RTMC Corruption: Whistleblower documents reveal CEO must be suspended and investigated

The Democratic Alliance (DA) has in its possession a number of documents that suggest that the mismanagement and fraud allegations against the CEO of the Road Traffic Management Corporation (RTMC), Ranthoko Rakgoale, were well founded. These documents were provided to the DA by a number of whistleblowers at the RTMC.

It is alarming that, despite the existence of these documents which indicate pervasive fraud, corruption, and mismanagement at the hands of Rakgoale, he has not been suspended and is still firmly in his seat as the CEO of the RTMC. These documents indicate that there are undisputable and clear grounds that show the CEO must be suspended pending a full, independent investigation.

Copies of the documents can be found on our Media Centre (see here).

The allegations against Rakgoale first came to light in a Sunday Times article on the 7^th of July 2009. At that time, the DA called for an investigation into these allegations and subsequently wrote three letters to the Minister of Transport requesting Ranthoko Rakgoale's suspension pending a full investigation. No reply was received from the Minister. The DA then raised the issue in a Portfolio Committee on Transport meeting and the Chairperson agreed to liaise with the Minister in this regard. The DA further issued numerous Parliamentary questions to the Minister with the hopes of obtaining clarification on the matter. Only two of these questions were answered.

The Minister's failure to act suggests that Mr Rakgoale is being protected. These documents prove this matter is no longer a subject for debate, they categorically prove there were an extensive series of highly problematic undertakings by the CEO. This is an overwhelming indication that the ANC continues to be a closed, crony society intent on protecting its members from prosecution for self-enriching themselves with public funds.

Thus, the DA believes the following must happen:

1. It is clear that there has been sufficient evidence for the CEO to be investigated. It is unclear why such investigation has not been carried out to date.
2. In light of this evidence, the DA calls for the immediate suspension of the RTMC's CEO.
3. Should an investigation not begin during the next 10 working days, the DA will seriously consider pressing charges against the CEO.

A summary of the findings follows below, as well as a link to each document. Below that, follows a full list of the evidence.

Executive Summary

1. Signing a R658-million 10-year lease on 9 office buildings, when only two are in use:

• Nine buildings appear to be entirely unnecessary, and the cost of paying them off, a collective burden the taxpayer should not have to bear.
• Furthermore, these documents confirm that, firstly, only one bid was considered. On face value it is difficult to believe only one bidder responded. The Bid Adjudication Committee's submission is contradictory on this matter, stating that only one bid was received, and yet refers to other bids in an annexure not included.

Doc - Rental: View

2.  Unilateral and unauthorised salary increases:

• Evidence of a Board resolution dated 10 September 2008 signed by the CEO.
•  The salary increase resulted in a 398% increase in the executive director's salaries and a quadrupling of the board's salaries.

Doc - Salary increments: View

3.  Not following tender procedures in the awarding of a R9-million tender for RTMC advertising: 

• The time span between the proposal and the payment indicates that there was no tender put out and no board approval obtained and, as a consequence, no tender process was followed.  This is in violation of the Public Finance Management Act (PFMA).

Doc - Advertisement fees: View

4.  R1.3-million unauthorised expenditure on suites for the 2009 Confederations Cup

•  RTMC approved quotations from a service provider indicating: "...24 x Matchday Suite Hospitality Packages" at a rate of R31 763 p/p. This package includes: Seats in "...Field-facing Private Suite"; ii.Pre-match hospitality luncheon, after-dinner snacks; iii.Bar refreshments; iv.Souvenir memorabilia gifts
• Approval on the basis that it will "...develop a legacy of safer road use."
• The fact that the payment to the tour operator was made out on 27 March 2008 and the CEO acceded on 7 April is further indication that firstly, an open tender was not put out, and secondly, flagrant financial mismanagement was approved by the CEO.

