Media Releases

Inside OUTA September 2016

Dear OUTA Members and followers

September 2016: another month of political madness and civil action success

As we roll into summer, our spirits in the OUTA office are not only heightened by the warmer weather and the prospects of much needed rain, but also by the growing public support extended toward our work and efforts.

The number of members who complete the monthly donation process (to the value of their choice), continues to grow and the more this happens, the greater our ability to expand our corruption fighting capacity and advocacy. In addition, our growth ensures that we are able to increase our litigation war-chest which is extremely necessary in the space of civil action against people in positions of authority.

Our experience and that of many civil action organisations, is that government has a tendency to use their endless supply of taxpayers funds against civil society’s challenges by adopting an ‘attrition through lawfare’ strategy. We are now able to counter this with a meaningful and sizable litigation fund to see these winnable cases that we tackle through to the end, as we hold those who abuse their positions of authority to account.

In this month’s newsletter, we reflect on a few of the campaigns we are busy driving and, more specifically, those which have made media headlines. Despite these articles, we are working behind the scenes on other matters pertaining to SABC and the Hlaudi Circus, the Water issues (a few of them) and specific campaigns within a number of State Owned Entities where maladministration and potential corruption is rife.

September also saw OUTA present its concerns on the flawed Eskom MYPD methodology which allows Eskom to generate unacceptably high energy tariff increases. We notice that Nersa (the supposed watchdog on behalf of the public) have shifted up a gear in their role to protect the public from Eskom’s abuse of the electricity tariff scheme. However, we believe they have still fallen far short of that which society requires of them. We will keep our members posted on developments in this regard.

To all who continue to contribute to OUTA, we say thank you. Your collective contributions are making a significant impact on our collective ability to fight for a more prosperous country. Our membership growth is also extremely encouraging to the entire 26 person team at OUTA. We are energised by the growing support and generosity of the public and businesses throughout South Africa.

Go well and be comforted in the fact that your contributions are making a difference.

Wayne
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September 30th saw the eventual retirement of Mr Nazir Alli, and the appointment of a new CEO, Mr Skhumbuzo Macozoma, to take up the reigns at Sanral.

Mr Alli was the architect and driving energy behind the failed e-toll scheme in Gauteng, along with many other failed or questionable matters such as the Western Cape toll routes, the N2 Wild Coast Toll Road and the planned De Beers Pass Route. We trust that Mr Macozoma will be able to rectify the mess that Sanral has become.

But what is the latest on the e-toll saga? Sanral and OUTA have issued media statements which appear to contradict each other on the “test case” issue. I’d like to assure all our supporters and those who contribute to OUTA (and therefore fall under the e-toll defense umbrella), that there is no ambiguity or misleading message when we say that Sanral’s lawyers have agreed to a test case process with OUTA. But if you ask Sanral whether there is a test case, obviously their answer is “no”, because in reality there is no test case as we speak. But there definitely is an agreement to a test case process.

What does this mean? In simple terms, it means that OUTA’s legal efforts to defend its 152 summonsed members could be handled in one of two ways. We could either go the whole way and meet Sanral in court on 152 occasions – which we are prepared to do – or we could combine a scenario of a few cases (such as an individual, a business and a trucking company) into one formal test case. The latter option makes sense and will surely be the route that the Deputy Judge President (DJP) would want this matter to be handled, instead of clogging up the courts with thousands of e-toll cases. In fact, if Sanral did not agree to a test case process, we would have applied to the DJP for such a process to be undertaken.

What now needs to happen for the test case process to begin, is for OUTA and Sanral’s lawyers to agree on a number of matters pertinent to the declarations and information being presented to OUTA on the e-toll claims. This aspect of the discussions between our respective legal teams is being conducted without prejudice, so we can’t say much more on these developments for now. But rest assured, we will keep our members and the public informed of this process, when we are able to do so.

Finally, we are adamant that if a test case process is in place, it makes no sense for Sanral to continue with the thousands of summonses issued to the rest of the public, i.e. non-OUTA members. We have asked Sanral to put all summonses on hold, not only those received by OUTA members, until the test case is heard. They have refused to do so, which we find rather absurd. We also feel the DJP will agree with us that it makes no sense to have the test case process underway, whilst Sanral clogs up the courts with thousands of other charges against the rest of society who have also defied the irrational e-toll scheme. We can only wait to see if sanity will prevail in this regard.

