Rivals are out to cut Vodacom’s state line
Competition Commission continuing probe into R5.2bn deal, regards it as priority case
A MULTIBILLION-rand contract awarded to Vodacom to provide phone and data services to national and provincial government departments is back in the spotlight following complaints that it created a monopoly.
The National Treasury’s acting chief procurement officer, Willie Mathebula, had told government departments and other state institutions that there were concerns raised that the R5.2 billion transversal term contract created a monopoly in the market and that it should have been awarded to multiple suppliers.
”As a result, government institutions are not clear whether or not this contract is compulsory for all organs of state to procure mobile communication requirements covered in this contract,” stated a letter from Mathebula dated September 26.
A transversal term contract was centrally facilitated and arranged by the National Treasury for goods or services which were required by one or more government department or state institution.
The contract, which started in September 2016 and would run until the end of August 2020, was also the subject of a Competition Commission investigation. Vodacom’s competitors have referred the matter to the commission to probe the legality of the multi-year contract to supply and deliver mobile communication services to national and provincial government departments.
In May, Independent Media reported that Vodacom beat MTN in the final round of the adjudication of the R5.2bn contract based on functionality requirements after Telkom and Metro Lifestyle were eliminated in earlier rounds.
Yesterday, the commission’s Sipho Ngwema said the investigation into Vodacom was continuing and that it was among its priority cases.
Vodacom has defended the awarding of the contract, saying the tender process was initiated and controlled by the National Treasury through strict governance procedures, and expressed confidence that it followed due process in a fiercely contested and transparent bidding process.
The Competition Commission has initiated the probe against Vodacom for alleged abuse of dominance in terms of the Competition Act.
According to Mathebula, the commission was approached by mobile communications operators to investigate the extent to which the contract may have contravened the Competition Act.
”The subsequent award of this contract to a single mobile communications operator has resulted in unsuccessful mobile operators that participated in the procurement process raising concerns about awarding such a huge contract to a single mobile operator to the exclusion of other operators” Mathebula said.
He added that Vodacom was now rolling out smart meters in some municipalities which may be in conflict with its mandate for such infrastructure as set out in the Municipal Finance Management Act, the Municipal Systems Act and other applicable legislation.
Mathebula said he was providing clarification with the prospect that the confusion created would be addressed and government institutions would be in a position to procure mobile communication and related services in an efficient, cost-effective, fair and competitive manner as provided in section 217 of the constitution and the Public Finance Management Act (PFMA).
“As indicated, this contract was concluded on the basis of cost containment and value for money accruing to the state. Should accounting officers/authorities opt not to participate on the transversal term contract RT15, accounting officers/authorities concerned need to ensure that any new contracts that they enter into with alternative service providers are in compliance with the prescripts and processes of the PFMA, Preferential Procurement Policy Framework Act and other applicable legislation.”
Mathebula also warned organs of state to ensure that any contracts they entered into took into account broad socio-economic objectives of government such as BEE, small business and local industrial development and businesses owned by designated groups.
This year, Vodacom announced that its mobile revenue was negatively impacted by the slower rollout of services from the National Treasury contract, with average revenue per user declining as it implemented the increased discount coupled with an unexpected lag in on-boarding of new departments.
A Vodacom spokesperson said: “Participating government departments and public entities have the option to opt into RT15 or remain with their current service providers, and therefore, the monopoly concern is without merit.”
According to Vodacom, the Competition Commission had not informed it when its investigation would be completed, but the operator would fully co-operate in the probe.
The spokesperson said the tender process was initiated and controlled by the Treasury through its procurement office, with the award based on elements such as cost savings and quality of service.
“We are confident we followed due process in a fiercely contested and transparent bidding process. None of the pricing structures put forward to Treasury were based on an exclusive provider-award basis or any restrictive minimum commitments.”