Media Releases

Inside OUTA May 2017

Dear OUTA Members and followers

Once in a while a momentous incident sets a nation on a new trajectory of hope and upliftment, generating economic growth and improved prosperity for all its people. History is filled with such turning points that have changed the course of countries, each a result of pressure from within or without the system.

South Africa’s most momentous nation-building events were initiated in February 1990, when the combination of external (sanctions and other international pressure) and internal (civil society) pressure, led to the release of Nelson Mandela and others from incarceration, along with the unbanning of the ANC and other political entities, followed by the April 1994 change to democracy and Mandela’s inauguration as the country’s first democratic president. Naturally, this led to the death of apartheid and a new-found national freedom, backed by a world-leading constitution. One can’t imagine a more momentous occasion than Madiba’s release and inauguration in South Africa’s lifetime.

Some would say that if the nation was able to halt the stealthy plan of state capture, along with the removal of Jacob Zuma as president and thwart the Gupta family’s influence over the state, this would go down as the next momentous, trajectory altering event in South Africa’s history. There is no doubt the issue of state capture and the corruption and maladministration linked to this is having a significant impact on the country, be it through lost revenue that should be used on national matters such as housing, roads, education and health, or be it due to higher interest due to our sovereign credit rating downgrades.

The removal of Zuma as the president of South Africa will be a momentous start to a process of undoing state capture, but this will only be the beginning of the work needed to reverse the political interference and capture of vital state organs. Here, we require the National Prosecuting Authority, the Hawks, Treasury, SARS, the police and other crucial institutions to be populated with people of moral courage, free of political interference, to halt the looting and rectify performance fit for the purpose of these entities.

Removing Zuma as the nation’s head can only be done through the internal ANC structures, until 2019, when the electorate has a chance to do so. Although he has now survived another round of internal pressure during the ANC’s NEC caucus last weekend, this does not mean he will survive the vote of no confidence (secret or not) in Parliament, or that he will get his way in December and the ANC’s internal elective conference.

Until then, the people of South Africa, supported and driven by civil society, labour movements, business and faith-based organisations, must continue to apply their influence. Do not underestimate the effect of anti-Zuma protests on 7 April 2017, which significantly weakened Zuma’s power base. Add to that the growing pressure by mainstream media and a robust social media’s expression of disgust at Zuma’s conduct. Then top this up with court challenges brought by civil society and political parties and you get a sense of the combined weight brought to bear on the ANC’s conscience to do what must eventually be done. It just needs more time.

This is the power of democracy at work, without having to wait for political elections, in order to bring about very necessary change. This is the power of the people who must give the ANC no choice but to remove Jacob Zuma as their leader, or die as the dominant political party by 2019.

Wayne

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Not enough customers pay their municipal electricity bills. And municipalities owe Eskom hundreds of millions of rand and can’t make ends meet. So for some municipalities, this is the solution: charge those customers who already pay, even more.

That was the theme running through the public hearing on 18 May on the applications by 24 municipalities for an extra increase to their electricity prices.
The National Energy Regulator of South Africa (NERSA) has previously set the legal hike for municipalities to charge their customers at 1.88% and this is due to be implemented from 1 July.

The 24 municipalities applied to NERSA for permission to increase their tariffs by up to 12%.

The biggest hike applications are from Thaba Chweu local municipality (for a 12% increase), Msukaligwa local and Phumelela local (both 10%) and Magareng local (9%). Two metros applied for increases: the City of Cape Town (3.34%) and the City of Johannesburg’s City Power (2.28%).

Some of the 24 municipalities are in real financial difficulty: the National Treasury’s most recently available municipal quarterly accounts show that by the end of December 2016, Renosterberg (which wants a 6.4% increase) was R1.56 billion in the red, while Lekwa (wants a 8.5% increase) was R55 million overdrawn and Msukaligwa (10% increase) was R17m overdrawn. The metros which are best off: Cape Town with a cash balance of R1.2bn and the City of Joburg with R7.8bn.

