Amplats sees green future for PGMs after 14% production slump in 2020

Written by Ciaran Ryan. Posted in Journalism

Fuel cell battery vehicles, driven by Chinese demand, will help drive demand for platinum group metals. From Moneyweb.

Buoyed by a weaker rand and strong prices, the group’s Ebitda margin was hoisted to a robust 55%. Image: Siphiwe Sibeko, Reuters
Buoyed by a weaker rand and strong prices, the group’s Ebitda margin was hoisted to a robust 55%. Image: Siphiwe Sibeko, Reuters

A 71% increase in the PGM (platinum group metal) basket price boosted Anglo Platinum’s earnings by 39% for the 2020 financial year.

This was despite the setbacks of the Covid lockdown which dropped PGM production by 14% to 3.8 million ounces (oz), and an explosion at a key converter plant which dropped refined production by 42% to 2.7 million oz. The first phase of the converter plant was restored to production in November last year, within budget and ahead of schedule.

Strong PGM prices and a weaker rand helped brush these setbacks aside, resulting in a 39% increase to R41.6 billion in Ebitda (earnings before interest, tax, depreciation and amortisation).

PGM basket prices increased to R33 320 per ounce sold from R19 534 in 2019.

Read: Platinum surges to six-year high on industrial bounceback bets

Anglo Platinum reported a strong recovery in the second half of 2020, with own-mines production up 1% compared to the same period in 2019 (adjusting for the sections at Amandelbult that came to their end of mine life).

Converter plant stoppage, rebuild

Refining on behalf of third party contractors was seriously impacted by the stoppage at the converter plant.

Some R500 million was expended on restoring the first phase of the downed plant. The second phase unit is now undergoing its full rebuild, which is scheduled to be completed in the second half of 2021 at an estimated capital cost of R550-R600 million.

The interruption at the converter plant resulted in a build-up of work-in-progress inventory of around one million PGM ounces. It is expected that this inventory will be released by the end of 2022.

Demand

Demand for light vehicles dropped 14% last year but is now back to near normal levels, led by demand from China. Demand was further underpinned by a 5% increase in PGM per light vehicle manufactured.

Jewellery demand is weak, but recovering, while industrial and investment uptake held up surprisingly well in an otherwise trying year.

The long-awaited lift-off of the hydrogen economy is critical to the future of platinum mines, with 109 corporate members of the Hydrogen Council and nine new national hydrogen strategies announced – all aimed at reducing carbon output using hydrogen-based technologies.

A green future for PGMs

Signalling its commitment to green energy, Anglo Platinum CEO Natascha Viljoen says the group will pilot its first hydrogen fuel cell truck in the first half of 2021, leading eventually the replacement of all diesel-powered trucks at the Mogalakwena mine.

Also being considered is the use of hydrogen fuel cells as a source of energy for processing facilities across the group.

The building of a 75MW photovoltaic plant at Mogalakwena mine will reduce carbon emissions by up to 25%.

The plan is to scale this up substantially in the coming years to reduce dependence on the Eskom grid as well as scale back carbon emissions.

Costs per unit up 15%

The 14% drop in mining production had a flow-through effect on unit costs per PGM ounce, which increased by 15% to R11 739 (2019: R10 189). By the fourth quarter of 2020, all Anglo Platinum mines were operating at 100% of normal capacity.

Buoyed by a weaker rand and strong PGM prices, the group’s Ebitda margin was hoisted to a robust 55%, up from 43% the previous year.

Net sales revenue increased by 38% to R137.8 billion (2019: R99.6 billion), mainly due to an improvement in PGM prices and higher sales from trading activities. This more than offset the supply disruption to customers following the temporary closure of the converter plant.

Return on capital employed increased to 72% (2019: 58%), and the company’s net cash position improved to R18.7 billion (2019: R17.3 billion).

A final dividend of R35.35 per share, or R9.4 billion, was declared – based on a payout ratio of 40% of headline earnings.

Source: Anglo Platinum 2020 results presentation

All heavy trucks sold in China and India by 2023 will need platinum-based catalysers, though many manufacturers are implementing these targets ahead of time. Platinum loadings in Chinese trucks will be three times higher in 2023 than in 2019, with a similar trend emerging in India.

Source: Anglo Platinum 2020 results presentation

Looking to the future, Viljoen says by 2022 all operations will be mechanised or modernised with a view to improving safety and pushing the group into the lower half of competitors’ cost curve. New and safer technologies are being employed to improve safety, such as emulsion-based blasting and winch operations developed in-house to halt operations when workers get too close.

PGM production is expected to return to pre-Covid-19 levels of 4.2-4.6 million oz in 2021, while refined production is expected to reach 4.6-5 million oz. PGM sales volumes are forecast to be in line with refined production. Unit costs are expected to remain between R11 000 and R11 500 an ounce.

Total capital expenditure is expected to be R7-R7.5 billion, not counting capitalised waste-stripping expenditure of R2.8-R3.1 billion.

“The supply and demand for PGMs are both forecast to rise in 2021 compared to 2020,” says the group.

“This was always likely as both have already improved significantly since the first half of 2020, mainly owing to the world learning to live with Covid-19.

“The rollout of effective vaccines now suggests further upside, though how soon they bring the promise of ‘normality’ will vary by country and sector and, in some cases, ‘normality’ will be different than it was before the pandemic.

“We expect palladium and rhodium to remain in deficit this year. Platinum is forecast to be in a small surplus.”

Outrageous predictions for the future

Written by Ciaran Ryan. Posted in Journalism

Abundant energy at a fraction of today’s cost, using blockchains to weed out fake news, and an exodus from crowded cities. From Moneyweb.

Among the recommendations: to short monopoly tech companies and big city real estate investments, and going long companies in education, art, crafts and hobbies. Image: Shutterstock
Among the recommendations: to short monopoly tech companies and big city real estate investments, and going long companies in education, art, crafts and hobbies. Image: Shutterstock

Covid-19 has accelerated super-trends that were dimly visible through the fog of a cracked reality held together by easy money and the illusion that tomorrow will be more or less like today, only with more gadgets.

