Strikes turn violent

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

The plastic converters industry strike by 33 000 workers, now in its ninth week, is turning out to be one of the most violent in years. The cost of the strike in terms of damage to property and lost production now exceeds R100 million, says the National Employers Association of SA (Neasa).

Employers believe this may be a signature of strike action going forward as unions battle it out for a dwindling pool of members. Unionised membership outside the public sector has slipped from a peak of 26% two decades ago to below 20%, and that may explain some of the pressures on unions – as well as employers – currently on display.

With national unemployment at 27%, trade unions are fighting to protect members whose jobs are most vulnerable to replacement by low-skilled entrants.

“This is not necessarily a turning point in industrial action in South Africa,” says Neasa CEO Gerhard Papenfus. It simply shows how trade unions, fighting for relevance, will behave in the future. Trade unions who rely on the membership of employees who, due to their unwillingness to be upskilled, elect to rely on negotiations to improve their circumstances, will resort more and more to this kind of behaviour in order to retain relevance.”

Murder and provocation

In the plastics strike, one worker was murdered, several more hospitalised, three CEOs assaulted at their place of work, and one CEO died as a result of attacks on his factory. Hundreds more non-striking workers were assaulted at their residences, houses were burned down and 17 factories vandalised, petrol bombed or looted.

The Plastic Converters Association of SA (PCASA) has blamed the National Union of Metalworkers of South Africa (Numsa) for the mayhem, but the union disavows responsibility. “We reject the attempt by the employers to blame us for violence and vandalism,” said Numsa general secretary Irvin Jim in a statement. “We want to remind them (employers) that we operate in a legal framework where everyone is innocent until proven guilty. The allegations made by employers are unfounded and not based on fact.”

Yet shop stewards were heard calling on their members to stop the ‘rats’, a reference to non-strikers who opted to show up for work.

This strike has turned particularly ugly. In a return to macabre days of ‘necklacing’, security guard Lesley Lekgalake Mphahlele was doused with petrol and set alight by striking workers, probably infiltrated by agents provocateurs, on the East Rand. He later died of his injuries.

Striking workers have demanded a 15% pay increase and a R40 minimum wage. Many employers had already settled the pay dispute and resumed production, but that hasn’t stopped the violence. Workers at the Mpact plastic bottling plant on the East Rand returned to work a week ago, but unknown outsiders entered the premises this week and set fire to the plant and several vehicles.

‘The only negotiating tool’

“These trade unions are competing for membership and external support from the ranks of thugs, where the only negotiating tool is to strike and demonstrate, and where that fails, escalate it to intimidation through violence, where nothing, not even lives, are spared,” adds Papenfus.

The SA Federation of Trade Unions (Saftu) threw its weight behind the strike, claiming the issues behind it extended beyond the plastics industry, and was “a response to an emerging pattern among all employer associations to try to paralyse bargaining councils and sabotage attempts to reach any collective agreements”.

There has also been violence at Sibanye-Stillwater, where three people died during a strike by 15 000 workers associated with the Association of Mineworkers and Construction Union (Amcu). The miners are demanding salaries of R12 500 and increments of R1 000 a year for three years. While three other unions settled their wage dispute with the company, Amcu is holding out for a better deal, and that has triggered inter-union rivalry and violence against miners returning to work. In an open letter to Amcu president Joseph Mathunjwa, Sibanye-Stillwater’s head of human resources, Themba Nkosi, called on the union to settle the strike for the safety and wellbeing of workers.

No wages for those who strike

“Striking employees will receive no wages if they do not report for work and an extended strike just before the December holidays will result in many of our employees experiencing significant hardship, especially during the upcoming back-to-school period at the beginning of the year,” says Nkosi.

“As we all know, there are no absolute winners in any strike action. Instead, this two-week-long strike already has negative repercussions for the local communities, regional economies as well as the mining towns, which are already in distress.”

