Media Releases

Inside OUTA August 2017

Dear OUTA supporters and followers

This month’s newsletter will provide more insight into the variety of work being done by team OUTA, as we tackle a myriad of issues related to corruption and maladministration of taxpayers’ money. It is, however, important to know that what we reflect on in these regular monthly updates are just some of the many projects we are working on at OUTA.

One of our biggest challenges at OUTA is having to decide which new cases and projects to take on each month. There is clearly no shortage of projects pertaining to corruption and serious maladministration that require attention, however we simply cannot get to everything. This means that we need to scale our operational structures with the necessary manpower to tackle more, whilst ensuring that our supporter base growth continues to enable our work.

The past month has seen its share of political hysteria and Parliament’s motion of no confidence in President Jacob Zuma attracted much of the nation’s attention. While hopes were high at OUTA and across our supporter base that President Zuma would be removed, it was always a tall ask of the ANC MPs to break ranks in the face of their allegiance and instructions to toe the party line.

However, the result was extremely telling, coupled with the mounting turmoil within the leading party’s ranks as politicians and party grappled with the implications of state capture and maladministration linked to poor leadership performance.

The recent rush by the Gupta family to deal with the Bank of Baroda’s decision to terminate their accounts has added a new dimension to their woes, whilst the mounting activity by OUTA, AmaBhungane / Scorpio, the free media, labour movements, political parties and other civil society movements has made their ability to continue with corrupt activities and to do business in South Africa unbearable. The heat has similarly been turned up on the many people within Government and SOEs caught in the Guptas’ web and OUTA will not rest until the people implicated in corruption and gross maladministration are held to account.

Fighting corruption and engaging with Government on rationalising tax policy is a long-term journey. We are in this space for the long haul and we thank our tens of thousands of supporters for enabling us. And just to quell the notion that OUTA is funded or somehow assisted by international influencers and agents, we do not receive any funds from political parties or local and international aid organisations. We are 100% funded by (extra)ordinary South African individuals, families and businesses.

Until next time, go well and stay happy. Together, we will make this country a better place.

Wayne.

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People’s Champion visits OUTA

Former Public Protector Thuli Madonsela visited OUTA, inspiring staff to continue opposing corruption. Madonsela met with OUTA’s executive.

“We shared visions and direction for a better South Africa and what the role for OUTA and civil society in general is in this regard,” says Wayne Duvenage, OUTA’s Chairman.

Staff were encouraged by her visit, her support for OUTA’s work and her ongoing campaigning against injustice and corruption, and queued up to take selfies with the “People’s Champion”.

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E-Toll update: That legal challenge is slowly progressing

On one side, batches of text messages with debt collection warnings are repeatedly sent in a war of attrition against motorists who don’t pay Gauteng e-tolls. On the other side, OUTA’s long-awaited battle over the constitutionality of e-tolls is slowly heading for court. These are different tools in the e-tolls war and both are set to continue for a very long time, even years.

“The battle against e-tolls continues on various fronts,” says advocate Stefanie Fick, OUTA’s Head of Legal Affairs.

“We continue to deal with the cases already in court and we have to keep an eye on SANRAL’s newest antics.”

The SMSes

SANRAL’s debt collection text messages are annoying motorists as much as the e-tolls. These are SMSes warning e-toll defaulters that they are about to be or have been handed over to debt collectors. This is routine debt collection and it is continuing even while OUTA is challenging the legality of e-tolls in the courts.

In August, there was a renewed spate of SANRAL debt-collection text messages to Gauteng motorists.

“The SMSes will never stop,” says Fick.

“That’s SANRAL trying to get people to pay e-tolls,” says Fick.

There’s advice on OUTA’s website on those SMS problems. (SEE BELOW- What to do about those SMSes)

The legal case

Then there’s the big OUTA legal action against e-tolls.

This is a legal action in the civil courts. SANRAL is suing both individuals and businesses for outstanding e-toll bills.

OUTA is defending 163 individuals and businesses over their unpaid e-toll bills totalling R64.794 million.

