Author Archive

Ciaran Ryan

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.

Joburg’s Weltevreden Park residents fix potholes themselves for R10k

Written by Ciaran Ryan. Posted in Journalism

Because the Joburg Roads Agency has been ‘socially distancing’ from the community for the last year. From Moneyweb.

Getting the job done. Image: Supplied
Getting the job done. Image: Supplied

If you’re a Joburg resident, you might have noticed the untended potholes in the area where you live.

The Panorama Residents Association (PRA) in Roodepoort to the west of Joburg says it tried every avenue to get the potholes in its area fixed, to no avail. Despite escalating their complaints up the chain of command at the Johannesburg Roads Agency (JRA), the potholes multiplied, until it became too much for residents to bear.

They complained of buckled wheel rims until they could take it no longer.

Read: Joburg’s woes continue

The association realised the JRA wasn’t going to get to the job any time soon, so it took matters into its own hands.

For the princely sum of R10 000, the PRA went out and bought one ton of pre-mixed tar and got some local residents to volunteer their time, while a local company EC Security provided a machine and labour to compact the tar.

One day later, nearly 100 potholes on the key arterial routes had been filled.

The association is funded by R250-a-year membership fee. Image: Supplied

Oddly enough, a day after starting their volunteer project, the JRA must have read about it in the local Roodepoort Record, because suddenly it sent out a team to start mending potholes in the area.

The PRA is responsible for the area bounded by Jim Fouché Road, Hendrik Potgieter Drive, Tennis Road, JG Strydom Drive and the N1 highway.

Chair Dave Baxter says the association is funded by R250-a-year membership fee, which is used to clear overgrowth near sidewalks and green areas, mend fences in public spaces and, now, to fix potholes.

This does not include a 64-strong volunteer force involved in local community policing to keep crime under control.

‘Broken window’ policy

Baxter has been monitoring crime stats in the area for years and says these combined efforts have resulted in a 20% drop in local crime rates. “The Covid lockdown certainly helped because everyone was under curfew, but we have found that keeping the area clean and neat also helps keep crime away.”

Baxter and his fellow PRA members are strong advocates of the ‘broken window’ policy which is credited with reducing crime in New York City during the 1990s by addressing minor infractions such as loitering and public drunkenness.

In other words, fixing broken windows creates a sense of order which makes residents feel safer, whether or not crime rates are actually reduced.

One of the authors of the ‘broken windows’ policy, the late George L Kelling, discovered that putting police on foot patrols, rather than in vehicles, also creates a sense of safety and wellbeing.

Community policing

SA has experimented with community policing forums, and some still exist around the country, but many areas are now policed by private security firms, in part because of an overstretched police force. This study also suggests that the police have some work to do to build public trust.

Community policing has made a robust comeback, with the support of the PRA and its 12 neighbouring residents’ associations.

The Honeydew Community Policing Forum is headed by 67-year-old real estate businessman Jon Rosenberg, who has built a 64-strong volunteer force that patrols a large area to the north and west of the city. It is this ‘eyes and ears’ on the ground that has reduced crime by an estimated 20% since the volunteers started patrolling the streets. It also provides victim support when needed.

Rosenberg says community policing forums fell into disfavour in parts of the country due to cowboy-type behaviour among some volunteers.

“This is why we put our volunteers through basic and ongoing training to make sure they know what they are allowed – and not allowed – to do,” he says.

“We are there to assist the police and report suspicious behaviour when we spot it. Our volunteers are kitted out with uniform shirts and jackets, and soon we will be providing bullet-proof jackets. Unfortunately, the criminals of today are often armed and think nothing of shooting a member of the public, so we have to take steps to protect ourselves.”

That’s one example of local residents taking back their streets.

Parallel service delivery

As Moneyweb previously reported, Free State residents of the Lesotho border town of Ficksburg have started to run a parallel local government because of the perceived ineptitude of the local municipality. Funded by residents and local businesses, they send out teams each week to clean up litter and clear overgrown brush from the side of the road. This had the effect of driving criminals, who had taken sanctuary in the overgrown brush, out of the area.

Read:Free State residents put down their pens and take to the streets

North West residents take matters into their own hands, and get court’s blessing

The revolt of the ratepayers

The Institute of Race Relations (IRR), under its #StopCitizenAbuse campaign, has adopted the PRA programme and wants to see similar campaigns being replicated across the country.

Says Amy-Claire Morton, spokesperson for the #StopCitizenAbuse campaign: “The IRR encourages communities either struggling with getting their municipality to attend to infrastructure and service delivery, or taking the initiative to fix things themselves and thereby acting to stop citizen abuse, to reach out to us.”

She adds: “Doing so will enable us to use such examples to inspire other communities and arm us with the real-life examples of citizen abuse that will help to put pressure on the government.”

Court orders suspended municipal manager’s reinstatement, mayor to pay costs

Written by Ciaran Ryan. Posted in Journalism

Jerry Mononela got caught up in the North West’s ANC factional war. From Moneyweb.

Losing two key court cases and being hit with costs in the latest case may dampen the municipality's enthusiasm for running up legal costs at taxpayer expense. Image: Shutterstock
Losing two key court cases and being hit with costs in the latest case may dampen the municipality’s enthusiasm for running up legal costs at taxpayer expense. Image: Shutterstock

This week the North West High Court ordered the Dr Ruth Segomotsi Mompati District (DRSMD) Municipal Council, its speaker and mayor to foot the court bill for unlawfully suspending the municipal manager, Jerry Mononela, after claiming he was guilty of financial misconduct.

“What’s interesting about this case is that the high court judge awarded punitive costs against the mayor, the municipal speaker and the municipal council,” says Mandla Mpempe of the Centre for Good Governance and Social Justice, a non-profit aimed at restoring accountability at local government level.

