Vodacom has won an estimated R5bn contract with the South African government as the national treasury seeks to cut costs, according to three people familiar with the matter.
The tender is to supply as many as 1,3m government employees for four years starting on 15 September, said the people, who asked not to be identified as details of the deal haven’t yet been made public.
If 400 000 government employees take up the service, the contract will be worth as much as R5bn over the duration of the deal, one of the people said.
“Vodacom is honoured by the national treasury’s decision to appoint us as a partner to government to deliver on the all-important task of enabling government to connect and communicate efficiently,” CEO Shameel Joosub said in e-mailed comments on Wednesday, without providing detail of the contract.
The decision is intended to save the national treasury money and have a reliable telecommunications supplier, according to one of the people. Finance minister Pravin Gordhan said in his budget speech in February that the reduction of government costs is a priority. The state could save R25bn/year through “belt tightening”, he said, including R500m from changing cellphone policies.
For Vodacom, the deal will help increase its number of customers who pay for voice and data on a monthly basis, rather than on so-called pay-as-you go deals. The Johannesburg-based company had 35,1m South Africa subscribers at the end of June, of which 30,1m were lower spending, pre-paying customers.
That’s a nice sales commission.
Was this an open and honest tender process ?
Or has the fact that the state run PIC, Public Investment Corporation holds a 13.9% share in VC played an important part in this decision ?
Gov sold this 13.9% end of last year to the PIC with 10% discount.
The PIC is run by the Min of Finance, and deals mostly with Gov employees pensions.
Eventually this disconnect is going to spill over.
Its in effect a giant pyramid scheme, with the seething masses continually bypassed at the bottom.
We all know what happens with pyramid schemes.
Trust me, smaller businesses are better off not doing business with government at all. Government can ruin them for good, by either not paying at all, dragging out the payments, giving the run around, breaching contracts, and so much more. Unless you have a team of lawyers that draw up your contracts meticulously and who are going to fight for your money when government stuffs you around, you’re better off without their business. I’ve seen it happen too many times. Businesses go broke and people’s lives are ruined by doing business with government.
Perhaps when we have a change of government, or if you are dealing with local government in the Western Cape, then it might be worth it.