AFFIDAVIT UNDER THE PROVISIONS OF THE PROTECTED DISCLOSURES ACT No 26 OF 2000 ("PDA")

I, the undersigned,

CRAIG JOHN KESSON

do hereby make oath and say:

1. The facts herein deposed to are within my personal knowledge unless the context indicates otherwise, and are to the best of my knowledge and belief, true and correct.

2. Any matters of a legal nature raised are on the advice of my attorney and Senior Counsel from whom I have sought legal advice prior to attesting to this affidavit.

3. I depose to this affidavit to my employer under the provisions and protections afforded by the PDA and the City's Whistleblowing Policy and seek the protections afforded by their provisions to employees such as me.

Introduction

4. l wish to state at the outset that I have no personal animosity against any of the persons I name in this affidavit I depose to this affidavit in good faith; In accordance with my duties under my contact of employment and my responsibilities as a senior official in the employ of the City of Cape Town; and with a view to drawing the facts set out below to the attention of my employer.

5. In good faith, I make this affidavit to the Deputy Mayor, Alderman Ian Neilson, as my senior officer in terms of my employment. I do this as the contents of this affidavit concerns both the City Manager and the Mayor, who would ordinarily be regarded as my respective senior officers, representing the employer. Furthermore, the Deputy Mayor has direct oversight over probity matters, which pertain to the substance of what I describe below.

6. I have however. out of deference and transparency, provided a copy to the Executive Mayor, (the Mayor) to whom I have a reporting line, who is the subject of this affidavit, so that she will not be taken by surprise or feel ambushed unfairly.

7. I do not believe that it is appropriate to submit this to the City Manager (CM), my other reporting line, given the sensitivities and the seniority and status of the Mayor, and that I have submitted a formal report about his conduct for transmission to Council (see below) a number of aspects of which overlap with what I set out below. In my respectful view, this is a matter for the Municipal Council, my employer to consider as the addressees deem appropriate.

8. I was appointed Executive Director: Directorate of the Mayor (ED: DOM) in the City of Cape Town on 1 January 2017 (and additionally Chief Resilience Officer [CRO] in March 2017) on a 5 year fixed-term contract. After the successful expiration of my probationary period, my appointment was confirmed by Council at its meeting of 27 July 2017 and confirmed by the City Manager in a letter to me of 3 August 2017.

9. I have had a close association with the City of Cape Town (the City) and particularly the Executive Mayor, Patricia De Lille (hereinafter referred to as "the Mayor") and the City Manager, for over 6 years, as my Curriculum Vitae (CV) indicates. My CV is contained in the evidence pack of documents I have lodged, along with this affidavit, with the Portfolio Manager: Probity Services, for record purposes. all documents and information referred to below, in support of this affidavit, which are available for perusal.

10. I have enjoyed a good and positive working relationship with both the Mayor and the City Manager over this time and had no cause for concern about either of them until the events which I relate below.

11. It is to be noted that the Mayor and I are co-authors of a book entitled "View from City Hair which was launched very recently, on Tuesday 19 September 2017. On the occasion of this launch, the Mayor publicly sung my praises, praising inter alia my princ iple s and ethical standards.

12. I am in possession of a host of documents, being an evidence pack in support of the facts contained in this affidavit but do not intend to attach them all, to avoid undue prolixity. They are all available for scrutiny upon inquiry. I have vested them with the Portfolio Manager: Probity, who has received other documentation relating to these matters, in the interests of transparency.

Background

13. I was involved in the restructuring of the City in accordance with its Organisational Development and Transformation Plan ("OOTP") and drove that process. This led to significant changes in the organisational structure of the City from the top down .

14. My position is a new one. It entails responsibility inter afia, for Probity in the City. Put simply, along with the Mayor and the City Manager , I am responsible for clean corporate governance in, the City.

15. Probity was a structure which I devised in the ODTP restructuring process. I initially recommended that this function fall under the City Manager. However he resisted this and it was agreed that Probity should fall under the ED: DOM's portfolio.

16. The Portfolio Manager: Probity (PMP), Lindiwe Ndaba (hereafter referred to as "the PMP") reports to me. I am in charge of Risk, Ethics, Forensics, Internal Audit and the Ombudsman.

17. The power to authorise forensic investigations does not vest in me but vests in the City Manager. However, in terms of my delegations as adopted by Council on 31 May 2017 in part 29 thereof, I have a range of delegations relating to

forensic matters and other probity functions. Probity includes: Forensics; Risk; Internal Audit; Ethics; and the Ombudsman. Insofar as it concerns forensics, I have the direct delegation from Council (part 3b of S29) to " In the performance of any of his/her functions, whether performed personally or via one or more Forensic and Ethics Department's employees or contractors: Subject to any relevant legislation, have access to, to copy and/or to seize any register, file, document, account, minute and/or other records, whether physical or electronic, of the City and/or any such register, file, document and/or record which may be maintained by any employee, in relation to the performance of his/her official functions."

18. I have also lawfully and properly sub-delegated this delegation to the Portfolio Manager: Probity Services. In terms of my job contract, I have managerial oversight over Probity and good governance. I have an oversight role and am entitled to conduct due diligence exercises to ensure that Probity departments, including forensics, are operating effectively. Forensics, Internal Audit and the Ombudsman operate independently and without interference from me.

Prelude to what follows

Introduction

19. As a matter of record, I have lodged with the Mayor, on 1 November 2017, a report for tabling at Council in terms of the Disciplinary Regulations for Senior Managers and the Financial Misconduct Regulationspromulgated under the MFMA, a similar report recording a number of serious allegations against the CM, and with the CM, as required, a similar report containing allegations against the ED: Transport and Urban Development Authority, Ms. Melissa Whitehead. A number of the allegations and issues I table below, overlap with the content of these two reports and I accordingly suggest and recommend that this affidavit and those two reports be read together.

Structure of this affidavit

20. To make for easier and logical reading and assimilation, I have divided the main substance of this affidavit into 17 discrete parts.