“This is not the first time that public officials have been held accountable for wasting public funds by bringing frivolous or vexatious cases before the courts.

“But this judgment sends a welcome and powerful signal to public officials across the country that the days of using public funds to wage their personal political battles are coming to an end,” says Mpempe.

“They will be held liable for the costs in their personal capacities.”

Dr Ruth Segomotsi Mompati District Municipality

Source: Google Maps

The court ruled that Mononela had been unlawfully placed on precautionary suspension on February 22, 2021, without being given adequate time to defend himself.

Unlawful

The municipal manager was placed on suspension by Mayor Kgalalelo Sereko, without a council resolution, which was supplied after the fact without hearing representations from Mononela.

All this happened just days after the previous executive mayor was removed from office by the municipal council by way of resolution.

Three days later, newly-appointed mayor Sereko removed the municipal manager and issued a media statement claiming the suspension was as a result of an advance payment to R16.1 million to a company called HT Pelatona, and for “failure to prepare budget adjustments”.

An internal municipal report provided to Moneyweb appears to show that the R16.1 million was not a pre-payment to HT Pelatona as alleged by the council, but was paid in terms of a contract for services already delivered for the installation of a tank and pump station.

Motive

Mpempe says none of this makes any sense unless one understands that an internal political war is raging within the ANC in North West Province, and those who stand on the wrong side of this factional battle are being sidelined.

“We strongly suspect that with the ANC conferences coming up in North West, this is an attempt to remove people who stand in the way of those who intend to misuse public funds to advance their own political agendas.”

Mononela was replaced as municipal manager by Teko Gaanakgomo, who reportedly does not have the required qualifications for the job.

Mpempe says he continues to hold this position, despite the municipality being ordered to remove him due to lack of qualifications by the provincial MEC for Cooperative Governance, Human Settlement and Traditional Affairs (Cogta).

Read: North West residents take matters into their own hands, and get court’s blessing

Also removed from her position was former executive mayor Boitumelo Mahlangu, who successfully challenged her suspension in the North West High Court. The municipality appealed this ruling last week, and the appeal ruling is being awaited.

Meanwhile the mounting legal costs associated with these irregular suspensions are being paid for by taxpayers.

Shocking financials

report by Municipal Money, a database of local government finances run by National Treasury, shows the municipality is hardly a bastion of financial rectitude.

The latest figures available for the 2019 fiscal year show that irregular, fruitless and wasteful expenditure accounted for 93% of operating expenditure.

The Auditor-General issued a disclaimer for the municipality in 2019, on the grounds that there was insufficient documentation to form an opinion on its financials.

Municipal Money also shows that nothing was spent on repairs and maintenance for the two years from 2017 to 2019.

For every R10 spent on building and replacing infrastructure, R0.80 should be spent every year on repairs and maintenance, equivalent to 8% of the value of property, plant and equipment.

The municipality relies on 98.4% of its income from provincial and national government, with only 1.6% being generated locally, and virtually all of this is from interest and investments.

The municipality’s loss of two key court cases involving the suspended mayor and municipal manager, and the awarding of punitive costs in the case of the latter, may dampen enthusiasm for running up legal costs at taxpayer expense.

Taxpayers are paying for all this

Mpempe points out that it’s all South African taxpayers who are footing the bill for these legal extravagances, as the municipality is almost entirely reliant on transfers from the national and provincial governments.

Read: Confirmation that municipalities are a huge burden on taxpayers

“It’s time for the provincial and national Cogta departments to start paying attention to these shenanigans at DRSMD municipality, which is part of a pattern we are noticing in North West, in particular.”

Nearby Taung Municipality reportedly ran up legal bills of R27 million in less than two years, most of them related to internal disciplinary matters.

Read: Taung municipality whistleblower’s 10-year battle for justice

Mpempe says the Centre for Good Governance and Social Justice has addressed its concerns over these issues to the provincial MEC, but has yet to receive a reply.

This is an admission, says Mpempe, of paralysis on the part of the department.

Retailers assisting the black market for cigarettes – Study

Written by Ciaran Ryan. Posted in Journalism

Nearly three-quarters of retail outlets in Free State, Gauteng and Western Cape are selling illicit cigarettes, according to study. From Moneyweb.

Image: Suzanne Plunkett, Bloomberg News
Image: Suzanne Plunkett, Bloomberg News

A study commissioned by British American Tobacco SA (BAT) – said to be free of interference from BAT – suggests the cigarette market has been given over to black marketeers, with four out of five outlets surveyed in the Free State offering smokes at below the minimum collectible tax (MCT) of R21.61 for a pack of 20.

Any pack of 20 cigarettes selling below the MCT of R21.61 is deemed to be illicit. Some packs were selling for as little as R10 and even R6 – meaning no tax could have been paid on these cigarettes.

The study says this is a consequence of the government’s imposition of a ban on cigarette sales in the early part of the Covid lockdown last year (now lifted). The ban allowed a black market for cigarettes to flourish, with the fiscus losing R8 billion a year in excise revenue.

Illicit cigarette sales were most prevalent in the Free State, where 81% of outlets visited were selling below the MCT price level, against 70% of outlets visited in Gauteng and 71% in the Western Cape, according to the Ipsos study.

“That’s almost a 10% increase on the figures recorded only a month ago before the big hike in tobacco sin taxes,” says Yusuf Abramjee, founder of Tax Justice South Africa.

“It is shockingly clear that the excise increase, which was double the rate of inflation, has triggered a full-scale price war among tax-evading manufacturers, who’ve been gifted more customers and even bigger profit margins.

“The government lit a fire under the illicit cigarette trade with the five-month lockdown tobacco sales ban last year that handed the market to criminal operators.”

