The Writer's Room is a curated by Ciaran Ryan, who has written on South African affairs for Sunday Times, Mail & Guardian, Financial Mail, Finweek, Noseweek, The Daily Telegraph, Forbes, USA Today, Acts Online and Lewrockwell.com, among others. In between he manages a gold mining operation in Ghana, and previously worked in Congo. Most of his time is spent in the lovely city of Joburg.
They asked the court to force Eskom to reconnect them, and to cap tariffs at R100 pm. From Moneyweb.
Several hundred Soweto residents got blown out of the Johannesburg High Court on Wednesday, after asking the judge for an urgent order compelling Eskom to reconnect their electricity and cap their monthly payments at R100.
Acting Judge Marcus Senyatsi threw the case out of court on the grounds that the case lacked urgency. He also said the court application, prepared by King Sibiya of the Lungelo Lethu Human Rights Foundation, looked more like a petition.
Eskom said it found it difficult to respond to some of the community’s allegations and asked that the matter be struck from the roll.
Many of the residents have had their electricity disconnected for more than six months. The case must now be placed on the ordinary roll and await a court date, probably well into 2020.
“Of course we are disappointed by the judge’s decision,” says Sibiya. “I was denied the right to argue the case for the residents of Soweto, most of them sick or elderly, because I am not a lawyer. We regard this as a denial of access to justice and this is something that we intend to take up with the Department of Justice.
“There is no question that this is an urgent matter, given the escalating service delivery protests that are happening around Soweto.”
Sibiya and other community members were frustrated at the judge’s adherence to court formalities, rather than the substance of the case and its broader impact on human rights.
This week actor Patrick Shai was injured when shot with rubber bullets by police, as he tried to stop the police from using force against community members protesting service disconnection.
Service protests have erupted in several parts of Soweto in recent months. Eskom’s latest annual report suggests arrears of R18 billion from Soweto, out of total arrears of about R40 billion.
Soweto community activist Monde Mngqibisa says frustrations are growing in Soweto, as most of the applicants in the case have prepaid meters but have been disconnected because Eskom has failed to do basic maintenance. The court papers also suggest that some of the meters have malfunctioned or caught fire. “We are not giving up,” says Mngqibisa. “We will regroup and re-present the case.”
Mngqibisa says he has not been affected by the disconnections but approached Eskom on behalf of community members. Some residents were told by Eskom to get their neighbours to start paying their electricity before their homes would be reconnected, which is a form of group punishment, according to Sibiya.
Moneyweb spoke to several of the applicants in the case, who dismissed the notion that Eskom disconnected their electricity for being in arrears. “That’s not true,” says Sello Mahsiloane, one of the applicants. “We are on prepaid meters and the reason we are disconnected is because the mini sub-station Eskom has [has] been broken for months and has not been repaired.
“Yet [President Cyril] Ramaphosa’s house nearby has electricity. How is that possible?
“My child failed school because there is no light at night for studying.”
Mashiloane is a diabetic and says he is forced to use candles for light and a “gel” stove for cooking. Martha Sedibe has a two-week-old grandchild living with her, and has been forced to use candles and a paraffin stove for six months since Eskom cut off power in the area in June. She is also on a prepaid meter and normally spent R300 to R400 a month on electricity.
Pamela Thobela of White City in Soweto says parts were stolen from an electricity sub-station in her area several months ago, and residents in her area have been without power since then.
Sibiya says he is in discussion with several legal organisations to provide representation for the next phase of the battle to restore lights to Soweto.
It’s sink or swim time for the national airline, as it contemplates retrenching up to 9% of its staff. From Moneyweb.
SAA appears to be on a collision course with trade unions as it contemplates retrenchments – perhaps as much as 9% to 10% of its 10 000-strong labour force (including subsidiaries) – in a fight for financial survival.
Trade unions were notified on Tuesday that retrenchments are being contemplated. The National Union of Metalworkers of South Africa (Numsa) and the South African Cabin Crew Association (Sacca) say they learned of the restructuring and retrenchment plans through the media. They have called for the SAA board to be scrapped, saying it is unfit to run the airline, and plan the “mother of all strikes” in response.
SAA refutes claims that labour was notified of the restructuring and retrenchments via the media. At a press briefing at SAA’s head office near OR Tambo Airport on Tuesday, the airline’s interim CFO Deon Fredericks said a Section 189 notice in terms of the Labour Relations Act was issued to recognised trade unions on Monday. This is a prerequisite whenever retrenchments are contemplated.
A joint statement by Numsa and Sacca says demands for a wage increase of 8% have been rejected by the airline, while Air Chefs staff and airline pilots received wage increases of between 5.9% and 7%. “This is why we are questioning the timing of this announcement. It is a veiled threat to get workers to drop their demands for wage increases and for the removal of the SAA board. They want to strike fear into the hearts of our members. We condemn the management with the contempt they deserve,” says the joint statement by the trade unions.
Acting Human Resources General Manager Martin Kemp explains that Air Chefs was subject to the catering bargaining council, while pilots were able to enforce a 2010 agreement on salary increases after this went to arbitration. The airline was obliged to honour these agreements.
Says Fredericks: “It is our hope that our unions will grasp the full extent of the financial situation we find ourselves in and engage with us in finding a constructive way going forward.”
He adds there is no finality on the number of workers to be retrenched. A figure of 944 has been mentioned which, depending on the seniority and type of worker, could yield savings of R700 million a year. The final figure on retrenchments will only be known once consultations with the unions have run their course.
Last year the airline saved R600 million through more efficient procurement and cutting out agents and middle men.
The airline says it has contingency plans in the event of a labour strike, but adds there is little it can do if there is a complete shutdown of operations.
Labour unions have threatened a total shutdown of the airline, which could sink it outright.
SAA is under pressure from lenders to show progress in its financial turnaround. In June it was announced that SAA needed an additional R4 billion to survive the current financial year. Government has committed to repaying the airline’s R9.2 billion guaranteed debt over the next three years. SAA has run up cumulative losses of more than R28 billion over the last 13 years, and government is keen to find an equity partner to reduce the airline’s drain on the fiscus. Fredericks says reaches have been made to potential partners, but that there is little concrete interest until the airline is financially stabilised.
The airline’s restructuring plans include subsidiaries Mango Airlines, Air Chefs and SAA’s technical divisions.
