Media Releases

Inside OUTA November 2017

Dear OUTA supporters and followers

It’s that time of the year again and the race to get the in-box cleared before year end gets more hectic with every year that passes. But what a year it has been at OUTA, with the #GuptaLeaks being a significant injection into our war-chest of information, helping us to tackle many matters within our mandate. I will reflect more about the year that was in our Summer Break edition in mid-December.

For now though, it is the dynamics of the recent political changes in Zimbabwe and the much-needed leadership change required in the ANC that is on many a mind, as we contemplate the various scenarios that could ensue and affect South Africa’s future.

It’s very clear that when change happens as fast as it did in Zimbabwe, their corridors of power become filled with hypocritical sycophants, who only a week before his removal from office, revered Robert Mugabe as God on earth and some would have gladly died for him in an instant. Yet now they dance at his demise. With Emmerson Mnangagwa now ushered into State House to lead the country, the real and present danger is that the military may want to keep him there no matter what the electorate desires, because we must not forget that these are the same generals who helped to orchestrate Mugabe’s so-called victories in 2008 and 2013.

The one area of change that we all desire from our leadership, is meaningful action to deal with the issue of corruption. In the Zimbabwe developments, the general consensus is that until there is meaningful change, they live in hope of returning their country to a free and prosperous democracy. The saying by Will Cuppy is apt: “A few cobras in your home will soon clear it of rats. Of course, you will still have the cobras.”

This is precisely the frame of mind we find ourselves in here in South Africa. As a nation, we have become acutely aware of large-scale corruption that is severely hampering our nation’s progress and prosperity.  It is literally a handful of people that are becoming extremely rich as a result of rampant corruption throughout all levels of governance. At OUTA, we have become privy to the vast extent of the problem of corruption in South Africa and, while we realise how rampant the problem has become, it is one that we sincerely believe can and must be tackled.

However, while President Jacob Zuma remains in office, or someone else who has no meaningful desire to address the status quo, the country will remain on a downward spiral. What we now need as a nation, and urgently, is a new leader who will prioritise the end of corruption and enable law enforcement to be free to do their work. Mid-December’s ANC elective conference cannot come soon enough and, until then, we will watch the forces at play as the political jockeying heats up. Be prepared for some dirty tricks and outrageous campaigns.

In this month’s newsletter, we feature more developments on some of the projects at OUTA, a prominent one being our fight to challenge Eskom’s application for a 19,9% tariff hike, plus a piece that covers OUTA’s governance journey, and a piece on the MultiChoice/ANN7 saga.

Wayne.

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DStv must come clean on ANN7 contract

Over the past year, we have seen a relentless and growing call from OUTA supporters to have the ANN7 news channel (405) removed from the MultiChoice platform, due to the blatant bias and the political and factional agenda that provides support for a corrupt leadership.

However, this is a matter than runs far deeper than biased reporting. We are fully aware of the need for a free media and to have multiple voices representing various opinions and positions in the news. OUTA’s position on ANN7’s removal is based on the corrupt transactions and government-assisted funding that enabled the channel to exist in the first place.

Following our first letter to the MultiChoice CEO Mark Rayner on 16 November to axe the ANN7 channel, more facts came to light. These point to dubious and potentially corrupt dealings that also involved MultiChoice management, ensuring that not only did the Guptas get what they needed – a news channel that was handsomely rewarded with annual payments from MultiChoice – but also that MultiChoice appears to be complicit in the decision to stifled the roll-out of a competitive encryption service for all TV platforms.

In addition, following the release of minutes that reflect dealings between SABC and Multichoice in 2013, questions have now arisen about anti-competitive conduct and dubious transactions that is fast severing the trust contract between Multichoice and the public.

Unless MultiChoice or its parent company Naspers comes clean with everything in these matters,  DStv could find itself suffering the same backlash from the public as Bell Pottinger, KPMG, SAP, McKinsey and others.  Hiding behind confidentiality clauses and telling half-truths is no longer an option in today’s world of citizen power, when the public has the ability to trigger the demise of organisations that profit from unacceptable and undue conduct.

