Letter from Zille to Rasool on Erasmus Commission

From Mayor of Cape Town to Western Cape Premier February 7 2008

7 February 2008


The Office of the Premier of the Western Cape

Provincial Legislature Building
2nd Floor, Union House
14 Queen Victoria Road

Attention: Mr Ebrahim Rasool

Dear Premier


1.  As you know, I have been advised by independent senior counsel that the Erasmus Commission, established by you, as well as the investigation instituted by Minister Dyantyi in terms of s106(1)(b) of the Systems Act, are unlawful. The appointment of the s106(1)(b) investigation inter alia failed to comply with the requirements of that section, and thus contravened the requirements for lawful administrative action in the Promotion of Administrative Justice Act, 3 of 2000, as well as the principle of legality. The establishment of the Commission; together with Minister's Dyantyi's decision also amount to an unconstitutional interference into the autonomy, functions and integrity of the City of Cape Town. I enclose herewith an Executive Summary of the legal advice which has been provided to the City of Cape Town and me in this regard.

2.  In addition to the advice which the City has received regarding the lawfulness of the establishment of the current Commission and the underlying s106(1)(b) investigation, I am also advised that, on a conservative basis, the costs of the Commission to the taxpayers and ratepayers (attributable to the City's legal representation and the remuneration for the Commission's secretary and evidence-leader) will be in the region of at least R200 000.00 per day. One must also add to that amount any disbursements in respect of the extensive documentation which is being generated by or for the Commission, the use of transcription services for the Commission and the costs of paying at least two of the three commissioners.  In addition, the public will be prejudiced by the use of Court facilities and an active Judge for the duration of the Commission. I am advised further that the Commission anticipates sitting for at least a month, probably longer: counsel and attorneys have already been reserved for three five-day weeks and in addition asked about their availability for the entire month of April 2008. As such the costs to the taxpayers in respect of legal representation alone is likely to be well in excess of R5 million, and the City alone can expect to spend millions of Rands. Then there is also the additional indirect cost to the City occasioned by the extensive loss of personnel which the City will experience as a result of the Commission, given that virtually the entire upper echelon of key personnel in the City Manager's office, together with the Speaker, myself and various other Councillors, some of whom serve on the Mayor al Committee, have been subpoenaed.

3.  This advice has caused me some disquiet as I am now faced with a dilemma in that I have no doubt that should the City proceed to challenge the establishment of the Erasmus Commission (as we have been advised to so do), persons with conspiracy theories to peddle, or political agendas to promote, will no doubt immediately allege that the action implies a "cover-up" by the City of some wrong doing by it. Nothing could be further from the truth as the Jordaan Report has shown. Indeed, I myself relish the prospect of appearing before this Commission, so as to put my version of events on record formally, and deal with the many mistruths that have been circulated regarding this matter.

4.  On balance however, and taking into account, the above advice and the additional factors set out below, I am compelled to conclude that the City cannot ignore the unlawfulness of the Commission and participate in unlawful commissions with such enormous financial consequences for the rate payers of Cape Town.

A.   Political Motives At Play

5.  As early as December 2004, the National Government, via its National Intelligence Agency (NIA), was of the express opinion that Badih Chaaban was:

"Involved in a wide range of organised crime activities, including dealing in false passports, the drug trade, money laundering, prostitution, human trafficking, and murder".

6.  This information was confirmed in writing to the City by the NIA.

7.  In addition, you yourself, have been quoted in the media as being of the opinion that Mr Chaaban is a "disservice to governance".

8.  As has been well documented in the press, Mr Chaaban was found guilty on 6 counts of breaching the City of Cape Town ' s code of conduct and the full Council of the City resolved to dismiss him and requested the MEC to remove him as a Councillor on 5 November 2007. At all stages of the disciplinary enquiry, the MEC was fully informed thereof by the Speaker of the City of Cape Town.

9.  Notwithstanding the NIA information regarding Mr Chaaban set out above, and your own comments regarding his ability to provide a service to the City, the MEC has refused to act on the City's request and confirm the dismissal of Mr Chaaban.

10.  There can be no rational explanation for this, other than that the MEC, for political purposes, refuses to assist or cooperate in any way with the City of Cape Town.

11.  The arrest of Philip du Toit by the South African Police and the confiscation of certain alleged tape recordings made by him late last year, resulted in a media frenzy of wild allegations regarding unlawful spying by the City Council and/or the DA, together with allegations that the DA had "used" the City Council to pay for certain surveillance and/or spying on opponent politicians. What is crucial to note is that these allegations did not originate from the police (who were at that stage apparently still in the early stages of investigating the alleged crimes), but rather from your office and/or other ANC politicians. On the 25th of October 2007, you indicated in the media that you had been "briefed" by Western Cape police commissioner Mzwandile Petros on that investigation. Clearly, even at that stage, whilst police were presumably involved in a legitimate investigation into any wrong doing by any person, the provincial government was already interfering in that investigation, given that you were being "briefed" by the Western Cape police commissioner on these matters.

12.  I point out that notwithstanding all the allegations and assertions made of wrong doing on my part, or that of the City, the police have had over three months to investigate the matter and charge anybody with a crime, but have not done so. The only reasonably assumption to be drawn is that the police have found no evidence of any wrong doing by any person. Should I be mistaken in this assumption, then no doubt the police will charge such person in due course and I welcome them taking this action as this is where an investigation into allegations of "spying" rightly belongs.

