Media Releases

inside OUTA August 2016

Inside OUTA - AugustHEADERIn this issue…
1 – A Note from our Chairman, Wayne Duvenage
2 – SAA: We will go all the way, Ivan Herselman
3 – E-toll Update: OUTA’s legal defence gaining Traction
4 – Hlaudi, Muthambi and the SABC debacle
5 – We won’t allow Eskom to get away with this

download a PDF of this issue here


Dear OUTA Members and followers

Today, we see a ruling party in crisis and at war with not only the people, but itself.

Casting one’s mind back to the aftermath of December 2015 Nenegate tsunami, I recall how, after the waters had settled, Pravin navigated our nation through the close shave with the credit ratings downgrade. I and many others would have seriously thought that one man (and his henchmen) might have learned a lesson or two on how not to trash a country’s foreign currency trade and ratings.

How wrong I was, as we witnessed the shenanigans of the Hawks’ interest in charging Minister Pravin Gordhan in a manner which smacks of sheer political meddling and gamesmanship that makes this nation look like the circus it has become. And the ringmaster, none other than our President, the new overseer of State Owned Entities, the very breeding grounds of the big tenderpreneur projects in the country.

Following very successful local elections and what was clearly a turning point in the political history of our nation, the tide of change is thick in the air today. But with three years to go to the 2019 elections, with projections pointing to a radical shift in party leadership at the national and provincial levels, one senses a situation of “to hell with the party and stuff the country, let’s grab what we can, while we can”.

Today, we see a ruling party in crisis and at war with not only the people, but itself. These are the signs of a looming political implosion with serious consequences. The sad reality is that those who suffer may not be the perpetrators of the ills and wrong doing.

I would like to salute the stance taken by a former trade unionist and foreign affairs director-general, Sipho Pityana who, whilst paying tribute at the funeral of former Sports Minister Makhenkesi Stofile in the Eastern Cape this week, laid into the African National Congress and criticized the President and the ANC senior executive for its outrageously shocking leadership.

In his speech, Piyana reminded mourners of a Xhosa hymn, “ Zemk’inkomo magwala ndini” (Wake up, the cows are being stolen while you people are sitting doing nothing), by the late Walter Benson Rhubasana.

According to Pityana, one thing was clear: the ANC was in denial of the challenges it was faced with. He reminded us that it took Archbishop Emeritus Desmond Tutu to say, “you do not represent me”, but that everyone else was keeping quiet while the ANC was losing its founding principles and a movement in denial. “It’s time for new leadership,” Pityana added.

In this edition of OUTA’s newsletter, you will read of a few actions and stories on issues our team is working hard at, as we strive to make South Africa a better country. If there is ever a time for this nation’s citizens to rise up, it is now. But what does rising up mean? To most it signifies protest and anarchy, but this is not what I refer to. To OUTA, rising up and claiming one’s land from a tyrant is using the peaceful mechanisms available. To stop complaining and start doing. To remain positive, to stay here and be resilient. In short: to become active citizens.

An easy and highly effective way of joining the fight, is to support civil action movements such as OUTA, where we are firmly establishing ourselves as an effective corruption fighting machine. Thousands of people donating small amounts every month, makes us stronger and helps us grow our team of talented people to research, investigate, engage and fight hard to expose and hold accountable those responsible for the maladministration and corruption in SA today. We are passionate about the fights that help us rid the scourge that diminishes the value of our nation.

Strength to you.
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Last month OUTA made headlines for exposing and stopping the unlawful deal between SAA and BnP Capital, a virtually unknown middleman, that stood to gain more than R250 million for securing a loan of R15 billion on behalf of SAA.

1280x720tailOur investigation not only exposed serious corruption with SAA’s tender process, but also the fact that BnP Capital was operating unlawfully after its Financial Services Board (FSB) licence was revoked earlier. We also exposed that Inline Trading 10, the joint venture partner of SAA had fraudulently used the FSB number of another company in the tender documents. Our legal challenge ensured that SAA cancelled the deal with BnP Capital and its sole director and shareholder, Daniel Muhlangu.

However, OUTA didn’t stop there. After further investigation, we are now finalising criminal charges against Mr Muhlangu on various grounds. This includes his failure to inform SAA about his suspended FSB licence and his failure to disclose his non-completion of the necessary exams required by the FSB, thus exempting him from providing certain services to the SAA. Our investigation also proved that Muhlangu has been lying when claiming he had not been in contact with competitors. He had in fact had contact with Mr Matosha Mngadi, a Nedbank employee who has been involved with the BnP bid as well and who has since been suspended.

