Nuclear energy company’s not-so-secret plan to beat the courts

Written by Ciaran Ryan. Posted in Journalism

‘Unlawful’ recording does the rounds as over R2m is blown on legal fees. But with two court rulings against Necsa, why are board members hanging on? From Moneyweb.

Mines and Energy Minister Gwede Mantashe will no doubt be alarmed that an organisation that made R300m in profit two years ago is now asking Parliament for a R500m bailout. Image: Reuters
Mines and Energy Minister Gwede Mantashe will no doubt be alarmed that an organisation that made R300m in profit two years ago is now asking Parliament for a R500m bailout. Image: Reuters

It’s probably time for Mines and Energy Minister Gwede Mantashe to start paying more attention to what’s happening at the Nuclear Energy Company of SA (Necsa).

More than R2 million has been blown on legal fees, trying to get rid of suspended board members and Necsa head of legal Vusi Malebana.

Read: Axed Necsa board blames resistance of ‘privatisation by stealth’ for dismissal

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.

Read: Nuclear company burns through six CEOs and two chairmen in seven months

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.

Plan

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.

Read: Necsa and Auditor-General poles apart on 2018 financial report

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.

Read: Sack the Necsa board before it wrecks the company – union

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.

Radebe blamed

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.

Read: Court issues damning judgment against Jeff Radebe

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.

Read: Nuclear chair resigns as governance crisis boils on

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.”

Necsa response

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.”

Moneyweb response

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.

Eskom treads carefully with renewables

Written by Ciaran Ryan. Posted in Journalism

And plans to revert to long-term coal supply contracts to keep energy prices under control. From Moneyweb.

Eskom acting CEO Jabu Mabuza was applauded by miners last week when he raised the issue of the high cost of renewables (file photo). Image: Moneyweb

Eskom acting CEO Jabu Mabuza was applauded by miners last week when he raised the issue of the high cost of renewables (file photo). Image: Moneyweb

Coal will remain an integral part of SA’s energy mix for the next few decades, Eskom acting CEO Jabu Mabuza told the Joburg Mining Indaba last week.

The transition from conventional to renewable energy must be navigated with caution to avoid “dire consequences” for the power system.

Read: Expert panel proposes new renewable energy zones

The utility spent R26.7 billion on renewable energy over the last financial year, paying an average 235 cents per kilowatt hour (kWh), almost triple the average Eskom tariff of just under 90c.

That means the electricity consumer is subsidising renewable energy to the tune of 145 cents per kWh.

Read: Eskom’s R60bn-coal bill headache largely of its own making

Mabuza outlined a turnaround plan to stabilise Eskom that requires a “just transition” towards a cleaner energy mix.

He was applauded by the miners in attendance when he raised the issue of the high cost of renewables. There has been angry debate between the greens and coal miners about the best way forward for SA and Eskom. 

Read: How renewables are helping Eskom keep the lights on

“Given the socio-economic challenges facing the country, we support an energy mix based on providing reliable energy to the consumer at a reasonable price,” he said. “We believe that this should be a practical energy mix, able to meet the energy demands of the country while balancing the grid.”

Read: Little-known tax incentives boost business case for renewable energy

Mabuza proposes an industry-wide collaboration to resolve the country’s future energy needs.

“The various energy sources should not be viewed as competition, but as complementary,” he said.

“There is an unfortunate tendency to compare the cost of renewable technology with the cost of conventional technology on a simplistic basis of units of energy generated.”

Comparing the prices of different energy sources ignores other services provided by Eskom, often resulting in the conclusion that renewable energy is significantly cheaper than other technology, such as coal-fired generation. This is fundamentally flawed, said Mabuza.

Total mix for accurate picture

A comparison should instead be made on a total mix of services that are required for constant, reliable electricity supply to consumers that is sufficient to meet their peak demand. Inappropriate comparisons will lead to incorrect conclusions being drawn and the benefits of other services provided may be gradually neglected, resulting in an inherently unreliable and unstable power system.

Energy expert Des Muller says it is clear that some realism has entered SA’s future energy debate.

“What is now being factored into the debate about renewables is the high cost of managing its intermittency and grid connections, which is either passed through to the consumer or absorbed by Eskom.

“Eskom has to fire up extremely expensive diesel turbine generators and shut down and restart coal power plants to stabilise the country’s baseline power needs. Countries that have switched aggressively over to renewables, such as South Australia and Denmark, have not had a good experience with grid stability, compounded by high energy costs.”

‘Conspicuous silence’ from coal sector

Mosa Mabuza, CEO of the Council for Geoscience, said there was a conspicuous silence from the coal sector when it came to securing their own businesses.

“Maybe we should ask coal producers to stop production for three days,” he said. “Then people would understand what impact it would have on the economy.”

He added: “Either we have a serious conversation about this or just stop talking. This transition [to renewables] should not be away from coal, but should include coal.”

Subsidy recipients

Mxolisi Mgojo, CEO of Exxaro Resources and president of Minerals Council SA, argued that renewable energy suppliers are the recipients of subsidies. “There is a view that coal burning is always dirty. We need to transition [away from coal] over time, and we need to do it responsibly.”

Government should get out of the business of producing electricity altogether and let the private sector run Eskom’s power plants, said Claude Baissac, CEO of consulting firm Eunomix. “If Eskom is too big to fail, the government is saying that SA is not too big to fail. Eskom is a national emergency. Maybe it’s time to let it go.”

Long-term contracts

Eskom plans to revert to long-term coal contracts with a preference for coal delivered by conveyor belt, due to the lower associated transport costs. This was the successful formula adopted two decades ago when Eskom produced some of the cheapest electricity in the world. The reversion to long-term contracts will enable Eskom to achieve optimal coal costs while ensuring security of coal supply, said Mabuza.

The utility also plans to source 1.3 billion tons of uncontracted coal to cover the life of all coal-fired power stations.

“My special appeal to our partners in the coal mining sector is that the higher cost of coal should not be among Eskom’s challenges,” said Mabuza.

“It is important that we put the interests of South Africa first.”