The government had unleashed this monster and has a duty to get it back in its cage, added Abramjee. Illegal cigarettes are known to be pouring across the border from Zimbabwe, Mozambique and even Zambia, where SA’s high excise rates of cigarettes provide a god-sent opportunity to black marketeers.

The Fair-trade Independent Tobacco Association (Fita), which represents smaller tobacco producers based in SA, is unconvinced by the study findings and Abramjee’s conclusions, which point to some of its clients as the main culprits.

According to Ipsos, cigarettes produced by Gold Leaf Tobacco Zimbabwe (not part of Fita), Carnilinx and Afroberg Tobacco were most frequently found to be selling below the MCT level. According to a July 2020 study by University of Cape Town’s Research Unit on the Economics of Excisable Products (Reep), 93% of smokers were able to buy smokes on the black market.

The same study found that the market share by multinational tobacco companies (British American Tobacco, Philip Morris International, Japan Tobacco International and Imperial Tobacco) had collapsed from 74% to just 17%.

Says Fita chair Sinenhlanhla Mnguni: “These so-called independent reports are now also being used as ammunition by Big Tobacco for anti-competitive purposes to smear the names and brands of independent local cigarette manufacturers as a way to strong-arm retailers into removing the products of smaller independent manufacturers off their shelves. This is an attempt to maintain the status quo and to keep certain players in the informal trade in order to protect the profits of multinationals in an anti-competitive manner. This perpetuates the illusion that the brands of local cigarette manufacturers must be illicit, given that they can only be procured from informal traders and not in formal retail spaces.”

Tax Justice SA has called for a commission of inquiry into the collapsed tax revenues from cigarette sales due to black market activity, though Fita says this will not achieve anything other than wasting taxpayer money and time.

“Fita members are all compliant with the relevant laws of this country which govern the tobacco industry and have at all times been co-operative with Sars in as far as its efforts in implementing measures to curb non-compliance in the industry along its value chain such as that of installing production counters on the machines of our members.”

Gold Leaf Tobacco Company (GLTC) is a member of another industry body, SA Tobacco Organisation (Sato), which issued a statement in January that Gold Leaf was paying tax of R200 million a month.

“Our member’s market share, as researched by independent researchers, confirms that our member’s sales are in conformity with [their] tax contributions, thereby rubbishing all and any allegations concerning any illicit activity of GLTC,” said Sato.

Fita has turned the spotlight back at BAT, which was itself the subject of a report by Tax Justice Network in 2019 claiming it was shifting profits out of poorer countries to tax-friendlier jurisdictions.

Sato has called for all tobacco manufacturers, multinational and local, to open up their records for scrutiny by the public to determine where the tax leakage in the SA economy is occurring.

Crypto exchange iCE3 to be liquidated, suspends all withdrawals

Written by Ciaran Ryan. Posted in Journalism

Appears to have suicided itself, with its public admission in March of account balance ‘discrepancies’ prompting a rush by clients for the exit door. From Moneyweb.

The exchange removed its Facebook presence, resulting in clients launching their own page to post updates and share information. Image: Moneyweb
The exchange removed its Facebook presence, resulting in clients launching their own page to post updates and share information. Image: Moneyweb

Crypto exchange iCE3 posted an announcement on Monday that it had been “advised to initiate liquidation proceedings” after suspending all trading on the exchange in March following the discovery of account discrepancies.

Read: iCE3x suspends trading after discovering account discrepancies (Mar 18)

It has also suspended the withdrawal of client funds. This comes just a week after informing clients that it would process withdrawal requests for all cryptos and rands, with the exception of bitcoin and litecoin.

Several iCE3 clients contacted Moneyweb saying their requests for withdrawals have not been processed. On Monday, they were greeted with a terse announcement that the company would suspend all withdrawals and initiate liquidation proceedings.

It remains unclear why all but bitcoin and litecoin withdrawal requests were processed, as these are likely to make up the bulk of cryptos held in client accounts on the exchange.

Client draws a blank

One iCE3 client, who asked not to be named, told Moneyweb he has been trying for several weeks to withdraw his crypto, to no avail. “Up until Monday I was receiving communications from the company and was told my request for withdrawal was in the queue. Then suddenly things went quiet when the company posted a message saying that withdrawals had been suspended and the company was going to be put in liquidation.

“I’m worried that I am going to lose what I have built up in my account.”

iCE3 removed its Facebook presence, resulting in clients launching their own Facebook page to post updates and share information. “Since the ICE3x management have abdicated their responsibility in managing the narrative around this issue, this page has been created as a hub for people to share strategies about the way forward and status updates around the problems we face with the failures at their exchange,” says the welcome message on Facebook.

Not one of the bigger players

Moneyweb reached out to iCE3 founder Gareth Grobler for clarification but had not received a reply at the time of publication.

Though iCE3 is reckoned to have about 80 000 client accounts, a small percentage of these are active, making it a relatively minor player in the local crypto space.

The reasons given for the suspension of trading on the exchange in March were an apparent dispute with Austrian technology partner Merkeleon.com and its subsidiary Coinspaid.com.

The company appears to have suicided itself with its public admission in March of account “discrepancies in the balances pertaining to bitcoin and litecoin” – prompting a rush by clients for the exit door.

The statement by iCE3 in March reads: “On the advice of our legal & auditing team, we have suspended all Deposits & Trading. Furthermore, we have suspended BTC [bitcoin] and LTC [litecoin] withdrawals with immediate effect, pending the outcome of a full investigation and reconciliation. This is being done for the protection of all clients.”

iCE3 clients whose funds have not been paid out are now concerned that their fate lies in the hands of the liquidators, and it may take years before they know whether they will receive anything back.

iCE3 was established in 2013 and was one of the oldest exchanges in the country. The failure of a crypto exchange in a sector endeavouring to build public trust has been met with alarm by some in the industry.