Dis-Chem has also been hit by strike action that turned violent in recent weeks. Striking workers associated with the National Union of Public Service & Allied Workers (Nupsaw) clashed with police at Canal Walk in Cape Town last week. Four striking workers have been arrested for malicious damage to property and violation of picketing rules in recent weeks. Strikers are demanding a minimum wage of R12 500, a 12.5% increase for those earning above R12 500, and a bonus equal to the basic salary.

Labour court steps in

The ongoing violence and breach of picketing rules by striking workers prompted the Johannesburg Labour Court to issue an unprecedented order barring picketing and protest action by Nupsaw this week.

The trade union wants recognition from the company, but Dis-Chem has refused, saying it fails to meet the 30% recognition requirement in terms of labour law.

Dis-Chem said it upheld the union’s right to strike, but the union’s tactics of violence and intimidation forced it to approach the labour court for relief.

Papenfus says it is ironic that striking plastic workers have probably gained nothing out of the strike. They have won a modest pay increase but lost several weeks of income. Employers’ attitudes to employment are hardening, and many will be looking at ways to reduce their future dependence on manpower. A 2014 study by labour lawyer Frans Rautenbach found a correlation between union density and employment growth: employment growth was strongest in times when union density was weak.

There are also studies showing that unions have delivered better pay and conditions for members, but the long-term trend is not in their favour. The recent violence certainly won’t help.


3 court cases that changed the face of mining in SA

Written by Ciaran Ryan. Posted in Journalism


This article first appeared in Moneyweb.

Three recent court judgments have radically altered the mining landscape. Two deal with the need for miners to engage with local communities and take a hardline stance on the eviction of locals, and the third slapped down the mining minster for allowing coal mining in an environmentally protected area in Mpumalanga.

The case that has perhaps the greatest import is the decision of the Constitutional Court to overturn an eviction order against 37 members of the Lesetlheng Community in North West Province to make way for mining on the land they had occupied for generations. The judgment in this case requires mining companies not just to consult with communities prior to commencing mining – but to also obtain the written consent of the individuals directly affected. This goes beyond what is required in many other countries, where consultation, but not consent, is sufficient.

Ancestral land

The occupants in the so-called Maledu case say their ancestors purchased the land in 1919 but were unable to legally obtain title due to previous racial discrimination, so the land was registered in the name of the minister of rural development, who held it in trust. Like many communities in SA, proving their title to the land is a complex and legally fraught issue. A separate case is underway to establish the ownership of the Lesetlheng community land.

The respondents in the case were Itereleng Bakgatla Mineral Resources and Pilanesberg Platinum Mines, both of which have mining rights over the area. They argued that they had complied with the Mineral and Petroleum Resources Development Act (MPRDA) requirement to consult with the Bakgatla Ba Kgafela community before mining and had received the necessary permissions.

But the 37 applicants in the case argued they formed a subset of the wider Bakgatla Ba Kgafela community, and it was their forebears who purchased the land, not the wider community. The wider Bakgatla Ba Kgafela community had no right to dispose of land rights that did not belong to it.

The ConCourt agreed, invoking a clause from one of the briefest acts on the statute book, the Interim Protection of Informal Land Rights Act (IPILRA), which says “no person may be deprived of any informal right to land without his or her consent”.

Mining companies’ sordid practice

According to community activists, mining companies in SA have a sordid reputation for playing off one section of a community against another to secure mining rights. This is what happened in another case brought by 128 members of the Amadiba community living in Xolobeni on the Wild Coast, who have fought a multi-year battle to stop the mining of titanium sands on their traditional land. Australian-owned Transworld Energy and Mineral Resources (TEM) has applied for the rights to mine a 22km coastal strip in the area. One faction of the community is in favour of mining, another is against it.

How to rough up debt collectors

Written by Ciaran Ryan. Posted in Journalism


This article first appeared in Moneyweb.

A reader recently reached out with a harrowing story that goes like this: his home was about to be repossessed for a bank loan he says he never asked for nor received. When asked to provide proof, the bank supplied a loan agreement, but without his signature. There were witness signatures, but nowhere was our reader’s signature to be found.