Doc -Luxury suites at Ellis Park and Loftus: View

5.  The purchase of an Audi for CEO's use

•  These documents confirm that a luxury vehicle was indeed purchased using RTMC funds.  Included in the price are the optional extras of an automatically opening boot, an optional paint job, front centre armrest and leather interior.
•  If, as alluded to by the CEO, the car was indeed purchased for the delivery of post, this constitutes fruitless and wasteful expenditure as a significantly cheaper vehicle should have been bought for this purpose.

Doc - Audi A4: View

6.  Wasteful Expenditure on Workshops

• The documentary evidence proves that at least one RTMC board member was a facilitator of the workshops. Once again, the CEO disregarded procurement procedures for the appointment of service providers.
• The fact that the workshops were held at luxury hotels is a probable indication why the costs of the workshops escalated.

Doc - Workshops: View

7.  Mismanagement of e-Natis Transaction Fees

• It cannot be ascertained from these documents whether the transaction fees have been transferred to the DoT on a regular basis and what amount has been transferred.
• However, from the DA's own investigations, the Adjusted Estimates of National Expenditure indicate that in the financial year 2007/08 (beginning April 2007 till March 2008) R165-million in transaction fees was collected from the RTMC by the DoT. However, on our own calculation from June 2007 to March 2008, RTMC collected over R211-million in transaction fees.

Doc - Transaction fees: View

8.  The CEO purchased office furniture worth R1.2-million without following proper tendering procedures:

•  The Minister admits that there was no open bidding process for the procurement of the office furniture and it was disclosed as  ‘irregular expenditure' in the 2007/08 annual report.
• The whistleblowers allege that none of these companies exist. On the DA's own investigations, none of these companies existed in either the Telkom White Pages Directory or the Yellow Pages.

Doc - Parliamentary reply: View

THE FULL CASE AGAINST RANTHOKO RAKGOALE

Introduction

The Democratic Alliance (DA) has in its possession a number of documents that suggest that the mismanagement and fraud allegations against the CEO of the Road Traffic Management Corporation (RTMC), Ranthoko Rakgoale, were well founded. The documents were provided to the DA by a number of whistleblowers at the RTMC.

Copies of all documents attached

It is alarming that, despite the existence of these documents which indicate pervasive fraud and mismanagement at the hands of Rakgoale, he has not been suspended and is still firmly in his seat as the CEO of the RTMC.

The allegations against Rakgoale first came to light in a Sunday Times article on the 7^th of July 2009. In response, the DA called for an investigation into these allegations and subsequently wrote three letters to the Minister of Transport requesting Rakgoale's suspension pending a full investigation. No reply was received from the minister. The DA then raised the issue in a Portfolio Committee on Transport meeting and the Chairperson agreed to liaise with the Minister in this regard. The DA further issued numerous Parliamentary questions to the Minister with the hopes of obtaining clarification on the matter.

The only two questions that have been answered with reference to the allegations by the Minister revealed that an independent audit, with a cost of over R8-million, had been carried out at the RTMC commencing on the 13^th of February 2009 necessitated by the "...general lack of controls and inappropriate financial controls" at the RTMC. This audit was carried out without following proper tendering procedures for such a large job and the Board appeared only to act as a rubber-stamp. The second reply relates to the allegation that the CEO purchased furniture without following proper tendering procedures. It is discussed below.

Three months after the initial accusations, no apparent action has been taken against Ranthoko Rakgoale. This is yet another indication of the lack of commitment by the ANC-government to root out corruption and create a culture of financial prudence within its membership. It is also further proof that the ANC supports a closed, crony society in which corrupt members are protected from prosecution.

The purpose of this document is to set out all the evidence against Ranthoko Rakgoale. In each case the relevant documents are available on request.

The accusations

The CEO was accused of the following (as reported in the Sunday Times on 7 July 2009)

• Spending R4.5-million on provincial workshops, when only R1.5-million had been budgeted
• Entering into a 10-year R658-million lease for nine office blocks, only two of which are currently being used for a staff component of 144
• Blowing R1.3-million of RTMC funds for the hire of private suites at Ellis Park and Loftus Versfeld during the Confederations Cup
• Purchasing an Audi A4 for personal use using RTMC funds despite receiving a hefty car allowance
• Purchasing office furniture without advertisement in an open tender

It has emerged from the documents in the DA's possession that the CEO is also implicated in:

• Unilaterally and without advice from National Treasury raising the salaries of the executive and non-executive directors of the RTMC
• Gross mismanagement of e-Natis transaction fees
• Not following the proper tendering procedures in the awarding of a R9-million tender for the flighting of RTMC advertisements on SABC.