“It is obviously very unfortunate to hear of the closure and liquidation of any crypto exchange,” says Farzam Ehsani, founder and CEO of crypto exchange VALR.

“I’m not aware of the details of what has happened, but I hope that a favourable resolution can be found for all parties involved.”

The latest statement from iCE3 reads:

We regret to inform you that the platform will not return to operation and that we have been advised to initiate liquidation proceedings.

All withdrawals from the platform have been disabled, and we have processed the withdrawals which have already been submitted via the form today, manually.

We currently have no withdrawal requests pending for any currencies other than BTC and LTC.

We will provide further details and next steps during the course of the day tomorrow (07/04/2021)

As always we can still be reached via help.ice3.com or email us help@ice3.com (please be conscious of the fact that staff are operating under extreme pressure at the moment, and can only provide assistance as directed. We understand your frustration but please be respectful when communicating with service desk staff)

Please do not create multiple tickets or make use of multiple channels to make contact as this only increases the workload and amount of tickets the team needs to go through, which delays the operations significantly.

Thank you for your support and patience.

Kind regards

The iCE3 Service Desk Team

This story will be updated when we receive more information.

Terror attacks bring Mozambique gas projects to a halt

Written by Ciaran Ryan. Posted in Journalism

Dozens of South African oil, gas and construction companies affected in what is a massive setback for the entire region. From Moneyweb.

People displaced by the attacks on the town of Palma flee to safety with meagre possessions. Image: Alfredo Zuniga, AFP via Getty Images
People displaced by the attacks on the town of Palma flee to safety with meagre possessions. Image: Alfredo Zuniga, AFP via Getty Images

Some $60 billion in natural gas projects off the coast of northern Mozambique have been violently disrupted following an attack by Islamic State-backed terrorists on the town of Palma on March 24 this year, resulting in dozens being killed and more than 100 000 fleeing the area for safety.

Read:Tens of thousands feared displaced in deadly attack on gas town (Mar 31)

South Africa repatriating citizens following Mozambique attacks (Apr 5)

The African Energy Chamber says more than 700 000 people have already fled their homes in northern Mozambique as a result of the ongoing insurgency, and the count is still rising.

According to the United Nations refugee agency, UNHCR, the number could top one million by the middle of the year if the international community does not take steps to end the conflict.

There is talk of a joint Southern African Development Community (SADC) military force being sent to the area to quell an insurgency that has been gaining momentum since 2017.

Bad timing

Energy Voice reports that the attacks began on March 24, the same day French energy company Total announced a new security deal with the Mozambican government which would allow the company to return to work on the natural gas project in the area, having previously suspended work in January after a number of attacks close to its onshore production facilities.

Total has again put its plans to return to work on hold.

Dozens of South African oil, gas and construction companies are on-site in Palma, which is home to one of the largest gas investment projects in the world – a project that will transform Mozambique into the world’s third-largest natural gas producer.

South African security contractor Dyck Advisory Group is providing support to the Mozambican army in the area.

Earlier this year, Sasol announced that it would proceed with plans to supply gas to a 450 megawatt (MW) power plant in Mozambique, along with a liquid natural gas plant, with surplus feedstock being exported to SA. The project is expected to cost $760 million and commence supplies in 2024.

Security costs

But with the latest terror attacks, project delays and security concerns will add to costs. Total in a statement said its primary concern is the welfare of its workers.

Few companies are going to send staff back into areas that have suffered such intense casualties.

The areas have already attracted more than $50 billion worth of investment commitments from consortia led by major international oil companies such as Total, Italy’s Eni, and US-based ExxonMobil. Total and its partners have already invested heavily in an onshore base and liquefied natural gas (LNG) plant on the Afungi Peninsula.

Separatists strike

In a statement, the African Energy Chamber noted with alarm that the separatist militia known as Haul Sunnah Wa-Jamo (ASWJ) had stepped up its campaign to seize territory in Cabo Delgado, the country’s northernmost province.

More than 100 ASWJ fighters attacked Palma from three sides after a cessation of seasonal rains. Mozambique’s Defence and Security Forces, known locally as SDS, moved in quickly and mounted a counterattack the next day, but they were not able to regain control immediately.

The government in Maputo has pledged to work with Total to establish a safe zone around the gas complex on the Afungi Peninsula, but the fact that the attacks on Palma occurred inside the perimeter of the designated zone suggests far more will have to be done to cordon off the area.

US and Portugal assist 

Last month, Mozambique invited US military advisors and special forces into the country to deliver counter-terrorism training. Maputo has also accepted an offer from Portugal, its former colonial ruler, to provide additional training for the Mozambican armed forces.

“The investment going into this area will be more than $100 billion over the next decade, and this is of huge importance to the South African economy,” says NJ Ayuk, executive chair of the African Energy Chamber.

“The gas coming from Mozambique will allow SA to wean itself off coal as a source of power, and will contribute to reducing the country’s carbon footprint.”

“This is a massive setback not just for Mozambique and SA, but for the whole region. These attacks were targeted against oil and gas facilities, and happened just days after Total announced it [would] resume work in the area.

“A lot of South Africans are already working in the area, and a lot more were due to be relocated there to work on the gas projects.”

Strategic attack

The Mozambican army says it killed dozens of terrorists and claims to have recovered control of the Cabo Delgado district, of which Palma is the oil and gas hub. 

“We can argue about climate change and whether oil and gas are bad,” says Ayuk. “But this investment in Mozambique will lift that country out of poverty, and there will be spillover benefits for SA, so we all have an interest in seeing order being restored to the region.”

Ayuk warns that unless Mozambique’s friends and neighbours assist it in restoring order, terrorism will be exported to other parts of the continent.

“Don’t imagine that these terrorist attacks will magically stop in Mozambique,” he says.