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OUTA Cautions Against Calls for a Tax Revolt

OUTA has noted a dramatic increase in calls for a tax revolt, as every day brings new claims of substantive government corruption and as a result, our social network pages are littered with pleas for OUTA to coordinate an effective tax revolt aimed at forcing the government to end the gouging of our nation’s ever-dwindling tax revenue.

While OUTA empathises and understands the sentiment and emotion behind these calls, we do not believe that a tax revolt is in the best interest of the country. Simply put, when you contemplate the consequences and who ultimately suffers from a tax revolt, you won’t want to go there.

At the outset, a fully blown tax revolt is difficult to organise. The bulk of our taxes come from VAT, personal income tax (which is deducted by employers) and company tax, which means a tax revolt would need the active participation of big business and industry leaders.

A tax revolt raises more questions than answers, such as what do we do with the “taxes paid into a trust fund”, which so many believe is the route to go in order to teach our Government a lesson. Who’s going to set up and be in charge of this trust fund and what to do with it? What referencing system is implemented to ensure the taxes go back to the correct accounts when the revolt is over? Or do we all keep our “unpaid taxes” and perhaps enjoy or spend the ‘extra cash’?

A tax revolt would likely be most devastating to the poor, particularly under an amoral government. Remember how dangerously close we came to the government failing to pay social pensions because officials prioritised trying to keep an illegal contract over the welfare of the poor?

A tax revolt is also legally challenging. Not paying legally due taxes is a crime. The courts have not smiled on attempts to refuse to pay rates –  see the Supreme Court of Appeal ruling in 2011 and the Constitutional Court ruling in 2013.

A tax revolt once started would be almost impossible to reverse. The biggest challenge would be the reintroduction of a moral code and discipline to ensure former taxpayers start contributing to the fiscus again.  But is in the long term destruction of a public service that becomes a problem and where society as a whole will suffer, not only the corrupt few. Imagine a closure of all security services, water infrastructure being shut down, fuel supplies etc.

Instead of a tax boycott, we need to find other ways of addressing Government’s maladministration and lack of interest in tackling corruption. Those taxes we have paid belong to the nation and must benefit the people as a whole. The route we believe society must take, is to work harder to hold those in power to account for their conduct.

We will strengthen our campaigns to demand transparency and accountability throughout government, and prosecute those who perpetrate the problems. The government is accountable to the people and so we need to remind them of their role and responsibilities in this regard, failing which, some jail time should be the alternative for their conduct.

This approach we believe, is the most effective journey to take, as opposed to a tax revolt.

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Rescuing the Rehab Fund from the Guptas

We are confident about our legal action and request for the protection order of the Optimum and Koornfontein mine trust funds, in the ongoing interdict battle against the Guptas.

These are funds which are legally required for the future rehabilitation of the mines’ land and may not be used for anything else. But the Gupta mine management seem to think otherwise.

OUTA has already obtained an interim interdict blocking the Guptas from accessing the rehab funds in the Bank of Baroda. The Gupta owned companies are opposing the interdict and OUTA will remain relentless in this matter, by continuing the High Court case, following the submission of our heads of argument on 14 November. The matter has been rescheduled to be heard at the end of May 2018. Fortunately these rehabilitation funds will remain frozen until the matter is finalised.

We note with concern, the absence of Minister of Mineral Resources Mosebenzi Zwane in this matter, as he is the custodian of mine rehabilitation funds, however this does not come as a surprise as we know that Minister Zwane has been actively involved with the Guptas’ affairs and state capture. OUTA laid charges of treason against Zwane earlier this year.

