Are you suffering from corruption fatigue yet?

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared in Accounting Weekly.

Suffering from corruption fatigue yet? You better get used to it, because it looks like the Zondo Commission of inquiry into state capture is just getting started.

This week the commission heard from Angelo Agrizzi (pictured), a former executive with Bosasa and, boy, did he name names.

Bosasa (now called African Global Group) paid R50,000 a month to Communications Minister Nomvula Mokonyane, as well as truck loads of whiskey and liquor. The good people at Bosasa also paid money for funerals for Mokonyane’s family members. Mokonyane, now environment minister, has called the bribery claims “preposterous”.

Agrizzi said no financial benefit was received by the company as a result of these bribes. When he raised this point with his boss Gavin Watson, he was told: “You are in Africa, do as in Africa.” The Watsons, for those too young to know, were treated as heroes in the apartheid years for refusing to play rugby in racially segregated teams. They clearly capitalised on their fame when the ANC got into power.

Who else is alleged to have received money?

R500,000 a month went to officials at the Department of Justice and Correctional Services. This increased to R750,000 a month when former SA Revenue Services (Sars) head Tom Moyane was head of correctional services. (Bosasa supplies food and other services to prisons).

Vincent Smith, ANC MP and co-chair of the constitutional review committee looking at the issue of land expropriation, was paid R100,000 a month.

The former CFO of the Department of Correctional Services, Patrick Gillingham, as also on the payroll.

Agrizzi testified that former President Jacob Zuma was paid R300,000; former SAA chair Dudu Myeni received a designer bag stuffed with money.

It was also claimed that former National Prosecuting Authority (NPA) bosses Nomgcobo Jiba and Lawrence Mrwebi were also apparently bribed.

Let’s bear in mind these are untested accusations at this point so the presumption of innocence must be respected. But what a list of names Agrizzi provided. This is starting to show how potentially rotten HMS South Africa has become.

Transnet’s R100bn dagger pointed at the heart of SA

Written by Ciaran Ryan. Posted in Uncategorized

 

 

 

 

 

 

 

 

 

 

 

This article first appeared in Moneyweb.

Transnet pensioners have fought a decade-long battle to get their former employer to cough up an estimated R100 billion in benefits as a result of a 1989 promise made in the dying years of apartheid as Transnet assumed the legal responsibilities of SA National Transport Services.

This staggering sum of money is sufficient to sink the economy should Transnet lose the case, says Advocate Anton Alberts, chairperson of the Freedom Front Plus, which has campaigned on behalf of pensioners. “Transnet is holding the country to ransom. If they lose this case, SA is finished. We will straight away be downgraded to junk.”

Not that Transnet would have to pay out R100 billion in one go. But it would have to fork out several billion rands a year to top up the pension funds, putting additional strain on its already tattered balance sheet.

While the case has careened through the courts, the number of pensioners has declined from 80 000 to 50 000. According to some estimates, they are dying off at the rate of 300 to 400 a month. The question some pensioners are asking is whether there will be any pensioners alive to witness the successful conclusion of the case.

The case originates with a promise made by management in 1989 to top up the pension funds by 70% of the rate of inflation plus 2% each year, as was the case in the years prior. This promise was upheld until 2003 when all but the 2% annual payments were stopped. With inflation running at about 6%, this meant pensioners’ benefits were sliding back at the rate of about 4% a year. The pensioners’ lawyers, based on 2013 figures, claimed 80% of pensioners were receiving less than R4 000 a month.

“Some pensioners have nothing left at the end of the month after paying their medical bills. Now it seems that Transnet is reneging on its responsibility,” says one of the pensioners, Nicky Oelofse.

Transnet has fought the case every inch of the way, first by contesting the right of pensioners to be recognised as a class of claimants with substantially similar arguments. The case has been mired in technical argument and exceptions raised by Transnet, all of which were struck down in the Constitutional Court in April. The ConCourt case dealt mainly with exceptions raised by Transnet, rather than the merits of the pensioners’ claims.

Time running out

Pensioners saw this as a major victory and it looked for a time as if they were close to settling the case a few months ago, as Transnet itself reported to Parliament. But this turned out to be false. This means the case must go back to the High Court for argument. This is likely to happen next year, by which time a few more thousand Transnet pensioners will likely have died.

Construction mafia moves from Kwazulu-Natal to Joburg

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared in Moneyweb.