Fredericks said ongoing negative publicity about the airline is costing it dearly in terms of sales. Previously, SAA would make promises to lenders, now it is able to show turnaround results: such as the R600 million savings on procurement and technical improvements that reduced aircraft repair times from 63 to 35 days. “This is based on a pilot, but it shows what can be achieved if extended across the airline,” said Fredericks.
Labour costs accounts for 24% of turnover, and fuel 27%. There is little the airline can do to reduce fuel costs, which is why it is forced to look at reducing staff numbers. Management has identified non-core assets that could be sold to realise funds. The airline has also made progress in improving route profitability and identifying new routes under Chief Commercial Officer Philip Saunders.
“If this was a growth market, we would be having a different discussion,” said Fredericks. Average fares dropped 12% in US dollar terms, while passenger volumes were up just 2% over the last year. Another area of focus is fleet optimisation around Airbus A350s, which are renowned for fuel efficiency and low maintenance costs.
There are questions about the airline’s political capital to drive change, given that so many senior appointments are acting rather than permanent – a policy that appears to leave the door open for an equity partner to appoint a management team of its choosing.
“SAA has created an enabling environment of engagement with all its internal stakeholders, especially labour unions. We understand that this is a difficult time for all employees,” says Fredericks.
“SAA’s primary goal is to transform into a financially sustainable airline, with a renewed focus on driving customer centricity, commercialising the airline, route network profitability, strengthening commercial and aviation skills and a series of strategic initiatives that will refocus the organisation in driving a profit and loss ethos with a strong focus on cost management revenue and cost.”
It’s a problem long recognised among stock analysts and bankers, who spend their days reconstructing published accounts to read past the PR fluff. Earnings before interest, tax, depreciation and amortisation (Ebitda) was supposed to be a partial solution to this dilemma, but even this no longer does the trick.
As much as the accounting profession tries to close loopholes through enforcement of International Financial Reporting Standards (IFRS), there is still enough room here to fly a Boeing through a balance sheet.
The US Public Company Accounting Oversight Board recently found that the Big Four accounting firms – EY, PwC, Deloitte and KPMG – bungled 31% of the most recent US audits analysed.
Most of these transgressions go unpunished, despite the board being set up in 2003 to avoid another Enron or WorldCom-type collapse. Because auditors are paid by the companies they audit, there is a clear incentive to deliver the results management wants. The UK’s public audit watchdog, the Financial Reporting Council, says it will make public its grading of audit inspections following high profile company failures, such as builder Carillion and retailer BHS.
Estimates and assumptions
Part of the problem is that accounting standards lean heavily on estimates and assumptions. Revenue can include amounts that are not yet banked, as appears to have happened at Tongaat.
When to recognise revenue involves making executive assumptions that do not always agree with reality. For example, there must be reasonable assurance that the proceeds of a transaction are collectible. When it comes to complex land sales, this leaves the door open for the counting of revenue (and hence profits) that doesn’t actually exist either now or in the foreseeable future.
And when executive bonuses are tied to profits, it’s easy to see how this system can be manipulated. Companies seldom disclose how much of their revenue is based on estimates.
Nicolaas van Wyk, CEO of the SA Institute of Business Accountants (Saiba), says the accounting standard-setters are under huge pressure to adjust the regulations and standards being used to prepare and report on financial statements. “In this process of adjustment, care should be taken to ensure we make progress in the right direction.
“Corporate scandals driven largely by CEOs and CFOs manipulating IFRS to obtain favourable revenue, profit and asset valuation numbers are causing havoc in the industry.
“The question that needs to be asked is this: is the problem an ethical one or is there something in IFRS that makes it prone to manipulation? We urgently need an answer.”
He adds that the accountant of the future will have to adopt the mindset of a stock analyst or banker, where common sense adjustments will have to be made to published accounts.
Usefulness, or not
In a study on the usefulness of published accounts, researcher Baruch Lev places much of the blame on the proliferation of estimates in financial reports: “To a large extent, financial reports are based on estimates, judgements, and models rather than exact depictions,” he says.
“Estimates increase the noise and error in financial information, particularly when they are made by persons [management] having strong incentives to affect the perceptions of investors.”
There is debate in the accounting community as to whether intangible assets such as goodwill should be written off against income. Great brands such as Coca-Cola increase the revenue-generating capacity of a company, so why expense it against income?
Take Steinhoff as an example. It restated ‘errors’ for 2015 and 2016, writing down its asset values by R8.2 billion for 2015 and R11.4 billion for the 14 months to September 2016. That’s a nearly R20 billion write-down over two years, with most of this coming from evaporating intangible assets, followed by the effects of accounting irregularities. That restatement knocked R1.6 billion off the 2016 profit.
Yet these are the accounting standards to which all listed companies are held. A recent accounting change is IFRS 16, which brings billions of rands worth of leases, previously treated as expenses or ‘off balance sheet’ items, back onto the balance sheet where they rightfully belong.
In the past, leases were a way for companies to keep liabilities off the books, which is how you want it when approaching the bank for a loan.
Bankers understood the accounting game and would usually fix the problem by simply putting leases back on the balance sheet.
A PwC study of nearly 3 200 companies (‘A study on the impact of lease capitalisation’) estimates that the reported debt of these entities will rise by 22% as a result of IFRS 16. Many leases of fairly long duration, that were previously expensed to the income statement, are now shifted to the balance sheet as liabilities (with a corresponding asset entry). This can radically alter debt ratios – although, from a practical and cash standpoint, there is no real change.
It’s simply a matter of moving figures around on a spreadsheet.
By the time Tongaat’s shares were suspended at the company’s request in June, the share price had slid to a tenth of what it was two years ago, after information about its creative accounting practices surfaced. It seems land sales were counted as revenue before the deals were hatched, and stock was overcounted.
Its figures for the March 2019 year-end have yet to be released. In October, the company informed the market that it had conducted a six-year review process necessitating amendments to its accounting policies and practices. It is also reviewing key assumptions used in arriving at past results.
Therein lies the problem.
Despite the widespread adoption of IFRS – supposedly to settle on a common global language for business accounting – the feast of accounting scandals shows no sign of abating.
Steinhoff’s value destruction is Olympian in scale, with more than R200 billion in equity wiped out since 2017.
For a time it was heralded as a great retailing success story, breaking out of its southern African shell to spar with the biggest and the best abroad. It gobbled up competitors and flew the South African flag across Africa and Europe with brands such as Pep, Ackermans and Poundland.
But the figures were a pack of lies. PwC investigated and found fictitious or irregular transactions worth about $7.4 billion over eight years. These fictitious transactions were concocted by senior managers to create phoney income that hid losses elsewhere in the group.
