Public Protector releases Midvaal, Venda Pensions Fund reports

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.

In 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.

“Odendaal 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 explained.

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.

The Public 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 constituted maladministration.

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 MSA.

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) constituted maladministration.

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.

The 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 the members.

For the full report, follow the link below:

Issued by: Public Protector South Africa

For more information, contact:

Kgalalelo Masibi
Senior Manager: Outreach, Education and Communication
Public Protector South Africa
Tel: 012 366 7006
Cell: 079 507 0399

Published Date: 
Tuesday, November 8, 2011