The idea that tomorrow will resemble today is clearly a dangerous and misguided view.

Covid-19 and the painful US election cycle have brought what might have seemed a distant future a quantum leap closer, accelerating nearly every underlying social and technological super-trend.

Financial services provider Saxo Group has released its 2021 Outrageous Predictions, and it should be required reading for anyone involved in future planning.

There are credible predictions that by 2030, two billion jobs will be lost to automation, artificial intelligence, globalisation and faulty economic systems.

Per capita incomes will rise, but so will inequality, forcing regulators to intervene with universal basic income programmes to ensure food and shelter for their populations.

Here’s a sampling of these outrageous predictions.

Time to short the ‘too powerful’?

Saxo’s fixed income strategist Althea Spinozzi argues it is time to short monopoly tech companies like Amazon, Facebook and Microsoft which have become way too powerful and are coming under regulatory scrutiny from the US to Europe, not least for shifting profits to low-tax countries like Ireland.

In many ways they have become as powerful as nation states.

Consider that last year executives of Facebook, Microsoft and Alphabet were even invited as speakers at the annual security conference in Munich, together with presidents and prime ministers.

Provocatively, Spinozzi argues that Amazon will redomicile its EU headquarters to Cyprus and “help” it rewrite its tax code to suit itself, but will get punished nonetheless as the US and other countries move against these monopolies and punish them for their hubris.

Banks and bankruptcies

Christopher Dembik, head of macro analysis at Saxo, believes Germany will bail out suffocatingly overgeared French banks, as client companies face a wave of bankruptcies due to “stop and go” lockdowns. French banks will be further pulverised by massive losses on state-guaranteed loans already hit by years of weak growth and a low interest rate environment.

Fake news

Anders Nysteen, senior quantitative analyst at Saxo, argues that falsified and manipulated content is taking over the internet, funnelling readers to extremist content which sews divisions.

“Tackling this trend, companies like Verizon and IBM are developing technologies to counter fake news with verification using a blockchain network,” he says.

“Companies like Twitter and Facebook invest heavily in this blockchain tech, motivated first and foremost by self-preservation as the threats of regulatory oversight we’ve seen in recent years become white hot.”

Fusion energy

One of the more intriguing predictions is the emergence of an entirely new energy future based around fusion, rather than renewables. Peter Garnry, head of equity strategy at Saxo, says new alternative and green energy technologies are for the most part not the answer to our energy problems.

“The world urgently needs a disruption in energy technology,” he writes.

That disruption has appeared in the form of the Sparc fusion reactor design by MIT (Massachusetts Institute of Technology) with energy outputs boosted by artificial intelligence, “creating the biggest paradigm shift in energy technology since nuclear power”.

The mastery of fusion energy opens up the prospect of a world no longer held back by water and food scarcity, thanks to desalination and vertical farming (growing crops in vertical stacks). This will solve CO2 outputs and allow every country in the world to become food and energy independent.

Universal basic income

Kay Van-Petersen, global macro strategist at Saxo, argues that universal basic income (UBI) will be an essential part of the regulatory response to the decimation of jobs caused by AI and automation. Big cities have been the chief drivers of job growth for centuries, but the ability to work remotely coupled with high city crime rates and over-priced properties will trigger an exodus to smaller towns.

“The new UBI also drives changes in the attitude toward work and life balance, allowing many young people to stay in the communities where they grew up. Meanwhile, the professionals and the marginal workers in big cities also begin to leave, as job opportunities dry up and the quality of life in small, over-priced apartments in higher crime neighbourhoods loses its appeal,” says Van-Petersen.

His trade recommendation is to short big city real estate investments.

‘Citizen technology fund’

Market strategist Eleanor Creagh argues that a type of Citizen Technology Fund will be created that transfers a portion of capital asset ownership to everyone, allowing displaced workers to participate in the productivity gains of the digital era.

“The policy is spun as a Disruption Dividend, and goes a long way to relieving the economic and social anxieties for those who have been losing out on the share of economic output in recent years.”

This will unleash enormous entrepreneurial energy at the individual and community levels. More meaningful work in community restoration, artisanal crafts and food production will explode in popularity. Leisure-related sectors will likely boom as well, from hobbies to recreational sports and activities, real and virtual. She recommends going long companies in education, art, crafts and hobbies.

Silver

Ole Hansen, head of commodity strategy, says a silver supply crunch is on the way in 2021 and sees the price hitting $50/oz this year.

Grim outlook for zombie companies

Spinozzi also argues that as Covid vaccines are rolled out and normalisation returns, economies that were vastly over-stimulated during the pandemic will result in overheated economies, inflation and unemployment. Rising interest rates will kill off over-geared zombie companies. “For the first time in economic history, a strong recovery sees rising defaults.”

Africa

Here’s a slither of good news for Africa: the discovery that emerging and frontier market growth rates have been woefully underestimated for years, in part due to productivity improvements brought about by the internet and mobile phone-based payment systems.

John Hardy, head of forex strategy at Saxo, advises going long emerging market currencies based on their superior growth outlook.

Australian group Macquarie Metals comes to rescue of Vantage Goldfields

Written by Ciaran Ryan. Posted in Journalism

An amended business rescue plan will see all creditors paid within three months. But a court action by a competing bidder may derail the best laid plans. From Moneyweb.

Image: Supplied

Five years after the collapse of a support pillar that took the lives of three workers at Vantage Goldfields’ Lily mine in Mpumalanga, there’s light at the end of the tunnel for the company. The 2016 tragedy brought an end to mining operations at Lily and its sister mine, Barbrook, which were then placed in business rescue.

The bodies of Solomon Nyirenda, Yvonne Mnisi and Pretty Nkambule remain buried a Lily mine, and the only way to recover them is to sink a new decline shaft 50 metres below the surface to recover the container in which they were working at the time of the collapse.

The recovery of the bodies has been a critical part of the business rescue plan for the mines. Attempts to revive the mines have been going on for the better part of five years, but have been thwarted by competing offers that have ended up in court.