“Yes, right now they are trying to disrupt massive oil and gas development in and around Palma, but they will not stop there. Their plan is to establish a caliphate in this area.

“We need a co-ordinated response from the region to snuff out these terrorists before they gain a stronger foothold in this region, which has mercifully been relatively free of this kind of terror.”

Bigger plans

The African Energy Chamber says the Mozambican gas complex, which is just a few kilometres from Palma, will support upstream development work at the offshore block known as Area 1.

If the project is prevented from being completed, Total will have a hard time proceeding with its $20 billion Mozambique LNG project — and Eni and ExxonMobil will have a hard time following suit with their own South Coral LNG and Rovuma LNG projects, says the Chamber.

Anatomy of a bitcoin scam that’s hit at least four South Africans

Written by Ciaran Ryan. Posted in Journalism

TJ Naidoo of Durban got pulled into a bitcoin scam on Facebook. It started small, then quickly spiralled out of control. From Moneyweb.

If something sounds too good to be true, it probably is. Image: Shutterstock
If something sounds too good to be true, it probably is. Image: Shutterstock

TJ Naidoo (not her real name) works in a hospital in the Durban area and, sucked in by the buzz around bitcoin, decided she wanted to make some extra money to supplement her income.

She logged on to Facebook and started searching. Before long, she came across this guy:

Source: Facebook

Chris, it turns out, is a trader with a company called GooTrader.

GooTrader’s website assured TJ that it was “a legally operating company” but with nothing to verify this other than a bald statement.

Chris, when not making fortunes from cryptos, spends his time doing this:

Source: Facebook

TJ connected with Mason on Facebook. He offered her an opportunity to make some quick profits with bitcoin: invest R3 000 in bitcoin, said Chris, ship it to an address where he would put it to work in bitcoin “mining”, and she would get R11 000 in a matter of weeks.

In November last year, TJ purchased R3 000 worth of bitcoin through the Luno crypto exchange and sent it off to the address supplied by Chris.

Sure enough, a few weeks later she had R11 000 deposited into her Luno account.

She had made an astonishing 266% on her R3 000 investment.

Satisfied that her first investment worked out so well, she was game for another round.

Time to think bigger

But this time Chris said she should invest a bit more, and get a few friends to come on board as well, making it a party of four. TJ did R8 000 for herself and R3 000 for her mother. The two friends who came on board invested R3 000 and R5 000, making a total of R19 000 between the four.

All of this was used to buy bitcoin, again through Luno, with an instruction to send it off to a “GooTrader” bitcoin wallet, or what Chris called a “trade link” account.

This time, TJ and her friends stood to make an unbelievable R800 000 from their investment, also within a matter of weeks.

If that sounds too good to be true, it was.

When the “investment” fell due in early March this year, TJ and her fellow investors could hardly wait to get their hands on the promised R800 000.

Problems start cropping up

But there was a problem: Chris said she had to pay “tax” of R120 000 to get the money released.

TJ went out and took a personal loan and paid the R120 000 “tax” – also in bitcoin, to Chris’s wallet.

Still there was a problem. Because TJ had taken so long to pay the “tax”, Chris now informed TJ that she needed a withdrawal PIN to get the money released.

And, bad news for Chris, his bosses were so upset with him about the delay in receiving the tax that TJ’s account had been handed over to “Anderson”.

Funnily enough, Anderson’s English reads very much like Chris’s. TJ communicated with Chris/Anderson via WhatsApp and Facebook.

Here’s how it went on WhatsApp:

Chris: Once you have deposited the money to your Luno, let me know okay so I’ll guide you okay

TJ: Ok, I have to send it (the bitcoin) to the trade link?

Chris: Yeah, but not that link okay, it has to be the direct link for the pin. Let me send it to you.

Chris then sent a bitcoin wallet address, and TJ duly shipped the bitcoin to Chris’s bitcoin “wallet”. At that point her bitcoin was gone.

I decided to hop onto GooTrader to see if I could make any sense of what happened. I opened up a chat box and in no time “Bruce” was on the other end.

Me: Is this for real? Can I speak to Marco Verratti (one of the directors listed on the website)? You say there is 100% chance of NOT losing money. How so?

Bruce: Sir, you can get directive from any of our officers okay. There is not (sic) way you are going to lose your money because you alone will have access to your trade account….You have to trust the platform okay, so a start (sic) I’ll advise you to start with the minimum amount so you’ll be able to see how it all works okay.

Bruce: Ma’am it all depends okay… Only when you exceeded paying COT (sic), it will not have to pass through SARS verification if found hugh (sic) honestly you’ll be asked to pay Tax.

Me: What is COT?

Bruce: COT means cost of transfer!!!

Me: How much is the cost of transfer?

Bruce: Sir, COT is not determined by anyone okay, it’s determined by the market signal on your trade.

Me: Must I send bitcoin and to which address?

Bruce: Sir, you’ll create a trade account on the platform, after which you’ll now send the Bitcoin to the account you’ll create okay, once you create the account you’ll have a Bitcoin wallet on the account you’ll create.

At this point I had had enough of Bruce, or Chris, or Anderson, or whatever his name is. His use of “okay” in virtually every sentence is a dead giveaway that this is the same person.

An image search of Marco Veratti, a supposed director at GooTrader, shows the same photo popping up in dozens of other lookalike schemes.

Source: Google

There is a sad ending to this story in that TJ is now considering going under debt review to claw her way out of the hole she dug for herself.

Signs of a scam

There were red flags all along the way that TJ missed.

