The prosecution of corruption in local government
On 14 June 2022, the Africa Criminal Justice Reform and Multilevel Government projects of the Dullah Omar Institute, in partnership with the Hanns Seidel Foundation, hosted a Webinar on the prosecution of corruption in municipalities with Advocate Barry Madolo (NPA).
In a recent opinion-editorial, Advocate Barry Madolo, Director of Public Prosecutions (DPP) in the Eastern Cape, has described some successes enjoyed by the NPA in prosecuting corruption in municipalities in the Eastern Cape. There is highly specific legislation relating to municipalities, and to municipal finances, such as the Municipal Finance Management Act of 2003, with which prosecutors must be familiar in order to successfully prosecute offences relating to municipal finances. Professor Jaap de Visser of the Dullah Omar Institute is a leading expert in the field of multi-level government and municipal legislation. He recently co-authored a research paper on the combating of corruption in municipalities in the Western Cape, which also addresses the role of the NPA.
Prosecution of corruption in local government
Prof Jaap De Visser
The presentation was based on earlier research by De Visser and colleagues focussing on local government corruption in the Western Cape which involved interviews with officials from ten municipalities in that province. The focus was on, among other areas, experiences in referring alleged financial misconduct for criminal investigation and prosecution. A number of thematic concerns were identified:
- Concern about the duration of investigations, prosecution and trial. Constraints in capacity with investigating agencies resulted in some cases taking exceptionally long to conclude if at all.
- Concerns were also raised about capacity and prioritisation within SAPS and the Hawks. These also related to how criminal processes intersected with municipal disciplinary processes and that the latter may sometimes be purposefully manipulated as the route of resolution. Similarly, allegations were made of political interference with investigations.
- Capacity constraints in NPA were also identified as a major concern and related to the skills and abilities of NPA staff to take on and prosecute more complex cases and in at least one case, the local authority that laid the charge was expected to cover the cost of forensic auditors needed to support the NPA in the matter.
- Proving the unlawfulness of certain action requires specialised expertise in the NPA. For example, it was noted that prosecutors are not trained in the Municipal Finance Management Act (MFMA) and may resort to using other legislation such as ordinary commercial law.
- The question was raised as to whether municipalities should be granted a broader mandate and investigate alleged corrupt activities within a certain scope.
- Could the municipality initiate an investigation, collect evidence and ‘prepare the docket’? This is posed against the background that Metros already have investigative capacity
- It was noted that lower courts are overburdened and the possibility that smaller corruption matters could be dealt with in municipal courts should thus be considered.
- There is also scope for greater collaboration between municipalities/cities and the NPA but this would require careful consideration so as to ensure the independence of the NPA.
- Municipal investigations are typically different in aim and focused on preparing disciplinary charges.
- There are also limits to a municipality’s investigative reach. For example, a municipality does not have access to private bank accounts or the authority to intercept communication.
- The findings also highlighted a need for caution as municipalities may indeed be captured by corrupt forces. Giving municipalities wide investigative powers (and prosecutorial powers) may indeed enable further impunity.
- A possible avenue to address some of the concerns is to look at greater collaboration between provinces and the NPA.
- A more decentralised approach from the NPA may also yield better results.
Dealing with fraud and corruption in municipalities in the Eastern Cape
Adv Barry Madolo
Adv Madolo stated that the NPA continues to make progress in bringing high-profile national corruption cases to court in the E-Cape Division (ECD) and has registered a number of cases in this regard. In many of these cases, the modus operandi is the same as that seen in some of the high-profile cases elsewhere in the country. For example, public servants working in informal consortiums and collaborating with service providers to siphon money from the public purse. These cases also give insight into the way in which corrupt public officials have managed to manipulate financial management systems, either on their own or in collaboration with others.