21. I had no causes of concern regarding the issues referred to below before June 2017. However, since then f have become increasingly concerned about the attitude and conduct of the Mayor and City Manager primarily regarding allegations against, and concerns expressed about, a senior manager, Melissa Whitehead, formerly the Commissioner: Transport for Cape Town (TCT) and currently the Commissioner: Transport and Urban Development Authority (TOA) [hereafter referred to as "the Commissioner''].

22. As wilf appear below, my first substantial concerns regarding the Commissioner arose from a Forensics presentation regarding the MyCiti Bus Stations Tender contract with AEM and ICT Works which I attended on 30 June 2017. I notified the Mayor in a confidential memorandum dated 6 July 2017 that the presentation disclosed a multi-million rand loss to the City via the fare system of the MyCiti Bus Service. (This loss has subsequently tentatively been estimated as R43 million by Price Water House Coopers, though they are experiencing difficulties quantifying the loss.) I advised her that there was a possibility that this loss had been known to City officials for some time without putting in place suitable control mechanisms to stop the loss or attendto the conditions causing the loss. I notified her that the report suggested potential financial misconduct, but I also stated that no actions were required of her at that point.

23. The matter was subsequen1Iy considered by the City's Disciplinary Board, established under the Financial Misconduct regulations, who sought legal advice from Cliffe Dekker Hofmeyr (CDH). In a preliminary opinion issued on 29 August 2017 they recommended that the Commissione'rs and the City Manager's conduct in relation t-o this issue be investigated.

24. When I tried to present the attorneys ' opinionto the Mayor in a meeting bei'Neen the two of us on 31 August 2017, after I became aware of the report, the Mayor did not wish to receive it and said that we needed to make the issue "go away" and that the matter should not reach the Council. This naturally surprised and concerned me.

25. The Mayor displayed a similar stance at a subsequent meeting held on 5 September 2017 in respect of allegations which had been made concerning the bid evaluation process for the Foreshore Freeway tender. As will be explained below, a report from Moore Stephens , independent consultants who advise the City on tender matters, not only criticised the participation and conduct of the Commissioner on the relevant bid evaluation committee, but also alleged that she had stated in a meeting of that committee that a particular bid should be rejected because "Brett (Herron, Mayco Member for ·the TOA), the Mayor and the Deputy Mayor have said they will never accept the [redacted] proposal"; (I om it the names of te_nderers involved) and that the Commissioner had stated that she "reports to the politicians who are the ultimate decision-makers".

26. I expressed the view in a meeting of 5 September 2017 that this allegation (amongst others) needed to be investigated and then reported to the Counc il. The Mayor stated that the allegations would neither be investigated nor reported to the Council. She said we should all be "team players" and not make accusations; there was, she said, no need for investigations or reports on this matter. Again I was concerned about her stance. There is a sanitized note of this meeting (see below) which does not record some of the key aspects of the meeting. I have a contemporaneous record of it in the evidence pack. I also have my personal notesfrom that meeting in the evidence pack.

27. In a further meeting I had with the Mayor on 6 September 2017, I raised the concerns that had been expressed regarding the Commissioner's role in the MyCiti losses. The Mayor alleged that the Commissioner was being unfairly singled out and that allegations that had been made in historic Forensics' reports against other ED's, had not been submitted to the Council.

28. I found this to be startling, if true , and therefore decided to review, but not re­ open or investigate in any way, the last 5 y ars' Forensics reports (it turned out there were about 1100 of them). I advised the Mayor of my intended exercise in advance of the undertaking.

29. In the course of this review, I found no support for the Mayor's allegation that the Comm issioner was being singled out unfairly. However, I came across a report, which in my view shows quite the opposite: there was a 2015 Forensics report pertaining inter alia to a contract to purchase Volvo buses, in which it was found that a payment in excess of R43 million had been made for bus chassis in a manner impermissible under the City's policies and therefore irregularly.

30. The report recommended (amongst others) that the City Manager draw the Commissioner's conduct in re ation to this matter to the attention of the Council. Not only did this not take place, but I have been informed by the Chief Financial Officer (CFO) Kevin Jacoby, who can confirm the contents of this affidavit insofar as it refers to him, and who was at the meeting in question, and, whom I consider to be reliable, that the Mayor said at a meeting regarding this matter that the matter should not be investigated further, and threatened that there would be an investigation into the City Manager if the matter were to be reported to the Council. Further, the covering letter of the Forensic report notes nevertheless, that the Mayor had received a copy of the report at the request of the City Manager.

31. In this matter, the Mayor did not table the matters raised against the Commissioner or request an investigation into her at Council.

32. I discovered that in this matter, two junior staff members in the Finance Department were dismissed. However, the senior manager (the Commissioner) cited was not only not investigated but was reappointed to her position and another manager, who was implicated in the report (see below) was given a post­ retirement contract.

33. My primary focus in this affidavit pertains to the Mayor, but I also have concerns regarding the conduct and attitude of the City Manager and others. As mentioned above and below, on 1 November 2017, I furnished to the Mayor and to the City Manager, respectively, reports containing allegations against the City Manager (and the Commissioner).As I will explain below. once I started to express concerns regarding the MyCiti issue, the City Manager took steps to try to remove my Forensics delegations (though this did not ultimately eventuate).

34. Thereafter, when I started to express my views regarding the Foreshore Freeway tender issues, I was threatened by Cllr Herron at the meeting on 5 September 2017, referred to below, that Probity should be removed from my responsibility. Again, this has not yet actually come about.

35. Subsequent to this, on 12 September 2017. the City Manager, acting with the approval of the Mayor, immediately after an ad hoc and impromptumeeting with the her held at 1:30pm, attempted to remove all probity functions from me, with immediate effect, at a meeting with him, to which he summonsed me at 2:00pm, though this too has not yet come about. As will be seen below, this took place, immediately following, a meeting with the Mayor.

36. After the submjssion of my memoranda against the City Manager and the Commissioner submitted on 1 November 2017, the Mayor summoned the PMP to her office on 3 November 2017 and there informed her that she had informed the speaker that the PMP was reopening investigations into councilors concluded over the past 5 years, that she had engaged in unauthorized investigations into officials, and will herself be investigated. A copy of Lindiwe Ndaba 's notes is available in the evidence pack.