The evidence

1. Rental

The allegation

The allegation is that the CEO had leased out nine office blocks for a period of 10-years at a price of R658-million, despite only having a staff complement of 144. Only two of those building are currently in use. Nine buildings appear to be entirely unnecessary and the cost of paying them off, a collective burden the taxpayer should not have to bear.

What the evidence says

1. A document from the bid evaluation committee confirming the appointment of Mohlaleng Investment Holdings as the preferred provider for the provision of office space rental for an amount for R185 497 864 for a period of 5 years. The document indicates that "The only (1) bid was considered, discussed and evaluated at the Bid Evaluation Committee Meeting..."

2. A signed Lease Agreement between RTMC and Mohlaleng Investments for the lease is for 9 buildings erected or to be erected. The monthly rental of the 9 buildings, as listed on the lease, is R105 per square metre. This is equal to R 2 190 720 per month or R26 288 640 per year. The rent will escalate by a rate of 8.5% per year, compounded with effect from 1 August 2009 and each year thereafter, bringing the total rental for all 9 building rent for ten years to approximately R 656-million.

3. A signed contract between RTMC and Mohlaleng for the payment of R658-million to be paid over 10 years.

What the evidence means

These documents confirm that, firstly, only one bid was considered. On face value it is difficult to believe only one bidder responded. The Bid Adjudication Committee's submission is contradictory on this matter, stating that only one bid was received and yet refers to other bids in an annexure not included. It states:

"2.2. The closing time and date for bid submissions was at 11h00 on Friday, 11 April 2008. Only one (1) bidder responded to the bid. A list of the organisations, companies and consortiums, who submitted bids is attached under Annexure C."

The only bid considered was that of Mohlaleng, a company whose chairperson is Chelsyn Mostert, a former high-ranking ANC official.

It is not possible to determine why only one bid was evaluated. This matter needs to be investigated.

2. Unauthorised salary increments:

The allegation

The RTMC board unilaterally and without independent advice from the National Treasury resolved to adopt the fee payment structure of the South African National Road Agency Limited (SANRAL). This decision was deemed to be questionable as SANRAL has a much larger mandate than the RTMC.

The evidence

1. A Board resolution dated 10 September 2008 signed by the CEO adopting SANRAL's payment structure.

What the evidence means

The Board resolution indicates either the CEO's involvement or approval in the unilateral increase of the board's remuneration and adoption of SANRAL's payment structure. SANRAL does indeed have a larger mandate than the RTMC, SANRAL's total net operating income for 2009 was R 1.9-billion while RTMC operates primarily on government grants, which totaled R165-million for 2009.  Thus, the RTMC "operating income" (ie, government grants) is significantly lower than SANRAL's net operating income.

The adoption of this payment structure resulted in the tripling of the board's salaries in 2009. The RTMC's annual report indicates that in 2008 the board members' total salaries amounted to R287 262, and in 2009 this had escalated to R720 170.  This is despite the fact that the board had two less members.

The board seems to have also approved the 389% increase of the RTMC's executive directors' salaries in 2009. In 2008, the money spent on the directors' salaries was R647 090 and in 2009, the salaries were an alarming R3 164 510! The CEO's salary increased to R1.2-million from R317 849.

3. Advertisement fees

The allegation

The proper tendering procedures were not followed for the awarding of an R9-million tender.

The evidence

1. A proposal was drafted by the communications manger on 15 September 2008, requesting an "electronic media campaign." The proposal was approved and signed by the CFO on 22 September and the CEO on 27 September 2008.