This week, Vantage Goldfields’ business rescue practitioners (BRPs) accepted an offer to relaunch the shuttered Barbrook and Lily mines by Australian group Macquarie Metals, which last year acquired 98% of Vantage’s parent company, Vantage Goldfields Limited.

Vantage CEO Mike McChesney says the Australian parent will settle creditors, who are owed R212 million, and start with the sinking of a new decline shaft at Lily mine to retrieve the bodies of the deceased workers and revive underground operations at the mine.

“We expect creditors to be paid within the next 60 days and we are already in the process of gathering bank account information of employees who are ready and eager to restart work,” says McChesney.

“By July this year we will recommence operations at Lily and 12 months after that we expect to be recovering gold at Lily Mine. A decision will be taken to recommence operations at Barbrook Mine in short order. Initially we will re-employ roughly 400 to 500 workers, though we expect that to ramp up to 700 and possibly 1 000 over time.”

McChesney says the reboot of the mine has the full support of government, the community and the nearby towns of Louws Creek and Louisville, which were heavily dependent on income from the mines. Due to the shallow mining depths, Lily is a relatively low-cost mine with an average head grade of 2.5 grams per ton (g/t) while Barbrook’s grades vary between 3.5g/t and 4g/t.

The BRPs have amended the Vantage Goldfields business rescue plan to allow for the payment of 100% of the claims of secured, preferred and concurrent creditors, with 65% of their claims due in 15 days and the balance within 60 days.  Concurrent creditors in Makonjwaan Imperial Mining Company (which owns Lily) will receive 30c in the rand paid in two phases over the next 60 days.

Business rescue practitioner Rob Devereux of Qey-West Finance says the Macquarie Metals offer was one of two on the table, and far superior in terms of the benefits to creditors. “Macquarie Metals has the funds available, creditors are going to start getting paid in the next two weeks, and it is eager to start mining. This is a great success story, given the difficulties that Vantage Mining has experienced in the last five years.”

Bump in the road

One potential speed bump on the road is an “extremely urgent” application for an interdict to stop the BRPs proceeding with the business rescue plan, on the grounds that it was unilaterally and unlawfully amended – which is denied by the BRPs.

The application is being brought by competing bidder, Arqomanzi.

Says Devereux: “Arqomanzi wants to stop us paying the 800-plus staff who have been without pay for five years, and their offer was rejected because it proposes paying 60c in the rand to staff, while the Macquarie Metals offer will pay them 100c in the rand within the next 60 days.

“The courts must now decide the way forward. Our responsibility is to the company, and we believe we’ve acted in the best interests of all concerned.”

Bitcoin crashes through R700,000 – cheap at the price?

Written by Ciaran Ryan. Posted in Journalism

Does this mean the ship has sailed? Definitely not, according to this sample of experts. From Moneyweb.

Many are suggesting it won’t be long before bitcoin eclipses Apple as the world’s biggest company by market cap. Image: Shutterstock
Many are suggesting it won’t be long before bitcoin eclipses Apple as the world’s biggest company by market cap. Image: Shutterstock

Elon Musk’s announcement this week that Tesla had made a $1.5 billion (R22 billion) investment in bitcoin pushed the price to a new all-time high of $48 000 (R740 000).

The company also plans to start accepting payment in bitcoin for its cars.

Read:Bitcoin tops $48 000 for the first time after Tesla’s purchase

A brief history of Elon Musk’s devotion to the crypto cause

Bitcoin eased back to R680 000 after crashing through the R700 000 mark, a 36% jump in price in a little over two weeks.

Whether we are in bubble territory or not is a question that has been pushed to the side, as bitcoin’s price heads into unchartered territory.

It’s worth pointing out where bitcoin stands in the rankings of the world’s largest assets. This week it sailed past Tesla, Facebook and Alibaba in terms of market cap, and many are suggesting it won’t be long before it knocks Apple, the world’s biggest company by market cap, off its perch.

Source: Assetdash.com

A question readers are asking is whether it is too late to board this train, so it’s a question we put to crypto experts:

At R700 000, is bitcoin still a buy?

All respondents point out that none of their opinions constitute financial advice, and that cryptos are volatile investments that can expose you to risk.

Farzam Ehsani, CEO of crypto exchange VALR

Unlike equities or other asset classes where traditional valuation approaches – such as discounted cash flows, multiples or comparables – can be used, bitcoin and crypto are so new and different that traditional methods of valuation simply don’t apply. Bitcoin has no cash flows to discount, no revenue or profit to multiply and nothing else obvious to compare it to.

The closest asset class we can compare it to is gold, which is valued at $10 trillion to $12 trillion and many in the crypto space proclaim bitcoin to be ‘digital gold’. As such, if bitcoin hit parity with gold in terms of market cap, we’d be looking at a price per bitcoin of over $500 000 (more than R7 million).

The thing is that whenever something digital has replaced its analogue version, the digital version has always been much larger.

So is bitcoin cheap? In the long run I think it’s still incredibly cheap. But will there be a lot of volatility and can the price go down from here? Absolutely.

My personal price prediction [for bitcoin] is $500 000 [R7.3 million] by 2030, if not earlier.

Jason Carpenter, chief investment officer at crypto invest company Etherbridge

Bitcoin is still cheap at $45 000 (R680 000). Its total addressable market is north of $150 trillion. Its immediate addressable market is $11 trillion, [which is the] current size of the gold market. This potentially puts bitcoin at $350 000 (R5.2 million).

Our fundamental market cycle model which encompasses six different ‘on-chain’ indicators [using data from the Bitcoin blockchain] is at levels last seen in April 2017. From a fundamental perspective, all stakeholders are still far from being overheated.

The wave of sophisticated capital entering the space also serves as tailwinds for this cycle.

Josh Miltz, co-founder of crypto investment company BitFund

Of the 21 million bitcoin that will ever exist, 88.69% are in circulation. There are approximately 900 bitcoin per day that continue to enter the circulating supply through the mining reward, which means that (bitcoin) miners are receiving around $41.5 million (R614 million) a day in revenue.