Eskom has signed contracts with 93 independent power producers (IPPs), which this year accounted for an installed capacity of 4 900 megawatts (MW). Of this, 1 980 MW was wind, 1 474 MW solar panels, 1 005 MW gas turbines and 500 MW concentrate solar power. These IPPs produced 11 344 gigawatt hours (GWh) of energy during the past financial year.

Eskom operates 30 power stations comprising coal, nuclear, pumped storage, hydro, wind, and diesel power generation with a total nominal capacity of 47 474 MW, producing 220 000 GWh, which includes units at Medupi and Kusile that are not yet fully operational.

Mabuza says the utility is committed to 78% generation availability over the next five years, allowing for the shutdown of 5 500 MW for planned maintenance during the summer months and 8 500 MW for unplanned maintenance.

SA’s cheapest source of power still comes from the Koeberg nuclear plant at about 30c per kWh. Nuclear advocates point to the compelling business case for making greater use of nuclear in the energy mix to stabilise power supply and meet the country’s sustainability objectives in the coming decades.

Zimbabwe lunges towards economic despair

Written by Ciaran Ryan. Posted in Journalism

Inflation is running at 1 000% after reserve bank floods the country with money. From Moneyweb.

The cost of living is soaring; a litre of milk has risen from Z$7.50 to $25 in the space of a few months. Image: Philimon Bulawayo, Reuters

The cost of living is soaring; a litre of milk has risen from Z$7.50 to $25 in the space of a few months. Image: Philimon Bulawayo, Reuters

In May this year Zimbabwe placed itself under the watchful eye of the International Monetary Fund (IMF). The IMF’s so-called Staff-Monitored Programme (SMP) outlined a series of reforms intended to guide the country back to economic stability.

Read: Zimbabwe, the country we don’t know how to survive

The reforms included fiscal adjustments, privatising state-owned assets and the elimination of central bank funding of the fiscal deficit.

In July it seemed Zimbabwe was on target to meet the IMF targets. But then catastrophe struck – and it was entirely self-created.

The Zimbabwe Reserve Bank flooded the economy with billions of dollars in support of the agricultural sector. In the space of a year, money supply exploded by 86%.

The result was inevitable and entirely predictable: inflation is now running at close to an annualised 1 000%, while incomes have gone up just 100% over the last year.

Read: Zimbabwe hikes average electricity tariff by 320% – energy regulator

“It’s disheartening,” says Eddie Cross, former Movement for Democratic Change (MDC) parliamentarian and one of the architects of the return to the Zim dollar (officially known as the RTGS or real-time gross settlement dollar).

“A year ago, a typical bus fare in Harare was 50 cents. Now it is Z$10. It’s got so expensive that many people cannot afford to travel to work.”

Milk has gone from Z$7.50 to $25 a litre in the space of a few months. The Zim dollar lurched from Z$8:US$1 a few months ago to nearly 30:1, but has since clawed its way back to 15:1 as the reserve bank embarked on a mop up operation to reclaim the billions of dollars flooded into the economy in recent months.

Zimbabweans have a saying about inflation – easy up, sticky down.

It means inflation responds rapidly to an increase in money supply, but is slow to drop when money supply growth drops. That’s exactly what is happening now.

Finance minister Mthuli Ncube is now tasked with recovering the billions of Zimbabwe dollars – effectively free money – injected into the economy. The bank accounts of several major beneficiaries have been frozen and some of the money has been reclaimed.

Despair

Zimbabweans have lived through this nightmare before, but this time the despair is more acute because there was genuine hope that conditions would improve with former president Robert Mugabe out of the picture. The country is without power for up to 18 hours a day as it struggles to pay its Eskom bill and hours-long queues at petrol stations are routine. 

The IMF has given Zimbabwe a 15% chance of meeting its SMP targets before the end of 2019. If the targets are missed, it will take another two to three years before the country can re-engage with the IMF – which is a precondition for international re-engagement.

MDC parliamentarian James Chidhakwa says conditions in the country have become intolerable, with ordinary people surviving on US$0.20 a day. “There’s no water, no cash, fuel prices are going up weekly, and groceries are becoming unaffordable.”

In November last year Zimbabwe’s external debt stood at US$8 billion and domestic debt at US$9.6 billion. But a recent Parliamentary Portfolio Committee report on public accounts shows domestic debt now sitting at US$880 million.

This massive reduction in domestic debt represents a staggering US$7 billion “grand heist by government on domestic creditors,” according to the Zimbabwe Independent.

The National Assembly is now demanding accountability for at least 17 breaches of the law on public spending.

Read: Zimbabwe central bank paid out $971m without approvals

One of the changes introduced by President Emmerson Mnangagwa is the appointment of a new board at the reserve bank and the launch of a monetary policy committee – similar to that at the SA Reserve Bank – to take control of the country’s hitherto chaotic monetary policy. It has been given clear instructions by the president to bring stability to the country’s economy.

An SMP is an informal agreement between Zimbabwe and IMF staff, and does not entail financial assistance or endorsement by the IMF executive board. Cross says there is little hope of meeting the IMF targets in the given timeframe.

If that’s the case, it will be a slow and painful climb back to any form of stability.

Former National Lotteries Commission executive heads to Labour Court

Written by Ciaran Ryan. Posted in Journalism

Sershan Naidoo says he was questioning the use of Lottery funds. From Groundup.

Photo of National Lotteries Commission board

Senior National Lotteries Commission executive Sershan Naidoo is headed for the Labour Court. Archive photo: Raymond Joseph

Sershan Naidoo, for many years the public face of the National Lotteries Commission (NLC), was dumped in December 2017 after 19 years at the NLC for reasons that remain shrouded in mystery. He wants his job back and is now heading to the Labour Court after failing to get reinstated at a Commission for Conciliation, Mediation and Arbitration (CCMA) hearing more than a year ago.

Naidoo was a member of the NLC agency tasked with evaluating funding requests for Arts, Culture and National Heritage. He started as a driver, then worked as media spokesperson before joining the team tasked with evaluating funding.

What started out as a dispute over the terms of his employment has morphed into something more sinister, says Naidoo: “I was questioning how the NLC was allocating funds, and I was interrogating some applications which looked suspicious,” he says.