“The transactions identified as being irregular are complex, involved many entities over a number of years and were supported by documents including legal documents and other professional opinions that, in many instances, were created after the fact and backdated,” says Steinhoff on its website.
Manipulating figures is not confined to auditors and accountants. Investment bankers are prone to the same disease, as shown by the recent decision to pull the listing of US real estate company WeWork. Its listing documents repeatedly claimed it was a tech company rather than a renter of office space, in an attempt to mislead investors and justify a company valuation of $47 billion. What was to be the US’s “most valuable tech start-up” has observers now wondering whether it can avoid bankruptcy.
And all this in the space of weeks. That should trouble anyone relying on financial statements as a guide to corporate truth.
Damien Klassen of Nucleus Wealth, writing in Livewire Markets, shows how easy it is to double a company’s valuation by carefully rounding off assumptions. The tweaks are so slight you would barely notice them.
Analysts and investors rely on earnings-centred valuation models, but that becomes a problem if reported earnings deviate too far from actual business performance, says Lev. A 2017 study shows that even if you made perfect earnings predictions, your investment performance would not be significantly better than those who were poor predictors of earnings.
This perhaps explains the flight from managed to index funds.
Over the last five years Amazon missed almost half of the quarterly analyst consensus forecasts, while becoming one of the most valuable firms in the world.
Lev says the problem started when accounting standard-setters moved to the so-called balance sheet model, which “increased exponentially the number and impact of subjective managerial estimates underlying financial information”.
“A fair number of these estimates are of low quality and are sometimes manipulated, further eroding the usefulness of financial information.”
How to value goodwill and brands (and then expense them against income) has the veneer of scientific rigour, but is often as good as a guess.
The solution, suggests Lev, is a return to the “income statement” rule-making model, where revenues and the associated costs are matched. Income statements under the current regime include intangible asset expense write-offs that can massively distort actual enterprise performance.
No wonder auditors pad their accounting sign-offs with pages of explanations and caveats.
A better solution, says Van Wyk, is to have in independent body appoint auditors to companies, thereby denying management the ability to skew results in favour of their bonuses and egos.
It’s been nearly two years since the Gupta-owned operation was placed in business rescue. From Moneyweb.
The sale of Koornfontein coal mine – one of the Gupta companies now in business rescue – has hit a legal obstacle: losing bidder Lurco Group is asking the High Court to interdict the business rescue practitioners from selling the mine to another bidder, Black Royalty Minerals (BRM).
Lurco submitted two bids for the mine, both for R500 million. The initial bid was backed by funding from Central Energy Fund (CEF) subsidiary African Exploration Mining and Finance Corporation (AEMFC). CEF is owned by the state. Lurco also submitted an alternative bid, independent of AEMFC, with funding from Ocean Partners Holdings.
Lurco says the business rescue practitioners (BRPs) unlawfully changed its business rescue plan in October when they demanded that the full purchase price for the Koornfontein assets be placed in a South African bank account within five days. Lurco was unable to meet this deadline as funds had to be shifted from an overseas account, for which regulatory approval was required.
Having missed the deadline, BRM was anointed as the preferred bidder. The BRM bid, at about R300 million, is substantially lower than Lurco’s. Lurco’s R500 million offer was far superior to other bids received – which ranged from R217 million to R300 million – according to Lurco chief operating officer Aubrey Chauke’s affidavit now in front of the court.
The fact that the BRPs were now selecting the inferior BRM bid meant creditors and employees would be deprived of 60c in the rand.
Had Lurco been made aware that the full purchase price would have to be placed in a South African bank account within five days, it would have amended its bid accordingly.
Chauke’s affidavit says Lurco submitted two bids for Koornfontein in compliance with the conditions outlined by the BRPs in July. In late September, Lurco was advised that its alternative bid had been selected as the qualifying bidder subject to the payment of an initial amount of R45 million into an escrow account.
Chauke says Lurco had legitimate reason to expect that it would be the purchaser of the mine on terms outlined by the BRPs in September.
Attorneys for the BRPs, Smit Sewgoolam, wrote to Lurco on October 26 explaining that the amended bid condition that the full purchase price be placed in a South African bank account within five days was imposed by the mine’s “affected persons” by way of a vote that was passed on October 18. The BRPs were therefore bound by the adopted rescue plan and were obliged to implement it.
Lurco counters that the BRPs are bound by the Companies Act to adopt the original business plan of October 4, and not the amended one of October 18. Chauke says there is no provision in the Companies Act for the amendment of a business rescue plan after it has been approved and adopted.
The court papers suggest Eskom is a “contingent post-commencement creditor” of Optimum Coal Mine, also under business rescue, for R1.07 billion, being penalties levied by Eskom for non-delivery of coal. Lurco claims this applies to Optimum, not to Koornfontein, which therefore reduces Eskom’s voting rights in terms of the business rescue plan.
In this case, the rescue plan could not have received more than 75% of support from creditors as required by the Companies Act.
The BRPs are therefore bound to implement the original business rescue plan which did not require the full purchase price to be placed in a South African bank account within five days.
Responding to the court application, business rescue practitioner Louis Klopper says the Lurco application will be opposed.
“As BRPs, we are compelled to follow the instructions of creditors, and these were the conditions we are mandated to execute. Lurco is within its rights to bring this application, but we are concerned that this could delay the recommencement of operations at Koornfontein.”
A judgment handed down on Tuesday doesn’t read well for the bank. From Moneyweb.
It was a bad day in court for Capitec on Tuesday after Judge Bashier Vally found the bank in breach of contract and common law when it sought to block its BEE shareholder, Coral Lagoon Investments, from selling its shares to settle a R500 million claim from the Transnet Second Defined Benefit Fund (TSDBF). Coral Lagoon is ultimately owned by Regiments Capital.
Some of these names will be familiar to followers of state capture.
Coral Lagoon and the Transnet pension fund found themselves on the same side in the case against Capitec, but for entirely different reasons. The Transnet pension fund says it was a victim of state capture where Regiments “fleeced various arms of the state, state-owned enterprises and pension funds of employees employed by state-owned enterprises”.
Rather than fight the matter, Regiments and its shareholders decided to settle with the Transnet pension fund for R500 million, discounted from the original claim amount of R825 million.
‘Largest single recovery of state captured funds’
But for this deal to go smoothly, Capitec would have to be on board. Email correspondence between the bank and the pension fund and its attorneys suggested this settlement agreement was “of substantial national importance and prominence” as it was the “largest single recovery of state captured funds”.
