Soweto man’s house sold behind his back for R100

Written by Ciaran Ryan. Posted in Uncategorized

Solomon Nhlapo is accused of trespassing in his own house

This article first appeared in Groundup.

solomon-nhlapo-2Solomon Nhlapo, 65, is squatting in the Soweto house where his mother lived since 1965. Police have told him he is trespassing in his home which was sold in 2014 for a paltry R100. Nedbank apparently managed to obtain default judgment against him, even though he has written confirmation that his late mother’s loan is paid up.

Nhlapo turned up in the South Gauteng High Court in August last year with proof from Nedbank that his mother’s home was fully paid up. He was trying to defend himself, without legal representation, against an eviction order. To no avail. The court awarded the new owner an eviction order against him, which he is now fighting with the help of the Lungelo Lethu Human Rights Foundation, a group helping hundreds of people in similar situations across Gauteng.

The lucky buyer of this bargain R100 house at the sheriff’s auction is Nedbank itself, which offloaded it to a company called Pyramed for R51,000, which then sold it to a company called CC Trade 57 for R18,700, which then sold it to Company Unique Finance (CUF), which then sold the property to another buyer for R350,000.

These names keep on turning up as the fortunate receivers of hundreds of homes, usually in township areas, bought at sheriffs’ auctions for a fraction of their worth. These bargains are then off-loaded, as in Nhlapo’s case, to new buyers at a handsome profit.

To its credit, when contacted about this case, Nedbank appeared keen to resolve the matter. Spokesperson for the bank, Esme Arendse, wrote: “Because it dates back so many years, it was quite a complex process to arrive at some of the facts. That said, we were able to recover information related to Mr Nhlapo and want to resolve this matter amicably and quickly. We would therefore like to engage directly with Mr Nhlapo about a possible settlement.”

But the bigger issue is how Nhlapo and hundreds of people like him end up in this position. His case is riddled with irregularities: he was never served with a Section 129 notice in terms of the National Credit Act, where the creditor is notified in writing of default on a loan; since the Section 129 notice is a precursor to legal action, Nhlapo was unable to mount a legal defence; he says he was never summonsed by the bank; and the eviction order purportedly issued against him was not signed by a judge.

These are not mere technical oversights. Until a few years ago, it was common practice for banks to draft their own court orders and have them stamped by the court registrar so as to avoid the time-consuming and costly process of setting a matter down for hearing by a judge. Since the now famous Gundwana versus Steko Development case in 2011, the Constitutional Court demands that a judge actually preside on these matters before issuing a court order.

How did Nhlapo end up in this position?

Apartheid-era property laws 

To understand this we need to understand apartheid-era property laws. Before the 1990s, black South Africans were denied the right to own land in their own country, but they could lease property for a period of 30 years from the local government. At the end of the lease period, the property title was supposed to pass to the occupants. But the National Party government saw the train headed its way if millions of blacks suddenly claimed their title deeds in white South Africa. The government created the West Rand Board, which fell under the Transvaal Provincial Administration, to issue 99-year leases when the 30-year leases ran out. In other words, residents of Soweto would have to occupy their homes for 129 years before being given freehold title. The problem is, the 99-year lease extension was never formally signed into law, which raises all sorts of questions about who has legal title to the millions of homes in Soweto and other townships.

This was a crucial turning point in the struggle against apartheid. The Civic Association of Southern Transvaal (CAST) launched a boycott of the rent on the leased houses, which swept through the townships of the Transvaal. The West Rand Board initiated a campaign of evictions against the boycotters, who launched a court challenge to stop the evictions. One of the architects of this case is King Sibiya (pictured below), who was deployed by trade union federation Cosatu to defend the rent boycotters. He now heads up the Lungelo Lethu Human Rights Foundation. In the ground-breaking case known as Mngomezulu versus City Council of Soweto in 1986, the court ruled that tenants may not be evicted from their homes for non-payment of rent, on the grounds that the City Council had not followed the law in setting rentals. It was a technical rather than a human rights victory, but it provided security of tenure for tenants in township areas.

King Sibya of the Lungelo Lethu Human Rights Foundation says thousands of people with little knowledge of the law have been evicted from their houses. Photo: Ciaran Ryan

It was around this time that the banks deemed it safe, and perhaps politically expedient, to start lending money to township residents. This was legally dodgy, since in the event of default, the property would revert to the local government – not to the bank. But banks started lending to township residents, and the consequences of this are now becoming apparent.

Back to Nhlapo’s story. His mother, Mary, took out a 99-year lease in Dlamini 2, Soweto, in 1965. Twenty-one years later, in 1986, she took out a R22,000 loan with SA Perm (later acquired by Nedbank) to add some rooms to her little property, to make space for her growing family. She dutifully paid the monthly instalments on her loan until she died in 1994, at which point Solomon took over the repayments.

King Sibiya says he is aware of thousands of cases of eviction where poor South Africans with no knowledge of the law were served with eviction notices. They packed their belongings and moved out, making way for the new owners, often property investment companies populated with politicians and former bankers.

In 1997, Solomon paid a visit to his local Nedbank branch to find out how much was owing on the loan originally taken out with the Perm. He says the bank refused to give him this information, as the bond was in his late mother’s name. Solomon informed the clerk that he was entitled, as executor of his mother’s estate, to the information. The bank evidently still refused to hand over the information. Solomon decided at this point the bond was fully paid up and stopped making monthly payments.

Some time later a person purporting to be the new owner of his house arrived at the door, informing Solomon that he had to move out. Solomon was stunned. Unbeknown to him, Nedbank had apparently taken default judgment against him. Yet he had evidence from Nedbank itself that the loan was fully paid up. On 23 April 2015, Babalwa Makapela, team leader for sales at Nedbank’s retail division, wrote to Retail Cancellations in the same bank asking them to cancel Nhlapo’s mortgage bond “… as it has been paid up. The executor (Solomon) would like to apply for a title deed.”

The new owner subsequently won an eviction order against Nhlapo, who is now a squatter in his the house he inherited from his mother. With the help of the Lungelo Lethu Human Rights Foundation, Nhlapo brought an application for leave to appeal against the judgment in August before Judge Roland Sutherland. In his affidavit before the court, he says he wants the eviction order set aside on the basis that the judge did not allow him a postponement to obtain pro bono legal counsel. He further states: “The house in question belongs to my late mother Mary Matshediso Nhlapo who has paid up this house. There is proof from Nedbank that the house has been paid off. When I showed the house has been paid up, the judge refused to accept the proof before him.”

He is now appealing against the decision.

SA repossession laws among the most abusive in the world

According to a PhD thesis by Advocate Douglas Shaw, South Africa is virtually unique in the world for allowing homes to be sold in execution at auction without a reserve price. Most countries require these sales to be conducted at, or close to, market price. That typically involves getting an estate agent in to value the property and allow it time to sell.

Which raises the question: why don’t the banks get a better price for properties in foreclosure? This would reduce their loss and minimise the prejudice to the defaulting client. The banks routinely claim they use sale in execution as a last resort – as they are required to do following the Jaftha versus Schoeman case in the Constitutional Court, which overturned an earlier High Court decision allowing two houses to be sold in execution for R250 and R196 respectively. But as Shaw’s research shows, South African banking practice when it comes to foreclosure is among the most abusive in the world.

Given Nedbank’s willingness to reach an accommodation, there may be a happy ending in this for Solomon Nhlapo. That’s one case out of thousands just like it involving all the banks.

Nano-technology could be a game changer for gold mines

Written by Ciaran Ryan. Posted in Uncategorized

Is this nano-technology breakthrough to gold mining what Google is to the internet?

gold-pourThis article first appeared in Mineweb.

Nano-technology could come to the rescue of ailing gold companies.  A new recovery method using nano-technology promises to improve gold recoveries by upwards of 40%, and in some tests has achieved improvements of an astonishing 90%. For marginal mine operators, this is could clearly be a game changer.

In August, the technology transitioned from pilot phase to full production at Nevada-based New Gold Recovery (NGR), and is already attracting interest from mining companies around the world. New York-based investment firm Unicore Group has taken a minority share in the company and sees this as one of the most exciting additions to its portfolio.

UniCore Group’s senior managing partner, Herve Ime, says the expansion possibilities for NGR, given the parlous state of gold mining worldwide, is huge. “We decided to back NGR when it was still in its embryonic phase and the technology had not been commercially applied. The gold mining industry is crying out for something like this. We see this as a killer technology, rather like what Google is to the internet.”

NGR started production in August 2016, and will ramp up to 2,000 ounces a month by 2017. That makes it a decent mid-level player. Apart from gold, the company will generate revenue by offering its technology on a profit-sharing basis with other producers.

Given that margins in mining are so small – companies attempt to recover grams on the tonne – a small change in yield results in a large swing in profitability, and this could mean the difference between  life and death for many of the millions of mines, big and small, around the world.

The developer of the technology is NGR CEO Anastasios Morfopoulos, better known as Tas. He has been working on a system for improving precious metals recoveries for the better part of a decade. It’s long been known that  placer miners are losing almost half of their gold in the traditional recovery process, which relies on mills to separate the gold from the ore and then traps the liberated gold by means of gravity as it is washed down a sluice. But as much as half of the gold ends up in the tailings. These are the tiny particles, generally smaller than 100 microns, that do not respond to gravity-based recovery. Until now, there has been no way for placer miners to trap these particles.

Hard rock miners are also paying close attention to this ground-breaking development.

Eureka moment

Several years ago Morfopoulos had a Eureka moment when he realised that gold and other precious metals had a natural affinity for certain nano-particles. The precious metals can then be separated from the condensate without use of mercury, cyanide and other hazardous substances generally used in this type of mining, and which are in any event banned in most countries for health reasons.

The initial results from the Tas 3 technology were promising, showing 40% and even higher recoveries over more traditional methods. Further refinements were made to improve the recovery grades before settling on what is now called Tas 3, the third and latest system evolution. The system is described as the first-ever green and eco-friendly placer mining technology for gold recovery.

“We decided to use the technology to give us a recovery advantage as a primary producer,” says Morfopoulos. “Our studies show that placer mines lose up to 70% of their gold because they do not have a way to capture the fine gold particles. If we can recover that for them, then I think this is good news for gold mining generally.”