It’s not known whether this had anything to do with his dismissal, but Naidoo suspects that it does. Nor is he the only person to face the axe at the NLC in recent years – There were 48 labour relations matters in the last financial year, which is high for an organisation with 307 staff.

Naidoo was offered a new contract post as part of the NLC restructuring and, after discussions with NLC executives, he was assured that he would receive the same salary he had earned in his previous permanent position. But when handed the new contract by Thabang Mampane, the NLC’s Commissioner, he was offered 20% less and lost all accumulated benefits.

Naidoo says he refused to sign the contract as it did not reflect the salary previously agreed, and had discussed the matter with NLC chair, Prof Alfred Nevhutanda, who assured him that he would get an independent labour expert to address this. After Naidoo had reminded the NLC that his contract was outstanding well into his first year of service, and questioned the terms not being in line with discussions, the NLC claimed that he had repudiated the contract. The NLC’s acting commissioner, the controversial Philemon Letwaba, then had him escorted by security staff off the premises and he has been in dispute with the organisation ever since.

Naidoo took a case of unfair dismissal to the CCMA.The NLC argued that Naidoo had been given an opportunity to resolve his employment dispute but had chosen not to, and that he had failed to follow internal grievance procedures. Notwithstanding his 19 years of service, the CCMA found that there was no employment contract and that Naidoo had not been dismissed. Naidoo has taken this decision on review to the Labour Court.

“I was marched out of the NLC offices like a criminal by security on the day I was dismissed,” says Naidoo. “How do you follow internal grievance processes under those circumstances?”

“Something more sinister was behind my dismissal, and it has to do with the fact that I was diligent at my job and was asking uncomfortable questions about funding – which I was employed to do – and others in the organisation started to get uncomfortable.”

Naidoo believes his dismissal had to do with his ruthless interrogation of funding requests to the NLC. He is known to be a stickler for detail.

“We would get applications to fund grand pianos for rural schools across the country. Some of the requests were not realistic, and when I traced it back, though the funding requests came from different entities, the line items were identical and were really coming from the same source. We got many requests for funding from schools, and we would generally assist them by giving an amount of R50,000 for agricultural projects and R50,000 for musical development. But then we started getting unusual requests for big ticket items such as orchestral instruments and grand pianos, with no evidence of who was going to teach the different instruments. Once we saw this, we put in place measures to limit the extent to which we funded schools.”

“There were also organisations applying for large grants without the necessary experience. Questionable line items for food, travel and accommodation seemed to receive priority. VIP tents and toilets too. We were strict, on my insistence, with regards to what we would actually fund. We’d ask for proof of experience and demonstration that there was actually a need.”

Naidoo has written to the Department of Trade and Industry and former DTI Minister Rob Davies repeatedly since his dismissal in December 2017, as well to as the Parliamentary Portfolio Committee on Trade and Industry and the Presidency, with no success.

The NLC has come under particular scrutiny for its so-called pro-active funding. The Lotteries Act was amended in 2015 to allow the Commission to conduct research on “worthy good causes” and invite applications for grants without having to go through the regular funding approval process. This opened the door for corruption, as reported by Groundup.

Naidoo says the introduction of pro-active funding in 2015 was an open invitation to game the system. “Those arts and culture projects that received proactive funding would be part of our report. We were surprised to see that junior staff had been adjudicating on them, as the only persons allowed to make decisions on them were the distributing agency members, or the NLC Board if there was an appeal. That’s where we raised concerns and refused to have them as part of our report.”

In one instance Naidoo came across “research” by the NLC repackaged as an outside application for funding, down to the last cent, he says.

In the 2018 financial year the NLC adjudicated nearly 12,500 grant applications and disbursed more than R2 billion in grants, of which roughly R140 million was for pro-active funding. The Arts, Culture and National Heritage agency has an annual budget of about R300 million. Charities account for nearly half the total annual disbursement and sport 22%.

In response to a request for information from GroundUp, the NLC replied: “The matter you refer to with the said employee has been settled at the CCMA. The NLC will not be commenting further on the issue.”

Questions were also sent to the Trade and Industry Minister Ebrahim Patel but no reply had been received at the time of publication.

Naidoo is now waiting for his application for review to be heard at the Labour Court.

EOH subsidiary accused of sabotage and racketeering

Written by Ciaran Ryan. Posted in Journalism

Raising questions about the group’s much-publicised campaign to clean house. From Moneyweb.

Delays and alleged duplicity mean Malaga Medical International is out of pocket by more than R8m, a substantial hit for a relatively small business. Image: Moneyweb

Delays and alleged duplicity mean Malaga Medical International is out of pocket by more than R8m, a substantial hit for a relatively small business. Image: Moneyweb

JSE-listed technology group EOH has been accused of ignoring calls for an independent investigation into a subsidiary company, Healthshare Health Solutions, which is accused of sabotaging a client’s business.

It’s an odd story, and relatively small potatoes in terms of the claimed financial damage, but it raises questions about EOH’s much-publicised campaign to rid itself of any shady dealings.

The group has been swimming in controversy over irregular public sector contracts, that resulted in Microsoft terminating a contract with subsidiary company EOH Mthombo after a whistleblower report alleged corruption in a defence software deal.

Read: EOH to reveal findings of corruption probe

Several directors resigned from the board in July, around the time a forensic investigation by ENSafrica suggested about eight people were involved in a suspicious transaction worth about R1.2 billion, between 2014 and 2017. On smallcaps.co.za, analyst Keith McLachlan points out that not a single member of the 2016 board remains in place today.

Read: EOH rocked by top-level resignations

‘New dawn’

Stephen van Coller was brought in from MTN to bail water and steady the ship. He issued a ‘new dawn’ document promising to restore trust and accountability. Whistleblower channels were put in place, including the anonymous ExposeIt app, encouraging whistleblowers to come forward with information. 

It is in this context that the story takes place. 

The latest allegations come from Malaga Medical International, which operates the Concordia Lodge in Midrand and provides specialised accommodation for visiting medical patients sent by the health ministries of two African countries. Malaga was required to send its invoices to wholly-owned EOH subsidiary Healthshare Health Solutions (Healthshare), which would audit and thereafter submit the invoices to the African health ministries for payment. The latter required this for purposes of simplifying the payment process.