It’s a shakedown that’s been going on for several years in KwaZulu-Natal, but is now rearing its head in Johannesburg. Local community gangs, often armed, threaten to shut down construction sites unless they are given 30% of the work.

“The mafia is particularly prevalent in the Durban metro area, which is why I will no longer work in this area,” says a construction manager who asked not to be named. “I was previously working on a construction site in Pietermaritzburg and these guys would turn up every day, cocking an AK47 in front on my office. You have little option but to agree to their terms, which means 30% of our sub-contractors are imposed on us.”

The so-called construction mafia has organised itself into business forums, one of which is the Delangokubona Business Forum, reportedly comprising more than 3 000 members, according to the Sunday Tribune.

The gangs usually demand that construction managers employ their members, often at extortionate rates – in one case, a construction company was ordered to employ a bricklayer at R2.50 a brick when the going market rate is R0.80 a brick. Several sites have had to let other workers go to make room for the so-called mafia workers, who frequently lack the skills needed for the jobs. Nor are they necessarily local. Equipment and materials are reported to have been stolen in some instances when Forum workers have been employed.

Peter Barnard, a partner at Cox Yeats Attorneys, has won around 30 court interdicts against multiple business forums on behalf of construction firms in KwaZulu-Natal.

“It seems that this all started in February 2016 when a crowd stormed into the Durban mayor’s office demanding that local suppliers and contractors be given work,” he says.

“From what I understand, they left that meeting with the impression that local suppliers and contractors would be awarded 30% of government construction contracts. They obviously misunderstood what was being conveyed. The new Regulations to the Preferential Procurement Policy Framework Act, which govern most state projects, are complicated and don’t create an automatic entitlement to work.

“They obviously heard what they wanted to – and have proceeded on the basis that they are entitled to 30% of all work on projects. From about March 2016, ‘business forums’ started hitting construction sites and demanding work.”

Barnard says that virtually every major development and Project in KwaZulu-Natal has been affected by one or more forums.

The “construction mafia” rejects accusations of thuggery, claiming to be fulfilling government’s mantra of radical economic transformation by ensuring that 30% of sub-contracting work is given to locals.

Recently, construction of the Oceans Hotel in Umhlanga, backed by businessman Vivian Reddy, was shut down for several months after work was disrupted by Forum members. Last year WBHO downed tools for several weeks on the R1,8bn expansion of the Suncoast Casino when Forum members stormed on site demanding a slice of the action. One manager with a major construction firm confirmed that the mafia has now appeared on construction sites in the north of Johannesburg.

Some site supervisors and managers have started toting guns in self-defence after numerous instances of on-site assault. In some cases, site managers have been shot at or threatened.

Several construction firms have had to approach the courts to interdict the Business Forum from intimidating or harassing construction workers. Among the companies awarded interdicts against the group are Tongaat Hulett Developments, Vumani Civils CC, WK Construction SA and Water Bles Investments. The interdicts prevent members of the Delangokubona Forum from intimidating or harassing workers at the Sibaya Precinct development in Umdloti.

The troubling aspect is that the intimidation tactics appear to be working.

Many firms are forced to enter into negotiations and reach a settlement with the various business forums. Construction projects with a 15% profit margin cannot afford time delays, given the highly geared nature of these projects. Delays add to the costs, so companies will often prefer to come to an accommodation with Forum members rather than run the risk of further disruption and intimidation.

Local government officials and police have promised to stamp out such instances of thuggery, but construction managers say the city government in Durban is sending out mixed signals, promoting “radical economic transformation” on the one hand, while promising to stamp out thuggery on the other.

“The difficulty that companies have is that they are already employing locals and complying with the law,” says Barnard. “They have to meet government requirements to be awarded the tenders and projects in the first place. Then, after moving onto site, they now have another group, or several of them, coming in and demanding that they be employed. If they don’t get what they want, they often shut the site down.”

Some site managers say the police will respond only when a serious crime such as assault is involved. Barnard says the interdicts awarded by the Durban High Court include an action to compel the SA Police Services to do whatever is necessary to give effect to the court orders. “The SAPS have been very good in executing on these orders, and that has helped bring some order to the situation.”

One construction executive who asked not to be named says that although his company won an interdict against the business forum, it proved difficult to serve on the individuals involved. “So although we won the interdict, this did not stop them. Many of the people who were intimidating us were not even local. We then started working with the local community and explained that these people were trying to take their jobs. It was at this point that things started to quieten down.”

