This article first appeared in Moneyweb.

Coenie Vermaak, CEO of e-tolls collections company Electronic Toll Collection (ETC), was an e-tolls boycotter in his previous life as an engineer working on the Medupi Power Station and SA National Roads Agency (Sanral) roads.

Like 70% of Gauteng motorists, he believed the decision to impose electronic tolling was ill-conceived and done without proper public engagement. That changed when he was hired two years ago as CEO of ETC, owned 100% by Austrian company Kapsch.

“I was an e-tolls boycotter because I didn’t like being charged another tax for something that I had no decision over,” says Vermaak. “But I was also ignorant. I had not applied my mind to the matter. When I joined here, I didn’t even want my in-laws to know I worked at the toll collections company.”

ETC’s contract expires in December 2019, and will be put out to tender in the new year by Sanral.

E-tolls have become a political rod with which to beat the ANC government, and Vermaak concedes it is a tough ask convincing non-payers to follow his lead and abandon the boycott. With an election looming in 2019, e-tolls will become a key election issue in Gauteng, and opposition parties will feast on the entrails of this failed project. To underline the point, the Congress of South African Trade Unions (Cosatu), Organisation Undoing Tax Abuse (Outa) and the ANC in Gauteng staged a march against e-tolls last weekend in Pretoria.

In his medium-term budget policy speech last month, newly installed finance minister Tito Mboweni gave no sign of the government abandoning its fealty to e-tolls or the user-pays principle. He said e-tolls had to be paid if the road network was to function. The project originally cost R22.5 billion, funded through the issue of bonds, but that cost has now escalated to more than R40 billion. Sanral’s 2018 annual report shows a finance cost of R4.4 billion at an average cost of capital of 9.43% a year. If Mboweni sticks to his guns, it appears government will have little choice but to find an extra R500 million to R1 billion a year to pay the interest on these borrowings. Scrapping e-tolls could impact SA’s sovereign status and increase the cost of all government-backed borrowings.

Just as the decision to build the loss-making King Shaka International Airport in Durban was a political decision, so government pushed Sanral to upgrade Gauteng’s roads ahead of the 2010 World Cup. It is now clear that government never anticipated the level of protest that would accompany the launch of e-tolls in 2013.

This article first appeared in Moneyweb.

South Africa has a grimy history of companies raiding their pension funds, and the fear is that two recent court cases, which found in favour of the pension fund trustees, will do little to curb the practice.

The first case, involving two pensioners against the Tongaat Hulett Pension Fund, wound its way through the lower courts to the Supreme Court of Appeal (SCA), only to be defeated on what the vanquished pensioners regard as a poor understanding of the law by the judges. They were denied an opportunity for review at Constitutional Court (ConCourt).

The second case involved Rosemary Hunter, former deputy pension fund registrar at the Financial Services Board (now called the Financial Services Conduct Authority), against the FSB over its attempts to deregister funds that still had assets owing to former employees. She too lost her case in the ConCourt, principally on the basis that the court assumed the FSB had competent and responsible people running it, and had investigated a few funds (less than 20%) that had been deregistered as part of the FSB’s cancellations project.

Both cases ended up in defeat at the ConCourt, with no further avenues of legal redress available to the applicants. But the findings of the judges in favour of the pension fund trustees and regulator should be a cause for concern for employees, past and current, with claims to a share of actuarial surpluses or other assets sitting in pension funds of which they are members.

The Tongaat Hulett pensioners, in a recent missive to the 54 fellow pensioners that supported their legal fight, spell out several false or erroneous findings they believe were made by the judges who heard their case.

They claimed in their court papers that the trustees were able to deceive the courts by mislabelling R1.43 billion in contingency reserves as “excess assets”, a term not found in the Pension Funds Act. “Assets in contingency reserve accounts” – a term that isdefined in the act – should be shared among the members when they are no longer needed to provide for contingent liabilities. It is at this point they become an actuarial surplus. The pensioners argued that by renaming these assets as something else, the trustees, who by law must balance the interests of employees and the company, were able to divert funds away from the members to the company.

This article first appeared at Accounting Weekly.

President Cyril Ramaphosa has fired former SA Revenue Services (Sars) Commissioner Tom Moyane after receiving the Nugent Interim Report into the tax agency.

The President had little choice, though Moyane is taking his case to the Constitutional Court. It is clear from the report that Moyane was a one-man wrecking crew who instilled fear and distrust in the one state organisation that functioned reasonably well and was relatively untainted by corruption.

Moyane installed CCTV cameras so that staff felt they were under constant surveillance. He trashed the modernisation programme intended to use IT to replace the largely paper-based system that preceded it, thereby making it easier for cigarette smugglers and other tax dodgers to roam relatively unmolested.