In the legal battle to freeze the Gupta Mines Rehabilitation Funds, OUTA has asked the court to:

  1. Keep the trust funds frozen;
  2. Remove and replace the current trustee(s) and appoint additional, independent trustees; and
  3. Order the Minister of Mineral Resources to put in place satisfactory arrangements to protect the funds.

OUTA has raised various concerns over the administration of the funds, some of which are:

  • The fact that there is only one trustee, Pushpaveni Govender, when legally there should be more and that Govender is a director of companies in the Guptas’ business empire –  including a business with ownership in the mines – which is a conflict of interests.
  • The use of R7.5 million in interest from the Optimum fund and the encumbrance of R150 million from the Koornfontein loan as security for a loan.
  • There was more than R1.7 billion in the funds but now there is only R1.47 billion, and this doesn’t take into account any interest due.
  • As at December 2015, the Koornfontein Trust liability was R241. 2 billion and the Optimum Trust liability was R1.574 billion, which means the combined liability as indicated in the Minister’s documents exceeded the combined funds in the trusts disclosed by the mining respondents at the time of the Tegeta transfer.
  • Ronica Ragavan, a director of the mining companies and the CEO of Oakbay which is part of the Gupta empire, has sought to access the Koornfontein fund, claiming this was for mining rehabilitation purposes. But the mine is not closed and it’s an underground mine so there is no ongoing rehabilitation work and neither was there evidence of any work planned.

We believe the Guptas are feeling the pressure from all sides and are attempting to delay this matter.

OUTA’s case focusses on ensuring the sound management of mine rehabilitation trusts to ensure that mining companies comply with their obligations to rehabilitate mining areas over the long term. Mining activities notoriously cause lasting environmental damage even decades after mining activities cease. One notorious problem – which looms large in this case – is acid mine drainage which detrimentally affects water supply.

OUTA regards this case as a priority and will continue to fight to save those funds.

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OUTA’s Growth and Governance Journey

OUTA has come a long way since early 2012 when it was formed as a non-profit organisation (NPO) by a handful of business associations to interdict and challenge the e-toll decision. Its early constitution had three directors and an advisory committee, with two of the directors (Wayne Duvenage and Paul Pauwen) overseeing most of the litigation arrangements, payments and governance work on a non-salaried basis for the first three years.

Virtually all funds raised, initially from business, were used to settle the expensive legal challenge which set out to halt the e-toll scheme. With no offices and no salaries to pay, the few out-of-pocket expenses were managed by the appointed secretarial and auditing service company.

Between 2013 to 2015, two additional part-time team members were contracted to assist with communications and media liaison, where additional manpower was required with launch of the e-toll scheme. During this period, OUTA continued to be governed by its founding constitution, holding regular board meetings, AGM’s and receiving input from its advisory committee.

It was during the final quarter of 2015 that OUTA changed gear and began to transform into a larger movement that would tackle matters of general government corruption and maladministration of taxpayers’ funds. Over the next two years, OUTA grew rapidly from a four-person team to 38 full-time staff by the end of 2017. Naturally, along with this significant expansion over a short period of time, new structures, policies and operating procedures were required to be put in place by its management team.

In mid-2017, OUTA contracted an external tax and compliance specialist and revised its constitution to a formal Memorandum of Incorporation (MOI), ensuring that the organisation kept pace with legal requirements for NPOs and the Companies Act regulations, whilst also enabling additional directors to cater for OUTA’s expansion into a larger and broader focussed NPO.

Such rapid expansion for any organisation naturally comes with its strains and challenges, and OUTA is no exception to this rule, with its need for new tiers of management and subsequent changes within its leadership structures. The appointment of new non-executive directors, as well as a Chief Operations Officer to manage the multiple project based strategy helped improve its efficacy and streamline operations and functional outputs, enabling fast and effective case development.

Until recently, the roles of CEO and executive Chairperson were held by OUTA’s founding leader, Wayne Duvenage, however, with the rapid expansion and heightened focus on governance, the need to separate these functions gave rise to the chairperson role being assigned to a non-executive director (Ferrial Adam), with Duvenage heading up the executive duties as the CEO.

