Last month, Cell C said it has appointed Bowmans Attorneys to “investigate any parts of the business where we suspect that there may be irregular business practices”.
Given that Cell C executives have been accused of many things by #SAVECELLC and #CellCKwenzenjani group on social media the probe may in fact be overdue. For more read: R219 Million Paid To Three Top Execs At Cell C in 2017
The allegations are that executives have been dishing out contracts to family members.
Even, S&P rating agency downgraded Cell C’s rating profile, placing it deeper into ‘junk’ status in June.
Last week, Blue Label Telecoms shares took a nosedive after MTN announced that Cell C owes it R393 million and because of non-payment it has written off a part of the amount. For more read: Blue Label Telecoms Shares Battered Again Over Cell C’s Woes
Furthermore, Cell C may also lock horns with its empowerment partner, CellSaf.
South Africa’s competition watchdog has spent two years investigating whether to declare the recapitalisation of Cell C as a large merger conducted by both Blue Label Telecoms and Net 1.
At the time CellSaf said the deal was an attempt at corporate capture.
The empowerment firm alleged the complicated web of transactions and contracts by Blue Label Telecoms and Net1 would at the time give the companies full control of Cell C.
Should we – as the Mzansi people plus Cell C staff, #SAVECELLC and #CellCKwenzenjani group on social media – trust Bowmans Attorney to do the right thing?
For now, we don’t have a choice but to wait and hope that the probe will be conducted with a fine-tooth comb and all shall be disclosed publicly by Blue Label Telecoms.
On the one hand, similar corporate South Africa probes conducted by auditors and other law firms have never been made public.
Some of the probes have fingered junior staffs in irregularities. Clearly, they could have been sacrificed for senior executives.
That said, there is no reason to expect Bowmans will not conduct a proper investigation of “irregular” practices at Cell C.
After all the law firm cannot afford to dent its integrity and reputation by not doing a thorough job.
South Africa is already under scrutiny after alleged corporate governance failures at EOH, Steinhoff and Tongaat Hullet that eroded value for investors on the JSE.
It is, therefore, also critical that Deloitte acts above board as an independent financial restructuring advisor to Cell C.
Furthermore, it is important that PWC conduct a full procurement audit and review of Cell C’s processes with a fine-tooth comb.
The three companies, Bowmans, PWC and Deloitte, mustn’t take a leaf from KPMG, which suffered reputational damage after the revelation of irregular audit practices by some of its partners.
KPMG’s integrity took a knock following media scrutiny about its role in publishing the so-called SARS ‘rogue unit’ report – whose findings it has officially retracted; its role in the auditing of Gupta-affiliated entities; as well as the alleged improper conduct of at least two of its partners in the audit of VBS Mutual Bank.
In September 2017 KPMG’s local top leadership quit following an investigation by KPMG International into the work it had done for SARS and Gupta-linked companies. Businesses then started to cut ties with the audit firm.
Given the public interest in the matter, it would be good for Bowmans to reveal its findings publicly. One can only hope that Deloitte and PWC will meet expectations.
That said if the probe reveals irregularities the share price of Blue Label Telecoms, the biggest shareholder in Cell C, will be further hammered and this would erode more value for the JSE-listed firm.
For now, Cell C continues to be a drag on the share price of Blue Label Telecoms.
On the other hand, Blue Label Telecoms has delayed the publication of its 2019 financial statements to evaluate its investment in Cell C. For more read: Cell C at the Centre of Blue Label Telecoms Delaying Financial Statements
But while we (South Africans, Cell C staff, #SAVECELLC and #CellCKwenzenjani group on social media) do that, let’s keep an eye on Bowmans Attorney’s probe and seek answers.
What we should be asking is for Bowmans Attorneys to conduct the investigation in a manner that restores our faith in the legal fraternity and must not just deliver a whitewashed report because Cell C is paying them.
These must be trying times for the founders of Blue Label Telecoms, Brett and Mark Levy.
Cell C is in a mess that needs to be untangled. – firstname.lastname@example.org
Also read: The ‘Vodacom Cabal’ Must Go To Save Cell C