Altron Nexus ‘irregularities’, execs suspended
● Altron has placed three of its senior executives under precautionary suspension at a subsidiary, Altron Nexus, after allegations of procurement irregularities.
Less than a year ago the technology company tightened its procurement processes.
Altron CEO Mteto Nyati told investors it had suspended the executives after an investigation revealed potential internal irregularities in the firm’s procurement processes.
The findings come a year after a whistleblower made similar allegations against some senior executives in Altron Nexus, prompting the company to appoint independent investigators to probe the allegations.
The investigation did not find evidence of irregularities, but recommended improvements to reporting obligations for its procurement process.
“The process that we had at the time was not as tight as it should [have been] and that is the tightening that happened after the recommendations,” Nyati said.
The work on which the investigation had made its recommendations includes the Gauteng broadband network as well as others in the City of Tshwane and in Limpopo.
After another whistleblower came forward with similar information in June, Altron appointed forensic services company Naledi Advisory Services to conduct a probe.
The preliminary findings show there was potential deviation from Altron Nexus’s procurement processes, estimated to be R23m, and early profit recognition of about R20m in the 2018 financial year.
Altron CFO Cedric Miller said the R23m was for 10 individual payments which the company was not comfortable with in terms of the contracts in place or supporting documents and other related processes.
“In terms of the early revenue recognition, that relates to the 2018 year. The sign-offs from the client were only obtained in the early parts of the 2019 financial year.”
The issue with the R20m related to when the revenue was reflected in the financial statements because the work had been done and invoiced appropriately. Both amounts relate to public sector contracts.
Miller said the company would wait for the investigation to be completed to see if there was a misstatement, following which Altron would consider what the implications would be for the 2018 financial year.
“The revenue of [Altron] Nexus for the 2018 year was about R1.2bn, so it’s not material for Nexus from a revenue perspective but certainly from a bottom-line perspective. If this is found to be the case, it is material in terms of Nexus’s profit after tax. But it is certainly immaterial to the Altron group profit after tax,” Miller said.
Nyati said Altron viewed the allegations in a serious light and the three executives could have a disciplinary hearing, overseen by an independent chair.
On Friday Altron’s share price closed 2.32% lower at R24.37.
Altron’s troubles mirror those of EOH, the technology company that launched a probe of its governance following an investigation by law firm ENSafrica of allegations of irregularities for government tenders.