Soon thereafter, Malaga experienced payment delays on its invoices. In early 2016, Healthshare recommended bringing another company, SA Healthcare HMC (Healthcare), into the picture, which it said would expedite payments. Healthcare was made to appear as a separate company from the EOH subsidiary, but was in fact the ‘alter ego’ of Healthshare, says Malaga’s attorney Joel Shoot.

The names of the two companies are similar, but Healthshare is owned by EOH and Healthcare is not – yet they share the same directors, employees, office premises and systems, says Shoot.

A criminal complaint by Malaga alleges fraud and racketeering by the EOH subsidiary. The complaint further alleges that EOH founder Asher Bohbot, its CFO John King and three others are criminally liable in terms of Section 34 of the Prevention and Combating of Corrupt Activities Act for failing to report their knowledge of the racketeering scheme.

When contacted by Moneyweb, EOH said the matter was already the subject of a court case and it did not want to deal with the merits of the dispute outside the court process (see full reply below).

The EOH-owned Healthshare was supposed to audit and submit Malaga’s invoices for payment, while the ‘alter-ego’ company Healthcare would receive a varying percentage of the payment from Malaga, depending on the size of invoice.

A contract was signed and Healthcare committed to acting on behalf of Malaga, following up and visiting the foreign countries to collect payment.

From June 2016 to March 2017, commissions of R1.5 million were paid to Healthcare in the belief that it was performing the services as promised.

‘Extracting money’

But following further investigation, Malaga’s Legal Officer Martin Keevy says Healthcare and Healthshare had acted unlawfully to extract money from Malaga.

In a criminal complaint, Keevy says:

  • Healthcare never had any intention of rendering collection services, nor did it chase up invoice payments or visit the African ministries, and
  • The African ministries had no knowledge of Healthcare or the service it was contracted to perform.

“[We] were unaware that Healthshare had deliberately orchestrated a scheme to delay payments to [Malaga], which had caused (or at the very least exacerbated and contributed to) a severe cash flow crisis in [Malaga’s] business,” says Keevy’s complaint.

He adds that the purpose of bringing Healthshare into the picture – purportedly to expedite payments – was nothing more than a ruse after the EOH company Healthshare had delayed the submission of invoices to the African ministries for payment.

Healthcare had no intention of visiting, following up invoices or collecting payment on Malaga’s behalf, adds Keevy.

Malaga launched civil proceedings against Healthcare in 2018 for damages, and that case is still ongoing. It turns out the African health ministries had never heard of Healthcare.

When EOH was requested to investigate whether all service providers experienced the same delays, it refused to do so, according to Keevy.

The result is that Malaga is out of pocket by over R8 million, which is a substantial hit for a relatively small business.

Apart from the issues in the civil claim, Malaga decided in 2019 to take advantage of EOH’s offer to investigate the broader instances of malfeasance and wrongdoing.

Whistleblower invitation accepted

When Van Coller issued his ‘new dawn’ document in February 2019 encouraging whistleblowers to come forward, Shoot lodged his complaint, but says his requests for a transparent and independent investigation have been brushed under the carpet. In his complaint to EOH, he says there were broader issues of malfeasance that he raised and that these had to do with the way EOH was handling complaints.

When the broader pattern of unethical and unlawful conduct was reported, Shoot says he was shocked that instead of meeting with an independent law firm, he instead met two “examiners” who turned out to be on EOH’s payroll. Initially they told Shoot that the matters were being investigated. The two examiners were employees of an EOH Group company called XTND, which replied that they would not be investigated further.

Shoot also lodged a complaint with the National Consumer Commission (NCC), which is still awaiting resolution.

‘Duplicitous’

Shoot says EOH is operating a duplicitous scheme “which purports to offer whistleblowers a service whereby reporting of unlawful conduct and acts of corruption in the EOH group of companies would be investigated by a firm of independent attorneys. No bona fide investigation was done. The reporting and investigation scheme did not function as it was publicised. The EOH scheme is deceptive and misleading. There is a lack of fair and honest dealing, accountability and transparency.”

Shoot’s complaint to the NCC extends to the use by EOH of law firm LS Attorneys, which he says is inextricably linked to the EOH company XTND. They share the same offices and are not independent and do not participate in genuine investigations, as promised by Van Coller in his ‘new dawn’ undertaking.

EOH replies

When asked for comment, EOH replied:  

“We have engaged Joel Shoot extensively and endeavoured to do so constructively. We do not intend to engage with him through the media. He acts on behalf of Concordia [which] was in litigation with EOH for several years and [we] do not wish to deal with the merits of the case outside of the court process. He requested extensive documentation from us and we directed him to our internal process for the procurement of the relevant information. We await his request in this regard.”

Class action lawsuit aims to shut down scam lenders

Written by Ciaran Ryan. Posted in Journalism

Thousands of loan applicants deceived into signing monthly debit orders for unrelated services. From Moneyweb.

The Law Clinic has applied for an ‘opt-out’ class – meaning anyone who has been affected is assumed to be a member of the class unless they specifically opt out. Image: Supplied

The Law Clinic has applied for an ‘opt-out’ class – meaning anyone who has been affected is assumed to be a member of the class unless they specifically opt out. Image: Supplied

Stellenbosch University Law Clinic is bringing a class action suit to the Western Cape High Court, to stop internet loan lender Lifestyle Direct and 18 other respondents from deceiving the public into applying for bogus loans.

Customers who signed up complained that they did not receive any loans, but had their bank accounts debited for so-called “legal services packages”.

Read: Landmark court case seeks to stop over-charging by creditors

The Law Clinic also wants the court to stop Lifestyle from debiting the accounts of people who applied for what they thought were loan agreements, and from harassing or threatening them for payment.

Henno Bothma of attorneys Abrahams & Gross, which is defending most of the respondents, says Lifestyle intends defending the case. “Our instructions are to oppose the matter.”