  • No company registration number or certificate that could be verified.
  • No licence issued by a financial regulator anywhere in the world (crypto companies are generally unregulated, but they will still have company registrations, offices, phone numbers and credible directors with a track record of business success; you can, and should, investigate these).
  • ‘Directors’ who look like pictures of models grabbed off the internet, and when you Google search that image the person shows up as a ‘director’ of other dodgy investment schemes.
  • Bad English on the website.
  • Testimonials from ‘satisfied’ customers.
  • Claims of guaranteed returns.
  • Claims that you cannot lose your money.
  • Approaching clients on Facebook or WhatsApp.
  • Insistence that you invest in bitcoin and send that bitcoin to an address given to you by the scamster (once your bitcoin is sent to that address, it is gone and there is no one who can help you recover it).
  • Adding weird costs like “cost of transfer” (when you ship bitcoin or any crypto from a legitimate company like Luno, the costs of transfer are already paid by you, and they are generally quite small. You do not have to pay two sets of transfer costs).
  • Ponzi scheme set-up, as in TJ’s case: start small and then see a successful payout. Comforted by this success, you are encouraged to go bigger the next time. That’s when it unravels. You’ve been had.
  • Delays in receiving withdrawals: claims of procedural errors in requesting withdrawals, demanding more money (like cost of transfer), and then claiming you took too long, made some administrative error – anything to delay the process. In TJ’s case, she was blocked on Facebook by Chris.
  • Claims your investment will go into bitcoin “mining”: there are reputable “miners” (who use heavy-duty computers to solve complex problems and get rewarded with bitcoin) but these companies don’t need your money, and most of them are doing fabulously well, as we previously covered in Moneyweb. Some of them are listed on stock exchanges and offer an indirect way to gain exposure to bitcoin.

In TJ’s case, Chris demanded she pay over another $3 000 to get her R800 000 “profit” released. That’s another roughly R45 000 she would have to pay, on top of the R120 000 “tax” and the R19 000 original “investment”.

The Financial Sector Conduct Authority (FSCA) has been alerted to GooTrader and says it will be issuing a public warning. It seems “Chris” or “Bruce” or whatever his name is operates out of Florida in the US.

Legitimate channels

There are many legitimate crypto operators in SA, and we have covered them extensively in Moneyweb. Luno is a legitimate crypto exchange, and one of the largest in the country.

Ironically, had TJ bought and continued to hold her bitcoin at Luno, her investment would now have made her more than 100% gains since December 2020.

A look at Chris Mason’s Facebook page (which we will not supply) suggests numerous South Africans are about to take the same tragic steps as TJ.

“I would laugh if it was not so tragic,” she says.

According to Brandon Topham, head of enforcement at the FSCA, which issued a health warning on cryptos two weeks ago: “… it seems these people are foreign and even if local, the chances of you receiving anything back ever is less than 0.000000000000001% unfortunately.

“The banks won’t be able to do anything to help either unfortunately.”

MTI liquidators recover R1.1 billion in bitcoin

Written by Ciaran Ryan. Posted in Journalism

With a ‘high likelihood’ of recovering more. From Moneyweb.

Image: Chris Ratcliffe, Bloomberg
Image: Chris Ratcliffe, Bloomberg

Mirror Trading International (MTI) provisional liquidators have recovered 1 281 bitcoin, worth more than R1.1 billion at current prices, from the collapsed scheme.

Riaan van Rooyen, one of the joint provisional liquidators, told Moneyweb there’s a “high likelihood” of recovering more assets, following a Section 417/418 enquiry. The enquiry was held in terms of the Companies Act, which empowers liquidators to interrogate directors and officials in a quest to determine the reasons behind a company’s collapse, and to track down missing assets.

Van Rooyen could not reveal which MTI officials were questioned at the inquiry, as it is confidential in terms of the Companies Act. “What I can say is that we now have a better idea of what happened at MTI and where we might be able to look to potentially recover more assets. We are looking at every angle to recover assets, and we have had good cooperation from other crypto platforms in our investigations.”

Crypto exchanges started noticing unusual buying patterns late last year from people who had never owned bitcoin before, but were insistent on using these exchanges to purchase bitcoin and then ship them to addresses controlled by MTI.

MTI was placed in provisional liquidation in December last year after failing to pay out members’ requests for withdrawals. This was after CEO Johann Steynberg reportedly fled the country to Brazil, though the Financial Sector Conduct Authority (FSCA) believes he may be in Panama, which has no extradition treaty with SA. Others believe he is still in SA.

Read:
FBI jumps onto MTI investigation (Jan 4, 2021)
Liquidators swarm MTI (Dec 23, 2020)
MTI CEO goes AWOL, lawyers pull out (Dec 22, 2020)

Senior executives at MTI have maintained they were unaware that they were involved in a bitcoin scam that was offering up to 10% returns per month, though a dump of the MTI database by Anonymous ZA suggests some of the MTI “leaders” become multi-millionaires within a couple of years of joining the scheme.

It is reckoned that more than 23 000 bitcoin (worth more than R20 billion at current prices) were shipped to MTI by tens of thousands of members around the world.

Background

MTI claimed to be using a computer algorithm to generate these returns, but no evidence of the algorithm, or any successful trading, was found by the FSCA.

Van Rooyen says it will take more time to track down all the bitcoin shipped to MTI, given the difficulty of locating cryptocurrencies stored or hidden in different wallets.

In August last year the FSCA issued a warning on MTI and its exaggerated promises of 10% returns a month, and advised investors to request their money back.

Read: MTI was by far 2020’s biggest investment scam – Chainalysis

It seems thousands of people did not heed these warnings. MTI relied on a multi-level marketing system where members were paid commissions on new people introduced to the scheme. All seemed to be going well until late last year when the requests for withdrawals hit a slow, and members were asked to supply Know Your Customer (KYC) documents in order to access funds. Withdrawals came to a halt in December when Steynberg reportedly fled the country.

