Post Office’s Telkom debt threatens social grant payments
● Telkom this week threatened to cut off IT services to the South African Post Office over a R225m outstanding debt.
Insiders told the Sunday Times that the Post Office had to make an emergency payment to Telkom to avoid having its services disrupted. They say there is a strong push by the Post Office board not to renew the Telkom contract when it expires next month, a move that is opposed by the company’s executives.
Since August 2014, Telkom has been providing the Post Office with a range of electronic communications services which make it possible to renew vehicle registrations and pay social grants. The R960m contract is due to end next month, according to documents seen by the Sunday Times. But the cash-strapped Post Office is failing to honour payments for the services it gets.
The Sunday Times has seen a barrage of letters between the Post Office, Telkom and communications & digital technologies minister Khumbudzo Ntshavheni about the spiralling debt and Telkom’s threats to suspend services.
On August 11, Telkom CEO Jonas Bogoshi told Ntshavheni: “Sapo [South African Post Office] defaulted on the payment plan on many occasions despite your intervention at some stage, and several reminders and correspondence to comply with the payment plan. Sapo has failed or refused to make payment for services and products provided by Telkom.”
He said Telkom was giving the Post Office 10 business days to remedy the breach and pay the debt by September 30.
“Failure to do so will entitle Telkom to exercise any of its rights in terms of the agreement, which includes the suspension of services and claim for damages,” said Bogoshi.
Besides the once-off R225m, Telkom wants the Post Office to pay R30m every month until the end of their contract.
On August 24, Post Office CEO Nomkhita Mona fired off correspondence to BCX CFO Zweli Vilakazi, disputing the R225m figure, saying it was not provided for in the payment agreements they had signed, and questioning how Telkom quantified the outstanding debt. BCX is a subsidiary of Telkom.
Mona advised Vilakazi that the agreement with Telkom set out specific rights and remedies to an aggrieved party on breach of contract, and Telkom’s suspension of its services was not among those rights and remedies.
“Accordingly, the threatened suspension of services by Telkom may be devoid of merit,” she said. She further warned Vilakazi that the suspension of services would have a wider impact than only on the Post Office.
“You are doubtless aware that Sapo relies upon Telkom services to pay the social grants administered by the South African Social Security Agency (Sassa),” said Mona.
“About 10-million beneficiaries of social
grants rely on Sapo for the payment of their monthly grants, the next payment date of which is at the beginning of September 2022.
“You will appreciate that the threatened suspension thus stands to affect about 10million people in the immediate future.”
She informed Vilakazi that the Post Office was considering its position in respect of the master service agreement (MSA) and the statements of work, adding that there was a question mark over the constitutional validity of the agreements.
A legal opinion the Post Office had sought on the validity of its contract with Telkom suggested the contract and ancillary agreements were illegal because required procurement processes were not followed in awarding the initial contract in August 2014.
“The lack of an open tender process rendered the contract invalid and affected the enforceability of the terms to the MSA and scope of work agreement.”
It said if the Post Office still needs the services provided by Telkom beyond December, it should procure them through a competitive tender bidding process in compliance with section 217(1) of the constitution.
According to sources, this has divided the Post Office’s leadership. The board says the company should not renew the contract with Telkom when it ends in December, and is calling for an open tender process, a call ignored by the executives who plan to extend the contract.
The Post Office did not respond to detailed questions. Spokesperson Johan Kruger said it was not in a position to discuss active contracts with the media.
Telkom’s spokesperson Nomalungelo Faku said the company does not comment on contractual agreements with its clients. She did, however, confirm that its contract with the Post Office expires soon.
Sassa spokesperson Paseka Letsatsi would not be drawn into the tussle, saying the agency has a contract with the Post Office for its beneficiaries to be paid “and we expect our beneficiaries to be paid, as per the contract”.