Transnet-run Port of Durban is the busiest in sub-Saharan Africa. (Photograph: Wikimedia.)
Loss-making Transnet has until noon on Monday to pay Gijima R60 million for work done between July and September this year following failing in its bid to end a R1.5 billion tender.
Transnet’s agreement to pay Gijima follows a ruling earlier this month in which acting judge AJ Minnaar refused Transnet leave to appeal an October High Court decision that it could not force Gijima to hand over management of its core enterprise IT systems.
The payments, under six invoices, have been made an order of the court. This order, a copy of which is in ITWeb’s possession, records Transnet as agreeing to these payments “under protest”.
In terms of the order, any further disputes between the two entities will be dealt with by arbitration, which is targeted to be complete by mid-February next year.
Under the five-year R1.5 billion contract, Gijima was responsible for running Transnet’s data centre, hosting services, enterprise IT, and mainframe services. Gijima continued to manage the IT environment after the deal ended as a court case played out.
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The deal initially ran from December 2019 to November 2024, although it was extended to February 2025 and Transnet subsequently obtained approval for payments to Gijima through to June this year.
Transnet has been trying since mid-year to separate itself from Gijima and move forward with a new IT partner on the basis that the Master Service Agreement (MSA) had ended.
After losing a mid-year bid to force Gijima to hand back control of its systems in a ruling handed down in October, the state-owned logistics provider then asked for permission to appeal the matter to either the Pretoria High Court or the Supreme Court of Appeal in Bloemfontein.
Its application for leave to appeal was denied, with the ruling reiterating that Transnet was not in a position to technically accept handover. Gijima had advanced this argument during the first hearing in defence as to why it could not relinquish control over Transnet’s IT environment.
In October, Minnaar – who presided over both cases – said the state-owned entity “had no transition plan, no technical readiness, and no clarity on how the most critical component (the mainframe) was to be migrated”.
Transnet had argued it and its new transition partner Microsoft “have the necessary technical capacity, infrastructure and equipment to immediately disengage, migrate and host the majority of the remaining services which were not mainframe services”.
However, the judge noted Microsoft “still had to conduct an essential assessment and predicted it would take six to eight weeks. Despite being aware of this crucial shortcoming, Transnet elected to proceed with its case.”
Minnaar said that the absence of a transition plan “entitles Gijima to withhold performance until Transnet has fulfilled its reciprocal obligations under the MSA”. Without such a strategy, “it was and remains impossible for Gijima to perform” any disengagement.
Among the arguments that Transnet advanced in its application for leave to appeal was that it “ought not to be exposed to unbudgeted financial expenditure in respect of continuing services, as a result of Gijima’s own refusal to co-operate with Transnet to bring about the completion of disengagement services”.
Transnet has been loss-making for some time now and has been narrowing its deficit, with this figure dropping to R1.9 billion in the year to March this year, down from R7.3 billion a year earlier.
In its annual report, auditor-general Tsakani Maluleke flagged concerns about its viability as a going concern, although Transnet’s directors indicated that key issues had been mitigated.
This is not the first time the disputed contract has made headlines. In 2018, German IT firm T-Systems South Africa withdrew from a R1.5 billion deal, which ended a lengthy court battle and paved the way for Gijima to take over the five-year deal.
Gijima subsequently acquired T-Systems South Africa in 2020.
