Eskom in a contractual dispute with a critical service provider

South Africa’s public electricity utility Eskom is in the midst of a contractual dispute with Texas-based American technology company Oracle, which provides a bunch of technical support services to the electricity utility.    

Eskom said, in a statement on Monday, 5 April, that it has set up “contingency measures” to reduce its reliance on Oracle Corporation in the event that the supplier withdraws its services – which it fully intends to do.

ORACLE CLAIMS ESKOM OWES R7.3 BILLION

Oracle initially claimed that Eskom underpaid it by approximately R7.3 billion, which Eskom disputed. Upon further negotiations, Oracle reduced the amount to less than R400 million, the electricity utility disputed this as well and stated that it believes the amount Oracle is really about R166 million in total.

Eskom offered to pay the R166 million and offered to resolve the dispute “legally and sustainably” via a verification and court process.

“When Oracle rejected this approach, threatening to terminate its services to Eskom, Eskom approached the high court to compel Oracle in essence to continue providing the technical support services for the duration of the agreement until April 2022,” said the electricity utility.

On Thursday, 1 April, the Johannesburg High Court dismissed the application but the parastatal intends to launch an application for leave to appeal.

WHAT ARE THE SERVICES RENDERED BY ORACLE?

According to The Sunday World, the electricity utility relies on Oracle’s products and services for several critical operations, including its online vending system, which facilitates and records 77 million transactions of electricity sales per month.

Other services and products provided by Oracle enable Eskom to distribute electricity to prepaid customers, collect revenue, and pick out and repair faults in the distribution system.

“As far as the technical support services are concerned, Eskom have assessed the risks in the event of Oracle withdrawing technical services support. Eskom has interim risk mitigating processes in place to reduce the risk of its operations being disrupted,” said the utility.

The electricity utility described Oracle’s actions as “regrettable” and said as it is a entity that deals with public funds it refuses to be “bullied into paying any monies outside of the legal processes”.