Many of those who turned up for the hearings told NERSA they were heavily dependent on grants from central government, the municipal salary demands were “crippling”, they owed Eskom historical debt, they had aging infrastructure in need of repair and they had huge revenue losses due to customers’ failure to pay.

  • Renosterberg told NERSA its collection rate was only 29% and it owes Eskom R41m.
  • Phumelela told NERSA it owes Eskom R49m and has a collection rate of 88%.
  • Dikgatlong has a collection rate of 65% and not enough money or skills to maintain the infrastructure.
  • Rand West owes Eskom R120m.
  • uPhongolo told NERSA the 5% increase it wants is to pay Eskom debt.

Joburg’s City Power told NERSA it needs to fix aging infrastructure and that revenue loss is due to faulty metering systems, theft and superfluous maintenance costs.
Cape Town told NERSA that salary demands were crippling, the connection of independent power producers was reducing customer demand, and that it was subsidising poor communities.

Many municipalities have effectively been operating with whatever income they’ve received for electricity and water – while failing to pay the Eskom bills or maintain infrastructure – so now need current consumers to pay for both current and historical Eskom debt.

A decision from NERSA is still awaited, so that municipalities can finalise their budgets and price increases before their new financial year on 1 July.
OUTA provided the only public input at the NERSA hearings on the municipal increases.

OUTA’s energy portfolio director Ted Blom told NERSA that none of the increases should be granted, citing a range of reasons from defective applications to deviant behaviour by the municipalities.

“This includes poor debt collection, high historical outstanding debts, poor billing records, non-existence of meters, large non-technical losses and massive overheads in staff,” says Blom.
“Poor management is no excuse to increase tariffs.”

OUTA is assessing the existing municipal tariff framework, NERSA’s process and timetable for setting these, as OUTA believes the framework is outdated, cumbersome, contradictory and doesn’t allow sufficient time for public participation.

In the DA’s first budget, the City of Joburg simply assumes NERSA will grant its tabled electricity price increase application.
“Electricity tariffs will increase by an average of 2.28% for residents,” said Joburg Finance MMC Rabelani Dagada in his budget speech on 23 May.
Joburg is still losing a substantial amount of electricity to theft and faulty meters.

“A 2015 report compared City Power with utilities from the other major metropolitan municipalities. It found that our non-technical losses on electricity are 2.6 times larger than the average benchmark. This equates to up to R2.2bn in lost revenue on an annual basis,” said Dagada in his speech, adding that the city’s power utility City Power gets an operating budget of R15.5bn and a capital budget of R3.8bn.

Dagada said “poor maintenance and lack of investment in our aged, overloaded electricity sub-stations results in regular loses of power in parts of the city”.
But OUTA’s Blom says that Joburg’s power prices are premature.

“That’s illegal because they haven’t been granted exemption yet,” says Blom, explaining that the NERSA cap of 1.88% applies until NERSA rules otherwise.
“As far as we are concerned all the increase exemptions are illegal because none of the municipalities have complied, as far as we are aware, with the requirements that an independent cost-of-supply exercise per category of tariff be done before tariff increases can be applied.”

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The City of Tshwane has suspended a R30 million contract after an OUTA investigation raised substantial queries.

This action illustrates the willingness of the City’s new administration to act against what appears to be an irregular tender, and the problem of cleaning up dubious contracts set up under the previous administration.

OUTA was alerted to this tender by a whistleblower.

The contract was tender CPD-03-2014-15, awarded to Tahal South Africa (Pty) Ltd on 22 April 2015 for three years at a price of R30 664 348 excluding VAT which adds another R4 293 008. The contract was officially named “The identification and packaging of catalytic interventions and projects required to fast-track the development of East Capital to realise the required economic growth”, an incoherent name apparently designed to reduce interest from bidders.

Experts told OUTA that the project was worth about R2 million; it was initially budgeted at R8 million but ultimately signed off at R30m plus VAT. The entire project was apparently subcontracted, at a total cost of only R1.5 million. This huge inflation in the price indicates clear problems in the procurement process.