Originally, the plan was for NGR to licence the technology on a tolling basis to other miners, but it was then decided to go into full-blown mining production using the proprietary technology. Morfopoulos says the technology will be made available to other miners, and says the company is looking for partners in Africa and elsewhere.

The nano-technology is applied to a series of trays placed on a rack in a zigzag formation, trapping only precious metals as the concentrate flows over the tray formation. The dirt washes off, leaving up to 99% of the gold from the concentrate extracted.

Hard rock mines, with their sophisticated recovery plants, have much better yields than placer (or alluvial) mines, but even here there is potential for improvement that NGR wants to harness. For the moment, NGR’s focus is on placer mining, but Morfopoulos says he is receiving tailing samples from around the world to see if recovery grades can be improved.

Rich mining area

NGR, through its wholly-owned subsidiary New Gold Nevada (NGN), acquired more than 3,400 acres of land in north-east Nevada, one of the world’s richest gold and silver producing region with over 50 active mines and annual production of 4.95 million troy ounces of gold and 10.94 million troy ounces of silver in 2014. NGR raised $5m by way of private placement, and brought in UniCore Group as its financial partner. This gave it sufficient capital to acquire the Black Rock Canyon Mine deposit, reckoned to have $480 million worth of gold deposits lying no more than 90 feet below the surface, and refurbish an old processing plant on the site. UniCore is currently exploring the possibility of raising an additional $10 million for expansion of mining operations, which Morfopoulos says will initially focus on high value deposits in the south-west U.S.

The company recently secured approval from the U.S. Bureau of Land Management to commence mining operations. It also secured a water permit to allow it to establish settling ponds.

Black Rock Canyon has an indicated resource of 9 69 907 cubic metres averaging 0.6 grammes per cubic metre gold and an inferred resource of 3 344 509 cubic metres of gravel which are estimated to average 0.48-0.72 grammes per cubic metre.

The Tas 3 prototype was verified and cross-checked by two third-party inspectors: Bureau Veritas Group and Global Mineral Research, world-renowned metallurgical research labs.

Sanral’s mysterious and wishful accounting

Written by Ciaran Ryan. Posted in Journalism

When will the roads agency admit that most of its e-tolls debt is unrecoverable?

This article first appeared in Moneyweb.

etoll-gantry-2Organisation Undoing Tax Abuse (Outa) raised some interesting questions about the South African National Road Agency’s (Sanral) 2016 annual report which came out recently, specifically Sanral’s lack of enthusiasm for writing off unpaid e-tolls, which many suspect will never be recovered.

The balance sheet shows trade receivables of R7.66 billion, up from R4.96 billion in 2015 and R1.15 billion in 2014. Is Sanral continuing to count unrecoverable e-tolls as an asset on its balance sheet?

“Had Sanral accounted prudently and honestly as regards these unrecoverable amounts, it would have been forced to report a far greater loss than the R954 milllion reported for the 2016 financial year,” says Outa.

These trade receivables are largely uncollected e-tolls that have been rolled over from one year to the next. Most companies would be forced to recognise unpaid debts as unrecoverable after a year and write this off against the income statement. While this would not have impacted Sanral’s cash position, it would have impacted its income statement and balance sheet. It would also presumably have lowered the quality of its bond debt (it is already paying 144 basis points above the Johannesburg Inter-Bank Rate for its Highway bond series, which have been poorly supported in recent months).

Some of these outstanding e-toll bills are well over two years old, well past the age of write-off in terms of accepted accounting practice. Conventional accounting practice requires that unrecoverable receivables, which are clearly unrecoverable, must be expensed through the income statement.

Sanral is clearly keeping this debt “alive” through the issue of about 6 500 summonses to defaulting motorists.

This, then, becomes something of a legal as well as an accounting issue. The Prescription Act will make it difficult to recover debts of this nature once they are older than three years. One lawyer specialising in prescription law contacted by Moneyweb says e-tolls kicked off in December 2013 – exactly three years ago. Sanral’s prescription problem kicks off in little over a month.

Court challenge

The issue of a summons theoretically interrupts the prescription (though not necessarily) and keeps the debt alive. But what about the millions of people who have not acknowledged their e-tolls debts and have not been summonsed to appear in court by Sanral?

They could, and probably should, argue the debt has prescribed and boot Sanral to touch, says one lawyer. Sanral and Outa have a test case somewhere on the horizon to decide the lawfulness of its attempt to claim unpaid e-tolls from Gauteng motorists. Outa says the implementation of e-tolls was unlawful on the grounds that they were imposed on Gauteng drivers without the necessary public engagement and planning, and are far more costly than other alternatives.

The question is, when will Sanral recognise that large parts of its unpaid e-tolls are unrecoverable? Clearly, it is awaiting the outcome of its court challenge to make a determination about this.

According to figures reported to parliament, 2.9 million Gauteng freeway users have outstanding debts to Sanral, totalling R7.9 billion.

RMB credit analyst, Elena Ilkova, says it’s important to look at Sanral’s revenue recognition. The company recorded revenue of R8.4 billion for 2016, of which R5.6 billion was the Gauteng Freeway Improvement Project (GFIP). Turning to the notes in the annual report, we see that Sanral did not recognise R3.6 billion of this latter amount because it relates to the so-called alternate tariff for non-registered users. Sanral quite prudently assumed they would not get paid this money, which left it with GFIP revenue of R2.8 billion for 2016.

The trade receivables (toll) amount for 2016 was R7.2 billion, of which R730 million is current and outstanding for less than 30 days, while R6.2 billion (2015: 3.5 billion) is outstanding for more than 91 days.

“The R6.2 billion has not been written off or significantly impaired because until now Sanral has never actually made an attempt to collect the debt, in other words enforce its claim.  It would not be prudent to write this amount off until it becomes clear it is not collectible, which is why 6 500 summonses have been issued for roughly R575 million, and those cases are heading to court.”

Ilkova says once the court makes a decision, Sanral will either have to write off large amounts of these trade receivables (at least the R6.2 billion, potentially more), or adjustments will be made to the receivables figure as a pattern of collection is established.

Unrecoverable debt

“Therefore, I expect that both the revenue and trade receivable numbers would be subject to change once the court process yield some answers,” she says.

Sanral’s spokesperson Vusi Mona says Sanral has to record its receivables in the manner it has as it is an agency of government and cannot simply write-off debt. “Every effort is being made to recover what is due to the state. The legal process is slow but will assist in confirming to users that the user pay principle is here to stay.”

Moneyweb asked Sanral’s auditor, the Auditor-General of SA (AGSA), how it could continue to count presumably unrecoverable debts as an asset.

AGSA spokesperson Africa Boso said: “It is worth noting that the auditor’s responsibility is to express an opinion on the fair presentation of financial statements in accordance with the International Financial Reporting Standards. In auditing receivables, the auditor considers the recoverability of the debt by applying the International Standards on Auditing 540 (Auditing Accounting Estimates). This involves testing the reasonability of management assumptions and compliance with the accounting policies, informed by the relevant financial reporting framework.

“Determination of provisions for doubtful debt is largely a result of a number of considerations which are based on the judgment of the auditor after considering management representations. As to the matter about which you enquire, we as auditors were satisfied with the underlying assumptions made by management.”

Outa believes Sanral is “deluding itself and its shareholders” into thinking legal prosecutions against non-paying motorists will improve its e-tolls collections, and appears to have convinced the Auditor-General (AG) of this unlikely outcome. This in turn raises questions as to the independence and probity of the AG in issuing a statement to this effect, and on which its “going concern” assurance is heavily weighted.

Another point raised by Outa concerning the annual report is the cost of building roads in SA. Some R7.6 billion was spent on strengthening and improving 531kms of road, or R14.3 million per kilometre, which is well above local and international benchmarks.

Then there is the Sanral debt level, which has gone from R6 billion a decade ago to R47 billion in 2016. This massive increase in debt has been accompanied by a rather modest increase of about 500kms in the tolled portion of its network (1.8832kms). Sanral receives government grants for the non-tolled portion of its network, and relies on tolls for the rest.

The annual report raises more questions than it answers about the financial future of this organisation: what will happen if it loses the court case? Why are road construction costs so high? How are the concessionaries (who run the toll roads) spending the money they raise from road users? When the concession periods are over in 12 years or so and the roads are returned to Sanral, will the tolls drop to cover just basic maintenance? If not, what was the point of all this?

These are all valid questions that need better answers. Perhaps the bigger problem Sanral faces is a PR one: do you know anyone personally who actually wants Sanral to succeed in its court challenge? Case closed.

Airports Company of SA minorities sue for fair value buyout

Written by Ciaran Ryan. Posted in Journalism

or-tambo-airport

Minorities say they are economic hostages to the company

This article first appeared in Moneyweb.

It seems like a lifetime ago, but there was a time when the government seemed serious about privatising and listing the Airports Company of SA (ACSA), which manages SA’s nine airports. Private investors were encouraged to acquire shares at a pre-listing price, and many did, among them African Harvest Strategic Investments and empowerment shareholders who paid with debt.

Among the early investors was Aeroporti di Roma (ADR), which acquired 20% for about R890 million in 1998, or R8.19 a share. This valued ACSA at about R4 billion at the time. With no prospect of an IPO on the horizon, in 2005 ADR sold its shares to the Public Investment Corporation for R16.75 a share, more than doubling its initial investment.

But when minorities asked to be bought out, they were offered R12.87 a share – roughly 40% of ACSA’s net asset value (NAV), despite a 2014 valuation by Deloitte of R18 to R22 a share. In the same year ACSA did its own valuation exercise which valued the shares at just R10.36, less than half the R25.37 NAV a share disclosed in its own financial statements for 2014.

Shortly after the sale by ADR, ACSA paid a special dividend of R1.79 a share, apparently as an inducement to encourage the PIC to take up the shares.

Two of the minority shareholders – African Harvest and Upfront Investments – have asked the Gauteng High Court to compel ACSA, the government and the minister of transport to acquire their shares at fair value, rather than at 40% of net asset value. The R10.36 a share NAV relied on by ACSA was prepared by Vunani, which African Harvest says contains an error and is based on flawed assumptions.  ACSA’s audited NAV in its 2016 annual report was R34.27 per share.