Six of OUTA’s management team recently attended a King IV Codes of Good Governance master class training programme, as part of the governance journey. In addition, OUTA’s board has decided to expand its number of Board Directors to eight, four being non-executive and four executive positions, with the chairperson role being assigned to a non-executive director. Following recent director appointment changes, the board has also engaged with the Institute of Directors (IoDSA) to conduct an audit and assessment of its governance processes, to ensure that OUTA remains on track with its commitment to high standards of governance.

OUTA’s supporter database and collection services managed through a secure FSB-approved service provider (O’Keeffe & Swartz) and the website is hosted offshore by Hetzner. OUTA uses encrypted Sage Live accounting and Salesforce management systems to ensure confidentiality and security of its supporter databases.

“Governance revision is an ongoing process and one that doesn’t come with an ‘on-off switch’, but instead requires hard work and continuous focus,” says Wayne Duvenage, OUTA’s CEO.

Attending to policies, procedures and governance processes in a rapidly expanding organisation takes time and effort, as does addressing the search for talent required to fill the positions arising from structural growth and change. With fast paced growth comes increased demands placed on our people, some of which arises from amended roles and responsibilities of various positions within OUTA.  A natural consequence of  rapid organisational expansion are exciting internal growth opportunities, along with churn and the onboarding of new talent to take the organisation to greater heights.

“Despite some of the challenges, it’s all part of the exciting journey that has seen OUTA become a leading and well-respected civil action organisation in South Africa today,” says Duvenage.

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E-Toll Developments

Over the past two months SANRAL has again been sending out large batches of threatening text messages, warning people to pay their arrear e-toll bills or face being summonsed to court. Naturally, every time SANRAL threatens the public, OUTA receives hundreds of queries from concerned motorists in Gauteng.

However, many of the concerns raised with OUTA arise from motorists’ anger and frustration over inaccuracies in SANRAL’s billing. Many people say they are billed for vehicles that were sold years ago, for vehicles they do not own or for driving on roads they have never been on.

As we know, “trust” is a bit like an eraser, it gets smaller after every mistake or episode of questionable conduct and SANRAL’s behaviour is no exception. Public trust in SANRAL has been weak ever since the e-tolls scheme was launched and it has significantly weakened with the ongoing the billing mistakes.

Arising from the regular questions we receive, we have compiled some FAQs and answers for our Gauteng supporters.

1. When can the public expect to see the first e-toll court case happen?

OUTA expected the first case to hit the courts early this year, however, the compilation of affidavits, the ongoing need to rectify SANRAL’s documentation and the paperwork involved for both parties in preparing for the first test case meant this process lasted far longer than anticipated. A court date has not yet been set down.

2. What are the SANRAL’s text messages about?

SANRAL’s text messages are part of its ongoing attempts to raise money. Every time the messages are sent out, they get some increase in payment. But they also increase public anger, as it seems that SANRAL is using an outdated database, as many who received these messages say they had not used the roads. This indicates their ongoing use of the e-Natis system which is riddled with inaccuracies.

We advise motorists that they need to act only once a legally drawn up summons is served. You’ll find OUTA’s advice about the e-tolls and the debt collectors on our website here.

3. How is OUTA helping its supporters who have been summonsed?

The first e-tolls case will be heard in the civil court, as SANRAL is suing businesses and individuals for outstanding bills. OUTA is assisting more than 200 individuals in the magistrates’ courts for summonses for unpaid e-toll bills. In addition, OUTA is assisting at least 61 cases dealing with higher-value claims in the high court.

4. How can I get help from OUTA to defend an e-toll claim?

OUTA’s e-toll defence umbrella is in place to defend the public if summonsed for non-payment of e-tolls. The details are on our website here.