37. Furthermore, on the afternoon of 7 November 2017 and whilst a draft of this affidavit was at an advanced stage of preparation, the Mayor summoned me to meet with her and threatened to have me suspended, for improperly investigating the conduct of the City Manager.

38. Regarding Regulation 6 of the Disciplinary Code for Senior Managers, highlight that the Mayor mentioned only 2 grounds for investigation into me:

(a) Being party to a conspiracy against her and the Commissioner, whilst she threatens to take retribution against me for doing my job in respect of matters and issues she has in fact concealed and suppressed;

(b) Incorrectly referring to my improperly and unlawfully "investigating" and re­ opening old cases.

39. As at 9 November 2017, my memoranda of allegations against the City Manager and the Commissioner, of 1 November 2017, with supplementary correspondence of 7 November 2017, have not resulted in a Council meeting being convened to bring the very serious matters I have raised to the proper attention of the Council, 7 days after alerting the Mayor to these matters and allegations.

40. Having given the above summary of some of my principal concerns, I now turn to set out in more detail the material facts in the sequence in which they came to my attention in the 17 parts as mentioned above. It should of course be borne in mind that this is not necessarily the sequence in which the facts occurred.

The facts in the sequence in which they became apparent to me

PART1

41. As part of my functions and duties I chair the City's Risk Committee. In that capacity, I became concerned regarding the Commissioner's failure timeously to submit a proper risk register for the TOA to the Risk Committee meeting of 23 June 2017.

42. My concerns were raised to the Mayor, the Deputy Mayor, the Cjty Manager, and the Commissioner at the time.

43. What is of relevance is that, after raising my concerns, the Commissioner complained that my actions amounted to a campaign against her. I objected to this personal attack on me by the Commissioner and informed the Mayor accordingly. When I received no response to this from the Mayor, it led me to question her commitment to monitoring governance. It also alerted me, for the first time, to the Commissioners propensity , when questioned on her governance duties, to allege personal campaigns or conspiracies. This would become more apparent later.

PART2

44. On 30 June 2017, the Forensics Branch furnished to myself, the ED: Corporate Services, the City Manager. and the PMP a status report on an ongoing in vestigation of which 1 was, until then , unaware. Through this report, I became aware for the first time of a potential multi-million loss to the City arising from the breach of a contract/s pertaining to the MyCiti Bus Service.

45. . This matter had however been known for several years by the City Manager and the Commissioner: TOA, who had either originally requested, had knowledge of, or approved the original investigation. Those actions are not called into question. However, know1edge by Senior Council officials (including the Commissioner and the City Manager) that the Council had experienced and was still at risk of experiencing a loss of money due to fraud, corruption, maladministration, or some other failure in a contract, requires a review in my vie w, and likely cance llation of the contract. subsequent to legal procedure, so as to prevent the further loss of money and to put a halt to any further potentially irregular or illegal actions.

46. As refer red to below, it appears that the Commissioner and/or the City Manager may not have done all that they should have in this regard.

47. In the presentation of 30 June 2017 referred to above, the Forensics Branch informed the persons mentioned above that approval was needed for data mining and for legal advice regarding the contract and liability, both of which would require skilled external practitioners. Approval was subsequently processed in both cases. The City Manager also requested that the Commissioner be made aware of the status report.

48. A Forensic Report on this matter was issued on 6 July 2017, to the City Manager, myself, the ED: Corporate Serv1ce,sand the Commissioner. The report alleges that ICT Works, the automated fare collection contractor, had reported in November 2015 that AEM Cashiers had manipulated equipment, circumvented required processes and misappropriated cash which should have been received by the City. The loss of income to the City was initially estimated at R16, 801,000. However the loss was later estimated (in respect of a longer period) at approximately R33 million (and, later still, at approximately R43 million).

49. It was also alleged that there were indications that the contracts with AEM and ICT Works were not properly enforced and monitored on a regular basis with regard to cash management systems and processes. It was recommended that consultants be appointed to determine the quantum of the loss and that attorneys be appointed to provide legal advice and direction. All reports and documentary evidence in this regard are available in the evidence pack.

50. On the same day, 6 July 2017, the PMP addressed a letter to me regarding this matter. The letter referred to the view of the Forensics team that both contractors did not seem to have fulfilled their contractual obligations; and that they could also not find evidence that due processes were followed by the City to manage the contracts.

51. The PMP convened the Disciplinary Board (Financial Misconduct Regulations), formed in terms of Regulation 4(1) of the Municipal Regulations on Financial Misconduct Procedures and Criminal Procedures, and it was mandated to consider the MyCiti contractual problems.

52. Also on 6 July 2017, l notified the Mayor in a confidential memorandum of the reported loss to the City, of the possibility that there had been financial misconduct and of related potential governance issues within TOA. I advised her that there were no actions required of her at that point. As the potential misconduct possibly involved the City Manager. the report was addressed to the Mayor for her confidential attention, while a copy was logged with Probity Services, as part of a record of evidence of actions.

53. I received no formal response from the Mayor regarding my memorandum, other than confirmation that she had received it.

54. l went on honeymoon and took leave from 7 July 2017, but still attended to Council business, both in and out of th country, for the duration of July 2017.

Part3

55. Upon my return, I was alerted to the fact that the City Manager had decided that my delegations regarding Forensics, should be removed. As appears therefrom, the report proposed that my power to pursue any appropriate disciplinary,

criminal, civil and/or related proceedings flowing from any forensic or ethics investigation, and my rights of access to records and to question employees, should be removed and vested in the City Manager. This was done without any prior notice to, or consultation with me, which is most irregular.

56. I advised the Mayor against signing the CM's report, which advice she heeded.

57. I also formally notified the Mayor on 24 August 2017 that I found the actions of the City Manager in this regard, to be non-transparent and disturbing. I received no formal or informal feedback from the Mayor regarding this complaint.

PART4

58. Regarding the matter of the loss due to TCT/TDA contracts, the Disciplinary Board (Financial Misconduct Regulations} ("Disciplinary Board") solicited a legal opinion on the matter of "Alleged unauthorised transactions relating to the cash management and payment component of the station management contract," as well as an expert determination of the quantification of the loss.