In some of the correspondence before the court it seemed Capitec was initially amenable to the settlement, but quickly changed its tone, informing the BEE shareholders that they were prohibited from disposing of their shares in terms of a BEE share subscription agreement of 2006. The purpose of this restriction was to maintain Capitec’s BEE shareholding.
Capitec had invoked a share subscription agreement from 2006 to block the sale of the shares. This agreement required that the shares could only be sold to another qualifying BEE shareholder so as not to dilute its BEE shareholding. Coral Lagoon had earlier sold some of its shares in Capitec in settlement of a loan to the Industrial Development Corporation and to pay off a tax bill with the South African Revenue Service.
Here is a choice quote from the judgment:
“By refusing to grant consent for the sale on this basis means that it [Capitec] is quite willing to retain Regiments as a shareholder, even though it recognises that Regiments has stolen more than R1 billion from indigent pensioners belonging to the TSDBF.
“The logical conclusion of its position is that the loss of 0.7% of its B-BBEE rating is so important that it would rather keep its links with a shareholder who is tainted by dishonesty than reduce the rating.”
Judge Vally wasn’t finished with the bank just yet. Capitec also claimed it would have to seek shareholder approval for the sale in terms of the JSE Listing Requirements.
“The TSDBF pointed out in its papers that this is simply legally wrong,” reads the judgment.
“Capitec made no effort in its answer to explain why [Capitec chair] Ms [Santie] Botha misleadingly claimed that the JSE Listing Requirements was an obstacle to it consenting to the sale.”
Botha also claimed that the sale of shares would be prejudicial to Capitec, as it would benefit certain individuals who were involved in alleged criminal activities. The Transnet pension fund replied that this was incorrect and that none of the parties guilty of unlawful conduct in the “state capture” would benefit from the sale.
There was more. There were a number of ancillary court actions along the way: one judgment required Regiments to provide security to the pension fund, and another prevented it from dissipating its assets. The alleged victims of the state capture project were circling Regiments.
The judgment does not read well for Botha or Capitec: on the one hand they were issuing threats against the BEE shareholders who wished to sell some of their shares, while at the same time saying they wished to engage with the pension fund. The purpose of these inconsistent statements was the issuance of threats, said the pension fund in its court papers.
Capitec had made a number of changes in its approach to the sale of the shares, at one point agreeing to an “open offer” where some of the shares could be sold on the open market, with the balance subject to restrictions (they could only be sold to a qualifying black person). The open offer was rejected by Coral Lagoon.
This change in stance towards its BEE shareholders undeniably demonstrated that Capitec had acted in bad faith and was in breach of its duty of good faith, said the pension fund.
Here are some more choice words from the judge: “Having changed its stance on more than one occasion, it became incumbent upon Capitec to explain why it had contended in the letters and emails referred to, and quoted from, above that Coral Lagoon was ‘prohibited’ from selling the shares. In this regard it simply said that the averments made therein ‘were incorrect’.
“But saying they ‘were incorrect’ is not an explanation: it is either a statement of fact or an opinion. An explanation would have to furnish reasons for why the contentions were made. It would also have to focus on why it was followed up with the forceful threat that litigation would ensue should the sale proceed without its consent.
“The contention and the threat were made on more than one occasion and were made by its attorney and the chairperson of its board.
“These are senior persons. Any reasonable person who received them would be entitled to accept that the contention was correct and the threat was real. After all they emanated from persons who would be expected to have the skill, knowledge and experience to present a true and correct account of the subscription agreement and who would be careful before making threats.”
The threats made by Capitec against the BEE shareholders were designed to intimidate, and they succeeded in dissuading other BEE shareholders, namely Rorisang and Lemoshanang.
“With regard to the common law duty of good faith, I find Capitec’s claim that no such a duty exists in our law to be incorrect. Any person changing its stance so radically and not explaining itself cannot be said to be acting in good faith. It is also not acting with due regard to its duty of candour to this court.”
Judge Vally found that Capitec’s refusal to consent to the sale of the shares was in breach of its contractual and common law duty of good faith to the BEE shareholders.
Asked to comment, Capitec Bank replied: “We are aware of the judgment and will comment after we have had a chance to study it and discuss it with our legal team. We expect to make a statement in the week.”
Is Tito trying to break the tradition of ministerial delusion? From Moneyweb.
How do you know when a Finance Minister is lying? When he makes a prediction.
There is a fine tradition of Finance Ministers telling whoppers in their budget speeches. Granted, it’s never easy to make accurate predictions on anything fiscal, but the track record of our ministers in calling GDP growth rates is abysmal. They’ve over-stated GDP in eight out of the last 10 years, sometimes by inexcusably large margins.
Given this track record, we should treat budget estimates as PR gibberish intended to mollify the restless limbs of the ruling coalition.
This is not a slight matter. The country’s tax receipts and borrowing requirements are tied to the accuracy of economic forecasts. Every time Treasury over-estimates economic growth, the shortfall has to be made up in borrowings, and you can see the result of that in the public debt-to-GDP table below.
Public debt to GDP
Virtually every year in the last decade, tax receipts were lower than expected. Just two months ago Mboweni released a growth plan for the country entitled ‘Towards an Economic Strategy for South Africa’ which aims to kick the economy into high gear and wrestle down unemployment.
There were some references to this plan in yesterday’s Medium-Term Budget Policy Statement (MTBPS), delivered to Parliament by Mboweni. The Integrated Resources Plan, outlining the country’s energy future, has been gazetted; Home Affairs has simplified the visa regime (but the implementation is way behind schedule, according to tourism experts); and plans are afoot to accelerate the licensing of the broadband spectrum.
These on their own will not shift the economic needle anywhere near what is needed to get the economy moving again.
Mboweni doused growth expectations for the current year, reducing the GDP forecast to a miserable 0.5% from the 1.5% forecast made in his budget speech in February. The budget deficit is expected to reach 5.9% of GDP in the current year, which takes us back to the levels last seen at the time of the 2009 financial crisis. He expects growth to reach 1.7% by 2022. In other words, we will remain trapped in a low-growth cycle for the foreseeable future.