The 1 281 bitcoin recovered by liquidators came from a Belize-based broker called FXChoice that MTI had used for trading forex. A review of its trading performance found that it was losing money at a rapid rate, contrary to MTI’s claims of trading success. The FSCA likewise found no evidence of any successful trading by MTI.

Moneyweb previously reported that the application for the final liquidation of Mirror Trading International (MTI) has been postponed until May 31, apparently by groups that believe the company can still be saved and its debts restructured.

Neither Van Rooyen nor the FSCA believe there is much hope of that.

Other exchanges noticed unusually heavy bitcoin trading activity on the Luno crypto exchange this week, eliminating the usual arbitrage 2% to 4% gap that exists between local and overseas exchanges (South Africans generally pay 2% to 4% more for bitcoin on local versus overseas exchanges). It is believed these were the MTI bitcoin recovered from FXChoice being placed on the market for sale.

Marius Reitz, Africa general manager for Luno, says as much of the bitcoin shipped to MTI was purchased on Luno, it would make sense for it to be sold (on behalf of the liquidators) via the same exchange. He adds that the exchange became aware of clients shipping bitcoin to MTI, particularly after the FSCA warning, it started to block these transactions.

Van Rooyen has urged MTI members to lodge their claims at www.investrust.co.za and www.tygerbergtrustees.co.za.  Should MTI members have any queries regarding the lodging of claims, these queries may be directed at MTIclaims@investrust.co.za.

“We need everyone who was involved with MTI to lodge their claims” says van Rooyen.

Read: FSCA issues warning on crypto assets

Bank of America sees SA growing at 3.8% this year

Written by Ciaran Ryan. Posted in Journalism

Things are looking better on the economic front, with high commodity prices expected to leak into the rest of the economy. From Moneyweb.

On the downside, local fund managers see little hope of government reform. Image: Thomas White, Reuters
On the downside, local fund managers see little hope of government reform. Image: Thomas White, Reuters

Bank of America (BofA) has lifted its growth forecast for SA to 3.8% this year, up from its earlier forecast of 2.9% – and ahead of National Treasury’s forecast of 3.3%.

Powering this bump in growth are better than expected commodity prices which are expected to remain high for the foreseeable future as China and the US – the world’s two largest economies – bounce from the Covid crash of 2020.

Speaking at a media briefing on Tuesday, the bank’s SA strategist, John Morris, said the US economy is likely to clock 7% growth this year, easing slightly to 5.5% in 2022.

The International Monetary Fund forecasts China growth of 8.1% this year and 5.6% in 2022.

This is creating a surge in demand for commodities, which will lift SA economic growth to 3.8%. However, GDP will only return to pre-crisis levels in 2023.

Read:SA economy contracts 7% in 2020 (Mar 9)

Reflecting on the economy’s 7% contraction (Mar 15)

Source: BofA Global Research, Haver Analytics

“Resources [stocks] are doing well from high commodity prices, and we see metal prices remaining higher for longer. There’s a link between domestic stocks and commodity prices,” said Morris.

SA consumers have shown resilience over the last year as a result of low interest rates, government support and the commodity spillover. As was the case in the previous commodity super-spike from 2005 to 2008, the overall economy benefits from these high metal prices.

There are risks to this scenario, according to fund managers surveyed by BofA: electricity supply from Eskom being key among them, as well as wage increases which are likely to be 3-4% this year, roughly double Treasury’s target range. Though Eskom is unlikely to need further bailouts, its restructuring will take time and load shedding can be expected for at least another three years.

“Eskom load shedding has continued with the year-to-date energy availability factor at 58.6% from 65% last year,” said the bank in a note issued on Tuesday. “This is expected to continue at least til September. Unemployment rates are elevated at 32.5% with slowing momentum in the jobs recovery. Reform implementation challenges persist. Health experts also continue to warn of a potential Covid third wave in the winter months amid gradual vaccine rollouts.”

Read: Despite disappointment, hope persists

The bank’s sub-Saharan Africa strategist, Rukayat Yusuf, says SA’s debt-to-GDP should peak at just under 90% by 2025, and there are some welcome signs of smaller-than-expected bond issues by Treasury in recent weeks, suggesting its borrowing requirements are being tightly controlled.

BofA forecasts inflation at 4.2% in 2021, higher than its previous forecast of 3.8%, after allowing for higher interest rates and rand volatility.

Though the SA Reserve Bank is likely to keep interest rates steady for the time being, the markets are pricing in a 105 basis points increase in rates over the next 12 months.

The interest rate cycle is likely to turn over the next 12 months, most likely in the first quarter of 2022, when the Reserve Bank is expected to start raising rates.

Should oil prices push above $70 a barrel and the rand above R16 to the US dollar, this would nudge inflation towards 5% in 2021 and make SA bonds less attractive relative to other emerging markets.

A record 77% of fund managers surveyed by the bank believe SA bonds are undervalued, and 62% believe equity markets will be higher in six months’ time. Some 54% of fund managers plan to go overweight SA domestic stocks, while “weak earnings” is seen as the biggest risk to the local market.

On the downside, fund managers see little hope of government reform.

Equities remain the favourite asset class among fund managers, followed by bonds, with cash falling out of favour.

More managers are overweight platinum stocks and underweight food and retailers as well as construction, general industrial and transport.

Morris says investors surveyed by the bank at a recent conference have started showing interest in resources stocks such as Implats and Sibanye-Stillwater, with particularly strong interest in platinum group metals (PGMs) like Royal Bafokeng Platinum. There is also interest in e-commerce-related stocks, and companies likely to benefit from infrastructure investment, as well as agriculture and logistics.

Economic optimism is near its highest

Fund managers are most optimistic about general mining, platinum, banks and financial services, and beverage and tobacco companies. The least liked are real estate, gold and personal goods.