Once awarded, the payments were apparently moved on to other companies and individuals.

This contract is also significant in that it was a preliminary feasibility study and was thus possibly designed as the gateway to an even bigger contract which Tahal SA would have been in pole position to win.

OUTA believes this contract was the tip of the iceberg and that investigations are needed into all other contracts awarded by the City’s procurement team at the time, more so those that involve contracts which Tahal SA and its directors have with any other municipality, government department or entity.

 

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Dudu Myeni and Hlaudi Motsoeneng have become household names synonymous with corruption and maladministration, but their high-profile antics have hidden the fact that the fall of SAA and the SABC is not the fault of just those individuals.

OUTA filed a complaint aimed at holding to account two officials who should have stopped Myeni and Motsoeneng.

“Both the SABC and SAA have good governance policies in place to reduce the risk of maladministration but, to implement these policies, it’s essential to have qualified financial professionals in high-ranking positions. These people should also be held accountable,” says Ben Theron, OUTA’s Chief Operating Officer.

For the SABC, one such person was James Roger Aguma, a chartered accountant, former Chief Financial Officer and current acting CEO of the SABC.

“Recently, Aguma made the frankly ridiculous recommendation to expand the collection of TV licenses to include electronic devices such as laptops and cell phones to increase funding for the struggling state broadcaster. What he fails to mention is that the current crisis is a result of his failure to exercise oversight as CFO and his personal acts of maladministration,” says

Dominique Msibi, OUTA’s portfolio director for social services.

In December 2016, OUTA laid criminal charges against the SABC board, including Aguma and Motsoeneng, for corruption, racketeering, money laundering and abuse of power. It was the board’s governance and nominations committee, of which Aguma was a member, which signed off on Motsoeneng’s “success fee”, it was Aguma who co-signed the now-cancelled contract for the collection of TV licence fees with LornaVision even though it’s not registered with the Debt Collector’s Council, and it was Aguma, as a member of the executive committee, who oversaw the fraudulent R40 million studio procurement.

“To their credit, the new Minister of Communications and the new Interim Board are not blind to the crisis or those responsible for it and have taken steps to renew the SABC. These steps include advertising the positions held by Aguma and Motsoeneng,” says Theron.

The SAA has regrettably suffered from similar mismanagement at the hands of Yakhe Kwinana, a chartered accountant and former head of SAA’s audit and risk committee. Kwinana resigned in August last year stating: “The bottom line is that my reputation is at stake. My professional certification is at stake.”

“Her statement is particularly hilarious when one considers that she oversaw and, in many cases, actively contributed to many of the most notorious scandals at the airline, such as, the BnP Capital deal, the failed Pembroke Financial Services resolution and swap transaction with Airbus, and the complete failure to address the concerns raised by the Ernst & Young Report into procurement and contract management practices at the airline,” says Theron.

Today, OUTA has filed a complaint with the South African Institute of Chartered Accountants (SAICA) aimed at having both Aguma and Kwinana struck off the roll of chartered accountants. Being struck off would mean that they may no longer practice as chartered accountants.

“It is preposterous that a chartered accountant could, in good conscience, oversee and contribute to such maladministration and it is fair to say that both individuals have acted without integrity, professional competence or due care,” says Msibi.

“OUTA has faith that SAICA will hear our complaint, take heed of the abundant evidence and remove them from the roll.”

 

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While some poor communities are still waiting for access to basic water infrastructure, the government has instead diverted some of those funds to big-ticket high-profile projects.

A report by OUTA’s director of water and environment, Julius Kleynhans, and water expert Helgard Muller, found that the Department of Water and Sanitation is not keeping a good enough watch over the spending of grants for infrastructure.

The Regional Bulk Infrastructure Grant (RBIG) is a conditional grant which is supposed to be used only for the social component of water projects (that’s infrastructure for basic domestic use).

But Kleynhans and Muller found that, in practice, mega projects are being funded in their entirety. This delays basic services to those still waiting.