2. Tax invoice payable to Ramathesele Media Ltd signed by the CFO on 25 September 2008 for the "...flighting of the RTMC TV brand communication ad for September."

3. An RTMC claim form indicating the awarding of a R9 million contract to Ramathesele Media Ltd.

What the evidence means

The time span between the proposal and the payment indicate that there was no tender put out and no board approval obtained and, as a consequence, no tender process was followed.  This is in violation of the Public Finance Management Act (PFMA).

This matter deserves full investigation.

4. R1.3-million unauthorised expenditure on suites for the 2009 Confederations Cup

The allegation

The CEO splurged R1.3-million of RTMC funds on the hire of private suites for the Confederations Cup

The evidence

1. A quotation from PMS Sports Events for Ellis Park matches for the hire of "...24 x Matchday Suite Hospitality Packages" at a rate of R31 763 p/p. This package is inclusive of:

a. Seats in "...Field-facing Private Suite"
b. Pre-match hospitality luncheon, after-dinner snacks
c. Bar refreshments

d. Souvenir memorabilia gifts

2. A quotation from the same tour operator for Loftus Versfeld matches at R15 593 p/p for "24 x Matchday Suite Hospitality Packages" listing the same extras listed above. The total cost for both stadiums is R 1 392 835.

3. A RTMC payment advice signed by the CFO for R 1 392 835 to PMS Sports Events for the "...provision of private suite hospitality package Ellis Park, Loftus" made out on 27 March 2009

4. A submission by the Senior Manager: Supply Chain Management to the CEO requesting the procurement of suite hospitality packages for the 2009 Confederations Cup so as to "...develop a legacy of safer road use." This submission is approved by the CEO on 7 April 2009

What the evidence means

It is baffling how luxury suites at soccer stadiums would result in the RTMC being able to "develop a legacy for safer road use." Nevertheless, should the soccer event been necessary for the development of this legacy, once again, the time-span between the submission, the CEO's approval and the payment of the tour operator is indicative that an open tendering procedure was not followed.

The fact that the payment to the tour operator was made out on 27 March 2008 and the CEO acceded on 7 April is further indication that firstly, an open tender was not put out, and secondly, flagrant financial mismanagement approved by the CEO.

This matter should be fully investigated. A full guest list of attendees should be provided in order to ascertain who exactly was invited by the CEO to the event.

5.  The purchase of an Audi for CEO's use

The allegation

The CEO purchased and uses an Audi A4 luxury vehicle worth R271 573 for his personal use. His annual salary is R1.2-million, with a car allowance of R25 000. He is therefore required to purchase and pay for his vehicle with his car allowance. In response to these allegations, Rakgoale retorted: "It (the car) was allocated to the CEO's office and is not for my personal use. It is used to deliver post, and in instances when, as a law enforcement officer, I have to attend roadblocks, I use it because it has blue lights."

The evidence

1. An RTMC payment advice made out to Volkswagen SA for the payment of R271 573 for an Audi A4 for the purposes of ‘enforcement co-ordination' signed by the CEO.

2. A tax invoice from Volkswagen SA made out to RTMC. Included in the cost is an extra R6 749 for the optional extras of:

a. Automatically opening boot
b. Optional paint job
c. A front centre armrest
d. Leather interior

What the evidence means

These documents confirm that a luxury vehicle was indeed purchased for using RTMC funds.

If, as alluded to by the CEO, the car was indeed purchased for the delivery of post, this constitutes fruitless and wasteful expenditure as significantly cheaper vehicle should have been bought for this purpose.

Nevertheless, staff at RTMC confirm that the CEO does indeed use the car in his personal capacity, especially on weekends when he travels to his home-base in Bloemfontein.

This matter must be investigated in full. The RTMC must be compelled to produce the official log sheets of trips as well as petrol and toll fees receipts as this could have personal tax implication in respect of Mr Rakgoale, particularly since he is already receiving a car allowance.