There are consistently more than one million active bitcoin wallet addresses each day and the network saw more than $17 billion (R251 billion) in on-chain transaction volumes in the last 24 hours. That is an annualised transaction volume of over $6 trillion (R89 trillion), which is about half of Visa’s annual payment volume.

Some 60% of all wallets have not moved their bitcoin over the last 12 months. This includes hundreds of percent in appreciation and even one day where the bitcoin price dropped 50% in US dollar terms.

Simply put, bitcoiners are not selling their bitcoin.

Thus, it is arguable that if you are buying crypto and bitcoin for the long term, HODL (hold on for dear life). Then it is always a good time to consider buying bitcoin. However, if you’re simply trying to make some money, the high volatility may be risky.

Richard de Sousa, founder and CEO of crypto exchange AltCoinTrader

Bitcoin is certainly still cheap at the price. It’s heading towards R1 million and is on the verge of going parabolic. Cryptocurrencies are here to stay, and it’s gone mainstream. If you’re in the camp that thinks bitcoin is a scam or is not real, you are saying that your knowledge is better than the richest man in the world, and the top 500 businesses in the world. Elon Musk, arguably the richest man in the world, has just announced that Tesla has put $1.5 billion or 15% of the company’s cash reserves into bitcoin in the last few days.

Ethereum at about R27 000 is about to overtake gold, currently trading at R28 200 an ounce. Ethereum has problems: it’s too slow and doesn’t scale, and while this is true, it continues to hit all-time highs. I see Ethereum at R50 000 by the end of this year, which is double where it is now, though many people believe it will go much higher than this.

Michael Saylor of MicroStrategy [which has acquired more than 70 000 bitcoin using internal treasury funds] invited the top companies in the world to explain how to convert fiat money into cryptos. Bitcoin has been giving us returns of over 200% a year since inception, and in my opinion is the best investment ever. I agree with Saylor that the only time to sell bitcoin is when something better comes along, and I don’t see anything better on the horizon.

Jon Ovadia, founder and CEO of Ovex

Bitcoin is a difficult asset to value, however I do have strong conviction that the price now is significantly lower than it will be in five years’ time. Timing the market is very difficult and playing the long game is easy in my opinion.

In short, I think if you are buying on a five-year time frame, bitcoin is very cheap.

Whether it goes down from here is hard to say, but very possibly.

Of course there are those like ‘Dr Doom’ Nouriel Roubini who say bitcoin’s fundamental value is zero “and would be negative if a proper carbon tax was applied to its massive polluting energy-hogging production, I predict that the current bubble will eventually end in another bust”.

Roubini is professor of economics at the Stern School of Business at New York University, and has long been a critic of crypto currencies.

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

Written by Ciaran Ryan. Posted in Journalism

Helped itself to R8.6bn worth of bitcoin belonging to its ‘investors’. From Moneyweb.

Chainalysis was able to analyse MTI’s cryptocurrency transaction history to learn more about the scam. Image: Dado Ruvic, Reuters
Chainalysis was able to analyse MTI’s cryptocurrency transaction history to learn more about the scam. Image: Dado Ruvic, Reuters

It’s official: Mirror Trading International (MTI) was the world’s biggest crypto scam of 2020, having roped in $588 million (R8.6 billion) worth of bitcoin across 470 000 transactions, according to the recently released 2021 Crypto Crime Report by Chainalysis.

The number of victims likely runs into hundreds of thousands, says the blockchain analysis company.

However, 2020 wasn’t quite as bad as 2019 for crypto scams: in 2019, Ponzi schemes took in nearly $7 billion worth of cryptocurrency, against just under $2.7 billion in 2020.

The biggest scam of 2019 was PlusToken, which sucked up $3 billion worth of cryptocurrency from millions of victims – most of them in Asia. Chinese authorities have since arrested 109 individuals associated with the scam and prosecuted six of the most prominent.

Badge of infamy

The dubious distinction for 2020 goes to MTI, SA’s own home-bred crypto scam which was “by far” the biggest in the world in 2020, says the report.

“The fact that the value of loss from crypto Ponzi schemes declined in 2020 suggests that “cryptocurrency users and the general public have grown more suspicious of such scams, or that potential Ponzi scheme operators have been scared off by the punishments doled out to the PlusToken operators,” says the report.

Most scams in 2020 were smaller in scale, and tended not to follow the typical Ponzi route of paying out fake proceeds to early investors.

Source: Chainalysis 2021 Crypto Crime Report

MTI, which was placed in provisional liquidation late last year, attracted tens of thousands of investors from around the world by offering returns of up to 10% a month.

Read:
FSCA investigating Mirror Trading International (Aug 2020)
Get-rich-quick scheme pulls a crowd, despite regulators calling time-out (Aug 2020)

“MTI presents itself as a passive income source. According to its website, users simply deposit a minimum of $100 worth of bitcoin, and MTI promises to grow it using an [artificial intelligence] AI-powered foreign exchange trading software,” says the report, which analyses web traffic to the company’s web site as well as transactions flows.

“The site indicates that customers can achieve consistent daily returns of 0.5%, which would translate to yearly gains of 500%,” it adds.

“Algorithmic trading is a common premise for many cryptocurrency investment scams.”

MTI had offices in Stellenbosch and Johannesburg. More than half its web traffic comes from South Africa, with a substantial portion of the balance coming from the US, UK, Canada and Mexico.

“We assume from this that most MTI victims hail from these countries in similar proportions as well. MTI has been actively receiving bitcoin from ‘customers’ since June 2018 and even has 150 employees listed on its LinkedIn company page.”

Warnings

However, despite these airs of legitimacy, Google searches reveal that people have been rightly speculating that the company is a scam for most of its existence. In August 2020, the Financial Sector Conduct Authority (FSCA) issued a warning about MTI and urged investors to ask for their money back. There were almost multiple warnings about the scam in the press.

In December last year the FSCA filed charges against MTI after its investigation found that the company falsified trade statements, didn’t declare losses and committed other acts of fraud to deceive the market, says Chainalysis.