A water project for eThekwini Municipality in KwaZulu-Natal has been repeatedly disrupted by business forum members, despite an interdict being awarded to the contractors. “We are hoping for a final order that will allow the SAPS to make an arrest in this case,” says Barnard, adding that this would be the first such order that he is aware of.

There is a danger that some struggling construction firms will be put out of business by these mafia-style tactics. It remains to be seen how forcefully police in other parts of the country deal with cases of intimidation as the mafia spreads from Durban.

Tony Webbstock: a warrior has left us

Written by Ciaran Ryan. Posted in Uncategorized

My dear friend Tony Webbstock passed away last Wednesday morning, the result of complications from a decades-long battle with diabetes and – one has to say – poor medicine back in the day when diabetes wasn’t as well understood as it is today. Tony was a warrior with a Christian heart, a genius lawyer who put himself at the service of the people vs the banks.

I could hear it in his voice a few weeks back when I last spoke to him. He sounded strained and weak. He succumbed last week after a long fight with his ailing body. He remained his usual chirpy self, defiant and rebellious to the end. Never once was there a hint of victimhood in his voice.

Tony had been an attorney all his professional life, a devout Christian and champion of the small guy. He never once acted for the banks. With his genius and knowledge of the law, he could have made himself a rich man had he put himself at the service of the banks, but he refused this path. As an attorney, he would only ever act against the banks. Many clients he took on without charge. Whether you were from the townships or suburbs, as long as you were being hounded by the banks, Tony was always available on his phone for a consultation.

In an industry crowded with money grubbers and vultures, Tony stood above them all for his principle and his heart. He could not turn away from the misery and suffering that the banks had inflicted upon ordinary people. After the financial crisis of 2008, it became obvious to Tony that the banks were engaged in the biggest crime of the century. Having spread their confetti money across the land in the years leading up to the crisis, they then started foreclosing and vacuuming up of assets of their customers.

It is a well-known fact that South African law firms will seldom, if ever, act for clients against the banks. This is how they have captured the justice system. Tony was a rare exception, and he was brilliant at it. He knew every nook and cranny of banking and consumer law, and surrounded himself with a team that was without equal, including his son Matt, Stephen May and Leonard Benjamin. In case after case, they schooled the banks in the law that they were abusing.

Tony had fascinating insights into modern banking, the accumulation of four decades of legal battles with the banks. He knew their every trick: failing to properly serve summons on their customers to defeat their ability to put up a defence; illegally loading bank and legal charges onto mortgage bonds; arriving in court with recreated documents, claiming the originals were destroyed in a fire; litigating clients into bankruptcy, the final indignity for those who spent their lives in toil and struggle; bringing claims before the High Court when they should be argued in the Magistrates Courts where legal costs are a fraction of the higher court; failure to attach loan agreements to summonses; unlawful selling of credit and other insurance products and then failing to honour these policies; self-dealing by the banks when they repossess properties for a pittance and then on-sell them to insiders…. The list goes on. Tony had seen it all.

He was unique in that he was not motivated by money. His Christian heart had no place for this. From Timothy in the Bible: “The love of money is the root of all evil…” Tony lived this with conviction and passion. In a broken and troubled world, Tony made a difference. Thousands of people were rescued from ruin by his intervention. He was mostly gentle and kind. I say mostly. When confronted with that miserable breed, debt collectors, he summoned up the tiger and disguised his fair nature with rage, as Shakespeare implores us in Henry V:

In peace there’s nothing so becomes a man,

As modest stillness and humility;

But when the blast of war blows in our ears,

Then imitate the action of the tiger:

Stiffen the sinews, conjure up the blood,

Disguise fair nature with hard-favoured rage:

Then lend the eye a terrible aspect.

To hear Tony dispense with debt collectors was a beauty to behold. In battle, this was a guy you wanted in your corner.

The good news is that Tony’s crusade for a fairer world is in good hands. His son Matt, Stephen and Leonard will continue the path that Tony forged. Tony leaves us, his integrity and soul intact, a rare thing to say about any lawyer.

Does SA need 35 ministers, 9 provinces and 263 municipalities?

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared at Acts Online.

SA is over-governed. We have 35 ministers, 37 deputy ministers, and 9 provinces each with their own ministers and administrations. Then there are the 263 municipalities, operating another layer of bureaucracy. Perhaps government should set the pace by scaling back on this boondoggle.

