The Department of Home Affairs has made an about-turn when it announced a settlement with GijimaAST that will allow the disgraced IT company to continue with a multi-million rand project - despite "solid" legal advice that the contract was invalid.

After weeks of meetings behind closed doors to finalise the latest settlement, and a year after cancelling the contract, Home Affairs Minister Nkosazana Dlamini-Zuma said yesterday that Gijima would start up the Who Am I Online? project soon at a cost of R2.5-billion.

On Sunday, both Gijima and the department scrambled to hold separate briefings, embargoed until yesterday, at which they explained to the media the circumstances that led to the cancellation of the contract. Both parties attempted to shift the blame.

Gijima, which is owned by high-rolling businessman Robert Gumede, who has close ties to ANC leaders, last year threatened legal action when Home Affairs canned the contract because of the company's failure to deliver critical components of the contract for the soccer World Cup.

Not only does the reinstatement of the project go against legal opinion on the validity of the contract, it also ignores serious questions about how the contract price rocketed from R2.1-billion in October 2007 to R4.5-billion only two months later.

In October 2007, the department quoted a figure of R2.1-billion when it told Gijima that it had won the tender.

But when the contract was signed, in December 2007, the cost had risen to an unexplained R4.5-billion.

Other unanswered questions relate to suspected conflicts of interest of government employees who jumped ship to Gijima as the process to appoint the company was unfolding.

One such former public servant is Gijima chief executive Jonas Bogoshi, who was chief director at the State Information Technology Agency - which recommended that Gijima be given the contract in 2006.

Bogoshi left the agency for his current job in July 2007.

The Department of Home Affairs' former director-general, Mavuso Msimang, who left the department last year, was also a former chief executive of the State Information Technology Agency. He quit the agency in April 2007.

Dlamini-Zuma said yesterday that the contract with Gijima "had no strict time frames" but she hoped that it would be completed in two years.

As part of its contract, Gijima had to prioritise the parts of the Who Am I Online? project that were essential for the soccer World Cup, such as online applications for, and the issuing of, visas to the thousands of soccer tourists.

Dlamini-Zuma said: "It became clear to us that the phase [relating to the World Cup] was not going to be delivered by Gijima by February last year. We had discussions in the cabinet and we agreed to work together with the minister of finance and Sars, and we had to cancel the contract with Gijima."

Sars was roped in and, after only four months, in May last year, it had set up the system.

Gijima chief Bogoshi told The Times that the delays were partly to be blamed on Home Affairs.

"Home Affairs wanted us to bring forward some aspects of the scope of work, namely visas. There were delays and we blame them for the delays," he said.

The department, said its director-general, Mkhuseli Apleni, decided to cancel the contract after receiving legal opinion that it was invalid and unenforceable because it was funded for R2.1-billion instead of R4.5-billion.

Gijima had approached IBM and HP for loans, without authorisation by the Treasury, to fund the shortfall between the R2.1-billion and the R4.5-billion - a contravention of the Public Finances Management Act, which states that no government department can borrow money unless it has the express consent of the minister of finance.

Currently, there are two forensic investigations, one by the auditor-general, into the awarding of tenders.

The department has already paid R391-million to Gijima and will settle leases on servers, software, computers and other services from IBM and HP for an estimated R815-million.

The capital cost for the completion of the project is estimated at R1.3-billion.

Apleni said the out-of-court settlement was motivated by the fact that a protracted litigation process could delay the project by another seven years, and incur more costs.

Gijima and its partners, IBM and HP, have agreed to write off R375-million and R234-million, respectively.