As far as we are concerned, OUTA’s case in the defensive challenge is extremely strong and has been buoyed by the recent Western Cape Winelands appeal judgment finding against Sanral this month. In our opinion, whilst the e-toll scheme has failed as an effective mechanism to fund the Gauteng Freeway Improvement bonds, it is a matter of time before government has no option to pull the plug on this irrational scheme.

Minister Peters can stand on her soap box and holler that e-tolls is here to stay as much as she wants, but in reality, the public have spoken and there is little she can do about it. More and more of the few (less than 20%) road users who are still paying, are removing their tags and opting to rather keep their money in their own bank accounts and not to feed the defunct scheme.

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OUTA went to court on 31 March this year in an urgent bid to stop Eskom from implementing an electricity price increase of 9.4% on the 1st of April 2016. We challenged Eskom and NERSA on their failure to be transparent about the reasons for yet another price increase. Although our interdict was not granted, we continued our investigation into irregularities at Eskom and we are applying to the Supreme Court of Appeal to have the irrational judgment which set aside our challenge, overturned.

But why is the battle for transparency so important to OUTA? Would it make a difference whatsoever?

Like all state-owned institutions, the devil at Eskom is in the detail and especially in the details that Eskom remains stubbornly opaque about. In recent years, the lack of transparency at Eskom has given rise to a need for greater public scrutiny of their affairs.

The most objective measure of Eskom’s productivity is its total energy production, which has remained relatively static over the past 10 years. In 2007 the power supplier produced 218GWh, and it peaked in 2012 at 225GWh before dropping back to 214GWh in 2016. However, the electricity price over the same period increased astronomically from 20c per kWh in 2006 to over 80c per kWh in 2016. The impact of these increases has been significant on business and society as a whole, and an analysis of the underlying factors behind the rising tariffs is cause for great alarm.

The drop in productivity at Eskom has been staggering. Yet, over the last decade we’ve seen Eskom’s salary bill increase from R7,2bn in 2006 to over R27bn in 2016. During this period, Eskom’s staff compliment increased from 31 458 employees (2006) to over 47 978 currently. One has to ask where the extra 17 000 employees are being employed within Eskom if the company is producing less electricity than ten years ago.
When using state (and thus taxpayer) guaranteed debt, squander is terrible, but squandering borrowed – and therefore interest bearing – funds, is exponentially worse. This seems to be exactly what is happening at Eskom. The power supplier’s debt increased from just over R30bn in 2006 to over R322bn currently. More worrying is the fact that Eskom has publicly indicated this debt may increase by another R350bn in the next 5 years.

A debt of R700 billion attributed to a single state-owned entity is an astronomical amount, and poses a serious risk for the shareholders of that entity. The fact of the matter remains: the public are ultimately the shareholders who will be held hostage by repaying the debt run up by Eskom.

Shocking as these facts are, the more pressing and dangerous issue facing taxpayers, is the lack of transparency when it comes to Eskom’s procurement processes.

As with other state owned entities, OUTA has detected significant risk being undertaken with large state procurement projects funded by debt, since these artificially inflate the cash available to splurge and waste and at times, abuse.

The battle for transparency within Eskom will likely be one of the most important battles ever fought in our young democracy, and OUTA will play a significant role in this fight. We are very grateful for the growing trend of whistleblowers who have become fed up with the ever increasing fraud and maladministration, which provides us with more ammunition to challenge Eskom (and NERSA) and force them to be transparent in their use of taxpayers’ money.
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While OUTA is not opposed to the concept of nuclear energy, we are definitely against the secrecy surrounding government’s proposed nuclear deal with Russia and its state nuclear agency, Rosatom. This deal, if allowed to advance, will be unconstitutional, as there was no public participation or parliamentary discussion as is required by law.

Also, Treasury simply doesn’t have the money to repay Russian loans to the value of an estimated R1,2 trillion plus interest over the next few decades. Repayment will add R100 bn per year to our growing national debt. In the light of the looming economic junk status our economy is facing, the nuclear deal is simply incomprehensible. We have more pressing needs in South Africa to attend to, like education, health and unemployment, should there be money lying around.