“The investigation also found that MTI had over 16 000 Bitcoin of claimed customer investment funds unaccounted for. MTI claimed to have transferred those funds to a new FX trading platform after its old platform banned MTI due to its scamming reputation, but the new platform says these funds were never deposited.

“Since those charges were filed, MTI customers have complained that they can no longer access or withdraw funds they’ve deposited to the platform, and MTI CEO Johann Steynberg has fled SA.”

Investigation

Chainalysis was able to analyse MTI’s cryptocurrency transaction history to learn more about the scam.

“MTI Club has received $589 million worth of bitcoin across more than 470 000 transactions, primarily from exchanges, but also from self-hosted wallets. MTI has also sent and received significant funds to and from a popular, Bitcoin-friendly FX trading platform, as we show in the Reactor graph above,” according to the report.

“Perhaps most interesting is MTI Club’s apparent usage of a popular cryptocurrency gambling service as a money laundering and cash-out mechanism,” it says.

“The platform is the biggest risky destination of MTI funds by volume, having received $39 million worth of cryptocurrency from the scam in 2020.

“Cryptocurrency observer and venture capitalist Dovey Wan remarked that this is becoming a common money laundering technique for many cybercriminals who use cryptocurrency, as gambling platforms can be used similarly to mixers to obscure the origins and flows of illicitly-obtained funds.”

Source: Chainalysis 2021 Crypto Crime Report

The report shows scammers are disproportionately likely to send funds to gambling platforms rather than other services frequently used for money laundering.

Source: Chainalysis 2021 Crypto Crime Report

“Mirror Trading International is another example of why the industry must spread the word that algorithmic trading platforms promising unrealistically high returns are nearly always scams,” states the report.

“When cryptocurrency exchanges and other services learn of these scams and receive their cryptocurrency addresses, they should discourage users from sending funds to those addresses or at least warn them that financial losses are highly likely. In addition, exchanges, gambling platforms, and other services that these scams use to launder funds should consider blocking incoming transactions from businesses that relevant government bodies label as scams or potential scams, as removing the ability to convert funds to cash makes it more difficult for scams to operate.”

The Chainalysis report also warns of increasing scams involving decentralised finance (DeFi) platforms.

Source: Chainalysis 2021 Crypto Crime Report Tweet

Court ruling says mining group MRC is abusing court process

Written by Ciaran Ryan. Posted in Journalism

Australian mining group MRC and its CEO’s attempt to bring defamation suits against South Africans questioning its environmental and corporate practices, defeated. From Moneyweb.

Image: Shutterstock

In a ground-breaking ruling, Deputy Judge President Patricia Goliath has set a high bar for anyone contemplating bringing a Slapp suit as a way of silencing criticism of corporate behaviour.

The ruling says corporations should not be allowed to weaponise our legal system against ordinary citizens and activists to intimidate and silence them.

Strategic Litigation Against Public Participation (Slapp) suits are outlawed in many parts of the world on the grounds that they are intended to censor, intimidate, and silence critics, by burdening them with the cost of a legal defence until they abandon their criticism or opposition.

In 2016, Australian mining group Mineral Commodities (MRC) and its CEO Mark Caruso started filing defamation suits against six South African lawyers and environmental activists over comments they made criticising the company’s environmental and corporate practices.

The judge agreed with the activists that MRC and Caruso were engaged in a Slapp suit and ruled they were abusing the court process in doing so.

“The right to freedom of expression, robust public debate and the ability to participate in public debates without fear is essential in any democratic society. I am accordingly satisfied that this action matches the DNA of a Slapp suit,” reads the judgment.

“Litigation that is not aimed at vindicating legitimate rights, but is part of a broad and purposeful strategy to intimidate, distract and silence public criticism, constitutes an improper use of the judicial process and is vexatious. The improper use and abuse of the judicial process interferes with due administration of justice and undermines fundamental notions of justice and the integrity of our judicial process. Slapp suits constitute an abuse of process, and is inconsistent with our constitutional values and scheme.”

SA’s lack of anti-Slapp legislation such as exists in other countries “renders civil society vulnerable when they embark on pursuing legal challenges and raising legal defences.”

Two attorneys at the Centre for Environmental Rights (CER), Tracey Davies and Christine Reddell, and activist Davine Cloete, were accused of making defamatory statements about MRC’s subsidiary company Mineral Sands Resources (MSR) and its director Zamile Qunya during presentations at the University of Cape Town in 2017.

Prominent environmental lawyer Cormac Cullinan was sued over comments he made in a Cape Talk radio show suggesting the company had bought off traditional leaders as a way of pushing through the Xolobeni mineral sands project on the Wild Coast, against the wishes of most community members.

Social worker and journalist John GI Clarke had most to lose, with a defamation claim of R10 million, over an article in which he says he was misquoted as suggesting the company had been involved in the 2016 murder of Pondoland community activist Sikhosiphi “Bazooka” Rhadebe.

The arguments

In their defence, the defendants filed two special pleas: the first claimed that the case brought by Caruso and MRC was a Slapp suit and therefore an abuse of the court process; and the second claimed the company should have to demonstrate financial harm for its case to succeed.

MRC and Caruso filed exceptions (objections) to these pleas.

The court dismissed the first set of exceptions, effectively agreeing with the activists that the defamation cases are an abuse of the court process.

The second set of exceptions were upheld, meaning the court did not agree with the activists that the company must show financial harm for its defamation claim to succeed.

Cullinan says this part of the ruling was expected, because the High Court had to follow a binding Supreme Court of Appeal (SCA) judgment. This ruling in the Cape High Court can now be appealed to the SCA.

“We want to appeal that part of the judgment that went against us so that it can be decided by the SCA and if the SCA agrees with Goliath J our legal system will have a framework for dealing with Slapp suits in the future. Once MRC and Caruso picked this fight, our primary objective was to ensure that they became an example that would discourage others from using Slapp suits. The spotlight will now be on them to show why the defamations cases they launched are not Slapp suits,” he says.