This starts to smell like fraud. Or a terrible error on the bank’s part. But the consequences for the reader are horrifying.

The reader invited the bank to issue summons so he could challenge its evidence in court. The bank has yet to take the matter further. Yet the reader is being hounded by debt collectors and threatened with all sorts of legal action.

This is by no means an isolated instance. Lungelo Lethu Human Rights Foundation, which protects people against unlawful evictions, has documented several such instances of people with similar stories. Their houses were taken away for loans they never asked for nor received.

Independent legal specialist Leonard Benjamin provides a succinct checklist of do’s and don’ts when it comes to dealing with debt collectors.

“While I believe people must honour their debts, these debts must be valid and lawful, [but] in many instances I have seen, people are being hounded over unlawful debts. Creditors have an obligation, and the resources, to timeously pursue debtors who, for whatever reason, are unable to pay. Once the debt has prescribed there is no longer any legal or even moral obligation to honour the debt,” says Benjamin.

Prescribed (expired) debt isn’t payable

First, he says, understand the Prescription Act and the National Credit Act. In its simplest form, if a borrower defaults on a debt and three years has elapsed since the default, that debt is prescribed (expired) and therefore not recoverable. This applies to overdrafts, credit card and other debts (in the case of mortgage debt, the prescription period is 30 years). The bank can keep the debit ‘alive’ by issuing summons within the three years period.

Watch out for ‘prescription interruption’

Debt collectors will phone you up and try to get you to admit that you owe the money (also called ‘interrupting prescription’).

Debt collector: “Mrs Khumalo, I am calling you about that R5 000 loan you took out with Zama Stores. Do you remember taking out that loan?”

Mrs Khumalo: “Yes I do, but I have since lost my job and cannot pay.”

Right there she has admitted the debt and ‘interrupted’ prescription. There are a number of ways debt collectors will get you to interrupt prescription and keep the debt alive: you make payments subsequent to default; the bank or creditor issues summons; the creditor gets you to admit on the phone that you owe the money.

Here’s how Mrs Khumalo should handle it, says Benjamin.

Debt collector: “Mrs Khumalo, I am calling you about that R5 000 loan you took out with Zama Stores. Do you remember taking out that loan?”

Mrs Khumalo: “I don’t know who you are and if you want to communicate with me, please put it in writing. Goodbye.”

Even if you feel a moral obligation to pay an old debt, never agree to it on the phone. The lesson in all this is never to communicate with debt collectors on the phone. Benjamin says it is important to remember most of these ‘debts’ being claimed by debt collectors have actually been on-sold by the banks for cents in the rand, and lack the necessary documentation for legal enforceability.

Hence, the claim that “I am phoning on behalf of the bank” is often not true. The bank is out of the picture. The ‘debt’ has a new owner.

Many debt collectors illegal

Forensic accountant Andre Prakke adds that many debt collectors are acting outside the Debt Collectors Act, in which case any admissions made by the debtor are null and void. “Consumers need to ask from the outset if the debt collector is registered. It is an offence if they are not.

“One issue that I have come across lately is that those loan companies that have expired or prescribed debt offer new loans of a much smaller value on the condition that the previous loan be added to this one and it becomes a new loan. This will also include all their costs on the old loan and interest to that date. The public does not fully understand what they are agreeing to. When the two loans are combined, the borrower is a given new credit life policy as well, and the interest rate can be outrageous.

“The interest rate when taking these two combined is so outrageous and shocking. The debtor will probably never be able to repay it and this is where the situations arise where people started off with R10 000 and end up having to pay R100 000 as an example.”

Another trick

There’s another trick employed by banks and other creditors to stymy the legal rights of debtors: they bring cases before the high courts that properly belong in the magistrates’ courts (where litigation is much cheaper and expeditious). The reason they do this is that any writ of execution (to attach your property) issued in a magistrate’s court expires after 12 months and the bank must again approach the court if it fails to execute on the writ in this time period. High court writs do not expire, so the bank can sit on them for years without executing, and without having to approach the court a second time.