Source: BofA Global Research, SA Fund Manager Survey

Source: BofA Global Research, SA Fund Manager Survey

Taung municipality whistleblower’s 10-year battle for justice

Written by Ciaran Ryan. Posted in Journalism

With no immediate end in sight, despite the Public Protector finding in his favour years ago. From Moneyweb.

The municipality ignored the Public Protector’s order to reinstate the whisteblower. Image: Shutterstock
The municipality ignored the Public Protector’s order to reinstate the whisteblower. Image: Shutterstock

Thuso Bloem was suspended from his position as a senior administrator at the Greater Taung Local Municipality in North West province on May 17, 2011, by a municipal manager who, having been accused of corruption, had himself been suspended that same day.

While working as a legal clerk at the municipality Bloem had found the then-municipal manager, the late Mpho Mofokeng, to have run up R56 000 in personal expenses on the municipality’s account and awarded a R188 000 tender to a family member.

Bloem made a protected disclosure to the then-mayor Itumeleng Makgalemele.

The Municipal Council suspended Mofokeng, but the municipal manager refused to vacate his office and appears to have terrified his co-workers by reportedly openly carrying a handgun to work each day. Mofokeng applied to the Mafikeng High Court to set aside his suspension, but the court dismissed his application. Still, Mofokeng refused to vacate his office.

On the very day Mofokeng was suspended, he issued Bloem – who had by then been promoted to senior administrator – with a suspension letter of his own, alleging that he abused his municipal vehicle, along with other accusations of impropriety.

The municipality refused to recognise Bloem as a whistleblower, and denied that he suffered occupational detriment, as defined in the Protected Disclosures Act.

This is a case of a suspended official suspending another.

While under suspension, Mofokeng approached the Labour Court to interdict Bloem from entering the municipal offices, but this case was dismissed with costs. All the while, Mofokeng was using municipal funds to fight what Bloem says were personal battles.

Public Protector’s report

Few of these facts are disputed. They are detailed in a 2018 Public Protector’s report which found that Bloem had indeed suffered occupational detriment, and ordered the municipality to reinstate him and, within 60 days, to institute civil action to recover all wasteful expenditure against all municipal officials, whether still employed or not.

The municipality was also ordered by the Public Protector to table her report before the council – something that was apparently never done.

Read: Municipalities just don’t listen – Auditor-General (2018)

The municipality applied to the High Court to have the Public Protector’s report set aside. It remains locked up in the court process.

Dismissal

Bloem was then dismissed from his job after a disciplinary process, which the municipality deemed procedurally fair and just.

Bloem took his dismissal to the Labour Court, which dismissed the case, arguing that internal remedies at the municipality had not been exhausted.

It remains unclear why the municipality decided to get rid of Bloem but not Mofokeng, who steadfastly refused to vacate his office, despite his suspension by the Municipal Council.

The Public Protector came down squarely in Bloem’s corner and found that he was unlawfully dismissed and suffered occupational detriment.

This was not the first time Bloem, also a South African Municipal Workers Union shop steward, had blown the whistle on corrupt practices at Taung Municipality. In 2008, he received reports of fraud and corruption against the previous municipal manager, and lodged a criminal case at the Taung Police Station. The then-municipal manager was suspended from her post.

Whistleblower protection?

Bloem, meanwhile, has remained without work for the better part of a decade, despite the Public Protector finding in his favour, with a claim for backpay now running into millions of rands.

“This shows that whistleblower protection in SA does not work,” he says. “My case is a perfect example of what can happen – you do your job honestly, report corruption and fraud as I was required by law to do, and I get dismissed, with no source of income.

“This sends a terrible message to other would-be whistleblowers,” says Bloem.

“The municipality jumps to lawyers and court not to find resolution, but to frustrate those it considers bothersome.”

The Public Protector’s report gives further substance to Bloem’s claim: “The fostering of a culture of disclosure is a constitutional imperative as it is at the heart of the fundamental principles aimed at the achievement of a just society based on democratic values.”

Municipal purse

The Taung municipality relies on transfers from national and provincial governments for nearly 80% of its budget, according to Municipal Money, a database on municipal finances around the country run by National Treasury, and has received qualified audits for the last three financial years for which figures are available.

Read: AG: How to improve the state of our municipalities

Internal accounts supplied to Moneyweb show an amount of R4.7 million spent on legal fees for the 18 months to January 2019 – much of this apparently related to disciplinary matters against current and former staff.

Bloem says R27 million has been spent on legal fees in the two financial years to 2019, most of this on disciplinary matters. Moneyweb asked the municipality to confirm this, but no reply was received. What we have been shown is a ledger detailing scores of payments made to various law firms for what appear to be disciplinary matters. In one case, more than R200 000 was spent on a disciplinary matter involving a municipal employee, and in another case, an amount of nearly R130 000 was spent.

Read:North West residents take matters into their own hands, and get court’s blessing (Feb 9)

Another citizen group takes its local municipality to court (Feb 26)

The Centre for Good Governance and Social Justice, a non-profit organisation aimed at restoring sound governance at local government level, has taken up the baton on Bloem’s behalf. It has asked the Portfolio Committee on Cooperative Governance and Traditional Affairs (Cogta) to investigate Bloem’s allegations and take remedial action, including a full audit of all litigation undertaken by the municipality.

“We cannot make progress in restoring sound local government unless we provide absolute protection for whistleblowers and stop officials from using municipal funds to launch vexatious and frivolous cases under the cover of disciplinary hearings,” says Mandla Mpempe of the Centre for Good Governance and Social Justice.

“There must be personal consequences for officials engaging in this type of behaviour.”

Read: EY ordered to pay whistleblower $11m

Moneyweb sent detailed questions on the case to the Greater Taung Local Municipality, but no reply was received, despite email and phone follow-ups.