Says Clarke in response to the ruling: “It’s a huge relief. This judgment is akin to the release of a hostage. It’s said in warfare truth becomes the first casualty. In lawfare, truth becomes the prized hostage where the more powerful party uses legal procedure and arcane legal procedure to harm the truth.

“Going forward, so much more truth will be able to be shared and told, not just on the Xolobeni mining saga, but in other areas where powerful mining companies have tried to constrain the truth.”

Last year Australian press reported that Caruso is facing criminal charges of assault and aggravated home burglary. MRC issued a statement in October last year that Caruso had stepped down as chairman of the MRC board but would continue as CEO after “an alleged incident which occurred whilst Mr Caruso was assisting a friend in enforcing an abandonment order and a subsequent property seizure and delivery order at that friend’s premises.”

An abandonment order is when a tenant leaves a property before the end of the tenancy agreement without notifying the landlord or letting agent.

Quotes from the judgment:

Individuals or NGOs must have the freedom to respond to issues affecting society, such as those related to the environment and sustainable development.

The present matter arises in the context of debates about whether the mining companies have complied with their legal obligations and whether they have caused environmental damage. Matters such as this, self-evidently require public engagement and public debate.

The social and economic power of large trading corporations renders it critically important that they be open to public scrutiny without the inhibiting risk of crippling liability for defamation.

The mining companies are claiming inexplicably exorbitant amounts for damages, which the defendants can ill-afford. They instituted these proceedings fully aware of the fact that there is no realistic prospect of recovering the damages they seek.

However, it appears that the action is not aimed at obtaining monetary, or financial damages, but rather vindicating a right, or for some other purpose. The plaintiffs have indicated that in the alternative, they would be satisfied to dispose of the matter on the basis of a public apology. This is a signature mark of many Slapp suits.

The revolt of the ratepayers

Written by Ciaran Ryan. Posted in Journalism

The revolution is happening at local level, and it’s only just getting started. From Moneyweb.

Potholes in Maritzburg have reportedly gone unrepaired for years, and companies willing to do their own repairs are prevented by law from doing so. Image: Shutterstock

Potholes in Maritzburg have reportedly gone unrepaired for years, and companies willing to do their own repairs are prevented by law from doing so. Image: Shutterstock

Rates and tax revolts are either underway or being contemplated by ratepayer associations fed up at being forced to pay rates and taxes to dysfunctional municipalities.

They are called ‘tax diversions’ rather than revolts, and they’re of questionable legality, but several ratepayer associations are willing to test the law. Others are planning court actions to allow residents to take over the delivery of municipal services, as recently happened in Kgetlengrivier in North West Province.

The UAG or Umdoni Action Group (based in Scottburgh, KwaZulu-Natal) was established in 2015 to protect the interests of ratepayers, tenants and residents of the area, and has opted for ‘tax diversion’ to hold the local municipality accountable. The ratepayers’ complaints are familiar ones: “Broken roads and stormwater systems, crumbling basic infrastructure, decrepit CBD, very few working street lights, overgrown verges and parks. The list is almost endless,” states the group’s website.

The UAG launched a rates diversion policy in May 2020 after years of attempting to engage with the local municipality to resolve their complaints without success. To get involved, ratepayers have to fill in a ‘Declaration of Dispute’ form which the UAG emails monthly on behalf of all participants to the municipal manager. The rates and taxes that would normally be paid to the municipality are retained in ratepayers’ own accounts.

Ultimatum

“Should our complaints not be resolved within a reasonable period, we will impose on Umdoni Municipality an ultimatum, in which we will reserve the right to effect repairs using the diverted funds and our own labour, contractors and material,” says the group’s call to action.

UAG’s initiative appears to have borne some fruit. During a recent Zoom meeting, the newly-appointed CFO at the municipality undertook to “craft a plan” to resolve the rates diversion impasse.

However, UAG remains resolute that no retained rates will be released until repairs actually take place and services resume.

Geoff Smailes, a founding member of UAG, says several hundred residents have signed up for the tax diversion campaign so far, but to have any real clout, it needs all residents on board.

It’s a small beginning, but campaigns like this are being contemplated across the country.

Withholding taxes

This is not the first time ratepayers have voted by withholding payment to dysfunctional municipalities. In 2009, 30 ratepayer associations withheld rates and taxes and many more declared disputes with their municipalities for non-delivery of services and other issues.

“On the face of it, withholding rates and taxes is unlawful, and declaring a dispute doesn’t legitimise withholding taxes, but it does defer it, as it effectively puts the disputed amount on hold until the matter is resolved,” says Tim Tyrell, project manager at Organisation Undoing Tax Abuse (Outa). “It is also unlawful for local governments to charge taxes and fail to deliver services for which they are charging.”

A dispute is only legitimate if the person declaring the dispute is a legal persona, such as the ratepayer.

“This is why it’s very important to properly constitute and register any community organisation, especially one that seeks to go the rates/taxes diversion route,” adds Tyrell.

Moneyweb this week reported on the court-ordered takeover by residents of water and sewage services in Kgetleng in North West province, after the municipality was found to have breached its constitutional obligation to provide these basic services. Local residents got together and raised money and expertise to get the sewage and water plants – which had been abandoned by municipal workers – up and running in about a week.

Dissolution of municipality

In January 2020, history was made when the Makhanda High Court in Grahamstown ordered the dissolution of the Makana Local Municipality and an administrator be appointed to run its affairs.

The court action was brought by the Unemployed People’s Movement as frustration grew over the municipality’s failure to provide basic services, such as garbage collection and clean water.

The decision was appealed by the Eastern Cape government and the Makana Municipality, but the appeal was rejected by the court.

Another area where a tax diversion campaign is being considered is Pietermaritzburg, falling under the Msunduzi Municipality. Ratings Afrika’s Municipal Financial Sustainability Index (MFSI) survey ranks municipalities on six measures of financial sustainability: operating performance, liquidity management, debt governance, budget practices, affordability and infrastructure development. Municipalities are then given a score out of 100. As shown in the table below, Msunduzi scores a miserable 31. Umdoni is somewhat better at 51.