Two weeks after Moyane took office in 2014, The Sunday Times reported the existence of a “rogue unit” within Sars, whose members had supposedly placed listening devices in the home of former President Jacob Zuma. A series of similar stories followed, causing immeasurable damage to Sars. It began to look like a set-up, a ruse intended to take the heat off criminals and tax cheats.

Nugent could find no evidence that the setting up of this unit was unlawful. When the press reports were published, Moyane called the Executive Committee (Exco) together and asked what they knew about these allegations. The Exco disavowed any knowledge. Moyane promptly announced he had no confidence in the Exco and disbanded it.

“That response is extraordinary in any rational terms. Mr Moyane had barely arrived at Sars, with no experience of revenue collection, yet almost immediately he denounced and humiliated senior management, with vast knowledge and experience, and dissolved the body through which Sars was being managed. All that on the basis of no more than a newspaper report, and moreover, a report on events of which at least most of the Chief Officers could not be expected to have had any knowledge,” says Nugent’s interim report.

Two senior members of the so-called rogue unit – Ivan Pillay and Peter Richter – were suspended and their reputations smeared. Moyane ordered the disbandment of the rogue unit (called the High Risk Investigation Unit) which had been legitimately set up to chase down smugglers and big-time tax cheats. In December 2014 KPMG was brought in at a cost of R24 million (the money has since been returned to Sars) which made damning allegations against Pillay, former finance minister Pravin Gordhan and ANC secretary general Ace Magashula.

Consulting firm Bain was brought in, and after a perfunctory “diagnosis” with little or no consultation with operational managers, and no communication with employees, a new operating model was devised and implemented. It was a disaster. The new operating model threw operational managers into uncertainty on their jobs. Some 200 employees were eased out and forced to re-apply for posts in the new organisational structure.

Another consulting firm, Gartner, was brought in to review Sars’ IT infrastructure. It was paid R200 million but virtually nothing it recommended was implemented.

By 2017 the Exco that existed when Moyane arrived in 2014 had been demolished. No responsible leader of so complex an organisation would have acted as Moyane did, says the report. Legislative changes were needed to make sure this kind of one-man wrecking crew could never get near the levers of so vital an organisation.

This article first appeared in GroundUp.

The Mining Forum of South Africa has applied to the North West High Court to have the mining licences suspended of Lonmin, as well as Eastern Platinum and Western Platinum (both controlled by Lonmin). The Forum, a not for profit organisation that seeks regulatory compliance in the mining industry, says Lonmin has shirked its Social and Labour Plan (SLP) obligations.

Chris Loxton, counsel for Lonmin, told the court in Mahikeng on Friday that the application is incompetent, vexatious and must fail. He said the case against the mining companies was so deficient, the court should grant a cost order against the two applicants, the Forum and its president, Blessings Ramoba.

All mining rights in South Africa are granted in terms of the Mineral and Petroleum Resources Development Act (MPRDA) and are subject to the fulfilment of SLPs intended to uplift surrounding communities and provide jobs and skills.

The Forum argued that the three mining companies had failed to honour their SLPs spanning a period of five years, and that the minister was obliged under law to suspend their mining licenses. The Minister of Mineral Resources is also a respondent in the case.

The Forum is trying to stop the proposed R5-billion takeover of Lonmin by Sibanye-Stillwater on the grounds that this would erode the group’s SLP commitments to the community. The takeover would include Lonmin’s Marikana operations, responsible for 95% of the group’s output, and the scene of the massacre of 34 striking mine workers in 2012.

The Forum argued that conditions for mine workers and the surrounding communities were atrocious, with many miners living in informal settlements. Lonmin had failed in its promise to provide schools, health facilities and other infrastructure in terms of its 2014 SLP.

Lonmin argued in its papers that while it had not spent the full amount outlined in the original SLP, this was due to radically deteriorating economic conditions. The mining group pointed to the roughly R680 million over three years spent on upliftment programmes and nearly R12 billion in BEE procurement as evidence of its commitment to its SLP obligations.

This article first appeared at Accounting Weekly.

Several years ago John Micklethwaite and Adrian Wooldridge published The Witch Doctors, a brutal excoriation of the consultancy business and the damage it had inflicted on businesses in the name of “change management”, “quality” and “mastering chaos”.

In page after page, they detailed how consultants had sold business executives on the need for change – which they of course would administer – only to leave behind a trail of corpses. The advice being peddled by these gurus was faddish, unproven and often reckless.

