The meaning of the GovChat CEO resignation
OPINION: An environment should be created for entrepreneurs and innovators to develop solutions for government challenges in a way that does not hurt their reputations and standing in the business world, writes Wesley Diphoko.
Resignation has dominated the national discourse last week. GovChat, the company which manages a key government function, has shocked the tech world with the resignation of its founder Eldrid Jordaan.
Its Chief executive, together with the Chief Data Officer, shockingly resigned. Why would a founder and a leader of a company resign?
In his resignation letter, Jordaan did not say much except concluding with these words, “I will be taking some time off to reflect on the journey and consider my next contribution. And definitely start my book, “GovChat vs Facebook: The David & Goliath Story”.
These remarks, together with the fact that the Chief Data Officer also resigned, provide a glimpse into what could be behind the abrupt resignations.
The GovChat matter is complex for a number of reasons. The resignation of a founder is never a good sign. It often points to a displeasure of the investor and sometimes a key stakeholder.
During the same week in which GovChat founder resigned, its major investor announced its results and highlighted the major challenge faced by the company.
The company is embroiled in a dispute with Meta. It is accused of using the WhatsApp platform for a functionality it was not intended for in the form of government communications.
GovChat major investor, JSE-listed fintech group Capital Appreciation (CAPPREC), also announced it decided to impair its R56.3 million loan to 35% owned GovChat, a tech platform that facilitates engagement between citizens and government.
This is a non-cash charge with no impact on headline earnings, but it did knock 4.60 cents off basic earnings per share.
In terms of a key stakeholder that may be unhappy, it could be that the South African government has finally realised that there’s a data risk with enabling GovChat to handle citizens' data.
Open Secrets has released a report which indicates that their investigation has revealed several red flags that they believe necessitate much closer scrutiny of GovChat’s relationship with Sassa.
According to Open Secrets, “GovChat secured its contract without any competitive bidding process. Second, and perhaps most important, GovChat’s claim that it is providing its services for free needs scrutiny.
“GovChat’s financial backers are not philanthropists but shrewd fintech businesspeople, who have unambiguously stated their intention to monetise GovChat’s model to secure returns for shareholders”.
The report indicates further that CAPPREC is promising its shareholders that it will monetise the GovChat business in the future. How this will be done it’s not clear. The report by Open Secrets titled: DIGITAL PROFITEERS - Who Profits Next from Social Grants? raises serious concerns about the potential for GovChat to make money from citizens data.
Despite everything that has been said about Meta, the global tech company seems to be concerned about similar issues.
Meta has indicated in the past that: “GovChat has repeatedly refused to comply with our policies, which are designed to protect citizens and their information, preferring to prioritise its own commercial interests over the public. We will continue to defend WhatsApp from abuse and protect our users.”
The recent resignations are pointing to an internal realisation that these matters are also of concern.
The resignation of Jordaan, however, is a great loss to GovChat and South African government.
He formed this company after his tenure on Mxit board, another South African tech platform.
Jordaan has been a very important power player within the tech company.
His political connections and business credentials played a key role in building GovChat.
He is one person with political might and tech understanding that made it possible to develop a tech solution for a government challenge.
South Africa needs to find a way to avoid such an occurrence in the future. Government tech solutions should be managed in such a way that they don’t create a potential for abuse.
At the same time, an environment should be created for entrepreneurs and innovators to develop solutions for governments challenges in a way that does not hurt their reputations and standing in the business world.
When Jordaan finally publishes his book, let us hope it will shed light on the real reasons behind his resignation. If not, Meta (formerly Facebook) and the South African government will have to tell their side of the story.
* Wesley Diphoko is the Editor-In-Chief of Fast Company (SA) magazine.
** The views expressed do not necessarily reflect the views of Independent Media or IOL.
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