Energy experts also agree that we don’t need new nuclear plants. Our demand for electricity is not growing at the rate of Eskom’s prior MYPD projections and SA will have more than enough energy once Medupi, Khusile and Ingula power plants, currently under construction, come online. (See graph below) – INSERT GRAPH)

The rest of the world is moving away from nuclear, as renewable energy sources (sun, water and wind) have been proven to be a lot cheaper and better for the environment. This renewable mix, boosted by gas, makes for the cheapest blend of new energy requirements going forward. Yet government wants to push through this deal with Russia and Rosatom at all costs, forcing us to ask: “Who are the real beneficiaries from this deal? It is certainly not the public, and it will be taxpayers who will have to pay for this white elephant for many decades to come.

OUTA is also very concerned that Eskom – already known for their lack of transparency, under-production and overspending – is being tasked by government to construct, maintain and operate the proposed nuclear plants. Eskom’s lack of transparency was underlined yet again when we recently discovered their unlawful gazetting of notices regarding the Thyspunt and Duynefontein Nuclear Installation Site Licence (NISL) applications. Not only was it not gazetted nationally as is required by law, but the public was initially not given the required 28 days to comment on the proposed applications. OUTA received more than 25 000 public comments directed at Eskom on these gazettes, thereby forcing them to extend the dates for submission on the applications.

We support the Southern African Faith Communities Environment Institute (SAFCEI) and Earthlife Africa Johannesburg (ELA), non-governmental organisations who began a legal battle with government in October 2015 to challenge the legality of this deal and the processes followed. We trust this court challenge will force government to explain their clandestine decision and hasty processes undertaken for the biggest procurement deal in South African history.

We urge all South Africans to watch this video. Please share it with friends and family, as we need to stop the nuclear deal. Please support the SAFCEI and ELA legal battle financially by donating here.
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OUTA once again proved that we don’t simply talk about the corruption we expose – we take action! As part of our ongoing investigation against SAA about irregularities at the national carrier, OUTA has laid formal criminal charges against Mr Daniel Mahlangu, sole director of BnP Capital, on September 15th 2016.

Our investigation revealed that BnP Capital was part of an unlawful deal with SAA that would have earned this virtually unknown company a whopping R256 million for securing a loan of R15bn on behalf of SAA. Our investigations uncovered serious irregularities with the tender process, as well as several alleged fraudulent actions by Mr Mahlangu. Although SAA cancelled the deal following our legal demand for them to do so, the chairman of the SAA Board, Ms Dudu Myeni, still wanted to pay BnP Capital a fee of R49, 9 million for “costs incurred.”

Based on evidence gathered through our investigation, Ivan Herselman, our director of legal affairs acting on behalf of OUTA, laid formal criminal charges against Mahlangu on the following grounds:

  • Failure to inform SAA that his company’s financial services board (FSB) licence had been suspended, despite knowing that this was part of the critical criteria for a successful tender.
  • Having contact with a direct competitor prior to the bid and fraudulently failing to disclose this to SAA.
  • Fraudulently misrepresenting that parties would serve on his project team when they had never even heard of BnP Capital.
  • Fraudulently misrepresenting that there were parties on his team with aviation experience when the other party was in fact a luxury motor vehicle salesman, not part of Mahlangu’s team and also unaware of the existence of BnP Capital.
  • Fraudulently attempting to persuade SAA to pay a cancellation fee of R49, 9 million as a result of costs incurred by the international financier responsible for sourcing the funding when in fact the international financier had not incurred or invoiced for any such costs.

Mahlangu has since denied any wrongdoing and claimed that he was under attack on the basis of incorrect allegations.

OUTA has no interest in tarnishing any individual’s good name with false accusations, and it was as a result of the evidence of fraudulent actions resulting in taxpayer’s money being wasted or abused, that we decided not to not allow this matter to go unchallenged or unnoticed.

By laying formal charges, we hope to send a very clear message to those in positions of authority: if you are party to dubious transactions with any state department or state owned organisations where taxpayer’s money is involved, we can and will hold you personally accountable legally.

We have proof that Mahlangu wasn’t the mastermind behind this scheme and that he did not act alone. We will also closely monitor the unfolding of the criminal case against him and are hopeful that he will be convicted based on the evidence we gathered.

Our investigation is continuing, and we will take legal and other action within the next few weeks against others within SAA who are involved or implicated in this and other unlawful deals.

OUTA will also monitor the ongoing labour matters against various SAA employees who were suspended because they raised the alarm over unlawful or irregular financial activities at the national carrier. Early indications are that these will be successful in proving their innocence.
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