Because of the higher costs involved, bringing such cases to the high court is a denial of access to justice under the constitution. The Pretoria High Court recently told the banks to take their cases elsewhere, particularly for smaller money claims.

“I advise people that they must develop an extremely thick skin where these people [debt collectors] are concerned,” says Benjamin. “They will use every trick in the book to flout the law.”

Benjamin’s advice for how to deal with debt collectors:

  • Use Truecaller or a similar app to block calls.
  • If a debt collector manages to get through to you, insist on only dealing with them in writing.
  • Deny, deny, deny. They are accusing you of owing money. They must prove. You don’t have to prove anything.
  • Ask for copies of the agreement they rely on and a breakdown of the debt they are claiming.
  • Refuse to discuss anything with them until they have answered your above request, in writing.
  • Refuse to confirm your ID number.
  • Check your credit record at least once a year (credit bureaus are obliged to provide you a free copy once a year). If you see a debt you think is prescribed, you must lodge a dispute and have it removed.

Benjamin says South Africans are paying billions of rands a year in unlawful or prescribed debt because they do not know their rights. “If you are aware the debt is prescribed, your proper response to a debt collector should be: ‘You are breaking the law by trying to recover prescribed debt.’ And put down the phone.

“It’s the same with garnishee orders (also called emolument attachment orders). These must be issued by a magistrate’s court close to where you live or work. Get a copy of your garnishee order and see where it was issued. If you work in Cape Town and it was issued in Hermanus, sorry, that’s an unlawful order. You don’t even have to go to court. You go to your employer and instruct them to stop paying. It’s that simple. If they don’t, get a lawyer to send them a letter.”

Claims of discrimination against black FNB customers heads to court

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

More than 4 000 bank customers claim they were charged 30% more than whites on mortgage loans.

Cape Town-based usury expert Emerald van Zyl has waged a nearly 10-year fight against banking abuse. This time he is asking the Cape Equality Court to rule that FNB’s FirstRand Finance Company discriminated against more than 4 000 black customers by charging them 30-40% more than white customers on their mortgage loans. The total claim is likely to exceed R3 billion.

The claim relates to mortgage clients of the former Saambou Bank, later taken over by FNB. Though this case involves FNB clients, Van Zyl says he has substantial evidence of discrimination by other banks.

Source: Munro Consulting Actuaries

Van Zyl’s case was dismissed with costs six years ago in the Pretoria High Court, which found no evidence of racism by the bank, but Van Zyl says the judgment is flawed in several respects. For one thing, racism was not part of his pleadings in that case. He was looking for financial relief for seven FNB customers, who happened to be black, on the grounds that the bank exceeded the allowable interest rate in terms of the Usury Act. The judge ruled otherwise, declaring the interest rates charged “reasonable”.

This time Van Zyl wants the Equality Court, where the burden will be on FNB to prove that it did not discriminate, to hear the case.

In 2005 he appeared on Carte Blanche accusing the bank of overcharging interest on thousands of mortgage loans – and he was proven right. FNB subsequently admitted the overcharge and refunded customers R154 million. In that case, the bank had charged double interest in the first month of the loan, which causes the bond to be in arrears from day one.

The charging of so-called ‘interest in advance’ is illegal in terms of the Usury Act and can result in jail time for offenders. As far back as 1990, the South African Reserve Bank (Sarb) warned banks to stop the practice, but Van Zyl claims Saambou carried on regardless. In 2002 there was a run on Saambou and the Sarb scrambled to rescue the bank before things got further out of hand. It was at this point that FNB acquired R8 billion worth of Saambou mortgages, of which R2.6 billion was for low-cost housing.

