Public Protector releases Midvaal, Venda
Pensions Fund reports
Tuesday, 08 November 2011
Public Protector Adv Thuli Madonsela on Tuesday upheld the
majority of allegations relating to maladministration, abuse
of power and abuse of state resources that were levelled
against the Midvaal Local Municipality.
Among a host of
allegations, the Municipality was accused of appointing
Odendaal and Summmerton Inc., a law firm, as its sole
provider of legal services for the past 30 years without
following proper procurement procedures.
It was also
alleged that the Municipality allowed the law firm to
auction properties to the value of 30 million and earn
commission or transfer fees in contravention of the
Municipal Structures Act (MSA) and the Municipal Finance
Management Act (MFMA).
It was further alleged that the
Municipality enabled Mr Andre Odendaal, a partner in the law
firm, to benefit improperly from the sale of properties
donated to the Municipality.
Complainants also alleged
that the Municipality failed to collect a debt owed to it by
a vendor who acted on its behalf in the sale of prepaid
electricity and failed to collect rates and taxes owed by a
son of a former councillor.
Presenting her findings during
a media briefing in Pretoria, the Public Protector told the
journalists that Odendaal and Summmerton Inc had been
attorneys for the Municipality over the last 29 years.
2000 the law firm was appointed to render all legal services
to the Municipality, including conveyance services, debt
collections, legal opinions on labour matters, and
Magistrate and Supreme Court matters, she said.
and Summerton Inc. was only appointed on the basis of a
tender for the first time in 2006, to provide legal
services, debt collection services, and auctioneering
services. The Municipality’s procurement practice prior to
2006 was in violation of the Preferential Procurement Policy
Framework Act, section 217 of the Constitution, the Local
Government Transition Act (LGTA), and the MSA,” she
However, the Public Protector said the
procurement processes by the Municipality in 2006, in
respect of legal services, debt collecting services and
auctioneering services, were formally competitive but not
substantively competitive. The processes failed to comply
with the principles of fairness and competitiveness as
provided for by section 217 of the Constitution, the LGTA
and the MSA. The relevant provisions of the MFMA were not
applicable at the time.
She further indicated that the
continuous and deliberate extension of the law firm’s
contract by the relevant Municipal Managers, in
circumstances where the firm gained an unfair advantage over
other prospective service providers by having access to
information and influence over the procurement instruments
amounted to maladministration.
The failure by the relevant
Municipal Managers to have reasonably foreseen and managed
the perceived or actual conflict of interests with Mr
Odendaal’s position as attorney and debt collector and his
2007 appointment as Constituency Chair, fostered a
substantial personal benefit at the expense of the public
purse, constitutes maladministration.”
It was further
found that the law firm earned commission and fees in
respect of the sale and transfer of properties on behalf of
the municipality. However, no finding could be made on the
complaint that the fees and commission were paid by the
municipality in an irregular manner as the matter was
referred to the Special Investigating Unit.
Protector also found that the management and sale of
properties donated to or intended to be donated to the
Municipality by property owners who were in arrears with
their municipal accounts, contravened the MFMA.
Furthermore the Municipality’s failure to pursue the debt
was found to have been improper and unfair and therefore
In her remedial action, the
Public Protector directed, among other things, that the
Accounting Officer must, within 60 days of the receipt of
this report, submit a report to the Municipal Council in
accordance with the Municipality’s Supply Chain Management
Policy and Procedures to enable the Council to deal with the
non-compliance with the Constitution.
The Council must
investigate the deficiencies and non compliance with the
policies and control mechanisms by the officials involved
and responsible for the management of the debt collection
policy of the Municipality in terms of chapter 9 of the MSA,
as well as the management of the provision of service
through external mechanisms in terms of section 80 of the
In another report released during the briefing, the
Public Protector found that the actions of the South Africa
government particularly the Department of Public Service and
Administration and Government Employees Pension Fund (GEPF)
This followed a complaint by a group called Vhembe
Concerned Pensioners which approached the Public Protector,
alleging that the GEPF and the National Treasury had acted
improperly during the privatisation of Venda Pension Fund.
They alleged this resulted in members of the VPF being
prejudiced by the actions and omissions of the state.
The Public Protector found that the management of the VPF
prior to amalgamation led to a situation where there was a
different dispensation for members who participated in the
First Privatisation Scheme, the second and members who
elected not to transfer their interests or share.
This amounted to unequal treatment of the members of the
Fund in terms of which certain members were worse off than
others even though they contributed equally to the Fund,”
the Public Protector said.
“The Venda Pension Fund, as
well as the Government and its predecessors who managed the
Fund prior to and directly after amalgamation, did not
exercise a sufficient duty of care towards the affected
members of the Venda Pension Fund to ensure that their
pension interests were fully protected and secured. This
amounted to maladministration.”
The Public Protector
further indicated that the acts of the VPF relation to the
calculation of the benefits of the members who privatised
resulted in maladministration as the members were entitled
to 100% of their accrued benefits.
She also indicated that
the omission of the South African Government, and in
particular the GEPF's failure, to implement the
recommendations of the Public Protector in Report No. 18 of
2002 amounts to maladministration and a violation of the
section 181(3) of the Constitution.
As part of the
remedial action, the Public Protector directed that the
Ministers of Public Service and Administration and Finance
should appoint a task team to review the implementation of
the Privatisations Schemes of the former VPF.
ministers should consider changes to the GEP Law and Rules
to enable members who participated in the privatisation
schemes the opportunity to repay the benefits received and
to recalculate their pension benefits in terms of the rules
regulating normal retirement.
They should also determine
whether or not the service periods that have been bought
back before the privatisation schemes of the Venda Pension
Fund should be included when re-calculating the benefits of
For the full report, follow the link below:
Issued by: Public Protector South Africa
more information, contact:
Senior Manager: Outreach, Education and Communication
Public Protector South Africa
Tel: 012 366 7006
Cell: 079 507 0399