Source: Ratings Afrika

Melanie Veness of the Pietermaritzburg Chamber of Business says businesses are fleeing the area because of inconsistent electricity supply, potholed roads and a near total breakdown of basic service delivery. “This is the second time in 10 years the Msunduzi Municipality has been under administration, and not a single portfolio within the municipality is well run.”

Factional rivalry

Complicating matters in the local government are factional rivalries in the ruling ANC. Ratepayers are expected to pay for services while a huge percentage of the prepaid meters in the area are illegally bypassed.

Veness says there are roughly 40 000 electricity meters in the area, but only 11 000 are being billed.

Criminal “entrepreneurs” have been able to run electricity cables to poorer arrears and charge R150 a month for connections. None of this goes to the municipality. Potholes have gone unrepaired for years, and companies willing to do their own repairs are prevented by law from doing so. Unless something drastic is done, more companies will leave the area, adds Veness.

Anthony Waldhausen, chair of ratepayers umbrella body Msunduzi Association of Residents, Ratepayers and Civics (Marrc), says the group is consulting with lawyers over an appropriate course of action to ensure ratepayers are given the services they are paying for. Marrc has been emboldened by the recent victory of ratepayers in Kgetlengrivier in North West province, who were allowed by the court to take over the provision of services.

“A lot of residents in this area are talking of a rates and taxes boycott, but we are discouraging that as we are looking for more effective ways of getting the basic services we are paying for. One possibility we are looking at is to ask the court to follow the Kgetlengrivier court case in North West and allow us to take over service delivery in this area.

“We’ve made numerous attempts to resolve our concerns by meeting with the mayor and municipal manager, but these have not borne fruit.

“We now have to look at more urgent ways of solving the problems we face.”

Politically connected but unqualified

Like many other municipalities around the country, Msunduzi is rife with cadre deployments. Unqualified people with the right political connections are being appointed to senior positions.

“There are many good and competent people in the municipality, but their hands are tied. Their budgets are redirected elsewhere by their seniors and there is little they can do.”

Ratepayers across the country are fed up with being told to suck it up while local municipalities are being run into the ground by comrades with neither the expertise nor the willingness to do their jobs.

The issue of rates and taxes boycotts will not go away.

“We don’t encourage boycotts but we do endorse the various types of civic indignation we are now seeing. If enough people break the law, the law becomes moot,” says Tyrrell.

“What are local governments going to do? In many cases, there has already been a collapse of services.”

Outa says it is rolling out a number of campaigns to improve communication between residents and local government, including a mobile-based app to report faults and potholes to the right people in municipalities, and then track the progress in addressing these issues.

Another Outa campaign plans to focus on building capacity at local level to form ratepayer associations and become effective in holding municipalities to account.

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

Written by Ciaran Ryan. Posted in Journalism

When local government broke down, the people of Kgetlengrivier rolled up their sleeves and did the work themselves. From Moneyweb.

The area has clear drinking water even though its municipality ‘fails to supply potable water’. Image: Shutterstock
The area has clear drinking water even though its municipality ‘fails to supply potable water’. Image: Shutterstock

In an astonishing judgment in the North West High Court in December last year, the judge ordered the imprisonment of the municipal manager of Kgetlengrivier in North West province for 90 days, suspended on condition that raw sewage spilling into the Elands and Koster rivers be cleared up within 10 days.The Kgetlengrivier Local Municipality falls within the Bojanala Platinum District Municipality (the seat of Bojanala Platinum is Rustenburg).

Justice Gura also ordered that residents association Kgetlengrivier Concerned Citizens be allowed to take control of the area’s sewage works, to be paid for by the local and provincial governments.

The municipal manager was further sentenced to imprisonment for 90 days, suspended on condition that he provides clear, potable water to the residents of Koster and Swartruggens in North West within 10 weeks of the ruling.

This is a judgment that should have officials in dysfunctional municipalities across the country quaking in their boots.

It means potential jail time for the worst offenders, and opens the door for citizens to take control of essential services in their areas.

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

AG: How to improve the state of our municipalities (2020)

Residents given control

Justice Gura also ordered that residents in Kgetlengrivier be given control of the area’s water works so they could appoint qualified people to run it. All this must be paid by the local and provincial government.

The result?

“Now we’ve got beautiful, clear, drinking water, and we’ve got more than we know what to do with,” says Carel van Heerden, the head of Kgetlengrivier Concerned Citizens.

“Local residents paid R7.5 million out of their own pockets, but we got the pumps repaired or replaced, we rented generators to make sure the water could continue pumping in the event of power outages, and we got the water system back in full operation in a matter of weeks.”

The local government will have to pay the residents back their R7.5 million – plus their court costs.

Read: Confirmation that municipalities are a huge burden on taxpayers

“This is unprecedented in South Africa,” adds van Heerden. “The judge in this case was incredibly brave, and we believe established a precedent for other ratepayers’ associations around the country dealing with corrupt or failing municipal leaders.”

Ministers’ reaction a sign of things to come?

In the Kgetlengrivier case, the national ministers of Environmental Affairs, and Human Settlements, Water and Sanitation were cited as respondents, but agreed to abide by the court‘s decision – perhaps signalling national government is no longer willing to back comrades found to have mismanaged at local government level.

On January 8, the municipal manager, RJ Mogale – facing jail time unless the conditions of the court order were met (and they were, but not by him) – issued a public notice claiming van Heerden “and a handful of white males” had illegally taken over the water and sanitation plants and “had disrupted the provision of water fundamentally violating the rights of residents to Kgetleng”.

Mogale goes on to advise residents that the municipality had made an application in the North West High Court to reassume control of the water and sanitation plants. That application was dismissed by the court.

‘Illegal takeover’ claim ‘despicable’

Van Heerden says Mogale’s attempt to frame what happened at Kgetleng as an illegal takeover by a “handful of white males” is racist and despicable, and a legal suit is being planned against him in the coming weeks for his incautious remarks.

The court order makes it clear that the municipality has been bypassed and rendered irrelevant, other than to pay the costs of providing water and sanitation services provided by the residents.