Surveying the wreckage of SA’s public sector and the R24,6 billion spent on consultants in just eight government departments in the three years to 2013, one can only conclude that the consulting business has been good for consultants – but not for anyone else. To put this in some kind of context, then deputy Auditor General Kimi Makwetu (now Auditor General) issued a report in 2013 pointing out that 74% of the total spend in these eight government departments had gone on consultants. He urged much stricter controls on the use of consultants, but it is clear that this advice went nowhere.

Nicolaas van Wyk, CEO of SA Institute of Business Accountants (Saiba), points out another feature of the consulting scam that is rife in SA: the revolving door nature of the work. “Projects initiated by one firm are never completed, so the next consulting firm can come in and take over. This seems to be the way they agree to operate, so they are always generating work for each other.”

Appearing before the SA Revenue Services’ (Sars) commission of inquiry this week, IT consultancy Gartner explained how it had been brought into the tax agency within months of suspended commissioner Tom Moyane’s decision to freeze the modernisation programme. Last week the inquiry was told that Sars’ IT infrastructure was falling apart. Gartner was brought in to fix that as part of a dubious multi-phase project. It was paid R200 million for its efforts, but virtually nothing it recommended was implemented.

Then there are claims that Boston-based consulting firm Bain & Company had been instrumental “in the capture and destruction of the revenue service.” Evidence was led at the inquiry showing that Bain’s managing partner, Vittorio Massone, had been Tom Moyane’s executive coach prior to him taking over at the helm of Sars, and had recommended a radical refresh of the tax agency based just on publicly available information. He also recommended “neutralising” Sars’ then chief operating officer, Barry Hore. Within weeks of Moyane arriving at Sars, Hore resigned.

Things took a dramatic turn when Massone failed to arrive to give testimony at the inquiry, saying he was receiving treatment in Italy. Massone has since withdrawn from the inquiry, offering instead to file evidence by way of affidavit.

It was left to Gartner to take the heat at the inquiry. Business Day reports that Lithgow largely blamed the Sars leadership at the time for this. He said he wrote a letter to Moyane and ‘‘made it clear that unless we had strong, committed leadership, the transformation process would not work’’. He said there was resistance to change within Sars, and there were also ‘‘fiefdoms and factions’’ and people ‘‘would not co-operate’’.

The way in which Gartner and Bain secured their contracts was also highly questionable. Both firms worked closely with Moyane and the contract specs appear to have been written to suit their sales pitches. In Gartner’s case, the firm appeared unaware that writing specs for the contract eventually awarded to it was illegal. In total, both firms picked up fees of about R400 million from Sars. But it was Bain that is reckoned to have done most damage at the tax agency, getting rid of 200 skilled staff and overturning what had been a relatively functioning organisation.

The destruction at Sars has benefitted tax dodgers and delinquent taxpayers, wrote retired Judge Robert Nugent, who is chairing the inquiry. It desperately needs a new CEO with credibility and clout.

Given what we already know about consulting firm McKinsey’s fleecing of Eskom, and the havoc created by accounting firms and their consulting units, it’s reasonable to assume the future of Big Consulting in SA is bleak. No government department, state-owned company or private organisation will look at these witch doctors the same way again.

This article first appeared at Accounting Weekly.

I was waiting for The Economist to diss Bitcoin. Now that it has done so, I feel it is safe to buy. This smug, establishment BS factory is at it again. Reg Rumney tears into them here. Back in the 1980s, what was their solution to apartheid South Africa? Dump gold everyone! That’s real activism for you. Drive down the price of gold and the racists will surrender. This ship of fools just keeps on sailing, talking into the establishment bubble that is its base. How they have kept going so long with a track record as miserable as their’s is one of the wonders of our age.

The magazine that is famously wrong on just about everything is a trader’s best friend. You cannot take them seriously on anything. When it says go long, it is a dead certainty that the reverse will happen. The crypto naysayers have been at it for a decade, and they have been wrong every time.

Now listen to two guys who actually know a thing or two about cryptos, Marco Wutzer and Doug Casey. The real risk for everyone alive today is the sustainability of the fiat currency ponzi scheme that has made everyone poorer.

Understand this: there are those who are mortally threatened by cryptos. After reading this you would be a fool not to own some.

From International Man:

This article first appeared at GroundUp.

In a moment of anger, ANC member Velaphi Khumalo let rip on Facebook that South Africa needed to be cleansed of whites. He said whites needed to be treated as Hitler treated the Jews.

He was responding to an earlier racist comment on social media from Penny Sparrow, who referred to blacks as “monkeys”.

Both, no doubt, have come to rue their remarks. Both recanted. But Judge Roland Sutherland of the Equality Court in Johannesburg was not satisfied with Khumalo’s retraction, especially after Khumalo more recently decided it wasn’t hate speech after all.