6. Wasteful Expenditure on Workshops

The allegation

Fruitless and wasteful expenditure had been incurred of R4.5-million on provincial workshops when only R1.5-million had been budgeted. The proper tender procedures were not followed for service providers. Facilitators included members of the RTMC and other friends of the CEO.

The evidence

1. A signed letter addressed to Hennie van Tonder, an RTMC board member, from the CEO inviting him to be a facilitator of 2-day workshops to be arranged in each of the nine provinces. The CEO asks van Tonder to "...please provide me with your costing structure and the hourly rates on which your claims as facilitator during the provincial workshops will be based."

2. A letter of appointment for van Tonder as facilitator indicating:

a. A daily rate of R2 111
b. A commitment by the RTMC to pay for road and air travel as well as accommodation

3. An RTMC invoice indicating the payment of van Tonder of R32 831.50 for "CEO-Business Plan" as well as R8270 for "Board fees - Travel and Substinence"

4. A list of luxury hotels that the workshops were to take place including the 5-star Gallagher Convention Centre in Midrand, The Ranch in Polokwane, and the Royal Hotel in Durban.

What the evidence means

The documentary evidence proves that at least one RTMC board member was a facilitator of the workshops. Once again, the CEO disregarded procurement procedures for the appointment of service providers.

The fact that the workshops were held at luxury hotels is a probable indication of why the costs of the workshops escalated.

This matter must be fully investigated to ascertain why the budgets for these workshops escalated as they did and what the outcomes of these workshops were and the number of stakeholders that attended.

7. Mismanagement of e-Natis Transaction Fees

The allegation

The e-Natis transaction fees have been mismanaged. Although over R500-million has been collected since the inception of e-Natis, only R200-million has been transferred to the Department of Transport (DoT).

The evidence

1. A practice note from National Treasury indicating that the RTMC must collect and monitor transaction fees from Provincial Departments of Transport. These monies must then be paid over to DoT. The DoT subsequently pays these monies over to the national revenue fund on a monthly basis. The RTMC must keep a consolidated statement of funds received and transferred from Provincial Departments and paid over to DoT.

2. A record of transaction fees collected by the RTMC from June 2007 to July 2009 indicating that the RTMC has collected R576 705 600 in transaction fees

What the evidence means

It cannot be ascertained from these documents whether the transaction fees have been transferred to the DoT on a regular basis and what amount has been transferred.

However, from the DA's own investigations, the Adjusted Estimates of National Expenditure indicate that in the financial year 2007/08 (beginning April 2007 till March 2008) R165-million in transaction fees was collected from the RTMC by the DoT. However, on our own calculation, from June 2007 to March 2008 RTMC collected over R211-million in transaction fees.

There seems to be a contradiction in figures and this needs to be fully investigated.

8. The CEO purchased office furniture worth R1.2-million without following proper tendering procedures

The allegation

The CEO purchased R1.2-million worth of furniture without following proper tendering procedures from a non-existent company called either Machaba or Mochabo Trading and Projects. This expenditure was termed as ‘irregular expenditure' by the Auditor-General in the RTMC's 2007/08 annual report. The CEO has again authorised the purchase of a further R500 000 worth of furniture from the same supplier.

The evidence

1. A parliamentary reply to a DA question. The Minister admits that there was no open bidding process for the procurement of the office furniture and was disclosed as ‘irregular expenditure' in the 2007/08 annual report. The Minister further replies that "...The request for price quotation was sent to three (3) service providers, namely Hetseikani Development and Projects, Mochabo Trading and Projects and Malusi and Son Computer Services and Projects, Only one response was received from Mochabo Trading and Projects to which an order was issued."

No reference is made to the further procurement of furniture from the same provider.

What the evidence means

The whistleblowers alleged that none of these companies exist. On the DA's own investigations, none of these companies existed in either the Telkom White Pages Directory or the Yellow Pages. It also appears that much of the furniture is inappropriate for the office space. It is unacceptable that in a competitive society such as ours, further suppliers could not have been contacted in order to have a comparative price.

Statement and report issued by Stuart Farrow, MP, Democratic Alliance shadow minister of transport, October 16 2009

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