Mhulangu also misrepresented facts when he claimed that the FSB number of Inline Trading 10, his joint venture partner, was correct and true when in fact it belonged to another company. He also misrepresented facts about the parties said to be executing the bid. OUTA’s investigation proved that one of the parties has never even heard of BnP Capital, nor have they ever been involved with them. The other left BnP in February 2016, long before the bid was even submitted.

It is of the utmost importance that not only the board of the SAA be held accountable for their role in the unlawful deal, but also Muhlangu and BnP. OUTA will therefore request the FSB to fully and finally revoke BnP Capital’s licence. We will also request the Companies and Intellectual Properties Commission of SA (CIPC) to investigate and declare Muhlungu a delinquent director and unfit to hold the office of director in any company in SA for the required maximum period.

OUTA will also take action against the SAA board supporters identified as the key role players in the BnP saga. They are Ms Dudu Myeni (chairman of the board), Ms Yahke Kwinana, Dr John Thambi, Ms Phumeza Nhantsi (interim Chief Financial Officer) and Mr Musa Zwane (acting CEO and also a director).

We will lay complaints against Kwinana and Nhantsi (both chartered accountants) with the South African Institute of Chartered Accountants (SAICA). We cannot let their unethical conduct in this unlawful transaction go unnoticed. It is also likely that Kwinana and Nhantsi’s names will be included in an application for delinquency. Despite Kwinana’s announcement that she will now resign from SAA to protect her Chartered Accountant status and reputation, we believe the damage has already been done and that she cannot escape what she has already perpetrated.

OUTA will also lay a complaint against Myeni with the Institute of Directors and lodge a request for her supportership of the institute to be revoked for her part in this unlawful transaction. Furthermore, we will approach the high court for an order declaring Myeni a delinquent director and unfit to hold office in any South African company for the maximum period for her role in the BnP transaction, the airbus swop deal and various other decisions at SAA. This may take a few months, but we see it as absolutely necessary. OUTA will also request the minister of finance to investigate the various acts of financial misconduct against Myeni that our investigation uncovered. The Public Finance Management Act places an obligation on the minister to investigate and take appropriate disciplinary action, and we trust that he will fulfil this legislated obligation.

The possibility of criminal charges against Myeni for contravening section 86.2 of the Public Finance Management Act, relating to financial misconduct committed in a wilful or grossly negligent fashion, is also currently being investigated.

Criminal charges will be laid against Mr Zwane for lying under oath in his affidavit in the matter of the suspension of SAA group treasurer Cynthia Stimpel. He stated under oath that BnP Capital started working for the SAA in March 2016, while our evidence shows that BnP Capital was only appointed on 22 April 2016. It seems that the purpose of Zwane’s lie was to create the impression that BnP Capital had enough time to look into and investigate the financial affairs of SAA to provide the airline with well researched expert advice on sourcing the R15 billion loan. However, the fact is that they would have had to do this extremely complex exercise with a team of between two and four people in less than nine working days. It should also be noted that SAA did not need to employ anybody to source the loans, as this could be done by the very experienced financial staff themselves.

We at OUTA want to show the public that highly placed politically connected individuals cannot simply function above the law and use state coffers like their own piggy banks. We can and will bring to book any private sector parties participating in the plundering of the public purse. We also want to commend the courage shown by the whistleblowers in this case. It has enabled us as a civil organisation to take steps against people that previously seemed untouchable.
In another very important development, SAA this week capitulated at the last minute in the Labour Court case against Cynthia Stimpel – the airline’s suspended treasurer and the whistleblower on the BnP deal – and agreed that her case will now be heard at the Commission for Conciliation, Mediation and Arbitration (CCMA).

Stimpel was suspended by SAA in July 2016 for misconduct as “she had [supposedly] acted in contravention of SAA’s code of conduct”. The airline denied that her suspension had anything to do with the fact that she allegedly objected to SAA’s decision to award a tender to BnP. Stimpel then applied for an urgent interdict from the Labour Court against the airline from proceeding with a disciplinary hearing against her.

A lot of time and dedication from a team of experts went into the SAA investigation thus far and we are positive that our actions will cause a dramatic shift in the way board supporters and officials of state owned enterprises behave in future. Although there is still a lot of work to be done, we are happy and confident with the investigation and outcome so far. That said, we are not ignorant of the fact that this could still take years of litigation, but OUTA is willing to fight every step of the way for our supporters and the public at large.
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OUTA undertook to defend its supporters over the non-payment of e-tolls, and over the past three months we have entered the defence phase of over 150 supporters summonsed by SANRAL earlier this year.

