Arivia.kom arrival delayed
According to data from Eskom Enterprises, which holds 58,5% of Arivia, the company generated a profit in the 2006 financial year of just R20m on turnover of R1,48bn. This compares with a net profit in 2005 of R63,5m. Revenues in 2005 were R1,59bn.
Arivia recently became a subsidiary of Eskom after arms company Denel sold its 22,98% stake to the electricity giant and to Transnet. Eskom now holds 58,5% and Transnet holds the rest. The transportation parastatal has said, though, that it plans to sell its stake in Arivia as it does not regard IT services as part of its core business.
It’s not yet clear whether Transnet will sell its stake to Eskom or whether government will seek a partial privatisation of the company. "I’m not sure what the shareholders want to do," says CEO Zeth Malele.
Arivia was originally created through the merger of Transnet’s IT arm Datavia, Eskom’s IT department and state-owned IT company Ariel Technologies.
A recent report prepared by the department of public enterprises (DPE), which has responsibility for Arivia and its shareholders, suggests that government wants the company to play a bigger role inside Eskom: "Arivia.kom will support Eskom’s business with strategic IT services and will effectively become a direct subsidiary of Eskom. This means that in future, Arivia.kom will receive similar treatment to all other subsidiaries [of Eskom]."
Public enterprises minister Alec Erwin has long promised to resolve Arivia’s shareholding structure. Management has wanted to sell equity in the business to a black shareholder. Company insiders wonder whether Erwin is opposed to a privatisation, even if it is only partial and even if it means bringing in a black shareholder.
Erwin told parliament more than a year ago – in April 2005 – that he would announce a course of action by the end of August last year, but nothing transpired. Erwin said at the time that government had previously considered the option of a strategic equity partner for Arivia but that this had been put on ice while a study was conducted to assess the combined IT capacity of Arivia and two of its shareholders, Eskom and Transnet.
The delays have cost Arivia dearly, says one company insider. Because the company does not have a black shareholder, it has failed to win a number of big contracts. "That is what has crucified us," the source says. "It’s out of our hands. It’s the DPE’s decision [to make]. We can do [nothing] about it."
That’s not Arivia’s only challenge, though. "In the private sector we are seen as a parastatal and we are excluded from contracts. In government, we are seen as a commercialised entity and discounted on a similar basis.
"We really depended on the DPE to get us out of this no-man’s-land, to get us a black partner so we could at least say our equity was sorted out."
It’s still not clear what government’s plans are for Arivia. One scenario, which seems likely, is that the company will simply be made a division of Eskom Enterprises. From there it will provide IT services to Eskom and to a few, selected government clients.
This shift may already be happening. Efforts to expand the business in Africa, a strategic objective of Malele and his management team, have not achieved the desired outcomes. A plan to sign up more private-sector clients has also met with limited success. Indeed, more than three-quarters of Arivia’s revenues are still derived from Eskom and Transnet. And Transnet has begun shifting some of its business to other IT suppliers.
Malele says, however, that relations with Transnet are still good. "They are happy with our service levels, generally speaking. There are, of course, a few things we’d like to do better."
Arivia is said to be intensifying its focus on government clients. Its main customers are Eskom, Transnet, the SA Revenue Service, the Airports Company and the department of water affairs & forestry. "The focus of Arivia.kom has reverted to these accounts and to government," a source says. "The stuff that Arivia set out to do five years ago, like conquering the private sector, has come to naught."
Malele says the group has been significantly restructured to respond to various challenges. "We have realigned the business to the needs and demands of the market. We have structured it in a more client-centric way so we can respond quicker to client needs at lower cost."
One Arivia subsidiary that has had a particularly tough time recently is Csiper Consulting, which implements SAP business software solutions. Hans Visser, who headed Csiper, has resigned and has been replaced by Joe Mazibuko, formerly of the State IT Agency. Other businesses, such as Face Technologies, a supplier of driver’s licensing and other systems, apparently continue to perform well in spite of the challenges.
Malele, meanwhile, strongly denies speculation in the IT industry that he plans to tender his resignation: "There is no truth in that at all. I have no plans to leave at this stage."
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