59. The legal opinion was obtained from Cliffe Dekker Hofmeyr (CDH) and was issued to the City on 29 August 2017. It will be noted that it recommends in paragraphs 15.1.6 and 15.1.7 that both the City Manager's and the Commissioner's conduct be investigated. I am advised that this would require the triggering of the provisions of the Disciplinary Regulations for Senior Managers. The City Manager would be required to submit a report in respect of the Commissioner to the Mayor for her to table in Council; and the Mayor would be required to table a report to Council in respect of the City Manager. An investigation by the Disciplinary Board in terms of its regulations would also be required.

60. A quantification of loss has recently been tentatively provided by PWC at R43 million, though they are experiencing multiple control and reconciliation difficulties.

PART 5

61. Upon receiving the CDH opinion I tried to present it to the Mayor at 13:00 on 31 August 2017 in accordance with my understanding of the requirements of the I.aw and my probity functions and duties. The Mayor informed me that she did not want a copy of the report. More disturbingly, she said to me that we needed to make the issue " go away' and it should not reach the Council.

PART 6

62. On 31 August 2017, I became aware during the City Manager's feedback slot in a meeting of the Executive Management Team (EMT),that the Foreshore Freeway tender process had stalled. I asked whether the Mayor had been informed of this and the Commissioner confirmed that she had been.

63. In a meeting later that day with the City Manager at 11:00, he informed me that he had documents submitted by Moore Stephens, a due diligence advisor to the City, mentioning the Mayor's name in the events which resulted in the stalling of the tender.

64. I was concerned, not least for the Mayor's reputation. later that same day, I asked the Mayor whether she was aware of the stalling of the tender process. She informed me that the Commissioner and Cllr Herron had made her aware of this and that it had been due to the irregular actions of two members of the technical Bid Evaluation Committee (BEC}.

65. I informed the Mayor that the City Manager had told me of correspondence mentioning her and that this was concerning, insofar as, in terms of the City's Procurement Policy, politicians are not supposed to be involved in the consideration of tenders after the specification stage, save in relation to the finances of the project/tender. I recommended that an urgent meeting be convened with the City Manager at 14:45 that day to discuss the matter.

66. That meeting took place and I attended at the Mayor's ad hoc request. The City Manager brought two documents with him to the meeting: the assessment from

Moore Stephens and an opinion arising from by Senior Counsel. Given the probity matters concerned, and the fact that I had previously received a governance query on this particular BEC, I requested a copy of the documentation and was provided with these by the City Manager.

PART 7

67. Upon reviewing the Moore Stephens report, I noted that there were serious allegations regarding the conduct of the Commissioner: TOA during the technical Bid Evaluation Committee (SEC) for Tender 7C/2016/17: Request for proposals for the development of the Cape Town Foreshore Freeway precincts.

68. I quote pages 5-6 of the Moore Stephens report: "We have become increasingly concerned about the meetings held thus far, as regards:

- an absence of objectivity, impartiality and a Jack of consistency on the part of Ms. Whitehead regarding the scoring of certain criteria in relation, in particular, to two of the proposals [redacted}

- more particularly, apparent partiality on Ms. Whitehead's part in relation to the favourable scoring of [redacted] and the unfavourable scoring of [redacted), and

- the apparent undue influence which Ms. Whitehead is seeking to bring to bear on other members of the BEG as regards scoring, more especially given that their reporting lines in the City are to her.

At the meeting on Friday 4 August 2017, our concerns came into relief when Ms. Whitehead stated, amongst other things, that she is not prepared to stand up and recommend a proposal where [redacted].

She reported that 'Brett (Herron, Mayco Member for TDA), the Mayor and the Deputy Mayor have said that they will never accept the [redacted} proposal [redacted.}: that 'she reports to the politicians who are the ultimate decision makers."

69. The Moore Stephens report states further: "Ms. Whitehead was not prepared to consider the members' comments to the effect that the [redacted] proposed financial model was fundamentally flawed."

70. Further: "We are concerned that flawed scoring flowing from the Technical Evaluation (Scoring) Meetings will taint the formal BEC process; when a/1factors are considered, the entire process will be subverted and compromised."

71. The report did not consider or advise on actions aga inst officials, as it was a due diligence report regarding process and ssurance. It recommended remedial actions, including obtaining an opinion from senior counsel regarding the i6b technical evaluation process. Such an opinion was duly sought. So far as I am aware, its recommendations were followed.

72. I was deeply concerned by the Moore Stephens report but believed that the matter could be resolved by commissioning an appropriate investigation, in the interests of transparency, and possibly consequence management. I made my advice known to both the City Manager and the Mayor on 4 and 5 September 2017 respectively.

PART 5

73. On the morning of 5 September 2017, the Mayor informed me that the City Manager informed her the day before on 4 September 2017 that there had been a grievance lodged against the Commissioner by one of her directors, who also served on the same BEC, Mr. Frank Cummings. The Mayor was made to

understand that there was a possibility of Mr. Cummings making his grievance public.

74. Allegations made in a grievance submitted on 31 August 2017 by Mr. Cummings appear to support what Moore Stephens alleges. To quote pages 12-13 of the grievance:

'As the evaluation process progressed, two schemes have emerged as front runners, one of which the Commissioner has demonstrated a high degree of support towards. Indeed, early in the process she openly declared her preference for that scheme.

Five particular moments of the evaluation process concern me greatly:

The Commissioner regularly expressed concern regarding the "political acceptability" of the location of the affordable housing proposed by the other front-runner (and by implication, competitor to her preferred scheme) throughout the evaluation process. During Mtg 2 she was particularly forceful in this regard and at times pressed BEC members on whether they would be prepared to support the location of the affordable housing if asked by the Mayor. At one point she also mentioned having discussed with the Mayco member and Mayor the content of the [redacted] bid, in particular the location of the affordable housing. She informed the BEG that they were not supportive of the affordable housing proposal. It was very difficult (sic] situation for the Chairperson to manage and as a result fundamentally eroded the integrity of the process. Some members noted that the Prospectus was silent on the location of the affordable housing and therefore we could not score the scheme NIL, so the compromise score of [redacted) was agreed.