Our highly experienced legal team, under the leadership of Senior Counsel Gilbert Marcus has been engaging with Sanral’s lawyers for over two months now. The process of seeking clarity on their declarations from SANRAL continues, but is taking much longer than we would like. Accordingly we will not let up on the pertinent information required in order for OUTA to defend its supporters against SANRAL’s declarations and will now apply the necessary pressure to speed up this matter.

In our opinion and that of our senior counsel, every single summons received from SANRAL for alleged e-toll debt has been defective in one way or another. Before we proceed on the test case sought, SANRAL will first be required to remove all the causes of complaint we have raised with regards to their summons and the declaration/statement of their case. This is necessary so that the test case can continue on a properly pleaded case.

So far, the first attempt by SANRAL to remove all the causes for out complaint raised has not been successful and has therefore resulted in additional causes for complaint being identified by our legal team. Should SANRAL fail to address or refuse to remove these causes for complaint, the possibility may exists for more drawn out legal judgments on these points, before the case regarding the enforceability of e-toll “debt” can continue.

We remain extremely confident that the e-toll scheme will not survive for much longer in its formal ‘lights on’ position, but in its practical position as an efficient user pays scheme, it has already failed.

Many believe that with the DA’s appointment in the mayoral capacity in two of the three local governing positions in Gauteng, they should be able to halt the e-toll scheme. This however is not the case, as the e-Toll decision is made two levels higher at the National level. Nonetheless, we do believe that with a DA presence at this level, there is some role for them to play in opposing this irrational, inefficient and unworkable scheme that needs to be formally closed down. Until then, the civil disobedience campaign will continue to maintain its failed and defunct state.
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OUTA was concerned at the recent input to the Parliamentary Portfolio committee by Communications Minister Faith Muthambi and the South African Broadcasting Corporation (SABC) board, who defended the public broadcaster on 23 August.

hlaudis woesThe committee convened to address various issues of the SABC, including controversial editorial policy decisions, the firing of journalists, legal battles and the broadcaster’s financial situation.

Instead of using this opportunity to conduct a thorough investigation into the affairs of the SABC and it’s controversial COO Hlaudi Motsoeneng, ANC MPs on the committee said they were happy with the explanations provided by Muthambi and Motsoeneng. The chairperson of the committee, Humphrey Maxekwanay, confirmed there won’t be any investigation. This despite an apparent “agreement at the committee’s last meeting that there will be an inquiry”, says the DA’s shadow minister of communications, Phumzile van Damme.

The SABC board denies claims of chaos at the public broadcaster, despite it making headlines over the past few months on a number of serious matters, some of these being:

  • The banning of broadcasting violent protests and the unfair dismissal of eight journalists who disagreed with this directive, seven of whom were reinstated by order of the Labour Court.
  • Other questionable ‘people harassment’ activities have played out when their treasurer Arrie Thomason and chief financial controller Petra Campher were placed on “special leave” after they warned of the SABC’s dire financial situation. They were subsequently reinstated.
  • On the 29th of July, Motsoeneng announced during a special live broadcast of Morning Live that 185 musicians will get R50 000 each from the SABC as a “token of appreciation”. This amounts to an off-the-cuff spend of R9 million. Despite enquiries, it still remains unclear who the artists are, who selected them and most importantly, who approved the handout and on what grounds.
  • On the 1st of August 2016, the SABC announced three senior management appointments; that of the Group Executive for SABC News and Current Affairs, Group Executive for Media Technology Infrastructure and Group Executive for Commercial Enterprises. These appointments have been questioned by amongst others the Broadcasting, Electronic, Media & Allied Workers Union (BEMAWU), as none of the positions were advertised and the appointments were not transparent. However, SABC spokesperson Kaizer Kganyago defended these appointments and said people’s CV’s won’t be disclosed as “it would not be fair” to them. He said management is happy that they have “many, many years” of experience within the SABC.
  • Later in August, the SABC made headlines again for a dubious debt collecting contract of R385 million that was awarded to LornaVision, owned by Kuben Moodley, a businessman associated with the Guptas. This contract apparently did not go out on tender, as is required by law. SABC sources also claim that LornaVision was paid its full two year consulting fee of R2.1m within weeks after having been appointed without collecting any debt.
  • In another matter, three SABC staff supporters were suspended when they queried transactions surrounding the R42.3 million studio deal that Motsoeneng commissioned in 2015. It is estimated that the SABC overpaid by almost R40 million for the building of a studio which was also not correctly approved by the board.
  • Motsoeneng also increased his own salary from R1,5 million per year to R2,4 million per year (in one year), which the Public Protector stated was “fruitless and wasteful expenditure that had been incurred as a result of irregular salary increases to Mr Motsoeneng”.
  • In February 2014, the Public Protector recommended that disciplinary action should be taken against Mr Motsoeneng for lying about his qualifications, something to which he admitted.
  • The Public Protector also said that the position of COO, should be filled with a “suitably qualified permanent incumbent” within 90 days of her report. Yet, two years later, Motsoeneng is still COO and fully supported by the SABC board of directors