There are 61 cases in the high court (for the higher value cases) dealing with R61.478 million and 102 cases in the magistrate’s courts for R3.316 million.

The Constitutional challenge and the individual merits.

There are two elements to OUTA’s civil action against SANRAL, says Fick.

There are the merits of each specific case: someone individually is sued for unpaid e-tolls. And there are 163 different cases, each with its own specific merits which must be considered individually. This is the fight over whether the bills were sent to the right address, whether it’s the right registration plate, if the correct tariffs were applied, whether there are photographs and so on.

But before we even get to the technical merits of each case, there’s the crucial “collateral challenge”, which is the overall legal challenge to the constitutionality of the e-toll scheme itself. OUTA’s legal team hope to have this part of the application heard first before continuing with the merits of each specific case, although this isn’t yet finalised. If the constitutional issue is unsuccessful, then the case moves on to the merits of each of the 163 cases; if OUTA wins on this constitutionality issue, then the whole e-toll scheme falls.

That issue of the legality of the whole scheme is the key focus, says Fick. “That is extremely important to us.” OUTA has substantial facts to present to the courts on the flawed e-toll decision.

But that’s a long way ahead and there’s a lot of paperwork to get through first.

There are three main stages in civil cases: first the filing of pleadings by each side, then the preparation for trial which includes discovery of documents, then finally the trial phase. This case is getting to the end of the first phase, which is a long process of exchanging paperwork, adding and amending papers on all the cases.

Fick and her team are painstakingly going through all those stages, planning and waiting for the big fight.

Haven’t we been here before?

OUTA and SANRAL fought in the courts over the legality of e-tolls some years ago and, while OUTA lost that round, the courts made it clear that wasn’t the end of the road.

OUTA lost at the high court level and was landed with a massive costs bill from SANRAL, which it could only get overturned by going to the Supreme Court of Appeal.

“We couldn’t just fight the costs order, we had to fight the case,” says Wayne Duvenage, OUTA Chairman.

The judges overturned the costs order but not the legality of the e-tolls scheme. The judgment allowed the Gauteng e-tolls to go ahead as SANRAL had already built the roads and borrowed the funds but, crucially, that judgment allowed the possibility of future challenges.

“It left the door open. It basically said, if somebody is sued, that person is allowed to defend themselves on all this stuff, whatever it is, whether the bills are right, whether this was constitutionally done,” says Duvenage.

OUTA promised to defend that first e-toll case, then widened that to the general supporter base.

What to do about those SMSes

Those SMSes can feel quite threatening.

Debt collectors must be registered. If you feel threatened, go to the Council for Debt Collectors.

The only way SANRAL can legally collect outstanding e-tolls is by issuing a summons (that means instituting legal proceedings). SANRAL cannot collect money by SMS or telephone call. The matter only becomes a legal issue when you receive a summons. You cannot be blacklisted for failing to pay e-tolls before the matter is heard in court.

OUTA’s comments on SANRAL’s SMS campaign in February 2016 are here.

OUTA’s suggestions on what to do if you get a letter of demand are here.

The suggestions on what to do if SANRAL has taken a default judgment against you for not responding to an e-toll summons are here.

OUTA’s e-tolls defence umbrella information is here.

Please watch our website for further updates on this.

 

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Activists and academics team up on policy work

OUTA and the Human Sciences Research Council (HSRC) have signed an agreement to collaborate on work on policy, legislation and governance. The research collaboration was driven by Erin Klazar, OUTA’s Head of Research, and Dr Hester du Plessis, Chief Research Specialist at the HSRC’s Research Use and Impact Assessment (RIA) Unit.

As a civil intervention organisation, part of OUTA’s strength is the development of in-house units for research, investigation and legal expertise.

“To strengthen OUTA’s research capability and integrity, we have embarked on developing powerful collaborative relationships with reputable research institutions,” says Klazar.

OUTA is proud to be collaborating with the HSRC.

“We look forward to working with the HSRC and collaborating on meaningful research that is truthful and objective in nature, contributing to the ongoing positive development of South Africa through the identification of key issues in society,” says Klazar.