During the commercial assessment stage (Mtg 2 and 3, 3(2)) I was so exercised by the Commissioner's disregard for much of the concerns I'd raised in relation the commercial aspects of the scheme that she clearly favoured, that it prompted me to remind the Commissioner that as members of the BEC we had a duty to evaluate each bidders' [sic] ability to execute the contract (if awarded)- that, beyond the tender Prospectus (i.e. at Stage 1) which she interpreted to her own cause throughout the process. My assessment of the commercial sustainability of the scheme she appeared to favour was that it had no prospect of passing a rigorous due diligence and was in my opinion unfundable. Further, the complexity of the proposal and most importantly, the fiscal contributions placed on the City as a result of the award were fanciful and would, in my opinion, introduce an unacceptable level of risk to the City. Further, in analysing the financial viability, I raised very serious concerns regarding the concentration of revenue (over half of the total revenue of the project) in just one building. Finally, I warned her that in my professional opinion, with over 20 years directly related experience in the delivery of these types of projects, the scheme had no hope of achieving financial close and financial viability- a core duty of the BEC.

During the review, the Commissioner repeatedly stated that she did not consider there to be any risk to the City at this, Stage 1, of the procurement process and as no contractual commitments had been created between the developer (her proposal was generated by a multi-disciplinary design team- there was no develop [sic} at this stage). I took exception to this assertion and argued with the Commissioner that the City, at the very least, faced considerable reputational risk if the qualifying bidder failed to achieve Financial Close after Stage 2. Her preferred scheme provided no details on the source and application of equity­ beyond the substantial amounts of capital and income forgone contributed by the City (including a multi-billion Rand bullet payment in cash, in addition to the land component). I also suggested that the BEG should consult the CFO's [sic] at this stage, given the substantial fiscal (and other) commitments that this bid placed on the City, to seek authority to select this bid (assuming the BEG approved it as the qualifying bid). The Commissioner was very unsupportive of this suggestion."

75. The grievance alleges, further:

· .. . At times, she appeared to support one scheme to what I'd describe as a level of irrationality.'

76. And further:

'Finally, I feel compelled to remark at how reckless I thought the Commissioner had been in largely ignoring my comments in relation to the commercial and financial risks associated with the scheme she preferred and the disregard for the City's finances and preserving fiscal sustainability·.

77. It should be noted that, as will appear below, the Mayor ultimately gave an instruction that Mr. Cummings' employment should be summarily term inated.

78. In principle, it may be legitimate and even understood that political leaders should be able to express their views on projects that will affect the shape of the City. However, within the City's current policy environment, political leaders are not to have any effect on tenders once they are submitted and are in the procurement domain, save only in respect of the finances of the project in accordance with the City's Procurement Management Policy. However, City officials involved in the tender process may also not be the agents of political leaders' preferences. In the case of the Foreshore Freeways tender, the technical assessments were considering not only proposals affecting the urban form but financial information relating to those proposals.

79. On the morning of 5 September 2017 at around 07:45, the Mayor instructed the City Manager to convene a meeting to discuss the Foreshore matter with herself, the City Manager, the CFO, the Mayco Member for Finance, the Mayco Member for TOA, the Commissioner, the Mayor's chief of staff and myself.

80. I advised the Mayor and City Manager against this meeting given the potential conflicts of interest and the possibility of further investigations which might be required.

81. My advice not to meet with these persons present together was not taken. The preceding written recordals are also contained in the evidence pack.

82. I requested, on the other hand, that the Deputy Mayor be present. The Mayor replied that she wished to discuss the process of the matter and how it should be dealt with and not the content of the allegations. I advised that he should still be invited as the political head of probity services, but I was over ruled.

83. The meeting took place. The City Manager expressed the view that he had taken sufficient steps to rectify the matter by getting senior counsel's opinion on where to restart the technical BEC. Senior counsel was, however. not briefed to advise on consequences against officials. I therefore proposed that there should be an investigation to finalise the matter and if anyone had sinister motives , these.could be discovered transparently.

84. Cllr Herron responded that he believed that Probity Services should be removed from my purview .

85. I objected and said that my suspicions were raised.

PARTS

86. When the matter of Mr Cumming's grievance arose, the Mayor stated that she would give a press conference and discredit him politically that same day. Mr Cummings has since left the City's employment.

87. The consistency of the Moore Stephens report and the Cummings' grievance should be noted. Once again these doquments are available in the evidence pack.

88. The above meeting was a difficult and tense engagement. The fact that the CFO had sought governance advice regarding the appropriateness of an ED (in this case, the Commissioner) serving on a BEC, and that I had referred this request to Probity, came up. The Mayor alleged that I was acting without her authority in referring matters to Internal Audit and said that she determined all governance processes in the City. She spent some time focusing on this in the meeting, essentially probing why the CFO could ask for a governance opinion and why I could ask Probity Services to provide this without her authorisation. I explained that Probity must be able to provide independent and objective advice when solicited. The Mayor expressed the view that anyone within the Directorate of the Mayor, including those within Probity, must always act with her imprimatur.

89. In my view, this would be irregular and intert·ere fn matters within my purview, and l advised her as such. There are in law separate responsibilities for political office-holders and for officials. Furthermore, Internal Audit by its nature acts and must act independently and without political agendas or directions. I said that, if my actions were considered suspect, then I would willingly submit to an investigation but that l would need to proceed to continue due process into the Foreshore Freeways matter, which I understood to be my legal and ethical obligation.

90. A sanitised note of this meeting, drafted I believe by the Mayor's chief of staff, was produced. What I have set out above is a true and accurate reflection of what transpired during this meeting. Both the sanitized note, and my personal notes of the meeting, are contained in the evidence pack.

91. Later that day, 5 September 2017, I requested and obtained a meeting with the Mayor. I advised her that she and the City were at risk on the tender issue and that further investigation was required. I also made·it known to her that I found her actions in the earlier meeting strange and inconsistent with my personal knowledge of her as an ethical actor on the public stage.

