“OUTA recently investigated REDISA and raised red flags regarding the dealings of the Directors in REDISA,” said Julius Kleynhans, Portfolio Director for Water and Environment at OUTA. “We recommended an in-depth investigation be conducted by the Department of Environmental Affairs (DEA) and the Green Scorpions. When we engaged with the DEA, they were already investigating REDISA and we were able to add our findings to their case,” Kleynhans added.
OUTA’s findings indicated that the CEO of REDISA, Mr Hermann Erdmann, was assumed to be the common denominator when looking into shared business interests as well as those who did business with REDISA. In conjunction with the findings, the complete executive authority of the REDISA board was also found to have been involved in some of the CEO’s dealings and needed to be investigated.
“The evidence obtained substantiated the DEA’s claim that Mr Erdmann may be in conflict of interest. It also supports the other predictions which have been developed during the investigation. The evidence showed that there is a high probability that the good corporate governance of REDISA and its structures may be ineffective or circumvented, which created an environment rife with possible opportunities for fraud to occur,” said Kleynhans
The DEA said that money was channelled as management fees to a host of companies in which the executive directors of REDISA had a financial interest. The combined expenditure by REDISA on the fees of executive directors and staff, comprising of only seven people, was a total of R1.7 million a month.
Kuzaga Taka Consulting, a company partially owned by Erdmann was appointed in the absence of competitive bidding processes as the management company responsible for implementing the plan at an annual fee of approximately R100 million a year. Soon after, again without a bid, the South African National Civic Organisation (SANCO) was appointed as a subcontractor to serve as a go-between for REDISA and tyre pickers, coming at an alleged initial cost of almost R3 million. Soon after a host of individuals, allegedly with political ties, received tyre recycling equipment free of charge ranging from R17 million to R30 million, totalling almost R100 million to start up their own tyre recycling businesses.
The Independent Online indicated further allegations that REDISA had purchased a freehold property for R18.7m, which fell completely outside the mandate of REDISA. It owned motor vehicles to the depreciated value of R4.14m, which was not authorised in the REDISA plan, and employed a security company to secure the private residences of the directors at a cost of R63 933 a month.
“We trust that the Hawks and the Green Scorpions will be successful in their investigation and prosecution. We sincerely hope that the DEA will claw back the money through its liquidation application. Those who abuse tax money must be held accountable,” added Kleynhans.