Like so many other empowerment deals, this one depended on a steady dividend flow – which never materialised – to service the debt. Nearly 20 years have passed since all the talk of privatisation, and there is still no sign of an IPO, so minority shareholders with 4.2% of the company are understandably keen to offload their equity.

ACSA has a storied history of grandiose plans and broken promises. ACSA is 74.6% owned by government, 20% by the Public Investment Corporation, 1.2% owned by staff and 4.2% by five empowerment companies.

Dividends dry up

A 2012 report by EY said the five empowerment shareholders paid R172 million for their shares in 1998, almost all of it borrowed. These shareholders received dividends of R109 million until 2006, well short of the R350 million cost of borrowings. Some of the financiers indicated their desire to foreclose on the underlying ACSA shares, which would have “a negative impact on perceptions of ACSA and the empowerment deal in the market,” says the EY report. ACSA stopped paying dividends between 2007 and 2012.

The report goes on: “Due to the difficulties of being minority shareholders in a company that does not intend to do an IPO and that is not currently paying any dividends, the empowerment shareholders are unequivocal in their desire to exit this investment, even though this would most likely imply taking a substantial write-down of their exposure.”

In its 2014 annual report, ACSA claimed that it continued to deliver shareholder value through achieving profitability, and delivered on all commitments to its investors.

In an affidavit before the High Court on behalf of African Harvest, adviser Alun Frost says this statement is at odds with the position ACSA has maintained with regard to minority shareholders. ACSA’s 1998 prospectus outlined the government’s plans to divest all of its shareholding in the company, through an IPO. The prospectus referred to a change to “separate till” tariff regulation where ACSA’s non-regulated business would not cross-subsidise its regulated airport tariffs, which Frost says never materialised.

ACSA behaving like a development arm of government

The 2015 business plan showed that ACSA has applied for airport tariff reductions in two years, with zero increases sought from 2017 to 2020, which Frost says is inconsistent with a company seeking to earn a commercial return on capital in each financial year as required by the Airports Company Act.  The latest tariff permission promulgated on December 30 2016 requires a 35.5% decrease in ACSA’s tariffs, effective April 1 2017.

Based on its expected annual return on capital of 5.8% to 8.4%, ACSA’s costs of borrowing exceed its return on capital. “In consequence, the minority shareholders are unable to unlock the value of their investments and this value is being eroded by the cost of funding,” says Frost’s affidavit.

Furthermore, he says the manner in which ACSA conducts its business is oppressive and prejudicial to minorities. The problem is further aggravated by ACSA’s decision to postpone the IPO and focus instead on economic development, which worsened its financial position.

Frost’s affidavit shines an interesting light on some of the business decisions made by ACSA over the years – for example, he asks why the board approved business plan included capex of R52.4 billion over the ten years to 2025 when its airports were operating at 63% to 68% of design capacity and forecast returns would be insufficient to fund the R52.4 billion.

Evidence before the court suggests Durban’s King Shaka Airport was built prematurely, with no feasibility study, and ended up costing more than R7.6 billion, more than double the original R3.1 billion budget.  King Shaka Airport is still not profitable.

“I believe ACSA is now primarily a tool for the state to stimulate socio-economic development and the state has wilfully sacrificed ACSA’s commercial objective at the expense of minorities,” says Frost’s affidavit.

Economic hostages

He further says minorities are economic hostages who, since 2012, have attempted without success to engage with the Department of Transport and ACSA to sell their shares at a fair price.

African Harvest is asking the High Court to appoint an independent investment bank to conduct a valuation of the ACSA shares based on the discounted cash flow method and incorporating international norms for airport companies. It is also asking for the right to make representations to the appointed valuer.

In an affidavit for ACSA, investment expert Sam O’Leary says financial institutions who provided debt to minorities “would not have done so without confidence that an IPO of ACSA would take place within a reasonable period. Without the IPO of ACSA, the minorities would have little chance of selling their ACSA shares at a fair price and without unlisted company minority shareholders discounts being applied.”

O’Leary adds that ASCSA’s corporate plan is inherently conservative, and if implemented as it stands, will destroy shareholder value at ACSA. Therefore using this corporate plan as a basis for a discounted cash flow valuation will result in a relatively low valuation.

Presidential housing project mired in fraud and corruption

Written by Ciaran Ryan. Posted in Journalism

Hundreds of residents of Gauteng townships cheated out of housing

This article first appeared in Groundup.

SONY DSC

A 2010 presidential project intended to house shackdwellers in the south of Johannesburg is mired in corruption and wholesale land theft, with hundreds of residents cheated out of houses they paid for.

Those who have attempted to get to the bottom of the theft have been threatened and, in one case, kidnapped.

GroundUp spoke to dozens of residents of Thulamntwana, near Orange Farm, who say they paid up to R25,000 to secure housing units in the township, only to find that the units had been sold to other buyers. They have been trying for four years to get their houses or to get their money back, without success.

On a visit to the area in 2010, President Jacob Zuma promised to improve living conditions. He said he was appalled that people still lived “like pigs”. A task team of national, provincial and City of Joburg officials was appointed to fast-track housing.

A 2014 report by Gauteng’s Department of Human Settlements found that the Presidential Project intended for Sweetwaters had been relocated to nearby Thulamntwana. But most of the beneficiaries were neither from Sweetwaters nor from Thulamntwana, and hundreds of houses intended for local residents were sold to people from outside the area, and in some cases sold multiple times.

“There are letters illegally issued on a letterhead of Greater Johannesburg Metropolitan Council recognising the ‘Bearers’ as residents to be relocated to the Thulamntwana Housing Development, purporting to be from the targeted informal settlements” says the Human Settlements report. The report goes on to say that these illegal letters gave the bearers the impression that they were being relocated to Thulamntwana from surrounding areas.

The report goes on to say that a Soweto couple illegally purchased a house in Thulamntwana from one Juta Maja for R25,000, and confirms that there are other instances of “duplicate allocation of stands.”

Daniel Sithole of Sebokeng is a driver who saved up money for several years to acquire a property in Thulamntwana. “I met a guy called Juta, who said he was an agent for these houses, who said I could get a house of my own if I paid R25,000,” he says. He says he handed over the money to Juta Maja, who was apparently working for a local ANC woman’s league official, and was shown what purported to be a receipt stamped 21 May 2013 for the purchase of Stand 335 in Sweetwaters.

But he never got the house and his name does not appear on the Johannesburg Department of Housing database as the owner of Stand 335 in Sweetwaters – or of any other stand for that matter.

These stories are repeated over and over. Precious Mazibuko of Sebokeng says she paid R12,000 to the same Juta Maja after she and her husband, a driver, saved up to purchase a property where they could bring up their two children. As the months and years passed by, Mazibuko wanted to know what had happened to the property. As in Daniel Sithole’s case, her name did not appear on the Joburg Housing database. She assumed her money had been stolen, and filed a criminal complaint (Case number 148-102015) at the nearest police station. The investigating officer, Cilen Moodley, referred GroundUp to Crime Intelligence’s press liaison officer, who did not reply to questions about this, or any of the more than three dozen criminal case complaints we supplied, along with case numbers.

Joseph Mokoena has been living in Thulamntwana since 1996 and erected a shack on a piece of land in the township. He says in 2012 someone from the Johannesburg’s housing department turned up at his door and told him he had to move, as plots in the area were reserved for those who lived and worked locally, and Mokoena had been working in the Northern Cape. He moved out of his tiny shack, which was then demolished to make way for a new house and a new occupant. He now lives with his nephew in Thulamntwana.

Ntombi Tokwana had been living on a stand in Thulamntwana for years, until she was told that she had to move. “Someone else took over my stand and then sold it on to another person,” she says.

Ntombi Tokwana says someone took her stand and sold it to someone else.
Photo: Ciaran Ryan

Elizabeth Ramaselele of nearby Weiler’s Farm is a single mother who has been raising her four children alone since her husband died some years ago. She also hoped to get a house of her own, and paid R1,000 to someone from the SA National Civic Organisation. She has a receipt showing she has been allocated Stand 1616 in Weiler’s Farm. But when she went to claim her house, she found it had been allocated to someone else.

Likewise, in 2012 Puleng Mofokeng paid R12,000 for a house which she never received. She opened a criminal case. “I was told to put up a shack on the stand that I had purchased to show that I am living here, which I did,” she says. “Then I found out that my shack was being rented out. I was told that the Hawks now own my shack.”

The chairman of the local SA National Civic Organisation (SANCO) is also implicated in taking money and illegally allocating stands, according to the Gauteng Human Settlements report: “The illegal allocation of stands is rife with letters issued as signed by its chairperson (of the SANCO) resulting in the illegal allocations of stands.”

Meanwhile, the more than 400 residents who paid money for stands have been waiting for someone – anyone – to lift a finger in their defence. King Sibiya, head of the Lungelu Letho Human Rights Foundation, says what is happening in Sweetwaters and Thulamntwana is symptomatic of what is happening across Gauteng. His office has been inundated with reports of illegal evictions of people who do not know their legal rights.

“It is time for the government to put a stop to all evictions until such time as we can reform the legal process so that people cannot be thrown arbitrarily onto the streets. Constitutional protections against arbitrary deprivation of property are meaningless in situations like this. Most people being served with eviction notices have no idea how or where to enforce their legal rights, and this is something that is happening at every level in SA,” says Sibiya.

“In Sweetwaters and Thulamntwana, we have evidence of cases of corrupt officials preying on the poorest people in the country. The rights of these poor people to housing have been trashed.”

The town of Harrismith gets a reprieve for now

Written by Ciaran Ryan. Posted in Uncategorized

This story first appeared in Noseweek.

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SA National Roads Agency’s (Sanral) determination to push through proposals to build the controversial De Beers Pass Route, which will shave just 14kms of the existing route at a cost of close to R10bn, was slapped down by the Department of Environmental Affairs in June this year. The route preferred by Sanral would by-pass the Free State town of Harrismith and put thousands of people out of work as dozens of businesses currently dependent on traffic passing between Gauteng and Kwazulu-Natal would close down.

