Vexall, an ICT company that started trading in September 2019, is seeking interim relief against Business Connexion (BCX), who owns the copyright to the computer program called Unisolv. BCX developed Unisolv some 26 years ago. It is said to be the industry-standard software for use by private retail pharmacies.
In 2019, some BCX staff members involved in developing and implementing Unisolv resigned and joined Vexall, in which Dis-Chem is a majority shareholder.
BCX claims the resignations were orchestrated, while Vexall says the workers were either retrenched as part of a substantial cost-cutting exercise, or resigned seeking job security.
In the second half of 2019, Dis-Chem and a substantial number of other pharmacies gave notice to BCX that they would no longer procure “value added services” from the company. These comprise a wide-range of ICT services such as hardware and software installation, central patient profile hosting and inventory management services, among others.
BCX says some of these services are integral to the functioning of Unisolv as a whole and it would not be viable to “unbundle” these. However, it does not object to Vexall providing non-integral services. Vexall, in turn, argues that it should be able to provide all “value added services”.
BCX lodged a case in the High Court in October 2019 against Vexall, Dis-Chem and 46 others (former BCX employees who are now with Vexall).
BCX’s allegations – that Vexall has acted unlawfully against BCX by illegally poaching its employees, customers and unlawfully appropriating its intellectual property in relation to Unisolv – are the subject of the case lodged in the High Court.
Vexall has lodged a complaint against BCX with the Competition Commission, accusing BCX of uncompetitive behaviour and contravening the Competition Act.
In summary, Vexall accuses BCX of being a dominant company and of “tying and bundling” i.e. forcing its customers to purchase “value added services” together with the licence in order to use the Unisolv software. It argues that this induces customers not to deal with Vexall.
The Competition Act prohibits a dominant company from selling goods or services on condition that the buyer must purchase unrelated goods or services (unless the dominant company can show pro-competitive effects which outweigh the anti-competitive effect of its conduct).
BCX denies that it is a dominant company. It also denies that it has acted anti-competitively (“tying and bundling”). In its papers before the Tribunal, it also submits that the matter before the Tribunal should be put on hold, pending the outcome of the case in the High Court.
Telkom, the partly state-owned South African telecommunications company, is billing the national police service for two contracts that cover virtually the same work, five people familiar with the situation said.
The Pretoria-based company secured a contract to work on the service’s switching centers, which allow the South African Police Service to communicate with staff and stations across the country, and started work in mid 2016 using Netxcom ICT Solutions (Pty) Ltd. as a subcontractor, the people said, declining to be identified because they aren’t authorized to speak to the press.
While Netxcom is continuing to do the work, Telkom has withheld some of the payments it owes to the subcontractor even though it has continued to receive money from the police, the people said. It is now in a legal dispute with Netxcom, which has sued to get the money it believes it is owed. Telkom said it did withhold some payments to subcontractors because of contractual “inadequacies” without naming Netxcom.
A few months after Netxcom started work, Telkom signed a separate R497-million ($34 million) contract, which will run for five years, with the police to do the same work on the same switching centers with a few minor additions. That agreement, which has been seen by Bloomberg, includes another subcontractor known as AppCentrix (Pty) Ltd. as a participant. It was not put through a competitive bidding process, as is mandatory for all government contracts over 1 million rand unless the requirement is waived by the National Treasury.
The Treasury says that it is unaware of the contract. The State Information Technology Agency, or SITA, which procures all of government’s information technology, was not consulted by the police on this contract as is also mandatory, the people said, declining to be identified because the information isn’t public.
Telkom spokeswoman Nomalungelo Faku cited confidentiality clauses when asked why a tender for the new contract had not been held. The police and SITA didn’t respond to queries. Netxcom and AppCentrix declined to comment.
“As a principle, Telkom does not withhold payment to its vendors,” Faku said by email, saying she was commenting on behalf of George Candiotes, Telkom’s executive for legal services. “However, during 2017 Telkom conducted a supplier review. Based on this certain actions were taken between Telkom and suppliers including the withholding of payments where certain inadequacies in the contractual arrangements were identified.”
Emails between senior officials of of Telkom’s BCX unit seen by Bloomberg said that the failure to pay Netxcom was souring Telkom’s relationship with the police and that Netxcom was still doing work for the police.
Telkom hasn’t answered questions on how the two contracts with the police differ.
The revelations come as Cyril Ramaphosa, who took over as president in February, is overseeing a drive to stem irregular and wasteful spending that’s led to the termination of boards of state companies.
Internal email communication, seen by Bloomberg, between Telkom staff including its chief executive officer, Sipho Maseko, and Candiotes corroborated what the people said about the non-payment of fees to NetXcom.
The South African Police Service “has not indicated any direct issues with the vendors or the work and we are receiving payment,” Candiotes said in an April email to Maseko. “Our view is that we are currently exposed in the instance where we cannot show why we cannot make payment, despite our contentions we have terminated the agreement.”
Telkom, which is 41% owned by the government, is trying to terminate the relationship with Netxcom in favor of its newer contract, the people said.