JOHANNESBURG — It’s Spin City over at the EOH headquarters on Wednesday morning as the company has tried to contain an escalating crisis. It all started last week when TechCentral editor Duncan McLeod broke a huge story detailing how Microsoft had given EOH the boot. At that stage, EOH said it still wasn’t supplied with an explanation from Microsoft about the decision. But this week, the situation became clearer when TechCentral again revealed that a whistleblower had, in fact, alerted the US Securities and Exchange Commission (SEC) about a questionable SA government defence contract that EOH entered into in 2016. What’s telling is that Microsoft’s HQ in the US instructed its SA office to immediately cut ties with EOH. Now, four directors, including the company’s founder and chairman Asher Bohbot, have announced their resignations just hours before a key annual general meeting. Subsequently, the already weak EOH share price plummeted further on the JSE and on Wednesday morning it was down by over 11% at one point. EOH has cited the directors’ exits as being part of a compliance-drive with King 4. While that may be the case, the timing of it all is too coincidental amid recent events in the week. There’s definitely set to be further fireworks coming out in the days and weeks ahead if the recent drama is anything to go by. Hopefully, it won’t be a Steinhoff 2.0. – Gareth van Zyl
By Loni Prinsloo and Renee Bonorchis
(Bloomberg) –Â EOH Holdings Ltd. said two of its founders resigned in a board shake-up as Chief Executive Officer Stephen van Coller races against time to restructure the South African technology firm and calm investors and lenders.
The exodus, which saw four of EOH’s seven directors quit, comes on the day the members were up for re-election at the Johannesburg-based company’s annual general meeting. It also comes after an anonymous complaint prompted Microsoft Corp. to abruptly cancel a contract, causing the shares to plummet.
Chairman Asher Bohbot, the firm’s CEO for 19 years, will step down at the end of this month and remain on as an adviser until July 31, EOH said in a statement. The other departures include Rob Sporen, also a founding member of EOH, Tshilidzi Marwala, a non-executive director who has served on the board for 11 years, and Tebogo Maenetja, the human resources executive director, who will leave at the end of April.
“EOH is refreshing the board,” spokeswoman Debbie Millar said by phone. “The board members that are leaving have been there for many years” and new directors will be appointed by the end of March.
The stock slid as much as 11% before paring losses to trade 4.2% down by 9:28am local time Wednesday. That extends losses this year to 55%, the biggest slump in the 164-member South African all-share index.
Van Coller, a former executive at Absa Group Ltd. and MTN Group Ltd., was brought in last year to turn the troubled business around. He plans to break the company into different parts, to ensure investors see the full value of EOH, that consists of more than 270 companies.
EOH said in July it would split the company into two independent units, with its information, communications and technology business operating under EOH and the new NEXTEC brand focusing on industries such as technology for renewable energy, health and water sanitation.
The banker is aligning the firm closer to a code of good governance known as King IV, which recommends term limits for directors and that a former CEO shouldn’t serve as chairman until after a three-year cooling-off period. Bohbot returned as chairman when Sandile Zungu resigned after more than four years in the position in March last year.
EOH shares have plunged since Microsoft ended its association with the South African company. Johannesburg’s TechCentral website reported that a whistle blower’s allegations about a South African government software deal were behind the US software giant’s decision.
EOH, Buffeted by an Anonymous Tip, Starts Whistle-Blower App
Expose-It, which was made available for download on Monday, enables those with sensitive information about their company or organisation to pass it on to relevant authorities without fear of being identified. The app is designed to encourage “the safe, anonymous exposure of wrongdoing, both within EOH and without,” Chief Executive Officer Stephen van Coller said in an email to employees.
The irony of the timing won’t be lost on staff. EOH shares plunged last week after Microsoft Corp. ended its association with the South African company. Johannesburg’s TechCentral website reported that a whistle blower’s allegations about a South African government software deal were behind the US software giant’s decision. EOH’s public sector contracts have long been a matter of scrutiny, and the company said on Tuesday that it’s probing all such deals over the past five years with the help of a law firm.
Van Coller, a former executive of lender Absa Group Ltd. and wireless carrier MTN Group Ltd., was brought in by EOH last year partly to restore the company’s reputation and boost corporate governance. The shares dropped 16% on Tuesday, extending losses over the past 12 months to 77%, the second-worst performer on the South African benchmark index over the period.
“Compliance is critical to our reputation, but as the old saying goes, culture eats governance for breakfast,” Van Coller said in his email introducing Expose-It to staff. The app “will help further elevate our corporate culture.”