Those who have been following Sanral’s apparent obsession with building the De Beers Pass Route (DBPR) have long suspected a deeper agenda. The concession to operate the current route between Cedara, near Durban, and Heidelberg in Gauteng, expires in 13 years. No business generating R400bn over the 30 year life of the project is going to just turn off the lights in 2029 and hand back the road to Sanral, as required in terms of the original concession contract signed in 1999.

To keep the party going, the concessionaires need the new by-pass route. That will allow the N3 Toll Concession (N3TC), which manages the route and collects tolls between Cedara and Heidelberg, to get a 30 year extension on the business and no doubt create a revolving door for Sanral suits once they exit the public sector. Sanral CEO Nazir Alli, who was supposed to have retired months ago, seems unable to vacate his seat until the e-tolls mess he helped create is brought to some kind of resolution.

Nothing seems to be going right for Alli, whose plans to build toll roads from the Cape to Kwazulu-Natal and beyond face opposition at every turn. Last year the Cape High Court threw out Sanral’s plan to introduce urban tolling on the N1 and N2 Cape Winelands route, citing the lack of a document trail within the organisation’s decision to build the proposed route. Equally mired in controversy is the proposed Wild Coast toll road, which local community members argue will ruin a fragile eco-system, and allow Australian mining group MRC to extract titanium sands in the area, further despoiling the area. The recent murder of Sikhosiphi ‘Bazooka’ Rhadebe, chairman of the Amadiba Crisis Committee, which had been fighting to keep mining out of the area, inflamed an already incendiary community.

Now it is the turn of Harrismith to feel Nazir Alli’s love. Contrary to the cheerleaders for the proposed new route who implausibly suggested the loss of just a handful of jobs, an economic impact assessment by Mike Schussler of Economics.co.za reckons Harrismith stands to lose R890m and more than 1,600 jobs, both direct and indirect, if the DBPR goes ahead.

But with just 13 years to go on the existing N3 concession, there is little time to waste for the N3TC. Especially now that the initial capital cost of building the N3 route has likely been fully amortised, so revenues (after deducting a small percentage for road maintenance, operational costs and payments to Sanral) go pretty much to the bottom line. By some estimates, revenue from the N3 route is R2bn to R4bn a year, though N3TC is understandably reticent about disclosing this information. Allowing for inflation and increased traffic volumes, this concession is valued at R400bn over the next 30 years.

The Department of Environmental Affairs’ rejection of the Environmental Impact Assessment (EIA) for the proposed route puts a crowbar in the works. The most cost-effective and logical solution is a simple upgrade of the existing route, which would likely cost around half the R11bn for the solution proposed by Sanral.

Those who have watched Sanral squirm over its e-tolls boondoggle in Gauteng, which the Organisation Undoing Tax Abuse (Outa) reckons cost an average 321% more than similar roads elsewhere in the world, are now starting to discern a pattern in the way Sanral conducts business. Why, for example, did the 1999 N3 Toll Road Concession contract include a requirement for the De Beers Pass Route, if not to bequeath new life to a 30 year concession whose end is nigh? And why should the concessionaires get the benefit of a route that is now fully paid up once the contract expires in 2029. The route should be returned to Sanral and tolls scaled down to cover maintenance only, or at a modest level to fund other essential routes, such as the Gauteng Freeway Improvement Project.

In any event, it’s back to the drawing board for Cave Klapwijk and Associates (CVA), the firm contracted to prepare the scoping report for the DBPR, which has now been kiboshed by the Department of Environmental Affairs.

The Department’s rejection of the proposal steers clear of the economic consequences of amputating Harrismith from the N3, and focuses exclusively on environmental issues, such as why a third alternative route (known as A/C) was not considered in detail, and why no assessments were done on ecological, wetland, air quality, avifauna, visual, noise and the economic impacts of the third route. CVA recommended approval for the DBPR even though the “ecological, wetland, avifauna, heritage, visual, noise and the environmental economics resource specialists are not in support of the above alternative route…” says the Department in a letter to CVA. Among numerous technical points raised by the Department for its rejection of the EIA is the claim that the Platberg Private Nature Reserve is not a declared nature reserve – which it is.

As reported in Noseweek (August 2015), Mary-Jane Morris of Morris Environmental & Groundwater Alliances, responded to the environmental study on the proposed route as follows: “In environmental terms we talk about irreversible impacts. From an ecological point of view, this bypass has several negative irreversible impacts”.

Once a wetland is damaged or affected in a way that alters its natural functioning, it cannot be restored to its pre-existing state. The DBPR runs right through a crucial wetland area, and the only way to prevent ecological damage is not to build the route. “The ecological changes that will result from building the road are forever,” said Morris.

Cave Klapwijk and Associates (CVA) drafted the scoping report for the N3TC and came up with three potential routes:

  • De Beers Pass Route (DBPR), which would branch off from the existing N3 north of the Tugela Toll Plaza, pass through a 500m tunnel before crossing the Wilge, Meul and Cornelius Rivers to rejoin the existing N3 just north of Warden – a distance of 97,7kms.
  • Alternative A, running parallel to the existing N3 Van Reenen’s pass for a short distance, passing the escarpment just south of the Van Reenen’s village, through the Swinburne area, but by-passing Harrismith to then follow the existing N3 to Warden, a distance of 107kms.
  • Alternative B runs from Tugela Toll Plaza to Van Reenen Village interchange, before crossing a wetland in a north-westerly direction to join the DBPR at the Lincoln interchange, a distance of 98,3kms.

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The Department of Environmental Affairs asks CVA to rectify the shortcomings in its rejection letter and resubmit its report. This leaves the door open for N3TC to make a second lunge at the DBPR, but opposition is likely to grow rather than diminish.

In a report for the Harrismith Chamber of Commerce, Mike Schussler of Economics.co.za points out that the new route is only needed once traffic volumes at Van Reenen’s Pass reach an average of 13,900 vehicles a day, against 2103 volumes of 11,884. The N3 is still several years away from reaching the point where the DBPR or an alternative route with more capacity would be   required, according to Bernal Floor, the veteran transport economist commissioned by the Harrismith Business Forum to side-check the Techworld Consulting Engineers report which recommended proceeding with the DBPR.

“The expected traffic growth at a rate of 5% a year from 2016 to 2043 for heavy vehicles travelling on the route between Warden and Keeversfontein is contrary to experience, as cycles in the national economy will surely result in periods of lower growth,” says Floor. In fact, traffic is presently  declining..

Floor adds that the Department of Environmental Affairs is doing its job in rejecting the N3TC’s proposed new route. “It rejected the proposal on procedural grounds, and haven’t yet taken all the factors into account, but it’s clear they are listening to the objectors.

“There is a  motive in  this rush to get the DBPR approved: why are SANRAL and the N3TC so against upgrading the existing route, and  pursuing the  DBPR when they were told by their own consultants that it will  create excessive  capacity  and waste resources?.”

Floor’s report  criticises Techworld on multiple counts: its claim that the various proposed routes were identified in response to pressure groups “such as the residents of Harrismith” (when Alli and his team were booed out of the town on a visit last year to drum up support); the lack of a sensitivity analysis to assess the costs and benefits of implementing the various route suggestions; and the fact that costs were left out of the analysis, which, if included, could render the project non-viable.

It’s clear from the wording of the rejection letter that the Department is leaning towards to a compromise in the form of an alternative route that would replace Van Reenen’s Pass, but in a way that does not kill the town of Harrismith, and allows the road to be upgraded in stages. This would be less costly from an environmental and economic standpoint than the alternatives currently being proposed.

Also unclear is how the proposed route is to be funded. N3TC are reported to have said they would fund it with a mix of equity and loan funding, which will likely be borrowed overseas. If SA’s credit rating is downgraded, increased interest rate costs may render the project non-viable.

A congenial arrangement

The congeniality between Sanral, the tolling companies and the big construction firms who fixed prices and charged more than three times the going rate for the Gauteng Freeway Improvement Project, is now the stuff of legend. In May, Sanral announced it was claiming R760m from seven construction firms which had admitted colluding on tenders relating to various road projects, but this is a pittance when compared with the R10,8bn over-payment for the Gauteng Freeway project that the Organisation Undoing Tax Abuse (Outa) reckons

Old Mutual and Australian investment bank Macquarie own two investment funds with shares in all three concession operators: Bakwena (operating the N1 Tshwane to Bela-Bela, N1 Tshwane to Rustenburg, and N4 Rustenburg to Botswana), Trac (which operates the N4 from Pretoria to Mozambique) and the N3TC (Gauteng to Durban). Several construction firms are also shareholders in the tolling companies. This poses obvious conflicts of public interest where construction firms are awarded contracts for maintenance on roads where they are also receiving tolling income.

Under pressure from bond investors, Sanral has started issuing summons to non-compliant e-tolls users to recover debts. Sanral’s nemesis, the Organisation Undoing Tax Abuse (Outa), has promised to defend its members against any legal threat and has briefed Gilbert Marcus SC to argue its case in court – which will likely drag out for years. So long as the cases are snaking their way through the courts, Sanral’s revenue remains under pressure and Gauteng motorists who decided long ago to give e-tolls a miss are unlikely to change their minds now.

There is no easy way out of this mess for Sanral, or Alli, who despite plans to retire, is hostage to the crisis he authored. Toll roads have become the touchstone for popular protest across the country.

State-owned enterprises drag SA to the brink of junk

Written by Ciaran Ryan. Posted in Journalism

This story first appeared in Finweek.

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SA’s persistently weak growth and the stench of failure in its state-owned enterprises (SOEs) has dragged the country to the brink of junk status.

Last week Moody’s issued a credit note warning that a credit downgrade was on the cards unless government embraced reforms needed to put the country back on the growth path, and placed five SOEs on downgrade watch. Moody’s warning merely restates facts already on the ground: bond investors are increasingly steering clear of SOEs such as SA National Roads Agency (Sanral), Eskom and Transnet. In other words, a downgrade is already priced into SOE credit instruments.