92. The Mayor told me that she had had to take an aggressive stance with me in the meeting, so as to show the City Manager that she respected him and would defend him. She told me that she was compelled to do this as the previous day, after my correspondence on how I thought we should proceed with matters, the City Manager offered to resign. I believed the meeting to be private and so offered my view, in good faith, that no one innocent offers to resign, and that historic management failures of the City Manager had enabled the Commissioner 's behavior, resulting in tumultuous meetings such as the one earlier in the day. The meeting concluded amicably.

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93. In a subsequent meeting on 6 September 2017 at 11:45, I raised the issue of the possibility that the City Manager and the Commissioner might need to be investigated around the issues disclosed on 6 July to the Mayor. I did this believing that t had managed to re-establish good relations with the Mayor.

94. I was in fact supposed to be in Washington DC on 6 September 2017 on official Council business but had requested that the Mayor cancel my trip as I thought the serious matters unfolding required me to be in the office. Further, I noted to her that the last time I had left the country, the City Manager had tried to remove my delegations. She agreed to cancel my official trip for reasons of operational necessity.

95. At the meeting on 6 September 2017, the Mayor said that the City Manager and the Commissioner had to be given a right of response to any allegations made in the CDH opinion. This was a modification of her earlier view of 31 August 2017 that the GOH opinion should not reach the Council. Further, the Mayor requested that when the CDH opinion, or allegations flowing from it, was tabled in Council, there should be accompanying affidavits from the City Manager and the Commissioner defending themselves. I advised that as neither the City Manager nor the Commissioner were the subject of either a pre-investigation or an investigation; they should be offered a right to respond only once and if the Council had moved to process any allegation and authorise an investigation into them as senior managers if the Councif decided to do so.

96. The Mayor was displeased with this view and stated that a report into the Commissioner undefended would weaken her and Cllr Herron politically. I offered the view that she could take a strong governance stand and thereby strengthen her position politically. The Mayor disagreed and stated that there was a conspiracy against the Commissioner aimed at removing her, that she was being unfairly picked on and that, by contrast, recommendations in the past by Forensics that other EOs should be investigated had been suppressed.

97. I asked the Mayor who she felt was behind this conspiracy. She responded that the CFO, and his associates (unnamed) in the Finance Directorate and TOA were responsible. I was not one of those named. This has now changed as will be seen below.

98. I countered that this was an extraordinary proposition and that I would look into the matter immediately and personally, which the Mayor said she appreciated.

99. For this reason, I instructed the PMP to do a due diligence report on all forensic investigations over the past five years, so as to interrogate the Mayor's claims and to bring any reporting inconsistencies to light. I decided I would also conduct my own due diligence exercise, so as to provide an additional, management perspective. This was consistent with my previous management concerns raised regarding the conduct of Forensics, noted to the PMP managerially and to the

City Manager in my management one-on-one on 31 August 2017 after the Audit Committee on 29 August 2017. It was also within the powers delegated to me by the Council as discussed above and within the powers of the PMP. It should be noted that at this time, Lindiwe Ndaba was not only the PMP but was also the

Acting Chief of Forensics until a new Chief could be appointed.

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100. The City Manager summoned me to his office on 12 September 2017 at 14h00, immediately after he had had an impromptu meeting with the Mayor at 13h30 on that day. I was supposed to be conducting interviews at the same time for the Chief Audit Executive, which I had to postpone and then cancel. There, he

informed me that he was, with immediate effect, removing all Probity functions from me. I objected strongly and stated that I would alert the audit committee and Auditor-General (AG) to his actions, which I thought we7reh : f}J

He then insisted that we consult the Mayor, who, he said, had agreed that probity be summarily removed from me, my oversight and my purview, with immediate effect. We were provided with an ad hoc audience with the Mayor immediately thereafter.

101. The meeting was acrimonious. It involved only myself, the Mayor, and the City Manager. The City Manager asserted that my request for the previous 5 years' forensics reports was suspicious. I apologised for not notifying him but said I did not think it necessary as it was within my direct management purview. The Mayor then stated that she was also concerned that the City Manager was upset and that I should consider his desire to 'take back' Probity. I expressed the view that

she was incorrect regarding the.City Manager 'taking back' Probity. I reminded her and the City manager that I had suggested during the ODTP process that Probity should reside with the City Manager, who had refused, and had taken the view that it should reside with the Directorate of the Mayor.

102. Indeed, after being appointed ED, I was requested to, and did, make the case to the Auditor General (AG) why Probity properly resided with the DOM. The Mayor and I also discussed our agreed rationale for this approach in a book we recently co-authored (see above).We also presented this rationale together when we launched the King IV process in the Council in the presence of Justice Mervyn King and approximately 400 officials ( when, incidentally Mervyn King stated that the City's approach to Probity and good governance served as the leading shining light and example in local authorities in the country- I was proud of this commendation given that these functions are under my stewardship).

103. I further stated that not once had either the Mayor or the City Manager expressed dissatisfaction with my handling of Probity before the events of the Foreshore Freeway matter meeting on 5 September 2017, that the City Manager had not raised any concerns with me in our last management meeting of 31 August 2017, that the mayor had expressed her reassurance of my actions on 6 September

2017, and that I therefore found it highly suspicious that suddenly there was now an issue in this regard without any due process or proper review.

104. I refused to relent. The City Manager then informed the Mayor that an official, David Marais, was suing the Commissioner in her private capacity. The Mayor then alleged that there was a conspiracy of people trying to block the Commissioner as a proxy of the Mayor. I asked who this conspiracy consisted of and was informed that it involved the Deputy Mayor, the CFO, Frank Cummings and David Marais, as well as a host of other unnamed officials. I suggested that, if there was such a conspiracy, the Mayor should make substantive allegations that could be immediately investigated, especially given the seriousness of the allegations.

105. The Mayor also gave an instruction at this meeting to the City Manager to terminate the contracts of Frank Cummings and David Marais with immediate effect.

106. Mr. Cummings has since been dismissed and/or his contract of employment has terminated (see above).

107. I threatened to take the removal of Probity from my purview to the audit committee and the Auditor General. The Mayor thereafter instructed that the CityManager and I should both establish our respective legal positions as to why we should have Probity Services within our purviews.