In about 2010, Van Zyl was handed a leaked Saambou customer database by a former bank employee. It showed roughly 80 000 customer accounts of which 23 000 were low-cost housing clients. Further investigation by retired university professor of sociology Cornie Groenewald estimated that 99% of these low-cost housing units were black-owned. Van Zyl reconstructed the accounts of these customers and found they were being charged as much as 30% or more than ‘high-cost housing’ customers.

FNB has refuted the charges of discrimination, in part because there is no reference to the race of customers in the Saambou database acquired by Van Zyl. But Groenewald’s research suggests otherwise. The ‘low-cost housing’ units referred to in the database qualify for government subsidies, for which the recipient must be black and earn below certain income thresholds.

Code words

Van Zyl says any reference to ‘low-cost’ and ‘high-cost’ housing in Saambou’s internal documents is effectively code for black and white customers. The discrimination is claimed to have started in 1998, four years before Saambou collapsed and was bought by FNB.

Van Zyl lodged a complaint with the SA Human Rights Commission over one FNB customer, Simon Michaels of Mitchells Plain in the Cape, who took out a 20-year mortgage loan for R64 000 in 1996. After 21 years, his outstanding balance was R77 000. This was the result of discrimination, says Van Zyl’s complaint.

In his affidavit before the Equality Court, Van Zyl presents evidence that “high-cost housing” (white) customers would benefit from a drop in interest rates, but not “low-cost” (black) customers with a mortgage loan less than R220 000. The interest rates charged to several black customers cited in his affidavit were kept at the old, higher rate even though the prime lending rate had dropped for all other customers.

An expert report by Munro Consulting Actuaries analysed 75 000 loan agreements, 58% owned by whites, 1% by Indians, 10% coloureds and 31% blacks. It found that white clients with large loans (above R150 000) pay on average 1.1% below prime, while black and coloured clients pay 0.45% below prime. But on small loans (less than R100 000), white clients were paying 0.75% above prime and black and coloured clients 2% above prime.

Source: Munro Consulting Actuaries

“Black and coloured clients within the same loan size groupings pay higher interest than white clients,” says the Munro report. The actuaries also looked at different product categories and found the same pattern: black and coloured clients were paying higher interest rates than whites for the same product.

Breaking it down further to suburbs, the report shows the southern suburbs in Cape Town have the lowest interest charged, followed by Stellenbosch. Kroonstad and Bloemfontein clients are charged the highest interest rates in the sample examined, though the sample size at suburban levels becomes sparse. “We note that these samples are mostly not large enough to give statistically reliable results, but they do confirm that even within the suburbs, race has a noticeable effect on the interest rate gap,” says the Munro report.

In the Pretoria High Court case heard six years ago, Van Zyl says he was unable to rebut the testimony of an FNB witness because he was taken ill during the hearing and had to have emergency surgery. In the Equality Court in August this year, Andrew Strachan of Norton Rose Fulbright, deposing for the bank, argued that it could not have been guilty of discrimination prior to June 2003, when the Promotion of Equality and Prevention of Unfair Discrimination Act came into effect. The Equality Court’s Judge Fortuin advised Van Zyl to amend his pleadings to reflect the fact that the court’s jurisdiction only came into effect in 2003. The case will likely be heard in the Equality Court in the New Year.


Van Zyl says in the Pretoria case that the relief sought was financial recompense for the seven clients, who happened to be black. There was no claim of discrimination. Van Zyl’s affidavit now before the Equality Court claims the bank at various times violated the Usury Act in respect of 4 000 customers by charging higher than the allowable interest rate.

He argues the discriminatory practices go back to 1990 when parliament passed an amendment to the Usury Act to prevent discrimination against low-cost housing customers. The banks lobbied against this on the grounds that low-cost housing was higher risk and therefore required a higher interest rate. As a compromise, banks were allowed to charge a R5 a month ‘admin’ fee, which was subsequently bumped up to R50 a month when the National Credit Act came into force in 2007. “The purpose of this fee was that low-cost housing would be charged the same interest rate as clients of high-cost housing,” says Van Zyl.