Source: National Treasury, StatsSA, Trading Economics
Year Forecast Actual Minister of Finance
2019 1.5% 0.5% (Est.) Tito Mboweni
2018 1.5% 0.7% Malusi Gigaba
2017 1.3% 1.3% Pravin Gordhan
2016 0.9% 0.5% Pravin Gordhan
2015 2.0% 1.5% Nhlanhla Nene
2014 2.7% 1.5% Pravin Gordhan
2013 2.7% 2.2% Pravin Gordhan
2012 2.7% 2.5% Pravin Gordhan
2011 3.4% 3.3% Pravin Gordhan
2010 2.3% 2.8% Pravin Gordhan
Perhaps there is some truth in the claim that Mboweni’s sobering assessment of our current economic malaise is intended to shock his ANC colleagues into more radical reform.
If so, this kind of truth-telling would be a welcome change of form.
Revisiting some of the fanciful predictions made by finance ministers over the last decade is sobering.
In his 2017 budget speech, then finance minister Pravin Gordhan declared: “Government debt will stabilise at about 48% of GDP over the next three years. The budget deficit for 2017/18 will be 3.1% of GDP.” The actual figures for government debt in 2017 were 53% and the actual budget deficit for 2018 was 4.4%.
Budget deficit 2009-2018
In his 2016 budget speech, Gordhan said the budget deficit would be reduced to 2.4% by 2018/19. It actually came in at 4.4% in 2018.
In 2014, the budget deficit was projected to be 4%, but came in at 4.3%. In the same year GDP growth was projected at 2.7%, rising to 3.5% by 2016. The actual figures were 1.5% and 0.5%. It’s clear the longer the time horizons, the more divorced from reality are the projections.
In 2013 the budget deficit was expected to fall from 5.2% of GDP to 3.1% in 2015/16. The deficit came in at 4.1% in 2015 and 3.8% in 2016.
And so it goes on.
In 2012 the budget deficit was projected at 4.6% of GDP (not bad, it came in at 4.4%), with a plan to reduce it to 3% in 2014/15 (way off the mark, it came in at 4.1%). That same year public debt was expected to stabilise at about 38% of GDP (this was way out: public debt to GDP was nearly 50% in 2015).
Back in 2011 Gordhan bemoaned the youth unemployment rate of 42% (for people between 18 and 29). Youth unemployment (ages 15-24) is today sitting at 55%.
Growth expectations for 2010 were 2.3%, rising to 3.6% by 2012. Actually, growth exceeded Gordhan’s 2010 forecast, but he was way off the mark with his 2012 forecast of 3.6% (the actual growth for 2012 was 2.5%).
The cumulative effect of these over-estimates is a rising debt burden which Mboweni believes will exceed 70% of GDP by 2022/3. “This is a serious position to be in,” said Mboweni. In fact, debt to GDP could hit 80% in the next 10 years. The status quo is not an option and everyone – parliamentarians included – would have to tighten their belts. The country may enter a debt trap, and ratings agencies are ready to pounce unless more radical action is taken. The public sector wage bill must come down.
Says Maarten Ackerman, chief economist at Citadel: “The elephant in the room is quite obviously the public sector wage bill, which is currently the largest of all the OECD countries relative to GDP, accounting for 46% of all tax revenue in 2019/20 as a result of years of an increasing public sector headcount and above-inflation wage increases. Mboweni pointed out that adjusting for inflation, the average government wage has risen by a shocking 66% over the past 10 years – completely disproportionate to increases in the private sector, and without achieving a commensurate rise in productivity.”
No need for panic yet, say farming experts. From Moneyweb.
The farming sector in KwaZulu-Natal (KZN) is growing at a 12% clip thanks to good rains, while the country’s key maize growing areas have delayed plantings due to the unseasonally dry weather.
Dawie Maree, head of information and marketing at FNB Agriculture, says the resurgent KZN farming sector contributes about 4% to the province’s GDP.
A report last week by Agbiz chief economist Wandile Sihlobo says despite late rains, summer crop farmers are still upbeat about the prospects for the coming season, and plantings are expected to be the highest in the last three years.
Expectations are that plantings will be about 7% higher than last year, or roughly 3.9 million hectares, driven in part by better domestic market prices for maize, sunflower seed, soybeans and groundnuts.
“There are prospects for good rainfall in the first week of November 2019,” says Sihlobo. “In fact, the next three months might bring sufficient moisture in most parts of the summer growing areas of South Africa. The South African Weather Service forecasts above-normal rainfall in the central to eastern regions of South Africa between November 2019 and January 2020. This could help boost soil moisture and thereafter plantings and crop-growing conditions.”
While KZN’s agricultural sector is recovering from a severe drought, growth in the rest of the country is more pedestrian, with single-digit growth in the first half of this year. Maree says good rains have helped sugar crops on the north and south coasts. Dairy and irrigated maize in the Midlands region have likewise been helped by decent rainfalls in the previous production season, boosting cattle and commercial poultry production inland.
Large tracts of land previously under sugar in KZN have been turned over to more profitable macadamia and avocado plantations. According to Macadamia SA, 90% of production is being exported, mainly to China.
Maree says the agricultural potential of the province is still growing, due to the availability of underutilised arable land in tribal areas.
Avocados are selling for between R80 to R140 per 16kg bag, with rising export demand from Europe, the Middle East and the soon-to-be-developed Far East market.
Key risks for farmers:
Land reform and expropriation without compensation is one of the key risks, and there is little that farmers can do to mitigate this, says Maree. “We consider the new policy on land a risk for agriculture but are not overly concerned at this stage. We do expect more clarity around March next year.”
Climate change is another risk, and one that farmers are better able to manage. Following the 2016/17 drought, farmers diversified both products and geographical areas. Small-scale farmers are less equipped to diversify geographically, but most have already diversified into new crops to mitigate climate risks.
Cheap imports of sugar and milk. There is heightened risk of cheap sugar imports from South America and neighbouring countries, while dairy imports are reportedly flooding through KZN ports – particularly long-life milk, which enters the country tariff-free, while milk powder and cheese carry tariffs of roughly R4.50 a kilogram.
Livestock prices took a knock following the outbreak of foot-and-mouth disease in January this year. The country has excellent poultry farmers, but they are battling dumped products and increasing feed costs.
Assuming late but otherwise normal rain patterns, Agbiz says the increased plantings could result in a good harvest and a drop in commodity prices.
In the case of major crops such as maize, the last time SA planted a large number of hectares close to the 2.5 million hectares intended by farmers this season was in the 2016/17 production season. This was accompanied by a record harvest of 16.8 million tonnes. This does not necessarily mean the coming harvest will match or exceed this prior level, but is an indicator of what could happen.
KZN’s agricultural recovery, despite the headwinds, is still poised for growth and an even greater contribution to the national GDP, says Maree.