And in case you think this is all well and good, consider that just 49 of the country’s municipalities achieved clean audits in the 2015/16 financial year, according to the Auditor General, Kimi Makwetu.

The AG also reported that Irregular expenditure in municipalities increased by over 50% to R16.81bn, though the figure could be substantially more as a third indicated that the full extent of mis-spending was unknown.

Narius Moloto, president of the Pan African Congress (pictured above right), calls the nine provinces “mini bantustans” and wants to see them scrapped, with the money spent on duplicated administrations spent on job creation and uplifting the poor. The 9 provinces have a combined 430 members of the legislature to look after, not counting their entourages and hangers-on.

The Democratic Alliance (DA) thinks it’s time to scale back on the blue light brigade. “This cabinet is by far one of the biggest in the world with 35 ministers; far bigger than the United States at 15 ministers, Kenya with 18 ministers, and the United Kingdom with 21 ministers,” according to DA spokeswoman Desiree van der Walt.

This year alone, the 35 ministers and 37 deputy ministers are expected to earn R163.5 million, with their ministerial staff (limited to 10 for minister and 6 for deputy ministers) costing a further R1bn.

Is this value for money? The DA has done some decent homework on this subject and concludes that government should set a good example by cutting back on the number of ministers. What do we need a sports minister for, other than to cheer on our soccer team and complain about race quotas not being met? What does our science and technology minister hope to achieve that the private sector cannot? Then we’ve got higher education and basic education. Why 2 ministries (both rather miserable in their academic achievements)?

That’s just one side of this boondoggle. Public Works doled out R188m on 33 properties in Pretoria and Cape Town for the ministers and deputies, a princely R5,7m per property. Another R48m is to be spent in the current fiscal year for 6 more properties – a cost of R8m per property. The R236m spent on ministerial properties could have built 2,000 RDP houses, says the DA.

Then there’s the travel and entertainment budgets coming in at a shade under R300m this year. But the real shocker is the VIP protection services, costing R1,5bn in the current fiscal year, and close to R5bn over the next 3 years.

The DA says part of the problem lies in the ministerial handbook, which provides rather generous staffing and expense limits on ministers and their deputies.

Previous presidents had smaller cabinets. Nelson Mandela – total cabinet size 50 (28 ministers); Thabo Mbeki – total cabinet size 50 (28 ministers); Kgalema Motlanthe – total cabinet size: 47 (28 ministers); Jacob Zuma/Cyril Ramaphosa – total cabinet size 73 (35 ministers).

Says van der Walt: “If the president is serious about helping National Treasury reign in the runaway budget deficit he will have to cut executive spending by finalising a stricter and more frugal ministerial handbook, as well as cutting the overall size of the cabinet.”

 

Thank Trump and Bibi for higher oil prices

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared at Acts Online.

 

Thank Donald Trump and Bibi Netanyahu for higher oil prices, which spiked from around $40 to nearly $80 a barrel after the US president announced last week he was pulling the US out of the Iran nuclear deal. Israeli prime minister Netanhayu’s signature is all over this. 


Oil prices are now at levels last seen in 2014. The fear is that Iran’s oil exports will suffer as a result of renewed US sanctions, resulting in a worldwide shortfall (even though Iran only accounts for 3% of global oil supply).

What this means for SA is rising fuel prices, a weaker balance of payments and higher interest rates. In other words, more poverty. You can thank Trump and Netanyahu for this outrage.

It looks like our hopes for reaching 2% growth this year can now be put to bed. Clive Eggers, head of Investment Analytics at GTC, says if the oil price continues to climb  – which it will if the US actions against Iran remain in place – and inflationary pressure builds, the SA Reserve Bank may be forced to raise interest rates to stabilise the economy.

South Africa imports its oil primarily from Saudi-Arabia, Nigeria and Angola. Higher oil prices will contract GDP by 0.3%, and could get worse if oil prices continue to rise – which seems likely.

“Trump’s announcement has essentially put the entire Middle East into a state of flux and risked a potential destabilisation of the area. The other signatories to the agreement have – for now – agreed to maintain the status quo and continue with the deal, though American sanctions would make it very difficult for many global companies – including MTN, Airbus, Total and Peugeot – who resumed doing business in Iran after the original nuclear deal was announced, to continue dealing with Iran,” says Eggers.