In June, Fitch and S&P held their SA credit ratings at BBB-, just a notch above junk. Bond yields started to strengthen in the belief that SA had perhaps dodged a downgrade to junk. But with the relentless news drip-feed of dodgy tenders at several SOEs, including Eskom, South African Airways (SAA) and Passenger Rail Agency of SA (Prasa), and the Hawks’ campaign against Gordhan over alleged irregularities while he was head of SA Revenue Services, the whiff of downgrade would not go away.

Also in June, Moody’s said it was concerned over tensions between finance minister Pravin Gordhan and other elements in government, which “raised questions about the commitment of the government to sustained fiscal consolidation and prudent governance of state-owned enterprises.”

The whiff of downgrade would not go away. Moody’s cut its SA growth forecast for 2016 from 0,5% to 0.2%, projecting a tepid recovery to 1.1% in 2017. It placed five SOEs on review for downgrade – Eskom, Sanral, the Land Bank, Industrial Development Corporation (IDC) and Development Bank of SA (DBSA). Adding a glimmer of hope, Moody’s added that reform of the labour market and SOEs might change this outlook.

President Jacob Zuma appeared on the same platform as Gordhan, as if to reassure investors that all was well between the two. Zuma also announced the formation of a high-level council charged with overseeing the troubled SOEs and restoring them to health.

“Far from being positive for the nation, some see this as Zuma’s attempt to exercise greater control over these SOEs than Treasury might normally have over the heads of these lucrative entities that hold large sway in the direction and appointment of many capital expenditure projects and tenders,” says Wayne Duvenage, chairman at Organisation Undoing Tax Abuse (Outa).

Last month Futuregrowth Asset Management, a subsidiary of Old Mutual, announced it would halt any further investment in some of the larger SOEs “without having deeper sight of, and comfort around, their governance, decision-making and independence.”

This was quickly followed by a similar decision by Denmark’s Jyske Bank, which said it would cease lending to Eskom, citing concerns over governance. The trickle became a flood: Aluwani Capital Partners and Abax Investmensts, based in Cape Town, were both reported to have soft-peddled on investing in SOEs due to perceived political and economic risks.  SA-based fund managers such as Aeon Investment Management and Sasfin Asset Management came out in support of Futuregrowth. Other investors have been less vocal, but are also understood to have made similar calls.

Following the Moody’s announcement, Anglogold Ashanti chairman Sipho Pityana couldn’t stomach it anymore and called for President Jacob Zuma to stand down before it is too late. “Zuma made commitments to the international investor community earlier this year to stabilise SOEs and to project policy certainty. He has failed to do this, and in fact maintains that there is nothing wrong with our SOEs or with policy direction.

“We can now see the consequences. Because of Zuma, SA is now one step closer to a sovereign downgrade, which will have disastrous implications; already, Eskom faces the prospect of having to pay higher interest on new debt, which means further electricity price increases,” said Pityana in a statement.

What has alarmed bond investors is the ongoing tussle between finance minister Pravin Gordhan and the Hawks, who want to question him over alleged irregularities while he has head of SA Revenue Services. Gordhan has so far refused to cooperate with the Hawks, a move broadly supported by business and opposition leaders, who see this as an attempt by elements within the ANC to unseat a highly respected finance minister who is investigating irregularities at SAA, Eskom and arms manufacturer, Denel, all of which are mired in suspicions of corruption and governance lapses.

Gordhan seems to be prevailing. He replaced the board at SAA earlier this month as part of a wide-ranging plan to restore the company to health and ensure corporate governance guidelines are followed. He made this a precondition for the release of R5bn in guarantees that allows SAA to continue operating as a going concern. This also allowed it to finalise its long-overdue financial statements.

Moody’s analysis of the SA economy and the state of its SOEs merely gave voice to facts already on the ground. Sanral was forced to cancel several bond auctions in the last year due to lack of interest. There were 11 bidders in 2014 when investors still held out hope that Sanral would persuade delinquent Gauteng motorists to support its e-tolls plan. But by May this year the number of bidders for its bonds had fallen to two.

The ratings agency warned that SA faced a downgrade unless there was a recovery in growth, and wants to see fundamental structural reforms.

In a statement explaining its decision to put Sanral on downgrade watch, Moody’s says public resistance to open road tolling remains strong, as measured by monthly average decline in e-tolls collections from the R86m in the 2015 financial year to R76m in 2016. This is well below revenues needed to entice investors to support its bond issues. According to research by the Organisation Undoing Tax Abuse (Outa), nine out of 10 Gauteng motorists do not pay e-tolls. The only way out of this mess for Sanral is to bring legal action against defaulters, but even this is unlikely to have the desired effect.

“While Sanral issued summonses to defaulting road users some are preparing to defend their cases in court further delaying debt collection. Therefore Moody’s expects Sanral’s cash flow pressures to persist in 2017,” says the ratings agency.

Sanral has served more than 6,000 summonses to motorists for non-payment of e-tolls, but this legal battle may take years to resolve, which means its e-tolls revenue is unlikely to improve any time soon.

For Futuregrowth, the harbinger of bad news for SOEs, retribution was swift and severe. It later issued a statement regretting the fact that it had not engaged with SOEs prior to making its announcement, but its decision not to invest in these companies would not change. Yields on SOE bonds spiked following the Futuregrowth announcement, effectively raising their costs of borrowing.

Investors are concerned that Eskom’s debt will overwhelm its liquidity. In March the North Gauteng High Court ordered the National Energy Regulator of South Africa (Nersa), which approves electricity tariff adjustments, to review its latest tariff increase. “Notwithstanding an ongoing appeal process, future tariffs might be affected, which could in turn further exacerbate the funding needs of Eskom against a backdrop of rising costs, notably due to the ongoing growth in power purchase agreements with independent power producers, and a very significant capex programme to upgrade and expand the country’s electricity infrastructure,” said Moody’s last week.

Eskom is able to raise debt on the back of a R350bn Guarantee Framework Agreement with government, but this guarantee may be stretched to capacity as tariff increases become more difficult to implement and the power producer’s capex programme moves into its next phase. Governance is another concern to Moody’s, particularly the ongoing investigation by National Treasury into coal contracts, notably to Tegeta Exploration, majority owned by the Gupta family and President Zuma’s son, Duduzane. Eskom awarded the contract in 2015 and then extended it this year, awarding Tegeta an up-front payment of R586m. amaBhungane reported earlier this month that National Treasury had blocked a further R855m extension of this contract, and has asked Eskom for details on its coal contracts. Had the latest coal contract been extended, Tegeta would hgave received R1.7bn without open tender.

Duvenage says many SOEs have changed accounting policies to boost asset values. “While this in itself is not unfounded by International Financial Reporting Standards (IFRS) standards, it could be frowned upon when applied by SOEs that should not be treating their citizens’ assets at trading tools with which to improve balance sheet ratios. This allows them to further borrow at relatively high interest rates, and spend on capital projects that often run over budget by as much as 300%, and more. Many of these projects which are shrouded in tender irregularities and corrupt activities.”

 

What the CEOs of state-owned companies earn

The hunt is on for new CEOs at Sanral, Prasa and SAA. The pay is pretty good (see below) but if history is any guide, taking on these posts could be a career-ending move for the new incumbents, who will have to sort through unimaginable financial and governance messes.

Sanral’s 2015 annual report says CEO Nazir Alli earned R4,032m in pay and benefits that year. Alli has been attempting to retire from the company, but has been re-appointed as the hunt for a new CEO continues. We are not surprised, given the e-tolls fiasco the new incumbent will have to sort out. Directors and management remuneration came to R197m in 2015.

Eskom’s chief executive Brian Molefe earned a total package of R9.5m, about R800,000 a month. This does not count shares awarded but not yet vested to Molefe, amounting to several millions of rands more. Directors and executives were paid a total of R75m over the last year, up from R51m the previous year.

Dudu Myeni is listed as receiving directors’ fees of R828,000 in SAA’s 2014 annual report, though this is almost certainly a fraction of her total package. The 2015 annual report is about to be tabled. Former CEO Monwabisi Kalawe is listed as receiving a salary of R3,8m in 2014. Kalawe was charged in May with using forged documents in an attempt to force Dudu Myeni to resign. Kalawe is accused of procuring false overseas bank statements, allegedly to smear Myeni. These were publicised after being handed over to forensic investigator, Paul O’Sullivan. O’Sullivan withdrew the statements and apologised once the forgery became known.

Passenger Rail Agency of SA’s (Prasa) fired CEO, Lucky Montana, was listed in the annual report for 2015 as earning a salary of R5.6m with a performance bonus of close to R2m. His replacement as acting CEO, Nathi Khena, earned R2.6m according to the 2015 annual report. The hunt is on for a permanent CEO, with transport minister Dipuo Peters reportedly at war with Prasa chairman Popo Molefe over the appointment of a suitable successor. It’s a tough job with a high casualty rate. Montana was mired in controversy, having presided over Prasa’s massive fleet renewal programme. According to news reports, 13 locomotives ordered from a Spanish firm at a cost of R600m are the wrong size for our rail infrastructures, and the company failed to adequately hedge its foreign currency exposure, which means it will purchase fewer trains than planned.

Industrial Development Corporation’s CEO Geoffrey Qhena earned a total package of R7,9m according to the IDC’s 2014 annual report. This was made up of emoluments of R3,94m, a performance bonus of R2,9m and retirement and other benefits of R1m.

Development Bank of Southern Africa’s CEO Patrick Dlamini earned a total package of R9.5m in 2015, up from R7.2m 2014. This was made up of a salary of R4.4m, a bonus of R4.45m and other benefits of about R650,000.

According to Land Bank’s annual report for 2015/6, the top earner in the company was chief financial officer Lebogang Serithi with a total package of R4m. Former CEO Phakamani Hadebe earned a performance bonus of R1.8m, while his replacement Tshokolo Petrus Nchocho is listed as earning just R653,000 for the year, though he was only appointed in February 2015.