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108 . The Mayor also said she wanted the DOM renamed, as it did not represent her. This was also surprising as she had personally insisted on this name throughout the ODTP consultation, despite my advice to name the directorate 'Strategy and Governance', and we ultimately explained the rationale together in the book we co-authored. I made my objections known formally to both the City Manager and the Mayor.

109. I forwarded the earlier correspondence between myself and the PMP to the Mayor and the City Manager, in good faith, to demonstrate the transparency of my actions requesting due diligence on the previous 5 years' forensic investigations, which in my view constituted a transparent management oversight mechanism. This correspondence, along with all documents referred to herein are contained in the evidence pack.

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110 . The Mayor then sent me a direct email dated 12 September 2017, asking me not to involve her in any investigative matters. This was a direct response to my correspondence demonstrating my reasoning behind my request for the previous 5 years' of forensic investigations (directly based on her serious concerns and allegations}. I considered this response to be incompatible with the nature of the Mayor's legal responsibilities. She appeared to me to have abrogated her duties. insofar as Probity matters were concerned.

111. The City Manager subsequently abandoned his stance that he should remove Probity from me. This is however, clearly not guaranteed, given the above and II the circumstances.

PART 14

112. I proceeded with my due diligence exercise of interrogating the previous 5 years of forensic reports, despite some resistance from staff in Forensics and despite reports I received of multiple informal briefings by Forensics managers against me, to both senior officials and political office-holders.

113. After receiving and then considering the previous 5 years' of forensics reports, of which there were some 1100, J did not find any evidence of a conspiracy against the Commissioner or that she had unfairly been singled out. As far as I could ascertain, all other matters involving allegations against EDs had been escalated to the Council. An exception was a 2015 Forensic Report, case no: FSD049/14-

15 in which it was recommended that allegations of misconduct against the Commissioner should be brought to the attention of the Council, which, so far as I know, were never brought to the attention of the Council. The report pertained to alleged irregularities primarily involving payments made to Volvo for 29 Volvo bus chassis, for which the City paid a total of R43, 801 607.06, on or about 21 June 2014. These payments were made for the bus chassis alone notwithstanding the fact that the relevant contract provided for the purchase of complete busses.

114. It appears from the report that Volvo had delayed the delivery of the busses and that payment was made for the chassis alone; so as to make use of the available capital budget. The fundamental issue addressed in the report was whether, in terms of the Council's policies, part payment (for the chassis alone) was permissible. The report concluded that it was not permissible, relying (amongst other things) on an opinion obtained from senior counsel. The report stated that the purchase of the bus chassis would appear to have constituted irregular expenditure as defined in section 1 of the Municipal Finance Management Act, No 56 of 2003.

115. I quote paragraphs from page 37-39 of the report:

116. "Invoices for incomplete buses were approved by TCT for payment. The Accounts Payable Department paid the invoices based on the approval of TCT. The payments for incomplete buses on pro forma invoices is contrary to the City's policy and procedures and was not in accordance with the contract. The normal process of verification of the goods delivered in terms of the contract was also not followed in these instances.

117. Further: "The goods for which the City paid Volvo R43 801 607. 06 were not delivered complete with the relevant licensing documents, with the result that the risk and rewards of ownership were not transferred to the City. Treasury could therefore not capitalise the assets by entering them into the City's asset register. The same considerations apply to the goods for which the City paid Scania R29 584 368. 00."

118. Further: "The purchase of bus chassis' was not in accordance with the City's policies and procedures and also not in accordance w;th the provisions of the contract as the contract provided only for the purchase of complete buses. It can therefore be concluded that the purchase of the bus chassis was irregular.''

119. Further: "There is also evidence that the City officials involved in the decision to purchase bus chassis under tender 138Gl2012113 and those who supported and/or approved the decision to purchase bus chassis, were involved in misconduct in that they knew and/or ought to have known that the purchase of and payment for bus chassis in terms of the said tender, was not permitted in terms of the City's policies and the terms of the tender.

120. Further: "Marthezewas told by the Commissioner 'to find a way' to pay for the bus chassis. This was to increase capital expenditure and to avoid the liability of underspending."

121. I now quote from the recommendations on page 40 of the report:

122. "In light of the above we respectfully draw the attention of the City Manager to the provisions of the MSA Disciplinary Regulations read with the MFMA Financial Misconduct Regulations which require any allegations of misconduct against a senior manager (a manager referred to section 56 of the MSA, in this case Whitehead- i.e. the Commissioner) to be brought to the attention of the municipal council ."

123. And: "We further recommend that disciplinary action be taken against the senior officials in TCT, namely, Martheze, Buerger, Whittle and Africa and that in respect of any irregular expenditure incurred, due regard be had to the MFMA Financial Misconduct Regulations and the City's position with regard to same."

124. The report found that financial misconduct had occurred in terms of paying for chassis' as completed busses, which is a contravention of the City's accounts payable policy and the MFMA. It noted that three junior staff members within the finance directorate had already been disciplined over the matter, with two dismissed.

125. It should also be noted that the same Forensic report reveals substantially similar concerns regarding payments to Scania on 3 July 2014 for 24 bus chassis. The total amount paid to Scania at the time was R29, 584 368.00. It would appear that all the concerns expressed in relation to the payments to Volvo apply equally to the payments to Scania.

126. I have recently been informed by the CFO, whom I believe to be credible, that in 2015, the Mayor hosted two meetings to discuss the contents of the report. The first was attended by Cllr Brett Herron, CFO, and the executive director to whom Forensics reported at the time, Gerhard Ras. l have been informed that in this meeting Cllr Herron challenged the senior counsel's opinion regarding part payment, on grounds which I do not understand, and without objection from the Mayor.

127. A second meeting, so I am informed, was subsequently attended by the same participants as before but now including the Commissioner: TCT and the City Manager. I have been informed that the purpose of this meeting, chaired by the Mayor, was to ensure that the proposal that it be recommended to Council that the Commissioner's conduct should be investigated would not be implemented. I am informed that the Mayor said she would ensure that there would be an investigation into the City Manager if the Commissioner's conduct was investigated, as these allegations, so the Mayor asserted, amounted to a conspiracy against the Commissioner.