Asked how Lifestyle intends to answer the claim of misleading the public, Bothma says numerous clients who qualified for loans were referred to lenders and received loans. “Our case will be more fully laid out in our opposing affidavit,” he says.

‘Unconscionable’

The Law Clinic says the lending practices of Lifestyle violate the Consumer Protection Act and are “unconscionable, unjust, unreasonable or unfair”. It wants any money deducted from consumers misled by these websites to be returned to them, as well as for the respondents to compensate them for wasted bank charges.

The loans are offered to the public via websites such as Loan Quest SA, Loan Locator SA and Loan Hub SA, none of which are registered credit providers.

The websites offer loans of up to R200 000 with no credit checks and a “hassle-free application process”.

Complaints started dribbling through to consumer website Hello Peter in 2016 when ‘loan applicants’ reported funds disappearing from their accounts, followed by harassing phone calls, after filling out what they assumed to be an online loan application. The dribble became a flood, with thousands of complaints online by consumers who have fallen victim to these scams.

There is also a Facebook group called ‘Action Against Lifestyle Legal, Loan Hub SA and other scams’.

Those who signed up thought they were applying for a loan or for assistance in finding a loan. They did not believe they were entering into an agreement to purchase unwanted services.

All the websites have virtually identical terms of service and legal disclaimers, and require the applicant to provide the date of salary payment to facilitate successful debit orders.

Deception intentional

The purpose of the websites is to deliberately mislead the public, says the court application. Some offer a 30-day cooling-off period during which applicants can cancel the agreement, but none knew they had entered into an agreement. Consumers also report that their pleas to cancel the unwanted agreements during this cooling-off period fell on deaf ears.

The Law Clinic has applied to the court for an ‘opt-out’ class – meaning anyone who has been adversely affected is assumed to be a member of the class unless specifically opting out.

In an affidavit before the court, the Law Clinic’s senior attorney Stephan van der Merwe says hundreds of complaints were received from members of the public who had visited one or more of the dozen websites operated by Lifestyle, which appear to offer loans or free loan-finding services.

Unrelated ‘services’

The websites all employ the same modus operandi: they invite consumers to submit an application online for what appears to be a loan or a loan-procuring service. Buried in the terms of service, consumers submitting applications are deemed to have entered into an ‘agreement’ for a service that has nothing to do with loans, such as “telephonic legal advice assistance”.

The agreement is usually for a fixed term of 12 months, with an initial subscription fee of R399 to R429 a month.

Consumers are required to fill in their bank account details as part of the loan application process, but what they appear not to realise is that they have consented to a monthly debit order against their bank accounts.

“Attempts to cancel the ‘agreements’ and to stop the debit orders are met by stonewalling and threats from companies behind the websites,” says Van der Merwe’s affidavit.

Most of the applicants for these loans are poor and often desperate people, he adds.

Despite acres of adverse publicity over the years, Lifestyle “continues to operate this scam with impunity and the number of consumers harmed is continuously growing”.

The Law Clinic is asking the court for recognition as a class, and for an interim interdict to shut down the offending websites and a prohibition on Lifestyle harassing and threatening ‘customers’ for the recovery of bogus debts.

One of the applicants in the case is Ignatius Heyns, who submitted an application through the Loan Zone SA website. Loan Zone SA then debited his bank account. Heyns reversed this, but was then hit with demands for payment and threats of “punitive” action.

The more-than-a-dozen websites offering loans are making fraudulent misrepresentations to the public, says the Law Clinic.

The websites are all connected to each other and to company directors Damian Malander and Nandie Paich.

All but one of the companies that operate the relevant websites were registered on the same day (May 20, 2015), and all share the same directors, namely Malander and Paich. Their websites are also hosted on the same server.

On June 10, 2016, Malander resigned as director of some of the companies and was replaced by Paich.

Lifestyle Legal, a subsidiary of the Lifestyle Direct Group, plays a critical role in the scam, says the Law Clinic.

Lifestyle Legal is a registered debt collector and the group’s in-house collections agency.

When a customer fails to make payment in terms of an ‘agreement’ allegedly concluded through one of the websites, they are handed over to Lifestyle Legal for debt collection.

In one case cited by the Law Clinic, after interacting with one of these websites, a consumer’s bank account was debited by an entity called All Wheel Auto (Pty) Ltd, despite the fact that the consumer had no prior interaction with the company. Malander is also a director of this business.

The case for the interdict to stop these websites from operating in this misleading way (or at all) will come before the court on November 27.

SA mine earnings at five-year high

Written by Ciaran Ryan. Posted in Journalism

Helped by rand weakness and commodity price strength. From Moneyweb.

Despite improvements, investors and consumers are questioning whether the industry can create sustainable value for all stakeholders. Image: Waldo Swiegers, Bloomberg

Despite improvements, investors and consumers are questioning whether the industry can create sustainable value for all stakeholders. Image: Waldo Swiegers, Bloomberg

PwC’s latest SA Mine report shows a mining sector in its best shape in five years, helped by a weak rand and recovering commodity prices. That has however not stopped the erosion of mining’s share of the economy, down to 7.7% from nearly 10% seven years ago.

The sector is transitioning from labour-intensive deep-level mines to shallower, mechanised mining. “Returning to long-term growth will only be possible with investment in innovative technology to make deep level resources viable again,” says the report, which is based on data from 26 mining groups.

Source: Stats SA, PwC

The JSE Mining index outperformed the All-Share Index over the last two years, mainly because precious metals picked themselves off the floor. Despite a healthy two-year climb, the Mining index has yet to recover to 2007 levels and has consistently underperformed since 2012.

Source: Iress, PwC

Climate change is a major theme in this year’s analysis, and it’s not just environmental pressure groups that are pushing for cleaner mining. Drought and flash floods have been identified as major threats. Barrick Gold, the world’s largest gold producer, estimates that it has a 5% chance of losing nearly $1 billion in production value every year across its operations because of droughts.

Increased climate variability could therefore lead to losses.

Research by the Council for Scientific and Industrial Research (CSIR) shows that change in the global climate is affecting the way local mines need to plan and build their water management and other infrastructure. “These studies suggest climate change will make the eastern regions of South Africa significantly wetter, and the western regions drier,” says PwC. “In the eastern areas of the country, this means mines will experience increased rainfall, which could overwhelm current water management infrastructure.”