The HSRC unit leading this MOU agreement is the Science Communication unit within RIA.

“We at Science Communication are the interface between ‘science and society’ and manage a few strategic programmes such as the HSRC Seminar Series, the online Policy Action Network (PAN), the Policy Action Network – Children (PAN-Children), the training, production and dissemination of policy briefs and the publication of the in-house magazine HSRC Review,” says Du Plessis.

“We are also developing and promoting science communication as a scarce field of research in South Africa and are engaged in a number of science communication research projects both locally and internationally.”

Initial collaboration is expected to focus on engaging with Parliament and lawmakers on policy issues.

OUTA recently sent a petition to Parliament calling for legislation on public participation requirements to be amended to block such participation from running from mid-December to mid-January, as this holiday period has been used to push through controversial policy and legislation. This is the first of many policy issues that OUTA would like to be involved in challenging, but support is required in the ongoing engagement with government and society: this is where support from the HSRC will be invaluable.

The organisations signed the memorandum of understanding in August, outlining the collaboration.

This includes:

  • Developing appropriate policies and legislation to promote integration in government development programmes and service delivery;
  • Providing strategic interventions, support and partnerships to facilitate policy implementation in provincial and local government; and
  • Creating enabling mechanisms for communities to participate in governance.

“We believe that OUTA’s engagement and collaboration with the HSRC will set the scene for meaningful and constructive thought leadership research with positive outcomes for South Africa,” says Klazar.

Wayne Duvenage, OUTA’s Chairman, called the collaboration agreement an exciting development.

“We believe that OUTA’s engagement and collaboration with the HSRC will set the scene for meaningful and constructive thought leadership research,” says Duvenage, who thanked Klazar and Du Plessis for paving the way.

“Thanks also to HSRC leadership for enabling this engagement. We see it as a clear display of progressive thinking and a way of embracing the role of civil society in the work you do. We’re looking forward to developing the mutually beneficial energy between us,” he says.

The HSRC undertakes a substantial body of science engagement activities, encouraging discussions between academics, business, policy makers, civil society and the general public.

This includes policy dialogues, conferences and workshops, with assessments of public policy issues on everything from economics to climate change.

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The state capture dossier: OUTA files charges against 8 directors

OUTA continued its fight against state capture during August, laying charges against the Gupta family, Duduzane Zuma and four current or former directors of Eskom.

Evidence was gathered, charges formulated and cases opened against:

  • The brothers Atul, Ajay and Rajesh “Tony” Gupta, charged with treason, racketeering, extortion and fraud;
  • Duduzane Zuma, the son of President Jacob Zuma, charged with treason, racketeering, extortion and fraud;
  • Anoj Singh, Eskom’s suspended Chief Financial Officer and Eskom director, charged with corruption;
  • Ben Ngubane, former Chairman of Eskom’s board, charged with fraud;
  • Brian Molefe, former Eskom Chief Executive and director, charged with fraud;
  • Mark Pamensky, former Eskom director, charged with corruption.

In a related matter, OUTA served a legal letter on Minister of Mineral Resources Mosebenzi Zwane, calling on him to ensure that the R1.75 billion trust funds for rehabilitating Optimum and Koornfontein coal mines – being sold by the Guptas – remain intact and in South Africa.

The case against the Guptas and Duduzane Zuma was filed as a single matter.

“They are at the heart of state capture,” says Ben Theron, OUTA Chief Operating Officer.

“These charges are designed for combatting organised crime.”

Duduzane is accused using his links to his father to get commercial gain for his friends and business partners the Guptas, giving them access to lucrative state contracts. In return, the business empire run by the Guptas and Duduzane benefited with an enormous R5.3 billion kickback in Transnet’s locomotive deal and a R66 million kickback from Neotel through another Transnet deal.

Theron points out that Duduzane first got onto the board of Gupta businesses in 2008 as a 26-year-old with no noticeable qualifications other than having a father who had won the position of ANC president a few months before and was clearly on track to become president of the country.

“At the age of 35, Duduzane Zuma has amassed a vast fortune. He has multiple business interests many of which involve the Gupta family,” says Theron.