128. This recommendation that the Commissioner be investigated did not, so far as I can ascertain, ever serve before Council. It should be noted that the issuing letter of the report included a copy for the mayor at the time. thereby providing her with direct knowledge of these matters.

129. The report was issued on 17 March 2015. A covering letter to the City Manager of the same date states: uone copy of the report is for your information and action. During a discussion with the writer it was indicated by you that a copy of the report should also be provided to the Executive Mayor. The other copy of the report is included herewith for the aforesaid purpose."

130. All relevant documentation, including the report forms part of the evidence bundle.

131. The issuing letter from the Forensic Department makes it clear that both the Mayor and the City Manager have copies of the forensic report in question.

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132 . These matters transpired in 2015. In 2016, Mr Buerger was given a post­ retirement contract, ultimately on the recommendation of the Commissioner and Cllr Herron with the approval of the Mayor, despite the forensic report described above recommending disciplinary action against him.

133. Furthermore, the City Manager was reappointed by a panel chaired by the Mayor and the Commissioner was reappointed by a panel selected by the Mayor, chaired by the City Manager, and included Cllr Herron.

134. The panelists in both instances above had knowledge of alleged potential financial misconduct against a senior official being suppressed and proceeded in their reappointment.

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135 . The various issues set out above disturbed me and I took legal advice as to my obligations and my rights. Based on that advice, I prepared two formal memoranda requesting that the Council approve investigations into the conduct of the City Manager and Commissioner, respectively. These memoranda were completed and forwarded to the Mayor and to the City Manager, respectively, on 1 November 2017. My memorandum in respect of the conduct of the City Manager is attached and my memorandum into the conduct of the Commissioner is attached. I confirm the content of those memoranda, insofar as the matters referred to therein lie within my personal knowledge.

136. In the interests of transparency and good governance, I also formally lodged copies of these memoranda with the PMP. See the file of record with the PMP.

137. On 03 November, the Mayor summoned the PMP to her office and, as the PMP has told me, threatened her with investigation for the execution of her duties. A copy of the PMP's personal notes of this meeting is in the evidence pack.

138. Further, the Mayor requested a copy of all 5 years' of forensic reports from the PMP.

139. The threat of investigation into the PMP amounts in my view to bullying, harassment and victimization of the PMP, who has had to take leave on account of severe stress inflicted following that encounter, as also undue interference with the independence of Probity Services. The PMP was merely acting as an objective keeper of records, at my request. The PMP compiled a contemporaneous note of her meeting with the Mayor which is contained in the evidence pack.

140. Further, the Mayor's request for a copy of the previous 5 years' reports is puzzling, considering that when I tried to present her with my reasons for requesting these investigations in September, she specifically requested that I refrain from informing her of this information.

141. On 7 November 2017 the Mayor responded, for the first time, to my report containing allegations against the City Manager. A copy of her response is in the evidence pack as is a copy of my personal notes from my meeting with her.

142. On the same day, with legal assistance, I prepared a reply to this letter, a copy of which is in the evidence pack.

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143. I was summoned by the Mayor to a meeting late on the afternoon of 7 November.

During this meeting she declaimed at great length that she is politically under attack from various quarters. She claimed that there was an agenda to stop the spatial transformation of the City and to remove her , Brett Herron and Melissa Whitehead. She claimed that it was a strange coincidence that my reports should have come at a difficult political time. She averred that both I and the PMP had

investigated the City Manager without authorisation from Council. She further averred that she had advised the Speaker that both myself and Lindiwe had been re-opening/re-investigating previous reports into councilors. She claimed that it had been improper for me to l:>e allowed access to view forensic reports from the past five years. She told me that she intends to propose to a Council meeting, not only tha1 the City Manager and the Commissioner be investigated, but that the PMP and I should be investigated too. Alarmingly, she·said that she would recommend that we all be placed on special leave while we are all investigated.

144. I responded that I had been acting in accordance with my ethical duty and obligations and I handed her a copy of my letter of 7 November, replying to her earlier letter of the same day. I made it clear that neither I nor the PMP had investigated anything, but rather had submitted issues and matters for investigation by an independent and impartial expert 3rd party, without pre­ judging anything or anyone, in fulfilment of our contractual duties and in accordance with law and regulation. A copy of my personal notes of this meeting is available in the evidence pack.

Conclusion

145. In my respectful view, the Mayor's conduct as described above is not compatible with her legal and ethical obligations. She has failed to ensure that due process is followed in respect of alleged misconduct and irregularities brought to her attention. She appears to have placed pressure on the City Manager, not to require due process to be followed. The result appears to have been the condonation of systemic governance failures within the TCT and TOA. The Commissioner has thereby avoided investigation in respect of diverse matters.

Whilst more junior staff members have been disciplined or lost their employment, investigation as to the Commissioner's role has been prevented. As shown above, investigation into serious issues concerning the City and its good governance have been suppressed, swept under the carpet and those bringing these matters in good faith pertinentlyto the attention of the Mayor- i.e. the PMP and myself, have ourselves been threatened, inter alia with investigation into our conduct for fulfilling our contractua,l legal, moral and ethical obligations. This is inexplicable.

146. In my view, the facts set out above have the risk to the City of: bringing it into disrepute; exposing it to financial risk; compromising its zero tolerance of financial misconduct; compromising its tender processes; compromising its probity processes; compromising the value system of the Organisational Development and Transformation Plan (ODTP), specifically the value of accountability; undermining the accountabilities of senior managers; and undermining the proper discharge of the separate roles and responsibliities between political office holders and the administration.

CRAIG JOHN KESSON

Thus signed and sworn to before me at Cape Town on this 9th day of NOVEMBER 2017, the deponent having acknowledged that he knows and understands the contents of this affidavit, that he has no objection to taking the prescribed oath and that he considers the oath to be binding on his conscience.

COMMISSIONER OF OATHS

Issued by the City of Cape Town, 21 November 2017. The original can be found here – PDF.