Several mining groups are already adapting to these risks. Gold Fields spent $32 million on water management practices in 2018, including pollution prevention, recycling and conservation initiatives. Some 66% of its total water use was recycled or reused.

Carbon tax

Adding to mining risks are the introduction of carbon tax and the withdrawal of bank funding for carbon-intense projects such as new coal mines. Insurance premiums are increasing due to investor concerns over climate change, adding to an already heavy cost burden. The Carbon Tax Act became effective on June 1 this year and levies a carbon tax rate of R120 per ton of carbon dioxide equivalent. This is expected to result in a 5-10% reduction in emissions over time.

Engagement with local communities will also feature powerfully in the award and retention of mining licences going forward.

Mining groups such as Anglo American are going green, using precision mining technologies to save on energy and water, while simultaneously reducing capital intensity. In 2018 Anglo implemented 440 energy and business improvement efficiencies, saving six million gigajoules in energy consumption.

Another major theme outlined in the PwC report is the adoption of new technologies to reduce unit costs and automate processes. Digitisation is a fundamental part of the new business model, encompassing and affecting all areas of business: supply chains and operations, marketing and sales, and interactions with current and potential customers.

Market capitalisation

Total market capitalisation increased in the current year to R884 billion, nearly double the level of the previous year. This was mainly due to the recovery of share prices in precious metals groups. The market cap of gold companies surged 133% and platinum group metals (PGMs) by 129% over the last year. Impala Platinum more than tripled its market cap on the back of better PGM prices and a strong recovery in operational and financial performance. Anglo American reaped the benefits of its portfolio optimisation with more than R150 billion growth in market cap over the 14 months to August 2019.

Source: Iress, PwC

Gold, iron ore and PGMs were the best commodity performers, and coal remains the largest revenue generator in the mining sector.

Manganese, iron ore and chrome are the only commodities that have seen real production growth over the last 15 years. Iron ore showed a decline over the course of the year partly due to plant maintenance at Sishen Iron Ore.

Gold production is on an ongoing decline despite the higher rand gold prices, which shows the challenges of productivity in deep-level mining.

PGM producers have in the last few years also contributed to the supply of chrome as it is processed as a by-product from the Upper Group 2 (UG2) reef. More UG2 is currently being mined as the traditionally more lucrative Merensky reef is mined out in some mines.

The report says the decrease in building materials from the prior year reflects sluggish local economic growth and resultant decline in demand for building materials. Coal production saw a marginal increase on the prior year. However, production has remained largely flat over the last 15 years.

“Lower production without a changing cost structure results in higher unit cost increases,” says the report. “The increased cost structure is therefore likely to put further pressure on declining production commodities, which could lead to further mine closures. A continued focus on productivity and cost efficiencies is required to ensure sustainable growth. Increased investments in technology can enable mining companies to unlock resources and improve costs.”

Capex increases

Capital expenditure increased by 10% over the previous year, with the largest contribution coming from gold (R34 billion), followed by PGM mines (R20 billion). Most of the capex was measured in US dollars, which means the increase in rand terms was largely flat.

Andries Rossouw, PwC Africa energy utilities and resources leader, says despite an improvement in mine operating performance and investor sentiment, the global attractiveness of the industry continues to erode, with investors and consumers questioning whether the industry can create sustainable value for all stakeholders.

“More than ever, the speed of technological advancement, climate change, sustainable operations and changing consumer behaviour should be top of mind for mining companies. They need to find a balance between stakeholder needs and long-term sustainable operations in their capital allocation decisions.”

Source: Stats SA, PwC

Airports Company heads to court over shareholder dispute

Written by Ciaran Ryan. Posted in Journalism

Minorities claim Acsa went from a commercial operation to a government developmental agency. From Moneyweb.

Enticed to invest in the company 20 years ago, the minority shareholders continue to be ‘held hostage’ by the state. Image: Moneyweb

Enticed to invest in the company 20 years ago, the minority shareholders continue to be ‘held hostage’ by the state. Image: Moneyweb

Airports Company of SA (Acsa) and the minister of transport head to court next month to overturn a 2017 Gauteng High Court order requiring them to buy out minority Acsa shareholders at fair market value.

Minority shareholders were enticed to invest in state-owned Acsa two decades ago, on the promise of an easy exit when the company was to list on the JSE. The listing never happened, leaving minority shareholders hostages of the state. Their only hope of exit was to sell back to Acsa.

They have been trying to do that for years, but could not agree on what was a fair price.

Minorities claim Acsa went from a commercial operation to a developmental agency of government, making irrational decisions to invest R10 billion in the King Shaka International Airport in Durban, and R1 billion for a 20% share in the technically insolvent São Paulo International Airport in Brazil.

Costly  ‘noose’

King Shaka airport still hangs like a noose around Acsa’s neck, costing a good part of the nearly R3 billion in loan and interest repaid over the last financial year. The R10 billion construction bill was two to three times the originally projected cost. Acsa has reduced its gearing ratio to 18% from 63% in 2010, and in its latest annual report says it will henceforth adopt a more conservative approach when it comes to infrastructure investments.

To get more traffic through the airports, the Department of Transport dropped airport fees, which reduced a vital source of Acsa revenue.

Source: Acsa

All this amounted to what is defined as “oppressive conduct” in the Companies Act, say the minorities in their court papers. The effect of lower airport tariffs on Acsa revenue is shown in the graph below.

Source: Acsa

These issues will be ventilated in court next month. The 2017 high court order was the result of an agreement by Acsa and the minister of transport to purchase the shares of minorities, represented by African Harvest, subject to a valuation to be determined by an independent valuer which was to be agreed by both sides.

Both sides agreed to appoint RisCura to do the valuation, but when it came up with a valuation of R78 a share, Acsa had a change of heart.

It was a case of “indirect buyer’s remorse” according to Alun Frost of African Harvest, representing the minorities, in his court papers. Acsa then appointed a different valuer, Professor Harvey Wainer of Wits University’s School of Accountancy, who came up with a valuation of roughly half this amount, or R36.36 a share, which is less than Acsa’s disclosed net asset value in its 2017 financial statements.

