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.

How the construction ‘mafia’ business model jumped to other sectors

Written by Ciaran Ryan. Posted in Journalism

They prefer to be called business forums. From Moneyweb.

Taking matters into their own hands … some of the rogue elements are demanding to be employed as refuse collectors. Image: Shutterstock

Taking matters into their own hands … some of the rogue elements are demanding to be employed as refuse collectors. Image: Shutterstock

They started off invading construction sites in KwaZulu-Natal (Kzn), demanding 30% of the contract work. Then it spread to Gauteng, and has now gone countrywide. The tactic is working, and many contractors simply pay off the gangs rather than have building work disrupted. Sometimes they employ the locals, often at extortionate rates.

They became known as the construction mafia, though they prefer to be called business forums. The business model is so successful that it is being replicated across the country in different sectors of the economy, as local community groups now move in on recently completed shopping and business centres, demanding to be employed in various roles.

Many of the gangs are armed and threatening, demanding that new businesses employ locals rather than trained personnel from outside the area.

All of this stems from new regulations to the Preferential Procurement Policy Framework Act, which allows 30% of all contract value on state construction contracts to be allocated to certain designated groups, including black-owned SMEs (small and medium-sized enterprises).

The regulations do not apply to private sector construction contracts, but this has not deterred the local forums.

Virtually every major construction site in Kzn has reportedly been affected by the forums.

Read: Engineers leave SA due to ‘construction mafia’

Peter Barnard, a partner at Cox Yeats Attorneys, has been involved in about 40 cases involving business forums and, when asked by clients, has gone to court and won interdicts against more than 30 of them, preventing them from disrupting site activities.

What is alarming, he says, is that the business forum model has spread to other sectors. “It’s no longer happening just in construction. It’s happening across the country and in many different sectors of the economy. I handled one case in the Eastern Cape last week where a major state-run project has been stopped for over a month by local groups demanding to be employed on the site.

“All that happens is the local community, which would benefit from the hospital, ultimately suffers.

“What has made the situation worse is that managers of the construction sites that have been targeted often end up paying off the business forums to make them go away, or hiring some of their members under duress, which only serves to encourage this kind of extortion.”

These groups are now demanding to be employed as refuse collectors, or as tellers in new shopping centres.

Barnard says broadly four groupings are involved:

  • MK Veteran associations
  • Taxi associations,
  • Business forums, and
  • Local communities.

He says the solution is for more proactive policing and greater clarity from parliament around regulations over the 30% set aside for SMMEs, as well as a unified approach and front from contractors and business owners.

Things got heated last week at the Master Builders Congress at Emperors Palace near OR Tambo International Airport, when representatives of the construction sector accused the police of doing little to solve the spread of crime on building sites. Gregory Mofokeng, CEO of the Black Business Council in the Built Environment, says contractors need to absorb as many South Africans as possible. “If not, the youth will create chaos here, not in Mozambique or Zimbabwe.”

‘We were not getting attention from our leaders’

Malusi Zondi, president of the Forum for Radical Economic Transformation, says forums are not a new development in the economic life of the country. “We formed business forums five years back because we were not getting attention from our leaders. We formed these forums not because we are criminals, but because government is failing in not enforcing contract obligations.”

Zondi admitted that business forums had done wrong, but added that they are not the enemy.

Sector Education Training Authorities are returning money to Treasury every year rather than training youth, as government has sworn to do.

Contractors are abiding by the regulations (requiring 30% sub-contracting to SMEs), but still their construction sites are being disrupted by rogue elements. “Where there are disruptions, the police don’t act. I’ve not heard of one case of prosecution of illegal disruptions. We expect arrests.”

German Mphahlele of the Construction Industry Development Board, told the congress that site invasions are exacerbated by a shrinking economy and rising unemployment. The problem is further aggravated by a misrepresentation of who qualifies for state sub-contracting work. “Some people are trying to say it is for locals. That’s not the case. It’s national.”

‘Some’ success

Aubrey Tshalata, president of the National African Federation for the Building Industry, pointed to some successful engagements between the public sector, companies and local business forums. One such engagement in Port Edward in Kzn resulted in a practical solution, with an agreement to train local youth and prepare them for work in the formal construction sector.

Lieutenant-General Nhlanhla Mkhwanazi of the SA Police Services said the police are constitutionally mandated to prevent crime, but that they can’t do it alone. “In construction, especially in KwaZulu-Natal, we ask if cases have been reported to the police. We have taken a number of cases to court for prosecution.”

A government unhinged

Written by Ciaran Ryan. Posted in Journalism

By ministers who flout the rule of law, according to a new book. From Moneyweb.

Martin van Staden has documented some astonishing ministerial whims and highlighted cases of judicial irresponsibility and recklessness. Image: Moneyweb

Martin van Staden has documented some astonishing ministerial whims and highlighted cases of judicial irresponsibility and recklessness. Image: Moneyweb

South Africa prides itself on being a nation based on the rule of law, yet we have ministers who trample the law from the moment they step into the office until the time they leave.

Read: The poison of politics is a risk to us all

This is not to unique to SA. It’s happening everywhere and appears so routine we hardly pay attention. Ministers do this by writing ‘regulations’ that far exceed the powers granted them by the Constitution of South Africa, by repeating the mantra ‘transformation’ and sometimes because there is no one to tell them when to stop. Perhaps the country is so deliriously happy to be rid of team Zuma that it is prepared to look past the systematic corrosion of the rule of law – something that preceded Zuma and has survived him.

Read: The rose-tinted blinkers approach to economic reform

Martin van Staden of the Free Market Foundation has documented some astonishing ministerial whims in a new book entitled ‘The Constitution and the Rule of Law’.

