KPMG: Siemens Services to SA Labor Department Substandard

Lucas Gilmore, “Big 4″ observer
February 10, 2011 /

CAPE TOWN, South Africa – The labor department has heeded the advice of KPMG not to give extension to the contract of the German technology firm Siemens after the audit firm has found that its services have been below standard.

According to KPMG, it would be less costly to come to terms with regards to the termination of the contract, which spans for ten years. The labor department would also seek compensation from Siemens for its losses.

Sam Morotoba, the acting director of the department, said they have already notified Siemens about the termination of the IT-contract, which will end in 22 months.

“We can now enter into negotiations that will result in a make-or-break with Siemens on going forward or not with this contract. We are in the process of setting up high-level negotiations,” Morotoba said.

KPMG has advised the labor department to present evidences to the company where it could justify the substandard services left by Siemens, in addition to over-billing charged to the department.

Since 2002, the total amount charged to the labor department has increased from R1.2 billion (US$165 million) to R1.9 billion (US$262 million) due to rises in interest rate and inflation.

The department is currently in talks with SITA over the replacement of Siemens upon the expiration of its contract.

“Given the remaining term of the contract we had to look beyond Siemens to develop an exit and transfer plan,” Morotoba said.


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