He highlighted a number of important cases that have been concluded or are in-going:
Nelson Mandela Bay Municipality
- Milongani Eco-Consulting case: it resulted in a R25,6 million loss for the municipality but an R11million restraint order was obtained on 27 July 2021. Charges relate to a 3-year tender contract for environmental impact assessment awarded to Milongani. In terms of the contract, Milongani was to be paid R350 per hour for its services, but the first invoice for R1 million was submitted within 24-hours of appointment. The probe assessed 42 invoices, which had been submitted for over R25,6 million. An investigation found complicity in abuse of official power (i.e. corruption) between municipal employees and Milongani. The case is enrolled and the NPA is finalising racketeering charges.
- Integrated Public Transport System (IPTS) matter: The ten accused include municipal officials, local business people, political office bearers who corruptly used their influence to have contracts awarded as well as a local attorney and the firm he represented. Total amount involved in the charge sheet is R100 million. The charges include racketeering, procurement fraud, money laundering, corruption and various charges under the MFMA. The case is being transferred to the High Court for pre-trial procedures.
Mandela Funeral Case
The case was transferred towards the end of 2021 to the High Court and 14 people and entities are accused of defrauding the Buffalo City Municipality (BCM). They have pleaded not guilty in February 2022. The State was due to start leading evidence on 11 April 2022, but has been delayed as a result of interlocutory applications by some of the accused. A total of R5.9 million for transporting mourners to various venues for the memorial services were misappropriated when the BCM’s procurement procedures were captured by the accused. The Asset Forfeiture Unit (AFU) has recovered R4.1 million in the 2014/15 financial year.
Amathole District Municipality (Siyenza)
- Charges were brought against ten people and three companies in connection with a tender for the accelerated sanitation programme. They appeared in East London Magistrates’ Court on 02 December 2019. Subsequently, the Grahamstown High Court granted the AFU a restraint order effectively freezing their assets, with an estimated value of R60 million. The restraint order stems from serious charges of corruption, fraud and money laundering in the 'toilet' scam. The project was for the supply, delivery and installation of 66 700 toilets in various villages of Eastern Cape and Amathole District Municipality (ADM) irregularly awarded the tender to Blue Nightingale Trading 397 (Pty) Ltd t/a Siyenza Group, with its sole director, Bongani Mpeluza. Mpeluza’s Gauteng house remains preserved from 31 July 2020, as proceeds from the scam since only R16 million was proven to have been utilised to erect the toilets. The group face eight charges, including corruption, fraud, money laundering, conspiracy to commit a crime and the contravention of the MFMA. Some will also face charges of conspiracy and inducing another person to commit an offence, assisting another to benefit from proceeds of unlawful activities, and acquisition, possession or use of proceeds of unlawful activities. The accused include former ADM municipal manager, Chris Magwangqana; former CFO, Nkosinathi Soga; former ADM director of engineering, Mpumelelo Shezi; and District’s former director of corporate services, Lulama Taleni.
Adv Madola noted that corruption among municipal and provincial officials is a cause for real concern in the Eastern Cape and thus increasingly the focus of the NPA’s activities in the province. There has been a growing number of charges being laid as well as an increase in asset seizures and convictions to confirm the success of the close collaboration between the Hawks and the NPA. There are, however, a few matters in court for longer than five years largely due to delaying tactics by the accused and their defence as they know long-term imprisonment awaits them when convicted. The use of asset forfeiture and recovery processes by the AFU has proven to be very effective in claiming back proceeds of fraud and corruption.
Conclusion
From the preceding three central issues can be lifted. The first is that in order to prosecute local government corruption matters successfully, it requires that prosecutors who are knowledgeable on the legal framework governing local government such as the MFMA. Secondly, a number of notable cases have found their way to the courts demonstrating that prosecutions are indeed possible and that lessons must be taken from these cases. Third, there is scope to explore other options. This may involve delegating certain powers to municipalities to investigate and even prosecute corruption matters within a clearly defined scope. There is also good cause to investigate closer cooperation between the NPA at provincial level and the provincial government as well as municipalities in order to improve cooperation and establish effective procedures to handle investigations and prosecutions.