“We have the support of the community, regardless of race,” says Van Heerden.

“We’ve provided jobs to the local community that were not there before. And we got the job done in weeks that the municipality couldn’t get done in years.

“It took us about a week to get the sewage plant running again. People from every part of this community [were] involved in this salvage operation, and everyone is fed up with the non-delivery by the municipality.

“Many of the more affluent people in the community have joined this fight, even though they don’t rely on municipal services. They have solar panels and boreholes because they can afford them. They got involved in the fight because they wanted to ensure poorer members of the community who desperately need these services were able to survive.”

How it came to this

There is a long and storied history behind this court judgment.

In 2018, workers at the newly constructed R144 million sewage plant downed tools over a pay dispute, leaving the community without water for several days. Van Heerden says vandalism and theft of equipment was rampant, and those running the site were incompetent. Workers abandoned the site one by one until there was no one left to work it at all. The town’s taps ran dry.

Residents obtained an urgent court order to restart the plant and supply water to the community. They ran the plant for a few weeks until the municipality resumed control.

In February 2020, workers again went on strike for backpay and again abandoned the site, says van Heerden. “We again got a court order to restart the plant and we ran it for four or five weeks before handing it back to the municipality.”

Residents previously won another case against the municipality, which they claimed was unlawfully setting rates and taxes.

Yet another case interdicted Eskom from cutting electricity to the municipality, which was more than R200 million in arrears.

Read: Municipalities owe Eskom R31.5bn

Municipality must show that it’s up to the task

This time, however, the court may not be so lenient with the municipalities’ attempts to reclaim control over the water and sewage systems.

The December 2020 court order reads: “It is declared that the KLM [Kgetlengrivier Local Municipality] fails to supply potable water to the residents of Koster and Swartruggens.

“It is declared that the water purifying works at Koster and Swartruggens are in states of disrepair and are mismanaged.

“It is accordingly declared that Bojanala [Platinum District Municipality, also a respondent in the case] and the KLM are in breach of their constitutional obligations for providing potable water sustainably.”

Though an interim order, the municipalities must show by March 1 this year why this order should not be made final – meaning they will have to put a powerful case to the court that they have managed to get their act together and can do a better job than the residents.

Growing trend

“Civic indignation is a growing trend across the country, as shown by this event in Kgetleng,” says Tim Tyrrell, project manager at the Organisation Undoing Tax Abuse (Outa).

“In this case, residents approached the court because they were being forced to pay for services that were not being delivered. They decided to ask the court for permission to take over those services, and the court agreed.

“This is an encouraging sign that courts are alert to the problems facing communities and are trying to come up with solutions that ensure services continue uninterrupted – as required by the Constitution.”

In other parts of the country, tax revolts in dysfunctional municipalities are either underway or being contemplated. That’s the subject of the next instalment.

Trade unions attach municipality assets over outstanding pay and benefits

Written by Ciaran Ryan. Posted in Journalism

Nelson Mandela Bay Municipality says it wants its trucks back and will settle the bill, while government steps in to save Kopanong’s assets being auctioned by municipal workers union. From Moneyweb.

Port Elizabeth. Image: Shutterstock
Port Elizabeth. Image: Shutterstock

The Democratic Municipal and Allied Workers Union of South Africa (Demawusa) last week attached assets belonging to the Nelson Mandela Bay municipality over an outstanding R8.8 million in pay owed to 36 workers.

The outstanding payment dates back to 2015 for the workers who were insourced immediately after the Labour Relations Act amendments, which require temporary workers to be permanently placed after three months.

The assets attached include a fleet of trucks as well as other vehicles. The loss of these vehicles would be devastating for the Nelson Mandela Bay municipality and its already crippled service delivery.

The 36 workers were employed in a call centre operated by the municipality, but had been short-paid since 2015, according to Demawusa coordinator, Siphiwo Ndunyana. “Most of these workers started as early as 2009 but were deemed to be permanently employed from 2015,” he said.

A dispute was declared in 2019 and was referred to arbitration, resulting in the workers being granted backpay of R8.8 million which had to be paid by December 15, 2020.

“The municipality ignored this legally binding award and did not pay the workers. As a fighting union, we are taking this to its logical conclusion. We do not want municipalities to smile at the expense of workers,” says Ndunyana.

The union called a halt to the auction as it says the municipality had agreed to settle the outstanding payments within a few days.

Nelson Mandela Bay municipality is in a stand-off with National Treasury, which has withheld R1.6 billion in conditional grant funding from the city, because of its failure to elect a mayor and a properly qualified municipal manager. Last week Eastern Cape DA leader Nqaba Bhanga was elected mayor, after two years in ANC hands. The city burned through 10 municipal managers in those two years. Bhanga blamed the ANC for breakdown in service delivery and promised to return order and good governance to the city.

A similar dispute to that in Nelson Mandela Bay was playing out in the Free State this week, when South African Municipal Workers’ Union (Samwu) was ordered to halt the auction of assets belonging to the Kopanong municipality. In 2017, the union secured a high court to attach the municipality’s assets to recover more than R58 million in unpaid pension fund contributions. SABC reports that the auctioning of the assets was halted after government obtained a stay of execution, arguing that the planned auction did not follow proper procedures. Kopanong has been mired in controversy for years for failing to pay its bills, prompting the DA to call for the dissolution of the municipality.

This is not the first time a municipality’s assets have been attached as a way of collecting outstanding debts.

Last year Eskom attached 139 farms worth R2.5 billion from Matjhabeng municipality in the Free State for unpaid electricity bills, and also went after furniture, cars and other equipment in settlement of a R2.3 billion arrears bill owed by Emfuleni municipality, south of Johannesburg. The utility also went after the bank accounts of Maluti-a-Phofung municipality in the Free State in pursuit of an outstanding bill of R5.3 billion, but later agreed to release some funds to allow it to pay salaries and other costs.

Dysfunctional municipalities that have been run into the ground are facing revolt across the country. In the next instalment we’ll look at some parts of the country where residents have had enough and are taking matters into their own hands.