Gumede back at troubled Gijima
ROBERT Gumede, the IT billionaire and founder of information services company GijimaAST, has blamed the previous management for the company’s woes.
On Tuesday last week, Gijima’s share price plummeted 16.67% at one stage after chief financial officer (CFO) Carlos Ferreira resigned with immediate effect, before recovering to close at about 6c a share.
Ferreira’s departure has been seen by some investors as a significant blow to the group and its turnaround plans.
Both Ferreira and Jonas Bogoshi, the former CEO who left last year, were wellregarded in the investment community and seen as pivotal to Gijima’s future prospects. But this is a point Gumede contests: “When they left, none of the major shareholders complained.”
Gijima shot to prominence in the late 1990s after scoring a number of windfall state contracts thanks to Gumede’s connections, as a donor to the ruling ANC.
However, Gumede is adamant that his personal relationship with President Jacob Zuma has not given him any special advantage. “Presidents don’t sit on tender boards and nor do ministers when it comes to state contracts. All that matters is whether you deliver the service on time and within budget,” he said.
Even though it still provides services to half of the JSE’s top 100 companies, the muchpublicised cancellation of a lucrative WhoAmI identification project with the Department of Home Affairs in 2008 hurt Gijima’s reputation.
Over a one-year period from July 2012 Gijima’s share has price slid 77% and it is not hard to understand the market’s disillusionment. Limited revenue opportunities, an ailing sales team, the partial loss of critical contracts with banking group Absa and the South African Police Service, as well as a R150-million rights issue announced in March, all cast a shadow over its future.
The company has also failed to perform as an investment against its peers. Over a one-year BCX, for example, has seen its share price rise 11.83%, while the stellar EOH has delivered an impressive 56.34% return.
But Gumede told Business Times this week that although mistakes had been made — particularly with regard to the large contract to implement an integrated system for the Department of Home Affairs that government cancelled — the company still had a bright future.
“The mistake that I made, both as chairman and as a board member, was to have never taken corrective action regarding the home affairs contract. That’s something I regret. When a company agrees to a settlement of that magnitude [R374m] there had to be consequences to management, which didn’t happen.”
He then took aim at Gijima’s managers. “I also regret not working harder to push against the perception of a business being dependent on one person. When I was executive chairman I helped the company clinch most of its contracts. And when I left that position the deals dried up and the executives that remained didn’t perform at the same level.”
Gumede said that in 2008, just before he quit as executive chairman, the company paid its maiden dividend and had hundreds of millions in the bank. “Since my departure as executive chairman, I believe that shareholders have to assess if the company has improved and I don’t think it has.”
But the charismatic businessman did not just blame management, he also rounded on the group’s sales force. “The company’s sales team has also been slack. When you pay people R150-million, I expect to see them bringing in revenue and when that doesn’t happen it’s clearly a problem.
“Over the past four years, there’s no doubt that the sales team has failed the company, especially when it comes to relying on existing contracts and not aggressively pursuing new business. But we’re now jacking it up through new appointments,” added Gumede.
Investors have not had much good news from the company. In March, Gijima reported an operating loss of R100-million and promised that it could deliver about R180-million in annual savings through “cost-cutting initiatives”.
But with only an acting CEO and CFO it may be difficult to hit this target. When asked if the cost savings were on track, Gumede refused to comment, citing JSE disclosure rules.
“What I’d like the market to understand is that all is not lost. I wouldn’t have put in R75-million of my own money during the rights issue if I didn’t believe in this company. Following the rights offer, I have moved into Gijima’s offices to ensure that I’m closer to the business and to provide support to management, staff and the clients.”
While the company tries to find a new CEO and CFO, the previous chief operating officer Eileen Wilton has been acting as its interim boss. On Tuesday, Liesl Tweedie was appointed acting CFO.
While praising Wilton’s efforts since she took up the position, Gumede has remained tight-lipped on who he preferred to take over the chief executive role.
“We are looking for a leader who understands the industry, someone who will surround themselves with capable people and not be afraid to disagree with the chairman,” he said.
Gumede has told Business Times that an announcement on the two key positions would be made in the next three months.
The company is expected to release its full-year results towards the end of September.
Few analysts look at Gijima anymore after being spooked by the steady trickle of bad news. One who does, however, is Irnest Kaplan, the managing director of Kaplan Equity, who told Business Times that while he was cautious, if anyone could restore Gijima to its former glory it was Gumede.
“If he’s intimately involved in the business it will go a long way to improving confidence, but it’s not going to be easy,” said Kaplan.
Gumede is promising big things: “Despite the problems, most of our major clients have renewed their contracts and we continue to service half of the JSE’s Top 100 listed companies.”
Ferreira and Bogoshi refused to respond to Gumede’s criticism.