Denel’s CEO Riaz Saloojee reportedly earned R4.7m for the 2016 financial year and R3.9m the previous year. Saloojee was fired as CEO last year and re-hired fired and re-hired in April this year. According to the Sunday Times, he was bulleted for renegotiating a R455m Nedbank loan for five years to six months, causing a cash crunch at the arms producer. Saloojee also appeared to be at odds with the company’s decision to establish Denel Asia through the acquisition of a company linked to the Gupta family, VR Laser Asia, which National Treasury says was illegal. Denel’s board of directors dispute this, saying it was in conformity with the Public Finance Management Act.

 

What a downgrade means for SA

Pieter Hugo, head of retail at Prudential Investment Managers, says in the event of a ratings downgrade, investors would demand higher interest rates on SA government bonds to compensate them for the higher risk involved, so the SA government’s cost of borrowing would rise by way of an increasing yield on government bonds. Current bond investors would experience a fall in capital values (to the extent that this hasn’t been priced into the values already).

“Over the medium term, higher borrowing costs would force the government either to raise more revenue via higher taxes or to cut spending in order to avoid widening the budget deficit. Consequently, ordinary South Africans could end up with somewhat lower disposable income, giving them less to save and invest – also also spend, which would then again have a knock-on impact on reducing the growth rate.

“SA government bonds would also be automatically excluded from certain global government bond indices. Such indices have become popular benchmarks for index tracking funds, helping to grow the global demand for SA government bonds. So index-tracking investors and any other investors precluded from investing in non-investment grade assets (like many pension funds) would no longer invest in our bonds, adding further pressure on yields to rise. There would be less foreign (and local) demand for our bonds and money would leave South Africa, causing further rand weakness and ultimately impacting inflation and investors’ pockets,” says Hugo.

The cost of borrowing for state-owned enterprises and private companies would also increase, which would likely dent corporate balance sheets, particularly those of companies that are highly geared or rely on borrowing, like property companies. This would in turn impact negatively on profits and investor dividends, trimming equity returns.

Also in the bond market, fewer corporate bond issues are likely in what is already a much smaller market following the collapse of African Bank. This also would mean fewer higher-yielding investment options for asset managers and reduced liquidity.

 

 

The medieval state of SA’s home repossessions industry

Written by Ciaran Ryan. Posted in Journalism

This story first appeared in Moneyweb.

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A recent study of home repossessions puts SA among the worst in the world. The enthusiasm with which SA banks rush to repossess homes is described as ‘medieval’ and cruel.

SA might claim to have one of the most liberal constitutions in the world, with supposedly strong legal protections against arbitrary deprivation of property, but tell that to the more than 5 000 people booted from their homes each year by the banks, and the 15 000 served with sale in execution notices, which is a prelude to sale at auction by the sheriffs.

Some years the figures are much higher. A recent study of home repossessions in SA by Advocate Douglas Shaw suggests 1% of the 1.8 million mortgages in the country are summonsed by the banks each year after falling into default. This figure is much higher than most other countries, including other developing countries.

SA’s rate of repossession on a per capita basis is four times higher than the average for the rest of the world and a shocking 20 times worse than counties employing best practice such as Denmark and Singapore. “This appears to clash with our South African Constitutional ethos of human rights encapsulated in our Constitution. With these aspirations South Africa would surely aspire to having one of the lowest rates in the world, not one that is even average,” says Shaw in a doctoral thesis entitled The Legality of the Law of Sale in Execution for Substantially less than Market Value in South Africa.

Shaw estimates that properties worth R5 billion are sold each year in SA at an average discount of 40% to fair market value. This means that “in the last 20 years since the Constitution came into effect, about R400 billion worth of damage has been done by sales in execution to the people of SA.”

This is because High Court rules specifically preclude the setting of a reserve price at auction. The same rules prevent estate agents from selling these properties. This opens the door to bid rigging by syndicates, who routinely pick up properties for a fraction of their market worth – in some cases for as little as R100.

Each day, the courts are crowded with lawyers representing the banks, attempting to obtain judgment against defaulting clients before proceeding to sell their properties at auction. Shaw’s study suggests SA’s medieval home repossessions practices are an affront to the Constitution and among the worst – if not the worst – in the world. To get a sense of this, you have to go to social media, where a growing network of angry, dispossessed South Africans vent their bile over supposedly corrupt judges and lawyers. One such network was People Against Lawyers and Liquidators, set up by Jonn Basson of Pretoria. Basson died of a heart attack last year when the sheriff came to evict him from his farm. The liquidators continuing to tally up his assets while his body was rushed to the hospital. Ironically, Basson had appealed the eviction order, which should have protected him against eviction.

A common complaint is that lawyers are in the pockets of the banks, or if they’re not, they soon will be. They charge outrageous fees and then drop their clients at the steps of the High Court, having suddenly found a better paying client in the form of the banks.

“What SA needs are new rules that are less damaging to the rights of those who are losing their homes,” says Shaw. “Calling our current laws medieval is actually unfair to the medievals. In Roman Dutch common law history, the judge had to confirm that the sale was for a fair price before it would go through. Medieval laws were actually considerably better than the dreadfully draconian system that prevails in SA today.”

Other countries require banks to sell repossessed homes at fair market value or, if no sale has occurred within a reasonable time frame, at marginally lower prices. Many countries require estate agents to be involved in the sale. Others, such as the UK, require banks to reschedule debts to allow defaulting customers to get back on their feet and remain in their houses.

Home repossessions affects South Africans of different races and income levels.

The Constitutional Court in Jaftha v Schoeman declared that banks should only sell at auction as a last resort and should find more creative ways to sell repossessed properties. Banks swear blind they are using the auction process as a last resort, though the evidence suggests otherwise.

Shaw’s study investigated alternative mechanisms in other countries, such as court orders to reschedule the debt (as is common in England), the sale of a house with a gradually decreasing price commencing with the market price (either through an estate agent or a series of auctions) and having reserve prices to reflect this. Such schemes are in place in other developing countries like Malaysia and South Korea.

The study examines the social costs of home repossessions: the indignity of eviction; the upheaval of families having to move, often into less desirable accommodation; children having to change schools; and the compounding effect of losing a home as well as a job.

“There is the further problem of actual death and serious illness caused by the current practices. Mental illness has been found to increase after repossessions though not evictions from rental properties. Foreclosures have been found in one US study to result in depression, stress-related illnesses and spikes in emergency room visits.”

This study found that a 5% increase in foreclosures in one state was associated with a 25% increase in suicides for people aged 46 to 64.

Home repossessions affects South Africans of every race and income group. A group called Lungelo Lethu Human Rights Foundation is preparing a class action suit against the four major banks for what it says are the unlawful evictions of thousands of South Africans from their homes. It is also calling for:

  • A judicial investigation into these repossessions.
  • Properties sold in execution must be at market value.
  • Insurance must be clearly defined in terms of who bears responsibility for what (both long and short term).
  • Disclosure between the service provider or financial provider and the consumer must be clearly defined, as in the securitisation (or onward selling) of home loans, which is conducted in secrecy and is of questionable legality.
  • Proper township establishment is required to ensure services are rendered to communities. Some townships were never proclaimed by the Surveyor General, allowing Eskom and oil lines to traverse residential areas, and sewage to escape into rivers.
  • Consumer education is woefully inadequate and banks have been able to take advantage of financial illiterate customers. This has to be changed.
  • The various ombuds are neglecting their duty to protect the poor against abusive conduct in the financial sector.

 

Did Standard Bank lie and cheat to get its hands on computer programme?

Written by Ciaran Ryan. Posted in Journalism

This story first appeared in Noseweek

noseweek-standard-bank-cover-story.

Did Standard Bank lie and cheat to steal an idea worth billions? When atm and internet fraud started seeping into public consciousness in the 1990s, Joburg-based software development company Advertising Digital Services (ADS) came up with a novel solution to a growing problem: hackers had found a way to secretly install a program on computers that would record keystrokes and mouse-clicks when users were logging on to sensitive websites. With this information, they could empty a bank account from anywhere in the world. ADS’s solution was to remove the keyboard as a point of entry to the computer and replace it with an on-screen virtual pin-pad that, each time it was used to input a password or PIN number, would rearrange the digits on its virtual keyboard. ADS director Johan Reynders wanted to patent the system, but was advised against it because, in any event, the system was protected by copyright for 50 years.

To avoid any ambiguity about ownership, however, he uploaded it to the internet in the 1990s so that people around the world could download it free, but only with his permission and provided they acknowledged that the intellectual property rights remained with ADS. Importantly, he says, he chose not to provide any information on the uses and applications of the product so as to prevent software developers coming up with rip-offs. He knew the industry had not yet woken up to the threats from hackers. When it did, he planned to introduce his solution to potential clients.

By 2001 it was clear that others were ripping off ADS’s intellectual property in breach of the user agreements, so Reynders updated the software licensing agreement to levy a penalty of $10,000 per machine using the random keypad without a certificate of authenticity. Legitimate users were charged a discounted rate of $250.

In early 2003, Reynders reckoned the time was ripe to introduce his solution to the market, and he approached all the local banks. All of them declined to meet with him, claiming they had no problems with internet security. But within months the national press was awash with stories of rampant internet banking fraud, prompting the Banking Council of South Africa to issue a public warning in July that year.

johan-reyndersIn the early days of August, Reynders (pictured) received a call from Louis Lehmann, head of Standard Bank’s IT security, requesting a meeting, as the bank wanted to find out exactly how the ADS system worked and how its software would eliminate the threats highlighted by the Banking Council. Reynders was happy to tell all, provided Standard Bank signed a non-disclosure and confidentiality agreement.

The meeting took place two weeks later, on 18 August 2003, with no fewer than 15 Standard Bank officials in attendance. They included Lehmann, Janie Basson (then head of Standard Bank Group), Anthony Olivier (senior manager for IT security), Michael Hawthorne (head of IT: personal and business banking), Guy Wigg (legal manager), Richard Seddon (head of online share trading) and Herman Singh (CEO of Beyond Payments at Standard Bank). The weight of the contingent attending left Reynders in no doubt the bank was now seriously interested. Also in attendance, for reasons unknown, were two Investec employees. All willingly signed the non-disclosure agreement (NDA).

Reynders outlined three vulnerabilities in the Standard Bank website, two of which, it transpired, were as yet undiscovered by the bankers. He explained how his software provided three levels of protection against “spyware”.