The cases against the Eskom four revolve around key prosecutable matters.
Ngubane and Molefe are accused of fraud around the attempts to pay Molefe a R30 million pension to which he wasn’t entitled, which involved manipulating pension fund rules.

Pamensky was a director of both Eskom and the Guptas’ main Oakbay business at the same time, whilst Eskom provided legally questionable help to enable the Guptas to buy Optimum and Koornfontein coal mines.

The Guptas accessed the trust funds for the rehabilitation of those mines and moved them to the Bank of Baroda.
OUTA has previously lobbied the financial authorities and the South African Reserve Bank to investigate the Bank of Baroda’s assistance to the Guptas through unrealistically large bonds on their businesses. OUTA’s call to Minister Zwane to ensure that the rehabilitation funds are secured follows the Bank of Baroda’s decision to close the Gupta accounts at the end of September.

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Taking back the SABC

OUTA applauds the SABC’s interim board for its work on unravelling state capture at the SABC.
“The interim board has done a sterling job of identifying and addressing maladministration at the public broadcaster and we hope sanity will prevail and allow these individuals to continue their work as members of the permanent board,” says Dominique Msibi, Portfolio Director of Special Projects at OUTA.

Thanks to the interim board’s work the future is looking brighter for the SABC, says Msibi. “They did a lot.”

The interim board fired COO Hlaudi Motsoeneng in June, the CFO and actin CEO James Aguma resigned a month later, filed cases against the pair aimed at recovering unauthorised payments and announced it was considering criminal charges against board members and executives who had flouted corporate governance. The board cancelled Motsoeneng’s policy requiring 90% local content as it cost the SABC both viewers and advertising, costing at least R284 million. The board cancelled the contracts with LornaVision for licence fees collection and with the Guptas’ ANN7.

OUTA has campaigned against the rot at SABC, filing charges of corruption and racketeering in December 2016 against Motsoeneng and the old board, and had called on the interim board to dump Motsoeneng and Aguma and reclaim ill-gotten funds from them.

Msibi welcomed the interim board’s actions. “They acted on the ad hoc committee’s report, which was in line with OUTA’s request to the interim board,” she says.

A new board is now being appointed and the Portfolio Committee on Communications shortlisted 36 of the more than 360 nominees for interviews, for the 12 positions. The candidates’ CVs are online on the parliamentary website and the interviews were running at the end of August. Four of the five interim board members — chairperson Khanyisile Kweyama, John Matisson, Mathatha Tsedu and Krish Naidoo – are on the shortlist while Febe Potgieter-Gqubule declined nomination.

Another development welcomed by Msibi is the proclamation authorising the Special Investigating Unit (SIU) to investigate the SABC, which was finally signed by President Jacob Zuma on 25 August. This must still be gazetted – expected on 1 September – before the SIU can start work.

“We hope the SIU will waste no time in proceeding with their investigation to hold these looters to account,” says Msibi.

“We want Aguma to be disbarred and struck off the roll of chartered accountants. He was complicit in the pilfering of tax payers’ money, leading the SABC to post losses that now necessitate a substantial government bailout.”

And responsibility also goes higher, notes Msibi. “We want to place it on record that the previous Minister of Communication Faith Muthambi should be held to account for her role for the sordid state of this once proud institution.”

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Watch out for those SASSA workstreams

OUTA is concerned that the illicit and expensive “workstreams” may be brought back into Social Development.

“The biggest achievement was the cancellation of the workstream contracts,” says Dominique Msibi, Portfolio Director of Special Projects at OUTA.

“The saddest event was the departure of Thokozani Magwaza.”

Magwaza was the CEO of the South African Social Security Agency (SASSA) who cancelled the irregularly appointed workstreams before he was forced out of his job in July.

In March and April this year, OUTA wrote to Magwaza and Social Development Minister Bathabile Dlamini, asking them to cancel the workstreams.