To prevent township from ‘sliding further into lawlessness’ over electricity disconnections. From Moneyweb.
Several hundred Soweto residents, led by the Lungelo Lethu Human Rights Foundation (LLHRF), are planning to haul Eskom before the South Gauteng High Court to stop the electricity utility carrying out what they say are arbitrary and discriminatory electricity disconnections.
LLHRF intends asking the court to compel Eskom to set up a fair and independent tribunal to adjudicate the complaints. Summons will be served on Eskom in the coming weeks.
Eskom’s annual report says it is owned R18 billion in unpaid electricity bills in Soweto alone, out of a total arrears bill of about R40 billion.
In the last few days President Cyril Ramaphosa issued a public letter calling for an end to the culture of non-payment that worked so well in bringing an end to apartheid, but “has no place in present-day SA. If public utilities like Eskom are to survive, then all users need to pay for the services they receive.”
Speaking at the recent Joburg Mining Indaba, Eskom acting CEO Jabu Mabuza also called for an end to the culture of non-payment that had contributed to Eskom’s dire financial situation.
By some estimates, just 10% of residents are paying for electricity in Soweto.
The notion that Soweto residents are wilfully delinquent is challenged by LLHRF president King Sibiya. “Our main objective in bringing this court action is to stop Soweto sinking deeper into lawlessness. Social protests are escalating and recently this resulted in the tragic death of two workers. We have held numerous forums in Soweto and have heard complaints from residents that Eskom is disconnecting residents without just cause.
Paying customers also affected
“Some residents who are dutifully paying their electricity bills have been disconnected, and others who are entitled to free or subsidised electricity are also being disconnected.
“Our request to the court is very simple: establish a tribunal to hear the individual merits of each complaint before deciding to disconnect power from people who are often living in desperate circumstances.”
Soweto is supplied with electricity directly by Eskom, and not City Power, which supplies most of Johannesburg. City Power has established channels for resolving customer complaints, largely due to various high court decisions in recent years. However Eskom is not subject to the same legal requirements and is therefore able to act with impunity when deciding to disconnect customers, says Sibiya.
He adds that Eskom’s claim that Soweto residents are R18 billion in arrears requires a proper audit.
“Based on our interactions with community organisations in Soweto, we believe this figure may be exaggerated,” says Sibiya. “We are not asking for any freebies for Soweto residents. We support President Ramaphosa’s call for an end to lawlessness and the culture of non-payment. But we want fairness and transparency in the way Eskom treats its customers in the area.”
The Soweto Accord
LLHRF says an agreement was reached in 1992 between Eskom and Soweto residents. The so-called Soweto Accord outlined an 11-point plan whereby Eskom would directly provide the township with electricity, thereby avoiding having to pay local government mark-up fees. The purpose of accord was to bring an end to the rent boycott prevailing at the time and restore a culture of payment within townships. That clearly hasn’t worked.
Sibiya says he decided to get involved when he saw service protests in the township and the destruction of Eskom property and assets. “If we don’t do something about this, the service protests will get worse.”
Some of the key points of the Soweto Accord were:
Residents of Soweto were to receive electricity direct from Eskom with a flat rate of R33.80 per month per household. This flat rate was to be paid until Eskom repaired all meter boxes in Soweto. This was supposed to end the practice of Eskom billing customers based on estimations (a practice that continues til today). Residents complain that they are not being accurately billed for services.
Eskom was to embark on a consumer education programme to explain to customers how billing worked and to assist them in reading their meters. The intention was to assist residents in saving electricity.
Eskom, together with civic associations, would embark on educational roadshows. This did not happen, says the LLHRF.
Eskom would repair all transformers to assist it in reaching its targets in terms of budget and service delivery. The resultant improvement in service delivery was considered a key component of the campaign to restore a culture of payment in the township. This, too, did not roll out as planned.
Poor households were to be extended “a duty of care”, meaning government would subsidise those who can’t afford to pay for services they consumed. Today, Eskom is claiming payment from these same poor people (and the municipality), to the tune of R18 billion.
Soweto’s disputed R18 billion debt to Eskom
“We are willing and prepared to pay electricity tariffs at affordable rates, taking into consideration the fact that unemployment and poverty are at extremely high levels in the township,” says Sibiya.
“Eskom’s unilateral approach to disconnections and billing is unjustified, unreasonable and inequitable. Water and electricity are fundamental human rights as stipulated in the United Nations Universal Declaration.”
LLHRF says the solution is for both sides to engage meaningfully with a view to drawing up a binding policy framework. A flat electricity rate can be agreed as an interim solution. The interim solution depends on the negotiations by both parties.
“We are also sympathetic to Eskom’s predicament,” says Sibiya.
“There is a debt outstanding. But the chances of recovering this are very low indeed so long as we have antagonism between Eskom and the people of Soweto.
“Criminality is spreading in the township through cable theft and destruction of Eskom’s property. This makes it difficult for Eskom to deliver on its mandate and to achieve its budget. We want to assist them to restore services in the township and bring an end to criminality. This will require the cooperation of law enforcement agencies, community forums and Eskom.
Electricity prices have been escalating at more than 18% a year in recent years. On the current pricing trajectory, expenditure by households will almost double by 2030. This is unsustainable in one of the poorest parts of the country.
Background to the dispute
LLHRF says at the start of winter this year Eskom disconnected electricity to hundreds of Soweto households, schools, churches, business without any notice. The disconnected included people who paying their monthly bills. This was a punitive and blanket response by Eskom to criminals who had stolen cables and destroyed Eskom property.
Soweto has a long history of disputes with Eskom, dating back to the apartheid years.
In the early 1990s, many residents joined the Operation Khanyisa campaign which encouraged the illegal reconnection of electricity.
The campaign justified illegal reconnections based on long-standing claims of massive and indiscriminate cut-offs, including cutting off entire blocks, thereby penalising those who were paying their bills.
According to a University of Johannesburg PhD study on township service delivery protests by Ndanduleni Nthambeleni, the campaign organisers also claimed incorrect billing, cut-offs without proper notice, unserviced and faulty meters and the lack of concessions for the poor, the disabled and the unemployed.
LLHRF says it approached Eskom on behalf of the community on numerous occasions, and was informed by Eskom management that it cannot reconnect electricity without an audit. “We sent petitions and memoranda to Eskom, to no avail,” says Sibiya.
Eskom is demanding R6 500 for reconnections and 25% of the outstanding debt as an upfront payment.