To his surprise, at the end of the meeting, the Standard Bank attendees, including its chief software engineer Corniel du Plessis, indicated they had no interest in his solution, and dismissed the threats to their internet banking services he had identified as “laughable” and “far-fetched.” They also expressed the view that Reynders’s randomised keypad, with its constantly changing number arrangement, would confuse their clients.

By signing his non-disclosure agreement, Standard Bank acknowledged that the information imparted to them was proprietary to ADS and “valuable, a special secret, and a unique asset”. The agreement further prohibited the bank from disclosing this information to a third party without the written consent of ADS, or from exploiting or using it in any way.

But, barely two months later, when Reynders opened the Sunday Times he was confronted with a report in which Herman Singh, CEO of Beyond Payments (a division of Standard Bank) and one of those who had been present at the meeting, bloviated about the threats of online fraud and how Standard Bank had developed a solution to protect clients’ cash. A day later, on 6 October 2003, Singh reported to Standard Bank’s 280,000 internet banking clients that it had just updated its internet security.

Reynders had no doubt the security update that Singh had announced to the bank’s customers was a direct rip-off of his intellectual property, and was therefore a breach of the confidentiality agreement they had signed.

Based on figures from Standard Bank itself, 500,000 internet transactions were recorded each day – a staggering 730 million over the four years the bank proceeded to use this particular security solution. Reynders reckons the bank owes him at least US$10 billion (R153bn) in damages.

Standard Bank discontinued use of the security system in 2007, coincidentally, just after Reynders deposited R200,000 into the bank’s attorney’s trust account as security for legal costs, as demanded by the bank as a precondition for the court hearing of his damages claim to proceed. He had no doubt this was done to mitigate any damages the court might in due course have seen fit to award him.

How Reynders comes to the $10bn damages figure is by a straightforward application of penalties outlined in his published user licence agreement. That is, $10,000 for every breach, multiplied by the estimated one million Standard Bank clients who used the system. To put this in perspective, Reynders’s claim is a shade less than the bank’s entire market capitalisation of about R180bn, and more than seven times last year’s reported profit of R23.8bn. This does not include Standard Bank users outside South Africa, nor use by associates such as Investec, Bank of China and Bank of India.

The problem Reynders faced was how to enforce his rights against a bank with deep pockets and a squad of highly paid legal counsel at its disposal. He attempted to negotiate a settlement with the bank over the next two years, but this went precisely nowhere. He managed to track down a firm of attorneys willing to take on the case – a rarity in South Africa, as anyone with a gripe against the banks knows – and on 25 July 2005 they served summons on Standard Bank, claiming breach of confidentiality and “re-creation and exploitation” of ADS’s intellectual property.

In its reply to the summons, Standard claimed that its chief software engineer, Corneil du Plessis (who had attended the meeting with Reynders, and had been particularly dismissive of the online threats and the type of technology proposed by Reynders) had coded algorithms on his computer that proved the bank was already working on a solution similar to that of ADS as early as 23 July 2003 – three weeks before Reynders disclosed his secrets to the bank. (But as it happens, at about the time the bank had called him seeking a meeting to be briefed on his scheme.) Which immediately raised the question: if the bank’s own staff were already on top of the problem with an identical solution, why invite Reynders under false pretences to such a high-level meeting where he is persuaded to reveal all the detail of his scheme to the bankers, on a supposedly confidential basis? And after which he is told they see no merit in it. Why the outright lie?

That deception was their intention is further confirmed by the fact that at their meeting on 18 August 2003 they made no mention to him of their own attempts, that had commenced just three weeks earlier, to develop such a system.

In response to Standard Bank’s plea of having had their own prior scheme that just happened to be almost identical to his, Reynders demanded proof that Standard Bank had beaten him to the punch.

Two forensic audits were commissioned, one independent, the other by the bank, to examine the computer hard drive of Corneil du Plessis, the Standard Bank man who, quite fortuitously, is said to have developed, independently, a very similar system. The first was conducted by Mervin Pearce of Security Audit and Control Solutions, the second, by Dr Fritz Solms, an IT expert commissioned by the bank. Both experts concluded independently that there was no evidence on Du Plessis’s hard drive to support the bank’s plea that he had developed the security software prior to the meeting with Reynders on 18 August 2003. What they did find on the hard drive was a stack of pornography and links to illegal websites.

Mervin Pearce of Security and Audit Control Solutions, in a forensic report drafted in September 2006, states the following after an inspection of the Standard Bank’s computer hard drive used for the program in question:

“The statement made by Corneil du Plessis (Standard Bank’s IT expert) that the scrambling code was developed on or before the 23rd July 2003 is incorrect as the initial book-out by Corneil du Plessis of the common pinpad.jsf (not the scrambling software code) was on Wednesday the 30th of June 2003 at 11:05:05 in the morning. This is one week after the alleged meeting where internet security was discussed…

“The evidence on the hard disk drive indicates that the first occurrence of the scrambling for the Pinpad is on 3rd of October 2003.”

In other words, the evidence suggests Du Plessis only started to work on the source code for the scrambled keypad after the meeting with Reynders on 18 August 2003.

Pearce goes on: “The critical analysis of Corneil’s contemporaneous statement [about] when the development of the scrambling code took place on the hard disk is negated by the evidence found on the hard disk drive and the physical audit trail.”

In summary, the forensic auditor found evidence that Standard Bank’s programmers had been working on a type of screen keypad as early 23 July 2003 (three weeks prior to their meeting with Reynders), but the crucial scrambling code was only added in October – after the meeting with Reynders. Pearce concluded that ADS, not Standard Bank, was the proprietary owner of the software.

In his forensic report, Dr Fritz Solms notes that Standard Bank first publicly announced the planned use of a virtual pinpad on 25 July 2003, but the first mention of a scrambled pinpad was made on ITWeb – a prime source of IT news – on 6 October of that year. But, contrary to Pearce’s view, Solms says: “In my opinion the technical implementation of a scrambled pinpad would not have posed a significant challenge to even junior software developers” ; adding that the algorithm for scrambling a sequence of numbers has been around since the 1980s.

This might have been true, had they thought of applying it as a means of further securing online banking transactions. They clearly had not, until Reynders told them about his idea.

Reynders says his case is not about the technical complexity of coding a scrambled keypad. He says his intellectual property relates to how this technology is applied to deal with the problem of online fraud – that is what has been pilfered from him by Standard Bank.

The mysterious Investec letter

A trial date was set down for 14 April 2008. Just a few days prior to this, Standard Bank introduced (“discovered”) a bombshell bit of new evidence – an undated letter on Investec’s letterhead in which two senior officials of that bank claimed that Investec had implemented a technology similar to ADS’s system on its website ten days before the Reynders meeting. The letter was signed by Paul Hanley, head of Investec Private Bank, and Tim Till, that bank’s head of risk.

Reynders believes it to be an outright lie intended to run up legal costs and delay justice – and told everyone so.

Standard Bank stuck to its claim that the Investec letter was authentic, despite ITWeb’s reporting that Investec had uploaded similar technology to that provided by ADS some time after Reynders met with Standard Bank.

The Investec letter was supposed to support Standard Bank’s contention that the technology was widely available prior to the bank’s having signed the non-disclosure agreement with ADS and, if it was a breach of copyright, it was an unintentional breach.

By now, Reynders’s legal team were getting cold feet. His attorney and legal counsel resigned, alleging threats from the bank’s legal team.

The bank’s advocate, Schalk Burger SC, approached Reynders on the day of the trial with an offer to settle, failing which he would ask the court to award costs against ADS. Reynders refused. In front of Judge Roland Sutherland, Reynders represented himself and asked for more time to get to the bottom of the Investec letter and find new legal representation. Judge Sutherland agreed.

Reynders appointed a new firm of attorneys, who pressed Investec on the authenticity of the letter it had provided Standard Bank. Investec simply refused to respond, reinforcing Reynders’s suspicions.

Reynders’s legal team also asked Standard Bank for a copy set of all the documents it would rely on in the upcoming trial, as he feared some of the documents might have gone missing when he changed attorneys.

To his amazement, he found that the duplicate set they supplied contained a copy of an email in which Corneil du Plessis discussed the security threats, that differed significantly from the copy of the same email that the bank had originally made available to him in the “discovery” stage of the case.

The copy of the email now provided by the bank had in the interim clearly been “doctored” by someone who presumed he was no longer in possession of the original. It looked like a crude cut-and-paste of some exculpatory text that would support the bank’s claim that it had had knowledge of the technology prior to its introduction by Reynders.

Reynders had now been given two versions of what purported to be the same email, one clearly a forgery. Why the forgery, other than to mislead the court with false evidence? This, says Reynders, is confirmed by an earlier affidavit, filed by Standard Bank’s Louis Lehmann in 2006 in response to a request for discovery, in which Lehmann stated that the bank had no documentation of whatever nature that would support their plea.

Around this time the bank’s attorney Aslam Moosajee of Deneys Reitz (later Norton Rose) argued that ADS was being deliberately slow in advancing the case, and requested the matter be placed under case management by a judge. The late Judge Mohamed Jajbhay was appointed to hear the matter, which would go to trial on 25 March 2010. If ADS was not ready by then, the case would be dismissed with costs. ADS wanted a postponement as it had not been able to elicit a response from Investec on its supposedly exculpatory letter, a bit of evidence potentially devastating to ADS’s case – if it were true.

ADS’s attorney at the time reported back to Reynders that Judge Jajbhay had “gone off at him” during the pre-trial hearing, and threatened that the bank would be awarded a de bonis propriis cost order (where the loser’s attorney – rather than his client – is ordered to pay all costs of the case), unless he withdrew the case against Standard Bank before it went to trial. Shocked, Reynders contacted Judge Jajhbay and asked why he had made this unseemly threat to his attorney, to which Jajbhay replied his comments were “in jest”. But by then the damage was done: Reynders’s attorneys had panicked and withdrawn from the case.