The three workstreams were irregularly appointed by Dlamini, as parallel structures to the department. They were to plan the reorganisation of the social grants system and appeared to favour the existing grants contractor CPS. The workstreams involved 17 contractors in addition to departmental staff, with payments to the contractors totalled nearly R48 million, according to a reply in the National Assembly to the DA in May 2017 and at least R40 million of that has already been paid.

“There are concerns that the minister is trying to bring back the workstreams,” says Msibi.

She says the Standing Committee on Public Accounts (Scopa) was told by the current SASSA management that they didn’t think that the South African Post Office (SAPO) would be able to run the full delivery for the grants, so they would go out to tender for the additional work.

“This was said before the evaluation of the SAPO RFP was completed, so how did she know?” says Msibi.

“The RFP (request for proposals) that SAPO was evaluated on was written by the workstreams.”

OUTA is also concerned about SASSA’s contract with Azande Consulting cc, an events management business that was hired in July 2016, according to a reply in the National Assembly, for R393 million to run door-to-door surveys. Azande was hired despite being under investigation by the Hawks.

“I don’t know how an events management company contracts to do door-to-door research. And Azande has already been paid a sizeable amount for what they were contracted to do,” says Msibi, questioning whether the work done justified the payments.
OUTA will keep watching on this issue.

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OUTA says 0% electricity price hike

Eskom wants a 19.9% increase in the electricity price next year but OUTA is calling for no increase at all.

The National Energy Regulator (NERSA) has not yet published timelines on the pricing process or the Eskom application or whether Eskom has provided the extra information required. NERSA has indicated that the timelines will be released in mid-September.

Eskom was due to provide NERSA with outstanding information on its application for the 19.9% increase by 27 August, after NERSA ruled that this must be provided in terms of the pricing rules.

Eskom had applied to keep certain costs information secret, partly because it said it was unable to provide such detailed information. OUTA objected to Eskom’s secrecy application and provided a detailed written and verbal submission to NERSA to back up its objection.

The NERSA ruling ordering Eskom to provide the information was a significant development ensuring transparency in electricity pricing.

NERSA is now due to run public hearings on the Eskom application.

Energy expert Ted Blom, OUTA’s Portfolio Director for Energy, is leading OUTA’s campaign against the price increase and will provide input to NERSA on this.

Blom is waiting to see Eskom’s full application to NERSA.

“We believe that this added level of transparency will highlight Eskom’s transgressions that have been invisible in the past, such as the expensive Gupta coal contracts,” says Blom.

Eskom’s price application, if granted, would take the price of electricity from 1 April 2018 to more than R1 per kilowatt hour (kWh). Last year’s increase was 2.2% and took the price to 83.60c/kWh.

This is the average price of electricity sold by Eskom to the public, including resellers. This means the price that consumers pay is usually higher, often much higher. It also excludes any surcharges or connection charges.

Blom also believes that the inclining block tariffs (IBTs) are illegal and unjustifiable.

He has already challenged this through the Competition Commission – and is awaiting an outcome on this – and will also raise it through NERSA.

The IBTs are designed to charge more for extra use, with the lowest charges on the lowest blocks and increases on every successive block.
Blom says the first block is set artificially low with the first penalty block starting as low as 300kWh for most users. But households cannot cook or use geysers if they restrict usage to this block.

“Worldwide, the average household consumption averages at around 1000kwh, so to artificially impose lower thresholds is nothing but consumer fraud and an illegitimate extra charge.” says Blom.

IBT blocks can jump by 150% to 500% as consumption increases, a punitive regime which applies to prepaid and postpaid users of both Eskom and municipalities.

Then there are “winter tariffs” which are up to 50% higher.

“This is also absolute hogwash. The cost of generating electricity is about the same throughout the year – in fact, I suspect it is cheaper in winter because of improved cooling at the power stations,” says Blom.

He also points out that IBTs are designed to restrict usage, but South Africa now has a vast surplus of power which is set to grow larger by more than 10% over the next five years.

“We are drowning in surplus electricity and Eskom’s unjustified tariff increases over the past 10 years have all but killed the Golden Goose,” says Blom.

If you oppose Eskom’s electricity price increases, watch for the dates of NERSA’s public hearings and join OUTA’s campaign.

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