Don’t be put off by the arid title – it’s written for the lay person. But be warned: it’s not a feel-good read.

For example, the Constitution, the highest law in the land, allows for private schooling at both higher and basic levels, subject to just three conditions: they may not discriminate based on race, they must be registered with the state, and the standard of education may not be inferior to that offered in the public sector. Anyone who meets these criteria can set up a private school or university.

Yet the SA Schools Act allows provincial education ministers to set their own criteria, which is precisely what they have done. The Act clearly violates the Constitution, and no one has objected.

Power grab

In 2016, then-Higher Education Minister Blade Nzimande said government “is not keen on allowing private universities on a full-blown scale” and that private universities posed a serious threat to the public education sector. That same year, the Higher Education Amendment Act appeared, putting these airy threats into law. Henceforth, the minister was empowered to determine “the scope and range” of operations allowable by universities “in the interests of the higher education system as a whole”.

By enacting this legislation, parliament abandoned the rule of law in favour of another arbitrary power grab.

Again, there was barely a whisper of protest against this unconstitutional power grab. This all happened in the midst of the #FeesMustFall movement, which quickly morphed into a campaign for free university education and then into a campaign for an Afrocentric curriculum.

Education in SA has always hewn within strict ideological railings. Thirty years ago, it was apartheid; today it’s transformation.

Van Staden cycles through the appalling record of law-breaking ministers and parliamentarians, from apartheid times up to the present.

SA cannot escape its apartheid past. Citizens, particularly those interacting with government, are required to declare their race. Contractors, companies and service providers must delve into the minutiae of ownership and management by race if they want crumbs from the king’s table. The black economic empowerment (BEE) codes become more complex each year and need specialised consultants to interpret them – all in the name of spreading equality and in contravention of the rule of law standard.

All you need to do is tune in to the Zondo Commission of Inquiry into Allegations of State Capture to see how easily these codes are perverted.

Source: Rule of Law Project

One of the most destructive pieces of legislation on the statute books is the Mineral and Petroleum Resources Development Act (MPRDA), which contrives two sets of rights for a single property: the surface rights, which belong to the land owner, and the underground rights, which now belong to the state.

SA is not unique in claiming underground rights as property of the state, to be dished out under licence to those satisfying the BEE requirements set by government. In the name of spreading equality and fairness – laudable goals though they may be – the effect has been to chase mining investors to Ghana, Democratic Republic of Congo and other friendlier locales. SA’s share of global mining capex fell to 3% in the five years to 2017 – from 9% for the previous five years. Virtually all of this lost investment was due to uncertainties around government policy.

Civil society’s reluctance to criticise the judiciary for some of its bizarre judgments contributes to the general assault on the rule of law.

Van Staden cites one case, Agri SA v Minister for Minerals and Energy, as “one of the worst precedents set in contemporary SA legal history.”

When a court abandons objectivity …

Agri SA brought the case on behalf of mining company Sebenza, and claimed that the enactment of the MPRDA in 2002 had the immediate effect of expropriating mineral rights. Before the Act, land owners also owned the mineral rights underneath and could do with it as they pleased. Agri SA lost the case, and in the introduction to the ruling, Chief Justice Mogoeng Mogoeng lauds the Act as a “break through the barriers of exclusivity to equal opportunity and to the commanding heights of the wealth-generation, economic development and power.” (sic)

Writing the judgment on behalf of the majority of the Constitutional Court bench, he goes on to gush about the virtues of the Act, choosing words that Van Staden says may just as well have come straight out of the Department of Mineral Resources’s PR unit.

In this case the court abandoned objectivity by assuming the Act was efficient at addressing the social ills it seeks to cure. It recklessly chose form over substance, rather than substance over form. “It was irresponsible for the court to assume it as simply true that the legislation is, in reality, effective at ‘addressing’ inequality,” writes van Staden. “The rule of law requires legislation to be reasonable, which includes rationality and proportionality, meaning the court was bound to undertake a far deeper analysis of the statute to determine its efficiency.”

In far too many cases, judges have abandoned their oaths and done the bidding of the dominant political ideology.

The rule of law is senior to the law itself, since it sets parameters for law makers and judges. When this is overrun by irrationality and ideological fervour, you end up with injustice and social schism.

A companion read is Anthea Jeffery’s book ‘BEE: Helping or Hurting?’ wherein she argues that elements within the governing party are so committed to the national democratic revolution that they feel exempt from the Constitution. For them property rights are malleable, subservient to the goal of enforcing demographic representivity in every sphere of society.

Read: How SA slept through the BEE revolution

Some have argued that affirmative action is unconstitutional, because it violates the right to equality in Section 9 of the Constitution. Van Staden points out that this a misreading of the Constitution, which specifically requires positive discrimination by the government to redress historical inequalities.

He argues that affirmative action cannot be racial in nature, because the Constitution itself is founded on the logic of non-racialism.

Positive discrimination can only be constitutional when it is based on a more rational characteristic, such as socio-economic status.

The fine line between law and tyranny

The problem with the campaign to amend the Constitution to expropriate land without compensation is that all property rights are vitiated. Nothing much thereafter stands between where we are now and outright tyranny. Aware of the potential to kill the economy, government will likely tread delicately around this landmine and focus its redistributive zeal on land already owned by the state, as well as abandoned and hopelessly over-indebted land.

Awarding itself a blanket right to expropriate without compensation is the hallmark of failed states, such as Zimbabwe and Venezuela.

Few are in any doubt where that road ends.

The softcover book is available for purchase by contacting the Free Market Foundation in Bryanston. It can be downloaded electronically here.