All of the above (and other) issues most certainly justify the need for an independent commission of enquiry, but there appears a clear reluctance to go down this route, as the political meddling and interference by the ruling party within the Public Broadcaster is very evident.
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On the 21st of August 2016, Carte Blanche exposed gross irregularities, overspending, maladministration and possible corruption at Eskom’s Ingula Hydro Power generation scheme.

Eskom-e1459417221276As you probably know, OUTA has been on Eskom’s case for quite a while now. On the 21st of August 2016, Carte Blanche exposed gross irregularities, overspending, maladministration and possible corruption at Eskom’s Ingula Hydro Power generation scheme. This exposé underlined our belief that is time for a full independent enquiry into the financial management and auditing controls throughout Eskom. (You can watch the Carte Blanche story here🙂

From the Carte Blanche exposé and other whistleblower input OUTA learnt that gross overspending on the Ingula project, located on the Free State and KwaZulu Natal border, has become a serious issue. We furthermore believe that, had Eskom ensured proper audit controls and management of contractor accountability, the overspending and irregularities would not have happened.

We find the regular repetition of excessive runaway costs of large capital expenditure projects at Eskom, a gross violation of the Public Finance Management Act and fiduciary duties of the Management and Board at Eskom. Any serious over expenditure of this nature needs to be thoroughly and independently investigated and accounted for, also to the public.

Hearing about the cost overruns at Ingula, just added insult to injury when it comes to the high cost of electricity and the regular tariff hikes over the past nine years. We are all too well aware of Eskom’s poor track record on projects like Medupi and Kusile, and taxpayers have every reason to be incensed about Eskom’s incompetence and unacceptably high operating and capital costs. One can imagine what lies ahead if Eskom are left to manage the proposed Nuclear Energy build project at Thyspunt (read more about that and add your comments to Eskom here🙂

Unfortunately, Eskom’s management has too often swept matters such as capital project overspending under the carpet. We saw it again this week when Brian Molefe rubbished the Carte Blanche report that cost at Ingula ballooned to R36 billion, instead of saying that this matter appears to have some elements which require investigation. It is unacceptable that Eskom management feel they don’t need to report how our money is spent and we believe the Eskom Board is obliged to explain how such irregularities can exist under their noses. They must be held accountable, and disciplinary action against those failing to do their duty, is not negotiable. Eskom’s management also have a duty to retrieve the money that was allegedly overspent on the project from the contractors implicated.

OUTA will use all avenues open to us to have Eskom properly investigated on this matter. After our successful intervention at SAA, we feel confident that we can do more to halt the abuse of taxpayers’ money. We do however want to encourage any whistleblowers within ESKOM who might have knowledge and proof of wrongdoing to come forward and provide information to OUTA.

More proof that Eskom is not as untouchable as they think they are, is the court ruling two weeks ago that Eskom’s electricity tariff increase earlier this year transgressed correct procedures. They will now have to, along with the National Energy Regulator (NERSA), revise the tariff increase and face a possible class action for this dire situation.

OUTA applied to interdict the Eskom tariff increase on 31 March 2016, on the basis of insufficient time and information to analyse the reasons for the electricity tariff increase agreed to by NERSA, as we wanted to stop the implementation of that on the 1st of April, but the interdict was denied. We are currently appealing the judgment against us, and believe that this latest court ruling has specifically confirmed our position at the time that Eskom could revert to the lowest tariff.

OUTA will be engaging with various experts to assess the viability of launching a class action against Eskom, on behalf of the public, to recoup the tariffs unlawfully charged. OUTA is fully aware that Eskom and/or NERSA are likely to appeal the ruling, but we will start with our preparations to determine whether a class action is feasible in the circumstances.
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