a situation where they try to get an added advantage by bribing a politician with an influence in government.
Revelations at the Zondo Commission should serve as a lesson for the South African government and SA tech companies on how to avoid corruption in the technology space.
To avoid “The EOH Problem” in the future, firstly, there’s a need for SA technology companies to develop their own technology solutions. The competitive advantage of a local technology company should be its own innovations. This would enable local innovation and allow companies to compete based on what they do.
Secondly, the South African government should prioritise local technology solutions and use this as criteria for choosing companies that can do business with the state.
This approach in the initial stages and in the short run will require a sacrifice of some advanced systems for the government. In the long run, it will enable the development of local solutions and the development of the local tech industry.
Read full article on fastcompany.co.za.