One example is the bulk water supply to Polokwane, although Kleynhans says that Limpopo’s capital should have enough financially viable water users who should pay towards the economic component of this project (for higher than basic services, commercial or industrial services) instead of taxpayers footing the total bill.
Kleynhans and Muller also noted the ongoing waste of money and failure to account properly for spending in those grants, which has been highlighted by others including the Auditor General of South Africa.

“It is clear that tax money is abused in the capital projects space because billions of rand are wasted, whilst human rights are violated due to the lack of access to sufficient water. One cannot help but question the leadership and lack of accountability within the department,” says Kleynhans.

“Capital projects must eradicate inequality, not be abused for self-enrichment.”

· Read Kleynhans and Muller’s report “Preliminary investigation into abuse of capital grants used for water and sanitation infrastructure projects” on the OUTA website.

 

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In May, OUTA barred at least 55 of SANRAL’s summonses on e-toll debts to the value of R2 million.

e-toll court case

Those summonses are thus effectively blocked, so if SANRAL wants to take motorists to court over those debts, it will have to start the whole process again. The summonses are barred as SANRAL missed legal deadlines for the paperwork.

SANRAL has now realised the problem and asked for more time on summonses, which OUTA refused.

SANRAL has claimed that the barring is irrelevant, but OUTA believes this illustrates SANRAL’s inability to run the cumbersome collection process for the millions of e-toll transactions.
“As far as OUTA is concerned, SANRAL’s journey of following an extensive litigation process to collect outstanding debt will take years to unfold and is a significant waste of the courts’ time and taxpayers’ money,” says Ben Theron, OUTA’s Chief Operating Officer.
Meanwhile the SANRAL case against Thandanani Truckers and Hauliers for unpaid e-toll fees of R402 841.62 run up from January 2014 to August 2015 is heading for court. OUTA is defending this and it’s regarded as a test for the case against e-tolling.

OUTA’s defence on this includes that SANRAL, the Department of Transport and the Department of Environmental Affairs didn’t comply with the legal requirements on public consultation, environmental approvals, alternative routes, alternative funding for the roads, the requirements for delivering the e-toll fee invoices and VAT.

“The real fight is now only beginning,” says Theron. “The matter is being fought on two fronts: the constitutional matters of the scheme’s introduction; and the technical matters and merits of each specific case.”

 

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Life’s a beach in Knysna, for some in government.

The Knysna local municipality has issued a by-law which allows any government department to take over a beach.

This is in the Knysna “By-law for the Recreational Use of Beaches and Bathing Areas”, gazetted on 8 May 2017. There’s no explanation of why a department might need a beach to itself – a party? topless bathing (oh no, that’s ruled out in a separate section)? cheap water cooling for a nuclear power plant? – and there’s no restriction on how long a beach may be restricted.
Knysna’s acting municipal manager Johnny Douglas says the by-law was reviewed last year and published for public comment but none was received.

“The relevant section doesn’t make reference to an indefinite period and if the situation arose for a proposed reservation, the section states that all interested parties will be notified,” says Douglas.

Douglas doesn’t explain why a government department might need to reserve a beach, but he flatly denies any nuclear power connection, saying “the section was most definitely not included for that reason”.

Here’s section 23 of the beaches by-law:

Reservation of beaches
(1) Notwithstanding any provision to the contrary contained in this by-law, the Municipality may, at the request of any Government department reserve —
(a) a beach within the area of jurisdiction of the Municipality; or
(b) any portion of such beach.
(2) For the exclusive use of any such Government department and shall notify all interested parties in any manner or by any means it may deem most expedient accordingly. No person other than the Government department concerned shall make use of or enter upon the beach or any part thereof reserved in terms of subsection (1) for the exclusive use of any such Government department.

 

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The party millions that aren’t for partying

The public funding for political parties this year is R140.7 million.

Political parties who got enough votes to have members of Parliament will get a share of this funding, which is allocated on a proportional basis.

This is the funding for April 2017 to March 2018, made available in terms of the Public Funding of Represented Political Parties Act, administered by the Electoral Commission of South Africa and gazetted recently.

There is also similar funding available in some province

 

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