Fraud and corruption case hits Pinnacle stock

TECHNOLOGY group Pinnacle’s share price fell the most in two years after it said its subsidiary Pinnacle Africa had been mentioned in a fraud and corruption case involving Gen Leon Eggers of the South African National Defence Force (SANDF).

The stock dropped 17.4% to close at R15.20 on Monday, wiping about R500m off Pinnacle’s market capitalisation.

Although no allegations have been levelled against Pinnacle, it faces possible damage to its reputation, as this is the second time the company has been drawn into allegations of tender fraud.

In March 2014, one of its executive directors was accused of offering a senior officer in the South African Police Service R5m to secure a technology contract. The case has since been dismissed.

Eggers appeared in the Pretoria Commercial Crime Court on fraud and corruption charges in July. Pinnacle said he had been accused of favouring Pinnacle Africa (now Pinnacle Micro), and a second supplier in the award of business in exchange for goods and gifts.

Pinnacle has denied the allegations against its subsidiary. It said its subsidiary had dealt with Eggers and the SANDF in the same manner as with any other customer.

“Pinnacle Africa networks with its customers and invites customers to many events including sporting events”, at its own expense, said Pinnacle Group CEO Pierre Spies.

“Pinnacle Africa has never requested, nor expected, nor received, any special treatment or favours from any of its customers, in return for any such entertainment provided by it, and it would never do so,” Spies said.

The charges against Eggers relate to a period from 2008 to 2014.

The business that he concluded with Pinnacle for the period between 2012 and 2014 amounted to R29m, said Spies. He said the SANDF was

an “end customer, which buys through resellers” that are customers of Pinnacle. The spending through the resellers amounted to less than R1m per annum, he said.

Spies said Pinnacle had not been charged and, therefore, the company did not need to defend its name.

The group decided to inform the market “so that all parties have the relevant information”.

Eggers was arrested in July following a lengthy joint investigation between the military police and the defence intelligence division of the SANDF.

An analyst who wanted to remain anonymous said it was a pity that Pinnacle’s name had been brought into these allegations, again.

The company had made a strong recovery and had regained market confidence following the 2014 debacle, the analyst said.

Pinnacle has since been growing its business through a combination of organic growth and acquisitions.

It is the majority owner of listed technology services firm Datacentrix.

Earlier in September, Pinnacle reported a 37% rise in revenue for the year to June, to R10.9bn.