Judge AJ Vorster of the Pretoria High Court found that the cessions giving Van Zyl the right to approach the court for interest rate relief were “bad in law and of no force or effect”.

The judge was scornful of Van Zyl’s ongoing media campaign characterising Saambou and its successor as racist. “During cross-examination of the Plaintiff (Van Zyl) it appeared that his conclusion that black people were charged higher interest rates than white people is completely unfounded.”

That hasn’t stopped Van Zyl.

This is thought to be the first time the Equality Court has heard a case alleging discrimination by a bank.


The curious case of PRASA’s “simulated” robbery

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in GroundUp.

The 14 Passenger Rail Agency of South Africa (PRASA) security guards arrested late last month for allegedly tying up fellow security guards and attempting to steal vehicles at the company’s head office in Pretoria were released last week on R2,000 bail each.

State prosecutors asked for bail to be denied on the grounds that the 14 accused were a flight risk and a threat to witnesses. This was disputed by Magistrate Mali Mokoena who set the bail at R2,000 each. The accused security guards claimed they were merely involved in a simulated robbery to test security at the PRASA premises after several previous robbery incidents.

Police spokesperson Captain Colette Weilbach said the 14 suspects were found with two firearms including a toy weapon, after tying up and threatening three fellow guards. PRASA staff later found knives and a toy gun in nearby shrubs, which may have been tossed away when the police appeared on the scene.

The security guards are reported to have said they were carrying out the orders of Wilson Sebiloane, head of PRASA’s Business Intelligence Unit. Sebiloane is a former uMkhonto weSizwe operative who was granted amnesty by the Truth and Reconciliation Commission for attempted murder and possession of a firearm. The Commission found that these crimes, committed in 1991, were politically motivated.

In court, the state prosecutor and police investigators said the “simulated robbery” claim was a convenient cover story. They said it was a carefully planned heist that went wrong when police arrived on the scene to find fellow security guards tied up and the accused attempting to make off with several of the 200 new company vehicles reportedly held at the premises.

PRASA media spokesperson Nana Zenani said the company was conducting an internal investigation into the circumstances surrounding the alleged robbery, but referred questions to the police and National Prosecuting Authority. “We would rather not comment on the progress of our internal investigation. I think we need to give the accused an opportunity to present their version of events to the court.”

One senior PRASA manager, who asked not to be named, said, “What doesn’t look good for the security guards is an email sent after the fact to corroborate their version of events. Also, that they tied up fellow security guards and threatened them with weapons while insisting they hand over keys to company vehicles.”

The state has argued that if this was a legitimate operation, the police and medical personnel would have been informed.

The defendants’ legal counsel countered that the simulated operation was approved and was one of several similar operations that had previously taken place. They also argued that the operation was recorded in the security operations book.

The case has been postponed till 21 January 2019.

Lessons for SA from Brazil

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

When it comes to attracting investment, SA could learn a thing or two from Brazil. The fact that Anglo American is Brazil’s largest mining investor should tell us something about ourselves.

Anglo is betting big time on Brazil, with a US$10 billion investment in the Minas-Rio iron ore project expected to reach production capacity of 26.5 million tons of iron ore concentrate a year, and the exploration and development of the massive Alta Floresta copper deposit in northern Brazil, covering some two million hectares. Anglo’s discovery has attracted other companies to the area, with mineral claims now expanded to 3.5 million hectares, explained Carlos Vilhena of law firm Pinheiro Neto Advogados at a recent presentation on mining in SA and Brazil.

Brazil recently created a mining agency headed by five independent professionals to fast-track the awarding of mining licences. Agency staff, who are mandated for five years and may not be sacked, will take over many of the functions formerly carried out by the Brazilian mining ministry. This is the same kind of fast-tracking agency that has attracted investment into other sectors, such as aviation and telecoms.