That being the case, minorities believe Acsa has misstated its financial results and should impair its assets by about R1 billion.

Wainer’s figure values Acsa at R18.1 billion, while RisCura’s put it at nearly R40 billion. The difference is that RisCura’s valuation compensates for “oppressive conduct” – such as the politically-inspired investments in King Shaka and the reduction in airport tariffs.

What the stake may cost

African Harvest represents shareholders with just 1.8% of Acsa’s shares, but this valuation meant Acsa would have to pay R700 million, a figure that has now escalated to around R850 million. If all 4.2% owned by minorities is included, the figure Acsa must pay rises to R1.6 billion.

What caused Acsa, having agreed to abide by RisCura’s independent valuation in 2017, to change its mind?

Frost, as advisor to African Harvest and other minorities (now formed under the umbrella of Oppressed Acsa Minority 1), argues that the attempts by government and Acsa to overturn a court order previously agreed to by both sides smacks of “bad faith and opportunism”.

“When you have to pay out R1.6 billion to purchase the shares of minorities, why not gamble R50 million on legal fees to see if you can improve your odds of winning,” said Frost when contacted by Moneyweb.

Read: Investors beware of smooth-talking politicians

One of the grounds for rescission being claimed by the government is that it was not party to the settlement agreement between Acsa and minorities, and that Acsa had entered into the agreement without board authority. It also argued that the minister of finance should be joined to the proceedings, as the settlement impacted state finances.

This is misleading, says Frost. The Public Finance Management Act (PFMA) is not triggered by the proposed share buy-back scheme agreed between the parties, as the Act only applies to transactions involving “significant” shareholdings. Hence no notice to National Treasury is required, and the finance minister therefore has no legal interest in the case. Nor does it seem the minister of finance has much interest in joining the case.

“I submit that it speaks volumes that the minister of finance has not entered the fray, despite being served with the application papers when the government launched this application,” says Frost’s affidavit.

‘Disingenuous’

Frost then says it is disingenuous to suggest government was not party to the settlement agreement. It not only knew of it, but consented to it and was instrumental in bringing it about. The government argues in its papers that the agreement is unlawful in terms of the PFMA, as it binds Acsa to a future financial commitment without the required board approval. The minorities reply that this is not a future financial commitment, since the agreement required immediate payment in full for their shares.

The government further argues that the share buy-back agreement will have a devastating impact on Acsa’s financial reserves, which in turn affects the national fiscus and public interest.

These claims are vague and incorrect, argues Frost. Acsa has been self-funding for many years, and there is no question of public funds being at risk.

Acsa is 74.6% owned by the state, 20% by the Public Investment Corporation (PIC) and the balance by minorities, which includes African Harvest and Up-Front Investments 65.

Vintage Paul O’Sullivan confrontation outside Germiston Magistrate’s Court

Written by Ciaran Ryan. Posted in Journalism

Accusations all round, not just against Tubular Construction Projects boss Tony Trindade. From Moneyweb.

Duelling adversaries … attorney Robert Kanarek (left) and forensic investigator Paul O'Sullivan outside court on Wednesday. Image: Ciaran Ryan

Duelling adversaries … attorney Robert Kanarek (left) and forensic investigator Paul O’Sullivan outside court on Wednesday. Image: Ciaran Ryan

Forensic investigator Paul O’Sullivan, slayer of corrupt cops and their peers in business, has never been known for his delicate choice of words.

“You are being paid with stolen money and you should be in prison alongside your client,” he told Robert Kanarek, attorney for Tubular Construction Projects (TCP) boss Tony Trindade, outside the Germiston Magistrate’s Court on Wednesday. This was after Kanarek told journalists that O’Sullivan was an extortionist whose time was coming to an end.

Read: Top construction company accused of R20m Kusile bribes

The court appearance (held in camera) stems from a harassment complaint against O’Sullivan by Trindade in August. Trindade says that in February this year O’Sullivan started accusing him of acting fraudulently and corruptly and repeating these allegations to his legal representatives and those of his employer, TCP. He wants the court to stop O’Sullivan harassing him.

Read: More woes for Tubular as BEE partners apply for liquidation

The court hearing may have been in camera, but the altercation outside was very much in full view of the public.

“He’s going to jail,” said O’Sullivan, adding that Trindade and TCP were pivotal in the financial destruction of Eskom, and are alleged to have paid at least R20 million into a business account controlled by then Eskom contract manager Frans Hlakudi. A contract for the installation of air-conditioned condensers at the massively over-budget Kusile power plant was supposed to have gone to Alstom and sub-contractor DB Thermal, but allegedly went directly to Tubular. The contract value reportedly started at R708 million, according to Fin24, but ended up increasing to R1.2 billion. It had to come in below R750 million so Hlakudi could allegedly influence the outcome.

The story began in December last year when O’Sullivan was hired by TCP minority shareholder Brian Bestenbier to carry out a fraud and theft investigation against Trindade and TCP with a view to opening a criminal docket against him and recovering R1.4 billion in allegedly stolen funds. A criminal docket was opened in June against Trindade and others for corruption and racketeering.

Brian Bestenbier outside court on Wednesday. Image: Ciaran Ryan

Bestenbier told Moneyweb he was brought in as a BEE partner of TCP but received nothing in the way of dividends. He intends launching a civil case in the Johannesburg High Court to recover what he estimates to be between R60 million and R70 million in dividends that should have been paid to him. This is based on an estimated profit of between R300 million and R400 million supposedly earned by TCP.

‘Vast sums stolen’

“Our preliminary findings reveal that vast sums of money have been stolen from the company, which obviously causes enormous prejudice to our client [Bestenbier],” wrote O’Sullivan to Trindade in March this year.

In his replying affidavit, Trindade says O’Sullivan has no right to threaten and harass him while purporting to investigate him.

Outside the court, Trindade referred all questions to his lawyer. The case was postponed, with Trindade instructed to provide his replying affidavit by October 14, and O’Sullivan is required to provide further documentation to the court.