5. What are the constitutional and individual merit challenges which SANRAL faces?

Frequently we are asked about the constitutional merits of the e-toll challenge. Advocate Stefanie Fick, OUTA’s Head of Legal, says that there are two elements to OUTA’s opposition to SANRAL’s claims.

Firstly, there are the “merits” of a case. Every case differs and the merits of each might need to be tested. OUTA’s attorneys consider each case individually, for example, whether the bills were sent to the right address, whether they apply to the correct registration plate, if the correct tariffs were applied, whether there are photographs for each transaction and if it is the correct vehicle.

Secondly and perhaps more importantly for South Africa, there’s the crucial “collateral challenge”, which is the overall legal challenge related to the constitutionality of the e-toll scheme itself. OUTA’s team is assisting the motorists to have this challenge heard prior to the merits of each specific case being heard.  Should a challenge on the unconstitutionality of the introduction of e-tolls be won, the entire e-toll scheme falls.

6. Is OUTA confident about the e-toll court challenge?

Fick says that OUTA has spent an enormous amount of time assisting the public in preparation of the defensive challenge of these cases. While one can never say any legal case is a “slam dunk”, all the evidence and recent developments indicate that the public have a strong and robust case. Should we require further evidence, it is clear from the ongoing angry responses from motorists that we won’t struggle to find it.

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OUTA demands 0% electricity tariff hike

During November, OUTA challenged Eskom’s application for a massive electricity tariff hike through the National Energy Regulator (NERSA) process.

As far as we are concerned, Eskom is not entitled to any tariff increase, let alone the 19,9% it is asking NERSA to approve from April 2018. In fact, OUTA believes the facts point to the need for Eskom to reduce its tariffs over time, but we will lobby for this long-term reduction in time and when the rationale to do so makes sense. For now, we need to strive for zero% increases.

OUTA outlined the ongoing decline in Eskom’s efficiency, along with growing maladministration and corruption over the past decade, which gave rise to unwarranted increases that has taken the average electricity price from 17c/KWh in 2006 to over 82c/KWh some 10 years later.

It is our view that NERSA has not played its role as effectively as it should have, failing to restrain Eskom’s mismanagement. As a result, maladministration and corruption have made Eskom grossly inefficient and reduced the entity’s ability to survive as a going concern.

In our presentation, OUTA asked NERSA to instruct Eskom to introduce rigorous measurable improvements in controllable costs and to ensure Eskom’s leadership improves efficiency and corporate governance.

OUTA has calculated that Eskom should be able to reduce its operating costs by up to R10 billion a year by addressing its bloated staff structure.  We believe that Eskom has approximately 15 000 excess staff and contractors which it should plan to remove from the organisation if it wants to be achieve the productivity outputs it was capable of a decade ago.

OUTA highlighted to NERSA that deficiencies in Eskom’s internal controls have produced unacceptable cost overruns and delays in the never-ending new build projects of Medupi, Kusile and Ingula. These now have a combined overspend of roughly R300 billion, which is three times higher than the original estimate provided by Eskom for these projects in 2007.

OUTA believes that Eskom’s evaluation of its Regulatory Asset Base is over-estimated and does not reflect Eskom’s economic reality (this is the basis for a substantial part of the electricity price calculation). OUTA also wants NERSA to exercise a heavy-handed regulatory approach to Eskom’s new build overruns and to demand that Eskom become properly transparent and honest in all its capital and operational expense reporting.

We have also asked that NERSA questions the environmental levy and engages with the National Treasury to phase this out, as it isn’t used for protecting the environment but merely adds to the price pressure on the public.

OUTA believes that unless the electricity price decision process is based on economic reality and affordability for consumers, Eskom will continue to be granted tariff hikes that will encourage inefficiency, maladministration and corruption.

For more on this, see OUTA’s submission to NERSA opposing Eskom’s price increase and OUTA’s presentation to the NERSA public hearing.

NERSA is scheduled to make a decision on Eskom’s application on 7 December. The process for municipal price increases will start after that.

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