Judge Jajhbay, struggle stalwart and defender of press freedom in ruling for the Sunday Times when it published unlawfully obtained medical information about the late health minister Manto Tshabalala-Msimang, had interesting ties with Standard Bank and its legal team. Standard Bank was the major sponsor of SA cricket at the time, and Jajbhay served on the sports body’s legal and governance committee. The bank’s attorney, Aslam Moosajee, is the brother of Mohammed Moosajee of SA Cricket fame. Adv AE Bham SC, who represented Standard Bank in this case, also previously provided legal counsel to SA Cricket.

Given these ties, Reynders didn’t like his odds. On 25 March 2010, Reynders was in court again, this time before Judge Tsoka. Again he was unrepresented, and was forced to ask the judge for a postponement as he had still not been able to get to the bottom of the obviously critical Investec letter. Adv Burger made sport of this, claiming Reynders had a pattern of showing up in court without legal counsel. Reynders attempted to point out that his lack of representation was the result of the bank’s bullying tactics. The trial was ordered to go ahead, or be dismissed with costs as per late Judge Jajbhay’s orders.

Just before the trial commenced, Reynders received an email from the bank’s attorneys advising him that they would not be using the contentious Investec letter in court. A reasonable deduction from this was that Investec was not prepared to testify under oath to the truth of its contents or be cross-examined on how they came to introduce the system at their bank.

Standard Bank’s only witness at the trial was Du Plessis, who had already been found to be a liar by both forensic experts. The trial was tainted with irregularities: Du Plessis was allowed to read his testimony from prepared notes, and gave hearsay expert evidence without filing an expert notice, as would be normal in such trials.

Errors of fact

Judge Tsoka dismissed Reynders’s case and found in favour of the bank. He further refused ADS leave to appeal without giving reasons. The judgment contains several errors of fact, hearsay evidence and rulings on points that were not part of the bank’s pleadings. For example, the judge states as fact that Reynders conceded that his software was not secret and was available freely on the internet – which is not what he conceded.

Reynders is now preparing to take his case on appeal to remove what he says are the errors of judgment handed down in the South Gauteng High Court. This time he plans to have some heavyweight legal counsel at his side. “Kenneth Makate won his case against Vodacom in the Concourt, which found he had been cheated out of his invention. According to media reports, Vodacom must pay him R10.5bn. But look what it cost him: sixteen years and R5.5bn in legal costs, which is what his legal funders are expected to receive from his winnings.”

How is that fulfilling the Constitutional right of access to justice?

“It’s been reported that Oscar Pistorius spent R30m on his defence. Imagine you are accused of murder – rightly or wrongly – and you don’t have money. You’d rather run than come up against a justice system which bankrupts you,” says Reynders.

When done with Standard Bank, he wants to press for specific legislation whereby anyone who is party to a legal fraud is criminally charged and jailed. God speed with that.

Residents fight back against banks’ eviction tactics

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared in Groundup.

A group called Lungelo Lethu Human Rights Foundation is preparing a class action suit against the four major banks for what it says are the unlawful evictions of thousands of South Africans from their homes.

MeetingOnEvictionsMethodistChurch-CiaranRyan-20151202 (1)The group is being led by King Sibiya, who has waged this fight before. “What we are seeing now is no different from the human rights violations that we fought against during the apartheid years. The difference now is we are fighting the banks. And it is not just black people who are victims of the banks, white people are too. This case shows that justice is for the haves, not for the have-nots.”

The Constitution provides protection against arbitrary deprivation of property, but Sibiya says this is routinely flouted by the banks.

Most of the evictees represented by the Foundation are from poor communities in Gauteng. In many cases, they were evicted from properties they had occupied for decades, properties that were acquired during the apartheid years when blacks were denied freehold title. The best they could get was a 30 or 99 year lease from the local municipality, which was the primary landowner in places like Soweto. Banks started lending money to those with leasehold title, and this is where trouble seems to have started. Part of the claim the Foundation is making against the banks is that they were not entitled to loan money to those with leasehold title, since in the event of default the property would revert back to the local authority – effectively nullifying their collateral (being the house). This is part of the legal mess the court is going to have to sift through.

At a meeting of about 40 evictees in Johannesburg’s Central Methodist Church last month, some disturbing stories of abuse were told, such as that of 91-year old Gladys Mviko, who was evicted from her home in Vosloorus in 2012 for reasons she cannot fathom.

Mviko acquired her home in 1988 by way of a 99 year lease, and took out a small loan with the Perm (later acquired by Nedbank) to build an extra few rooms. On 24 November 1998 a judgment was allegedly handed down against her for default on her loan with the bank. This is an impossibility she says, as she was up to date with her payments to the bank. The property was sold at auction on 17 May 2012 for R100 – a ridiculous and suspiciously low price. Mviko says no summons was served on her, and on the basis of this alleged judgment she was evicted from her property – without a court order.

“Who gave the bank permission to sell my house?” she asks. Her loan to the bank was debited every month from her pay cheque, and was not in arrears, she maintains.

She now lives with her daughter, Florence Majola.

Sibiya points over to the Johannesburg High Court building, a half block away from where we are sitting. “Go and look at the court roll in the High Court any day of the week. 80% of the cases in the court are home repossessions and Road Accident Fund cases. And nearly a third of the 80% are default judgments.”

I went over and checked the court roll as he suggested and he was right. By far the majority of cases on this particular day involved the banks against presumably defaulting clients.

Sibiya fought for tenants’ rights in the apartheid years, and was one of the architects of the Mngomezulu versus City Council of Soweto case in 1986 that prevented tenants being evicted from their homes for non-payment of rent on the grounds that the City Council had not followed the law in setting rentals. The case was won on technical rather than human rights points, but it gave black residents greater security of tenure in their homes. While whites enjoyed freehold title over land under apartheid, blacks were regarded as transients who had to make do with leasehold rights.

The stories of eviction range from the tragic to the bizarre. Moses Mgijima (65) now lives in a shack in Thembisa, having been evicted from a municipal house he had acquired under leasehold title in 1982. He says he never borrowed a cent from Nedbank, but was evicted in 2012 when he was informed that his house had been sold by Nedbank to a company going by the name CC Trade 57 cc. He brandishes a letter from Nedbank saying a loan was taken out, but Mgijima says they have the wrong person. “I never had a loan with Nedbank. They show my property in the name of Maria Mbatha (who lives in Thembisa at a similar numbered but different address).”

Josephine Ncanywa also lived in a leasehold property in Dobsonville Ext 2. She borrowed R28,700 from the bank and admits to falling behind on her payments, but I was shown an insurance policy issued by the Perm that it would cover any shortfall payments – which apparently never happened. She says no summons was served on her (a common complaint) and she was evicted in 2005. She complained to the local municipality and was told to re-occupy the house, which she did. She claims she was then evicted a second time in 2008 by Red Stripe Trading 68 cc without a court order – which is illegal. She went to retrieve her court file but it was lost. She now lives in Orange Farm.

Communities are wising up to the home repossession scandal and now come out in force whenever the sheriff arrives with officials to evict tenants. The same tactic is being used in other parts of the world and lawmakers are getting the message. Greece has changed its law to prevent homeowners being evicted from their primary residence.

At the Central Methodist Church in Johannesburg I meet up with Solomon Nhlapo, whose late mother Mary acquired a 99 year lease house in 1965 and in the 1980s borrowed money from the Perm to build extensions. Mary passed away in 1994 but her son Solomon continued paying the bond until 1997 when he figured he had probably paid off the loan amount. He approached the bank and asked for the outstanding balance, only to be told he could not have that information as the account was in his mother’s name. “But my mother is dead and I am the one paying the bond,” he told the counter clerk. He told the bank he must assume the bond was now fully paid up and therefore stopped paying. He then discovered that the house had been sold to a company CUF Properties for R100 at auction. No summons was issued, no eviction order was presented, according to Nhlapo.

CUF has since sold the house to a new owner for R350,000. Nhlapo shows me a letter from the bank showing the bond was paid up and instructing Nedbank’s home loans department to hand over the title deed. Instead, the bank sold the property to CUF.

When I previously investigated a slew of similar complaints in Cosmo City, to the north of Johannesburg, the pattern was the same. No summonses, no eviction orders. All of the evictees were working people, some of whom had lost their jobs and run into cash flow difficulties, with little or no knowledge of the law. It is easy to bamboozle them with official-looking eviction notices. One Cosmo City resident, Victor Zuma, had his home repossessed by FNB over an arrears amount of R6,000. He is now seriously ill, the result he says of the stress of first losing his job, then his house. When contacted for comment, FNB says it tries to give defaulting customers time to catch up on arrears and only engages in the sale in execution process as a last resort – a stock answer whenever this type of question is raised. I asked the same question of the other banks and got pretty much the same answer.

“What they do is the sheriff arrives and if no-one is around he hands the summons to a neighbour,” says Maxwell Dube, publisher of the Cosmo City Chronicle, which has investigated corruption around home repossessions in the area. “Most of the people I have spoken to who have been affected by this did not see their summons before they were evicted.”

One investor had purchased 26 properties in Cosmo City in 18 months, all of them repossessed by Absa. When I tried to contact the investor, he would not take my calls. Later I discovered that he had started transferring the properties out of his name, presumably to cover his tracks.

Another sad case is that of Johannah Tshabalala who, with her late husband Mantae Petrus, acquired a house in Katlehong’s Khumalo section for R39,000, financed by Nedbank. This was fully paid in February 2007. In fact Tshabalala over-paid an extra R1,000. She tried to approach the estate agent who sold her the property for her title deed, but he had since disappeared. In 2010 she received a summons saying the owner of her fully-paid up house is CUF Properties and she had 30 days to vacate. A deed search shows CUF bought the house in 2009 for R69,000. The deeds register shows the house has been sold seven times since. She was evicted in April 2015, but remains a squatter in her own house. She was arrested for trespassing and granted R300 bail – all for a house that she insists is fully paid up.

Though Nedbank features prominently in the cases mentioned above, it is by no means the only bank accused of improper or unlawful behaviour.

When presented with the above information, Nedbank appeared keen to resolve the matter.

– See more at: http://groundup.org.za/article/residents-fight-back-against-banks-eviction-tactics_3572#sthash.mrIcGcOF.dpuf