On Friday, Sutherland declared that Khumalo’s remarks were hate speech and interdicted him from repeating them. He also ordered Khumalo to issue an apology to all South Africans.

The matter was first raised in the Roodepoort Magistrates’ Court (which also has an Equality Court) by the ANC. However, the South African Human Rights Commission (SAHRC) was unaware of this earlier hearing at the lower court, and brought it before the Equality Court in Johannesburg.

Given the large number of racist remarks on social media, the ruling should give keyboard warriors pause for thought.

These are the facts of the case: In 2016 Khumalo wrote on his Facebook account:

[We should] “cleanse South Africa of all whites. We must act as Hitler did to the Jews. I don’t believe any more than is a large number of not so racist whit people. I’m starting to be sceptical even of those within our movement ANC. I will from today unfriend all white people I have as friends from today u must be put under the same blanket as any other racist white because secretly u all are a bunch of racist fuck heads, as we already seen.”

In a subsequent posting he wrote:

“Noo seriously though u oppressed us when u were a minority and then manje (Zulu: now) u call us monkeys and we suppose to let it slide. White people in south Africa deserve to be hacked and killed like Jews. U have the same venom moss. Look at Palestine. Noo u must be bushed (burned) alive and skinned and your off springs used as garden fertiliser.”

Khumalo, who at the time worked as a sports officer for the Gauteng Provincial government, said he was reacting in anger to Penny Sparrow’s well-known Facebook post in 2016 wherein she referred to black people as “monkeys”. He said he was upset and hurt by the post and that no reasonable person could construe his remarks as an incitement to violence. He was reprimanded by his employer (but didn’t lose his job), and the backlash on Facebook was instant and ferocious. The ANC took the matter to court.

This article first appeared on Moneyweb.

Last week the Pretoria High Court dismissed an attempt by a Swiss-based company, Charles King SA, to stop the sale of the Tegeta-owned assets now under business rescue.

This was the 44th case against the business rescue practitioners involved in salvaging the wreckage of the Gupta’s Tegeta business empire. Tegeta owns Optimum Coal Mine, a share in the Richards Bay Coal Terminal and Koornfontein Mines.

There are suspicions that in 2017, the Guptas, recognising that they had reached the end of their state capture rope, put in place agreements that would allow them to buy the companies back for a song, or at least direct their disposal.

Charles King SA had a written agreement signed in 2017 to purchase Tegeta for R2.9 billion, with a down-payment of R66.7 million. Tegeta’s assets are probably worth 50%-100% more than this. That in itself has raised questions over the authenticity of the share sale agreement, and who was behind it. Why would the Guptas sell their prize assets at below market price?

The down-payment was made on October 22, 2017, but was R2.3 million short. When business rescue practitioners started looking into this payment, they discovered several anomalies. The very next day after receiving payment from Charles King, the money was withdrawn from the Tegeta bank account and used to pay salaries at Tegeta, Optimum and other Gupta companies. This is highly suspicious, as normal procedure in such a transaction would involve paying the deposit into a trust account pending settlement of the full purchase price and transfer of the shares. The Guptas used this money to fund operating expenses.

This article first appeared in Moneyweb.

Eight years ago debt counsellor Fanie Grové started looking at vehicle loan statements from his clients and was staggered by what he saw: in every one of more than 80 cases he examined where the borrower had fallen into arrears, he says the bank was unlawfully overcharging interest.   

In some cases, the overcharge was 40-50% more than the interest allowable in terms of the National Credit Act (NCA), says Grové.

Considering the number of vehicles sold in SA each year – 557 000 last year alone – the implications could be huge. Wesbank, the market leader, reported R2.6 billion in profits from its SA retail activities last year.

The matter was raised with the National Credit Regulator in 2014 over a Standard Bank customer who missed some monthly payments in 2013. The NCR took the view that the bank was not in violation of the NCA and that it had calculated the interest correctly – despite the fact that the bank later reduced the loan amount payable by the client. The NCR’s dismissal of the case is puzzling to some in the debt industry. An actuary who reconstructed the bank statements and applied what he says is the correct interest charge found that the bank had overcharged the customer by 40%.

Standard Bank spokesman Ross Lindstrom says charging interest on interest when a client falls into arrears on a vehicle loan is “in line with the contractual agreement, which complies with all relevant legislative requirements.”

Why did the bank then reduce the client’s loan amount? Is this not an admission of wrongdoing? “Definitely not an admission of any wrongdoing, as this was an attempt by Standard Bank to assist the customer,” says Lindstrom.