“This is clearly unaffordable for many elderly people and pensioners now living without power,” says Sibiya. “Many residents also complain of over-billing, but are unable to have their voices heard by Eskom.”
LLHRF says Eskom is in violation of the Soweto Accord as well as the Consumer Protection Act, the Municipal Systems Amendment Act, the Promotion of Administrative Justice Act and the Constitution.
Response from Eskom
All Eskom tariffs are regulated by Nersa (National Energy Regulator of SA) and Eskom abides by those tariffs for each category of customers. Customers will therefore pay the tariffs applicable to their category as with all customers supplied by Eskom throughout the country.
Eskom cannot negotiate separate tariffs or have preferential arrangements outside of what is regulated. A fixed charge per household will result in customers paying a fixed amount irrespective of the amount of electricity used. This could lead to wasteful usage of electricity. Above all, this will cause network overloading and hindrance in providing good service to customers. Eskom’s lifeline tariffs are Homelight 20 A and Homelight 60 A.
The lifeline tariffs are meant to provide a basic electricity service at a subsidised rate to those who cannot afford to pay the full tariff.
The current inclining block tariff (IBT) is provided to all residential customers, and therefore provides a subsidy to all low-consumption residential customers.
Eskom has a yearly customer education schedule for various communities including Soweto. The programme focuses mainly on the safe use of electricity, how to use electricity wisely and efficiently, the IBT, free basic electricity (FBE) and other electricity-related information that is of benefit to customers.
Eskom is not in a position to continuously provide services in areas where the residents are not paying for their electricity. Non-payment of electricity does not only affect the security of supply for paying customers, but it also contributes to increased energy and revenue losses coupled with increased operational costs.
Eskom maintains and replaces failed infrastructure on a regular basis due to overloading caused by illegal connections. This is not sustainable and a PFMA [Public Finance Management Act] issue while not in line with Eskom’s revenue management practice and efforts to improve on its financial and operational objectives.
In order for Eskom to replace the damaged mini-substation and subsequently restore supply to the area, audits have to be conducted on the premises that are connected to the said mini-substation or the transformer. The audits will assist in identifying and eliminating the cause of the failure and damages to electricity equipment. During these audits, illegal connections and tampered meters will be immediately removed, customers who have contraventions will be disconnected and a fine of R6 052.60 will be issued to the customers that bypassed meters.
The government assists all qualifying indigent households by providing free basic electricity. This is a programme facilitated and administered by municipalities. Eskom issues FBE to identified customers on behalf of the government.
Eskom is allowed by law to estimate customer readings. The estimations are based on the customer’s consumption when actual readings are taken. Eskom is also able to correct estimations if a customer is over or underestimated whenever actual readings are taken. Eskom meter readers are in some instances unable to enter customers’ premises due to challenges such as locked gates and dangerous dogs. However, customers are encouraged to send their meter readings to Eskom between the 4th and 7th of each month.
Predicting dizzying prices in 2020 and beyond. From Moneyweb.
The gold bulls are back, predicting a price of $1 700 an ounce and higher in early 2020.
This month gold rallied to its highest level in six years, ranging between $1 480/oz and $1 510/oz. Standard Chartered Bank expects gold to remain at these prices for the rest of this year and then move to around $1 570/oz by this time next year.
The recent rise in the metal price has softened jewellery demand from India and China, but other factors are creating powerful tailwinds that will sustain price momentum into 2020 and beyond. Retail investment in gold-backed exchange-traded funds (ETFs) is picking up, while hedge funds are buying on the dips to $1 480/oz and selling on the mini-rallies to $1 510/oz.
World Gold Council figures show that 374 tons of gold was bought by central banks in the first half of this year, most of it by emerging market countries. Second quarter gold buying by central banks in 2019 was the highest in 19 quarters. It was also the highest quarter in six years for buying by ETFs. SA gold stocks have benefitted from the higher price despite weak production figures in the third quarter of this year, largely due to labour-related disruptions at Sibanye-Stillwater.
The predictions for gold range from the modest to the wild.
Gold doesn’t get much love from the mainstream investment crowd because of the peculiar universe it occupies.
It is a physical asset with limited supply and pays no dividend. What is does offer, however, is protection against economic uncertainty.
Frank Giustra, chairman of Leagold, says the global debt bubble has caused massive mispricing in asset values and the world economy is long overdue for a reckoning.
Global debt is now hovering close to $244 trillion, according to Bloomberg – more than three times the size of the global economy. The problem with much of this debt is that returns are now negative or close to zero, which poses massive risk to retirement savings.
This has to end badly for the world economy, Giustra told Kitco News, but will be good for gold. Central banks attack every economic problem with another bout of quantitative easing and appear to have run out of ideas about what to do to keep the world economy afloat.
This failed monetary experiment is going to drive the metal price higher in 2020, says Giustra.
He adds that the best way to participate in this bull run is by owning bullion directly and by making select investments in gold mining stocks managed by teams with a proven track record.
Higher cost mining groups are more leveraged to a rising gold price and therefore offer the potential of spectacular returns – assuming the gold price continues its upward run into 2020 and beyond.
The dizzying predictions
Independent gold analyst Peter Grandich has been pretty spot-on with his predictions in the last six years, calling the break above $1 500 an ounce over a year ago. Gold is now forming a base around $1 500/oz and is preparing for the third leg of a major bull run that will take it past $2 000/oz in the coming few years.
In 2018 he announced he was selling virtually all his equity holdings, arguing that gold was a better vehicle for capital gains going forward. Now that gold appears to be forming a new bottom at just below $1 500/oz, the weak-kneed gold bulls have already cashed out. But new retail investment appears to be picking up the slack.
We’re in the third and final phase of the gold market that started in 2001 and this will be the most explosive phase for gold, according to Giustra, who sees bullion punching through the $2 000/oz mark in the next few years.
This will be accompanied by recession, and countries competing with each other to devalue their currencies.
Giustra has a decent track record when it comes to predicting gold. In 2008 he predicted the world would avert a depression, but that the effects of the easy money project would be felt later and that gold would surge. The metal went above $1 900/oz in 2012 and then spent the next six years in hibernation.
As the chart below shows, coal was (and still is) the driving force of the mining sector for much of the last three years but has since fallen behind the spectacular surge in platinum and gold stocks. Gold stocks have lagged platinum over the last year, breaking a correlation that remained intact between 2016 and 2018.