SA has strong historical ties with Iran, as it first started importing Iranian oil after World War II and has constructed refineries to accommodate Iranian light crude oil. Until 2011, when sanctions were imposed by the US, SA was the third biggest importer of Iranian oil.

Within days of pulling out of the Iran deal, we were treated to visuals of Israeli troops shooting unarmed Palestinian protesters with live bullets, while 50 miles away in Jerusalem Ivanka Trump was cracking open the champagne to inaugurate the new US embassy building, in defiance of Palestinian claims to the city.

SA’s foreign minister Lindiwe Sisulu immediately recalled her ambassador to Israel in condemnation of the killings. The EFF wants the Israeli mission to SA shut down. The DA and the Jewish Board of Deputies “slammed” the ambassador’s recall, but not the killings, which were merely “regretable”. The Daily Maverick reports on the killing of “peaceful” protesters (note the parenthesis, a craven attempt at even-handedness). Other papers spoke of “clashes” between the Palestinians and Israelis. No. There were no clashes. It was a turkey shoot. This could turn out to be Israel’s Amritsar or Sharpeville moment, a slaughter so ugly that the world can no longer look away.

It’s getting hard to make sense of Donald Trump. It looked for a time as if he was Reagan 2.0, a right-wing pro-business president breathing fire and brimstone who miraculously brought an end to the Cold War with Russia.

Trump is nothing like Reagan. Reagan was more gas than propane. He pulled US troops out of Lebanon after a bomb attack on a US army station in that country, and dialled down the kind of crazy rhetoric were are now hearing whenever the subject of Russia comes up. Reagan, though he invaded Grenada for a bit of weekend sport, still managed to make the world a safer place. Trump may sincerely want better relations with Russia, but he is clearly hostage to the crazies in his government who need enemies to keep military spending faucets on maximum.

He twice ordered the firing of missiles into Syria in the last year over dodgy evidence of chemical attacks by the Syrian military. Netanyahu wants nothing more than to rid the region of Syrian leader Bashar al-Assad. A weakened Syria suits Israel (don’t imagine for a minute Israel will stop at breaking up Syria – it now has Iran squarely in view). Trump then surrounded himself with some of the most reckless pro-war hawks that had been lurking in the shadows of the Obama administration, bringing the world once again to the brink of a superpower war. Russia has warned that it would retaliate should any of its troops in Syria be harmed. “Brinkmanship” has returned as official US policy after a three decade sojourn, though this time could easily spiral out of control.

In his election campaign, Trump promised better relations with Russia, but has since cycled back from this hopeful talk. Russia’s entry to the Syrian conflict has virtually rid the country of jihadis, changing the dynamics of the region.

It was Trump’s predecessor, Obama, who signed off on the Iran nuclear deal, which lifted sanctions on Iran in return for the latter limiting its nuclear activities. Trump always maintained it was a “bad deal” without offering any sound proof. Netanyahu is leading Trump by the nose with his cartoonish exaggerations of the Iran threat. The International Atomic Energy Agency and US intelligence have on numerous occasions confirmed Iran is in compliance with its nuclear obligations.

Remember this the next time you refuel your car, or have to pay higher interest rates on your mortgage bond.

Ciaran Ryan on Bruce Whitfield Show discussing massive court action against banks

Written by Ciaran Ryan. Posted in Uncategorized

Ciaran Ryan discusses the R60bn court action in the Constitutional Court being brought by more than 225 applicants whose homes were repossessed by the banks and sold at auction for a fraction of their value. They are asking for criminal investigations into banking executives involved in this practice, and for a change in the law to force banks to sell foreclosed properties at market prices.

Listen here:

Banks cream it off bounced debit orders

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared in Moneyweb.

Fees charged by banks for bounced debit orders range from R5 to R150.

Banks are raking in between R500 million and R800 million a month from bounced debit orders. That’s a sizeable portion of the banks’ non-interest fee income each year for little more than running a piece of computer code.

Fees for bounced debit orders range from R5 for Capitec clients to R150 for Absa and Nedbank clients. The question arises why the fees vary from the reasonable to the ridiculous.

It’s a question bank customers in Australia, New Zealand and the UK started asking several years ago, leading to class action suits against the banks in these countries. The class action suits in the UK and Australia failed because the courts found the fees for bounced debit orders and other charges reasonable if they formed part of a basket of services. SA’s financial regulations are less prescriptive, so the chances of a class action suit succeeding here are much better, according to financial services legal consultant, Leonard Benjamin.