Approvals ‘within weeks’

Soon, mining companies will be able to apply online for exploration licences and get approvals “within weeks”, according to Vilhena. In contrast, exploration in SA has been dying a slow death at the hands of an insouciant department of mineral resources, though new mines minister Gwede Mantashe has promised to change this with a R20 billion investment in geo-mapping to assist explorers. SA’s share of global exploration has dwindled to 1%, despite the country accounting for 94% of the world’s known platinum reserve, three-quarters of its chrome and nearly 20% of global vanadium.

Brazilian president-elect Jair Bolsonaro, known for his colourful language and disdain for criminals, plans to leave key finance and economic posts in the hands of market liberals. Like US President Donald Trump, he wants his legacy to be economic prosperity and massive job creation.

“This is the first time in a generation that Brazil has not had a socialist leaning government,” says Victor Salinas, a Brazilian business consultant. “It shows how fed up people are with the government.”

Brazil seems to have been through many of the brutal lessons SA is currently experiencing in attracting foreign investment and decided to get the government the hell out of the way. It’s applying the same fast-track methodology to infrastructure investment through its Investment Partnerships Programme (IPP), which has so far pre-approved 191 projects worth $62 billion.

In SA, major infrastructure projects are for the most part originated by state-owned companies such as Eskom, Transnet or government departments. In Brazil, the IPP allows private companies to motivate projects and has introduced new rules and tax benefits to encourage investment. Key areas for infrastructure investment have been identified, and public and private financiers are encouraged to get involved.

A case in point is the expansion of the Carajás Railway involving the construction of 570km of rail to link Serra Sul, the largest iron ore mine in the world, to the coast. Unlocking the huge wealth of Serra Sul would not be possible without the rail ink. This type of infrastructure project is seen as an enabler of economic growth and Brazil is pouring massive resources into rebooting its economy through projects of this nature. Similarly, SA will need the cooperation of other state-owned companies such as Transnet and Eskom to unlock mineral wealth. The 861km Sishen-Saldanha railway line was built in 1976 to provide port access for iron ore in the Northern Cape. More projects of this nature will be required to unlock SA’s mineral wealth, along with a long-term solution to Eskom’s faltering power supply which has been a key bottleneck frightening new mining investment away.

The dangerous state of provincial finances

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

It’s hard to find a kernel of good news in the auditor-general’s (AG) 2018 report on provincial and national departments, other than the Western Cape and Gauteng leading the way in terms of financial accountability.

Elsewhere, the results are mostly dreadful. Only 23% of the entities audited had clean audits. The Western Cape is way ahead of everyone else with 83% of audits in the province proclaimed “clean”, but even here there was some slippage.

In Gauteng, where irregular expenditure remains a problem, the figure was 53%. This does not necessarily mean money spent was wasted or the result of fraud – it could mean that correct processes were not followed.

One has to empathise with AG Kimi Makwetu’s near-impossible task of pointing out and curtailing misspending at government level. Being an auditor is no longer a safe occupation in SA. A female auditor working as part of a team dispatched by the AG to clean up maladministration in Emfuleni Municipality, south of Joburg, was shot twice in the leg two months ago in the guest house where she was staying. The assailants made off with two laptops and a cell phone, all presumably containing vital information on wrongdoing at the municipality. Makwetu decided to withdraw his team.

Last month two AG staff members were held hostage by subcontractors in Tshwane when they were conducting routine asset verifications. An audit team sent to eThekwini was withdrawn in May after one of its staff members received death threats. Police must now accompany audit staff on dangerous assignments.

It’s clear from the report released on Wednesday that Makwetu is not the most popular man in SA’s administrative ranks. In his report, he says provinces and administrators prefer to contest his audit results rather than address the problems identified.

The number of departments reporting fruitless and wasteful expenditure was up 10%, and most of these have been on the list for the last three years. Even more disturbing is the 200% increase in fruitless and wasteful expenditure over the last year to R2.5 billion. Audited irregular expenditure came to R51 billion, but nearly R80 billion when entities not audited are included.