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- The high court has declared President Cyril Ramaphosa's 2022 proclamation for a SIU probe into alleged unlawful conduct by Telkom and some of its employees and agents "unconstitutional, invalid and of no force".
- The resultant probe has also been declared invalid and set aside and all related documents must be returned to Telkom.
- Costs were awarded to those who opposed the application.
- For more financial news, go to the News24 Business front page.
President Cyril Ramaphosa's January 2022 proclamation for a Special Investigating Unit (SIU) probe into alleged unlawful conduct by Telkom and some of its employees and agents has been declared "unconstitutional, invalid and of no force", with the North Gauteng High Court in Pretoria setting aside the proclamation.
The resultant SIU investigation has also been declared invalid and set aside, with the investigating unit ordered to return to Telkom all documents it obtained in pursuit of the probe.
The investigation was into alleged maladministration, irregular and unapproved procurement and misappropriation of public funds. Among the complaints to be investigated was an alleged irregular relationship between Telkom and some of its suppliers, including Network Telex and a contract with British Telekom.
The president, the SIU and the minister of communications and digital technologies, as well as Edward George Scott, representing a private company, had all opposed Telkom's application to set aside both the proclamation and the resultant investigation into its affairs.
In upholding the application, Judge Tlhapi awarded costs against those who opposed it.
The proclamation covered the period starting in June 2006 until the date of the proclamation - a 15-year-wide, "overbroad and vague" and invasive probe that Telkom contended was inappropriate for a listed company.
The company had also requested the court to determine whether the president had sufficient facts before him to make the proclamation, acted in a procedurally fair or procedurally rational manner and whether there was sufficient jurisdictional requirement for the presidential proclamation.
It contended that the president had also neglected to give Telkom an opportunity to make representations ahead of the proclamation.
Telkom insisted the president lacked particulars which are mandatory to fulfil the requirement for an SIU investigation and that, as a company majority-owned by investors other than the government, it was not a public state-owned entity in terms of the Public Finance Management Act (PFMA). The government owns 40.5% of the shares in Telkom, while the Government Employees Pension Fund owns 15.3% of the stock. The rest of the shares are owned by private investors.
After the sale of some of the government-held shares prior to the 1997 listing of Telkom on the JSE, the government failed to update the PFMA, which would remove the reference to Telkom as a Schedule 2 state-owned public company. Telkom was able to obtain open-ended exemptions from the requirements of the PFMA and was permitted to "act and trade as a commercial entity" without any government oversight, financing and control.
As such, the company also did not fall under any of the grounds in Section 2 of the SIU Act.
Telkom said that in authorising the "vague allegations formulated in the widest possible terms", the president had acted irrationally and arbitrarily.
The wide powers vested with no limits in the president by the SIU Act made it possible for abuse to occur.
Telkom also alleged that the consequences of subjecting to such a widely publicised investigation caused billions of rand to be lost in shareholder value.
The president denied this, and contended he had taken into consideration the memorandum of the SIU and sought legal opinion that agreed Telkom was a state-owned entity. The president also denied that the scope of the SIU Act was too wide and lent itself to abuse.
The president had received complaints about Telkom's business, and after considering those and acquiring the SIU's opinion, he determined an investigation was warranted.
Judge Tlhapi agreed with Telkom that the government was merely an ordinary investor in the entity, and that Telkom was not a state-owned entity as defined by the SIU Act. While the court found the president's decision was overboard and irrational, Telkom is, however, not excused from being investigated by the SIU, should the jurisdictional grounds be met.
