Group CEO Stephen Van Coller for Business Day: EOH survives annus horribilis as it claws its way out of a graft hole

When I joined EOH in September 2018, I was looking forward to growing its reputation as the leading provider of technology services on continent. I saw the enormous potential of leveraging the company’s entrepreneurial culture, the best technology brains in the industry as well as the unparalleled breadth of information technology solutions that allow for the creation of a “one-stop shop” for many clients.

This, coupled with the highly innovative intellectual property businesses, positioned EOH to play a key role in society, given its ability to serve almost the full spectrum of client needs in large private companies and the public sector.

This potential still exists for EOH and fuels my vision that we can be a force in the technology sector. The past year has, however, been the toughest year for the company since listing on the JSE 21 years ago.

We are living in a time in which morality has fallen by the wayside. What happened at EOH is an outcome of a society in which corruption and unethical values have taken root.

Our democracy has been affected by the scourge of corruption, which has resulted in the poorest of the poor paying the highest price.

It requires courage and resolve to clean up the business from a governance and financial perspective, and we are now seeing a deeply responsible and ethical consciousness emerging at EOH.

As Africa’s largest information and communications technology (ICT) company, and due to its systemic role in the SA economy, EOH is a business with tremendous potential. While we are not yet out of the woods, a year later we have made meaningful progress towards rebuilding a sustainable and well-governed group.

Microsoft’s termination of EOH’s licence-reseller partnership and the widely reported governance breaches in EOH’s public sector business had a huge destabilising effect on the business. Significant management time had to be dedicated to the extensive forensic investigation, conducted by ENSafrica, that revealed serious and fundamental flaws in the way the business had been managed and further identified suspicious transactions to the value of R1.2bn. This number has since been decreased to R900m.

Our reputation and credibility suffered, creating uncertainty with clients and a slowdown of the business pipeline. We saw a change in client behaviour through the delay or non-award of bids and in some cases holding off on payment until they were convinced EOH would survive. Staff morale was affected and we risked losing good talent.

Very early on, several issues that were hindering the unlocking of value and sustainability became clear. EOH’s strategy was opaque to investors and other stakeholders. Due to an aggressive and confusing acquisition strategy, the mix of businesses was widely diverse and heavily weighted towards products rather than the sale of solutions and services. Alarmingly, in the later years this acquisition strategy was largely funded by imprudent levels of debt. Several of the businesses were not generating cash and instead required large cash investments, placing the broader group at significant financial risk.

Tactical priorities

Several further financial missteps and unhealthy cash management practices in previous years put even further strain on the company’s tenuous financial position.

In early March we started zoning in on three urgent tactical priorities. The first was to rebuild credibility and reputation by addressing the corruption allegations and putting processes in place to protect the business. We also needed to delever the balance sheet as quickly as possible and address the bloated cost structure. Furthermore, we had to build a robust, transparent business model positioned for future growth and securing client and investor confidence.

Notwithstanding the headwinds, there were also opportunities to unlock value. EOH has been reorganised into value groupings to allow businesses to run at different speeds and scale where appropriate. Additionally, we identified and focused on a number of businesses with strong annuity revenue base. The rebranding of our ICT services business to iOCO in July is gaining great traction among clients and partners.

While the investigation was in full swing, we still managed to attract and bed down an experienced, King IV-compliant board and bring in an entirely new executive management team comprising talented individuals.

Whistle-blowing app

Furthermore we initiated cost savings of more than R600m and collected more than R400m from long-outstanding debtors. This required pulling together as a team to understand the low-hanging fruit and having a particularly focused execution strategy. Key to the process was regaining market trust by ensuring we keep all stakeholders abreast of the details of the forensic investigation. It was this transparency with the board and the market that saved the 11,000 jobs.

Our homegrown whistle-blowing app, ExposeIT, contributed significantly to the success of the investigation.

Being an ethical leader means making some tough decisions for the greater good. It takes courage to do the right thing even when the decisions you make might be unpopular or come at a price. When you have to make hard choices about the way you do business, especially if it affects people, a strong set of personal and organisational ethical values is the best navigational tool.

With the forensic investigation finally behind us and the legal processes taking their course, for the first time in many months we can get down to the real business of running Africa’s largest ICT business.

Most people want to work for an ethical business and do their work with integrity. Allowing the corrupt activities of a few people to taint an entire business or a country must not be allowed.

It is only when an uncompromising attitude to ethics and a culture of good governance is entrenched from the top that an environment is created in which corruption cannot take root.

By Business Day, full article here. 

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