Significant accounting judgements, estimates and assumptions
On an ongoing basis, the Group is party to various legal disputes, the outcomes of which cannot be assessed with a high degree of certainty. A liability is recognised where, based on the Group's legal views, advice and application of professional judgement, it is considered probable that an outflow of resources will be required to settle a present obligation that can be measured reliably. The disclosure of other contingent liabilities is made unless the possibility of a loss arising is considered remote.
Contingent liabilities
Other than the disclosures below, no significant movement or new matters have been noted on the contingent positions as reported in the 31 March 2023 financial statements.
High court
Radio Surveillance Security Services (RSSS)
On 27 August 2020, RSSS served a new summons on Telkom based largely on the same events which gave rise to its previous unsuccessful action. RSSS is claiming the return of 444 alarm systems, alternatively payment of R210 million and a payment of R319 million for alleged outstanding rentals for certain disputed alarm monitoring systems. Pleadings have closed in the matter, however, Telkom is in the process of applying for security for costs against RSSS. Telkom has applied for the liquidation of RSSS as a result of several cost orders in Telkom's favour. The liquidation proceedings were argued on 17 February 2023 and RSSS has now been placed in provisional liquidation.
Class action against Telkom and Mutual and Federal Risk Financing Ltd
During June 2021, Telkom received a High Court application to certify a class action against it. The application arises from minor billing discrepancies on device insurance premiums relating to VAT. Mutual and Federal Risk Financing Ltd acts as underwriter for the device insurance and has also been cited in the court proceedings. Telkom is continuing to take steps to oppose the application for certification of the class action.
Phutuma Networks (Pty) Ltd (Phutuma)
In August 2009, Phutuma served a summons on Telkom claiming damages in the amount of R5.5 billion, arising from a tender published by Telkom in November 2007. The High Court granted absolution from the instance in Telkom's favour. The Supreme Court of Appeal (SCA) had initially dismissed Phutuma's application for leave to appeal in October 2014. On 4 November 2014, the SCA rescinded its order granted in October 2014. In early 2015, the SCA referred the application for leave to appeal back to the full bench of the North Gauteng High Court. The leave to appeal was heard in September 2016 and was upheld. The matter now needs to be re-enrolled for trial. To date, Phutuma has failed to set down the matter for hearing before the same judge who granted absolution. Telkom has proposed that the matter begins anew before another judge. Telkom has not heard from Phutuma and it has taken no further steps to advance the litigation.
Masstores (Pty) Ltd (Masstores)
During November 2021, Masstores (a subsidiary of Massmart Ltd) launched arbitration proceedings against BCX claiming for damages in the amount of approximately R160 million as a result of alleged breach of contract. Masstores was recently granted leave to amend its claim after BCX filed various exceptions. BCX recently filed its statement of defence and counterclaims. Pleadings have now closed and the parties will meet to discuss the further conduct of the matter.
Government Gazette announcement on Telkom
On 25 January 2022, Telkom received notice that the Special Investigating Unit (SIU) would launch an investigation into contracting and procurement processes in respect of telex and advisory services and alleged maladministration in the disposals of iWayAfrica, Africa Online Mauritius and Multi-Links Telecommunications. Telkom has approached the High Court to declare the proclamation on the SIU invalid. Telkom contends that the SIU has no jurisdiction over it. The High Court challenge was heard during November 2022 and the parties are currently awaiting judgement in the matter.
Telkom follows robust corporate governance principles and has done so in executing the Telkom strategy to consolidate its operations in South Africa. The aforementioned matters date back as far as 2006 and most of them have been repeatedly reported on in respective Telkom reports.
Therefore, at this point, Telkom expects no material impact on its financial statements resulting from the outcomes of the SIU investigation.
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