Coal vs platinum vs gold index
Peter Major of Mergence Corporate Solutions says the commodity market bottomed in 2015, and coal became a victim of the state capture project at Eskom, where contracts were gifted to cronies rather than the large low-cost producers that two decades ago made Eskom one of the lowest cost producers of electricity in the world. That, and the rising costs of mine rehabilitation, pushed most of the large-scale players out of coal.
Instead of coal being shipped by conveyor belt, it was trucked in from afar, causing a spike in the cost of delivered coal for which the entire country is still paying today. Speaking at the recent Joburg Mining Indaba, Eskom CEO Jabu Mabuza said he wants a return to the proven formula of long-term contracts, with coal delivered by conveyor belt.
International coal prices have dropped from about $100 per ton to $60/t in the last few months, forcing investor interest to shift back to other commodities such as gold.
Gold price in USD – predicted to hit $1 700/oz in 2020
Necsa has been defeated twice in court in recent months: once in the Labour Court, when Malebana challenged his unlawful dismissal and again in the Pretoria High Court in a case brought by suspended board members Kelvin Kemm and Pamela Bosman, and dismissed CEO Phumzile Tshelane.
In August the high court overturned former Energy Minister Jeff Radebe’s suspension of Kemm and Bosman, but made no ruling on Tshelane’s status as a disciplinary process was still ongoing.
Legal experts say this should have immediately resulted in the dissolution of the current Necsa board, since the court ruling means all decisions made by the Necsa board since December 2018 – when the previous board was suspended – are subject to review.
Despite losing two recent court cases, Necsa appears to have a plan to beat the court rulings. We know this because Moneyweb is in possession of a secret recording of a September boardroom meeting in which various legal strategies are discussed. We were advised against publishing this as it violates attorney-client privilege.
A recording and transcript of the meeting has however been circulating on social media for some weeks, so the secret is already out.
It has also reportedly been sent to Mantashe.
He will no doubt be alarmed that an organisation that made R300 million in profit two years ago is now asking Parliament for a R500 million bailout.
He should also be alarmed that an ‘unlawful’ board seems preoccupied with its own survival. Meanwhile, MNS Attorneys, representing Necsa in several of its labour disputes, continues to rake in the fees.
This is what occupies the top nuclear minds in the country.
It’s clear the incumbent board plans on going nowhere, despite the recent court decisions.
Malebana, meanwhile, was suspended after raising serious legal and governance breaches at Necsa. He’s the kind of person one would imagine Parliament would want as head of legal at the state-owned company.
He was doing his job, perhaps a little too enthusiastically for the likes of some.
But Necsa does not want him back. Nor, it seems, does it want to take back the previous board suspended by Radebe nearly a year ago for “defiance and ineptitude”, despite the high court ruling.
Current board ‘unlawful’
“Any decisions made by this current board are unlawful,” says Malebana. “They were unlawfully appointed, they are unlawfully occupying their seats, and all decisions they make must be subject to review. This is quite apart from the fact that the board is inquorate [lacks enough members to make up a quorum].”
Nor, apparently, does the Necsa board have the support of labour.
The National Education, Health and Allied Workers’ Union (Nehawu) has called for the reinstatement of the board sacked by Radebe. It is particularly alarmed at a board turnaround plan that called for the retrenchment of 400 workers. This prompted it to come up with a turnaround strategy of its own – and it provides a fascinating insight into the inner workings of the company.
The Nehawu plans suggests Necsa can:
Save R40 million a year by halving the use of external consultants and contractors;
Save a further R15 million on needless legal expenses; and
Bring work currently being outsourced to the tune of hundreds of millions, in-house.
The Nehawu turnaround plan illuminates multiple areas of apparent wastage, not counting the business opportunities going begging, such as training opportunities in Africa. Zambia, Kenya and numerous other countries are planning to build their own nuclear medical plants and Necsa should be the continental leader in this.
In addition, Radebe nuked a non-binding agreement with Russian medical nuclear company Rosatom, that Nehawu says would have earned Necsa ongoing income from advisory and training services.
Much of Necsa’s current malaise is blamed on Radebe.
Former Energy Minister Jeff Radebe. Image: Moneyweb
While he assumes his new role as special envoy tasked with reassuring our neighbours and friends that we have xenophobia under control, Necsa is in perpetual crisis.
In the past year, Necsa has cycled through half a dozen CEOs and two chairs while its finances are in chaos. The medical isotopes plant at Pelindaba near Pretoria has been shut down multiple times in the last 18 months, largely for lapses in paperwork related to safety.
Malebana says he stands by his earlier claims of unlawful behaviour by the Necsa board. “I have always said that this unlawfully-appointed Necsa board is behind my persecution. I am lawfully employed as Necsa’s legal officer and I have always discharged my duties in the best interests of the company and its shareholder, the state.
“This board has infringed upon my rights as an employee and they have unlawfully interfered in my contract of employment with Necsa.”
Union pushed into taking ‘extraordinary’ step
Zolani Masoleng, Nehawu branch chair at Necsa, says the current “Jeff Radebe board” and its executives have no credible solutions to the crisis.
“All they are offering is lip service, endless excuses, blame game and abdicating responsibility.
“Things are drifting to a costly disaster under their watch.
“It is for this reason we, as the majority union, took the extraordinary step of developing our own credible and practical turnaround proposal which they [the board] are paid to do and we are not,” he says.
“In addition to us developing this proposal we have written to the minister of mineral resources and energy, and the Parliamentary Portfolio Committee on Mineral Resources and Energy, bringing to their attention this crisis for their intervention.”
Masoleng adds that last week the union lodged complaints with the Office of the Public Protector and the Companies Intellectual Property Commission of SA to alert them to the maladministration as well as legal and cooperate governance violations at Necsa.
Nehawu says that if no action is taken this week, workers will decide by secret ballot whether or not to embark on a protected strike.
“The lives of 2 000 employees and their families cannot be put on the line by people who don’t have the interest of this organisation at heart.”
Responding to questions from Moneyweb about the secret recording, Necsa issued the following statement:
“Please note that the transcript in your possession constitutes an unlawfully recorded communication between the Necsa board of directors and its legal representative.
“The recording and transcript of that communication constitutes confidential information that was exchanged, in a private setting at a national key point, to enable the Necsa board to be advised on various legal matters from its legal representative.
“In light of the above, the communication is protected by attorney-client privilege and you are prohibited from possessing, distributing, and using this information for any purpose.”
We elected not to publish the transcript of the meeting on legal advice.
There are however broader issues at Necsa that impact Necsa workers and the South African public, and we will not flinch from airing these.