In his reply to Trindade’s harassment complaint, O’Sullivan placed an affidavit before the court saying Trindade had come before the court with unclean hands and was abusing the court process.

“I submit that [Trindade] is abusing this process deviously designed at attempting to gag me and thereby stave off his inevitable appointment with the criminal justice system,” says O’Sullivan’s affidavit. He denies the charge of harassment. Included in his affidavit were copies of invoices he managed to obtain from a source, with what he says are fake value-added tax numbers. The invoices were approved for payment with Trindade’s signature.

The invoices are from Hlakudi’s own company and are dated while he was employed at Eskom. According to O’Sullivan, this is the smoking gun that will see justice being served.

In his reply, Trindade accuses O’Sullivan of extortion since he “threatened to pursue a criminal case against me on behalf of his client [Bestenbier] unless I paid an exorbitant amount of money”.

“When I refused to so, he subsequently got his client to open a criminal charge against me.”

O’Sullivan is known to bait his targets with incendiary emails.

“You may think the slippery advice of a cagey lawyer that lives off the proceeds of crime will keep you out of prison, it won’t,” wrote O’Sullivan to Trindade.

Trindade adds: “O’Sullivan further referred to [convicted gangster] Radovan Krejcir’s dirty lawyers who attacked him on a regular basis in the hope of getting him off his tail.”

Bestenbier says as a director of TCP he signed off on the financial statements without being given full access to the true state of the company accounts.

Trindade says the harassment means he can no longer sleep or work. O’Sullivan’s reply: “If he is having sleepless nights it is because his prior criminal conduct is fast catching up with him and he knows that I know what he has done and will ensure that he gets his day in court to explain his involvement in bringing Eskom to its knees through systemic corruption.”

Kanarek says the case is not yet over and believes his client will ultimately prevail.

Concourt orders Minister of Police to pay R300,000 for wrongful arrest

Written by Ciaran Ryan. Posted in Journalism

Judges reaffirm right of accused to be brought to court within 48 hours. From GroundUp.

Photo of inside of Constitutional Court

The Constitutional Court has reaffirmed the right of accused people to be brought to court within 48 hours. Archive photo: Ashraf Hendricks

The Constitutional Court, in August, ordered the Minister of Police to pay R300,000 plus interest for the wrongful arrest in 2012 of Bryan de Klerk after a charge of assault was lodged against him by an employee, Rael Lasarow.

This judgment provides police and magistrates with greater clarity over the limits of their constitutional powers when arresting and detaining individuals. It also gives members of the public legal clout when they feel they have been wrongfully arrested and detained.

The court reaffirmed the right of an accused person to be brought before a court of law within 48 hours of arrest. The judges said this had been written into the Constitution because of South Africa’s history of arbitrary and long detentions without trial.

The facts of the case are as follows: Lasarow said he had been injured after being pushed by de Klerk into a glass picture frame on or around 11 December 2012.

De Klerk reported to the Sandton Police Station on 20 December 2012 after receiving a voice message to report to the police. He was arrested without a warrant by Detective Constable Ndala on a charge of intending to do grievous bodily harm, transported to Randburg Magistrates’ Court and placed in a holding cell.

He was denied an opportunity to apply for bail at his first court appearance, and remained incarcerated throughout the Christmas period, only being released on 28 December 2012, after Lasarow withdrew his complaint. This was despite Ndala recommending de Klerk be released on bail at the first court appearance. De Klerk’s legal counsel argued that the magistrate had acted unlawfully in detaining him and then denying him bail, thereby aggravating the harm caused by the arrest without a warrant.

De Klerk then sued the Minister of Police in the Pretoria High Court for damages arising from his arrest and detention.

Conflicting judgments

The High Court found that the arresting officer had believed de Klerk had committed an offence and had exercised her discretion to arrest him. The High Court dismissed de Klerk’s claim that his arrest and detention were unlawful.

De Klerk then took the matter to the Supreme Court of Appeal. All five judges hearing the case agreed that his arrest was unlawful and that he was entitled to damages, but a majority of judges ruled that the Minister of Police could not be held liable for de Klerk’s unlawful detention after his first court appearance. They reasoned that the responsibility shifted to the presiding officer once de Klerk appeared in court, causing a break in the chain of legal causation. The Supreme Court ruled that the minister was liable for damages between the arrest and the appearance in court – a period of roughly two hours, for which de Klerk was awarded R30,000.

Constitutional Court

The matter was then referred to the Constitutional Court, which was faced with conflicting decisions from lower courts in the treatment of unlawful arrest and subsequent damages claims.

In an article on the case, attorneys Gildenhuys Malatji Incorporated (GMI), who represented de Klerk, say the question before the Constitutional Court was whether de Klerk could sue only the police (and not the National Director of Public Prosecutions) for his unlawful detention after his first appearance in court.

According to a commentary on the case by GMI, the status quo before this judgment was that once a person appeared in court, their claim against the Minister of Police came to an end and any claim arising from detention post court appearance had to be brought against the National Director of Public Prosecutions. “What we sought to achieve by the appeal to the Constitutional Court was to extend the liability of the Minister of Police in instances such as the present to include the period of detention after a court appearance in the event that the SA Police Services (SAPS) proceeded to take a person into custody full well knowing that that person would not be granted bail at their first court appearance.”

There was no question that the arrest was unlawful, said the Constitutional Court. What was less clear was whether the harm suffered by de Klerk’s detention at the order of the magistrate, from his first court appearance until his release on 28 December 2012, could be attributed to the unlawful arrest by the police.

Justice Leona Theron, in the majority judgment, found that the crucial fact in the matter was that Ndala subjectively foresaw the harm arising from the remand of de Klerk after his first court appearance.

“She knew that [de Klerk’s] further detention after his court appearance would be the consequence of her unlawful arrest of him. She [Ndala] reconciled herself with this knowledge in proceeding to arrest him,” Theron said.

In a separate dissenting judgment, Chief Justice Mogoeng Mogoeng found that considerations of public policy and justice rendered it unreasonable to attribute liability to the police for a court’s failure to fulfil its own Constitutional obligations.