13.  On the 26th of October 2007, the MEC raised various concerns with the City Manager which he expressly stated were based on "reports in the press" regarding the GFA contract with the City. Without bothering to ascertain the correctness thereof (many of the initial press reports were massively inaccurate), he issued a notice in terms of s106(1)(a) of the Municipal Systems Act, in terms of which he asked certain questions of the City and advised that he was doing so because of the "seriousness" of the matter.

14.  I have been advised that s106 of the said Act has three essential requirements which must be met for the appointment of an investigation into a matter in terms of s106(1)(b).

14.1. Firstly, the conduct which the MEC wishes to have investigated must be of the level of seriousness indicated by the words "maladministration, fraud, corruption or any other serious malpractice".

14.2. Secondly, the MEC must have "reason to believe" that such conduct has occurred or is occurring in the municipality.  Mere suspicion is not enough. The rationality of the MEC's belief is objectively justiciable.

14.3. Thirdly, the MEC must consider it "necessary" to appoint an investigation under s106(1)(b) (as opposed to enquiring into or resolving the matter in some less intrusive fashion).

15.  As at the 27th of November 2007, we know for a fact that the MEC ' s supposed concerns were only those as set out in his media statement of 27 November 2007, which was information he had been supplied by the City. In this regard, the City Manager had fully informed the MEC regarding queries he had raised on the date discrepancies of various invoices, what action was being taken, and how the procurement process had been complied with. Indeed, subsequent to the MEC ' s follow up letter to the City of 14 November 2007, the City Manger had provided all the documents requested by the MEC and furnished additional information.

16.  By the time the City Manager wrote his letter to the MEC (of 21 November 2007), I had also appointed a senior counsel at the Cape Bar to investigate the matters which appeared to be troubling the MEC and had confirmed publicly that any amounts still owing to GFA by the City would be withheld, pending the outcome of that investigation.

17.  In addition, the City Manager ' s letter to the MEC of 21 November 2007, and its attachments speak largely for themselves, but he concluded by stating that the information available indicated no evidence of corruption fraud or maladministration. Notwithstanding this, on 27 November 2007, the MEC notified the City that he had decided to proceed with an investigation in terms of s106(1)(b) of the Act and attached a press statement, and background document.

18.  I want to point out that the MEC took the decision reflected in his letter, notwithstanding that he had been specifically requested by the City Manager not to take further action until such time as the City Manager had completed his own investigations and enquiries with, inter alia, Messers George Fivaz and Associates regarding the concerns of the MEC. In addition, I point out that the MEC took the decision reflected in his letter of 27 November 2007:

18.1. without having directed any further queries to the Speaker, or me and without having asked to speak with the Speaker;

18.2. without having directed any further queries to the City Manager and without having asked to speak with him;

18.3. without awaiting particulars as to GFA's reply to the questions asked concerning the first invoice in the City Manager's letter of 8 November 2007;

18.4. without awaiting the outcome of the investigation which the City Manager said he was undertaking, and which might (depending on the outcome) have led to remedial action;

18.5. without awaiting the outcome of the Jordaan investigation appointed by the me;

18.6. without having ever raised with the City his supposed concerns (a) that the quotes reflected the client as a political party rather than the City (b) that the documents suggested that the City's investigation had been "for intelligence purposes" (whatever that might mean) rather than for the purpose the Speaker had affirmed in his letter to the MEC;

18.7. without ever having raised with the City most of the matters in the Commission's proposed terms of reference (only points 3, 6, 7 and 8 out of the twelve bullet points in the background document could be said to have been raised directly or indirectly in the correspondence).

19.  Notwithstanding that the decision was already taken by the MEC by 29 November 2007, on 29 November 2007, the Acting City Manager addressed a further letter to the MEC, commenting on the MEC's claims in his press statement fully and provided further information regarding the City's queries to GFA regarding the four disputed items in GFA's first invoice.

20.  The MEC's statement as to what his supposed concerns were, and which I am advised, led to the establishment of the Commission are set out in his press statement, and it is against this that we must test the reasonableness of his belief that a Commission was necessary, bearing in mind the legislation referred to above. I take the identified "concerns" of the MEC in turn:

20.1. One concern was that a GFA invoice referred to a consultation with a Mr Botha on 21 May 2007, before the date of GFA's first quotation:

20.2. The facts before the MEC showed that GFA's quote was submitted on 1 June 2007 and approved by the City Manager on 4 June 2007.

20.3. It is not in dispute that GFA met with Mr Theuns Botha and certain others of the DA on 21 May 2007 (and, for that matter, that GFA also did other work on 22, 28 and 31 May 2007).

20.4. It is not in dispute that GFA's first invoice (dated 15 June 2007) billed R3 500 for the meetings and work done in the period 21-31 May 2007 (out of a total, excluding VAT, of R47 990 charged in that invoice).

20.5. It is not in dispute that the City authorised payment of the said invoice on 28 June 2007.

20.6. As at 27 November 2007 the MEC knew that on 8 November 2007 the City Manager had, upon noticing the date discrepancy, requested GFA to explain the inclusion of the items dated 21-31 May 2007 and to state (if the services in question were not commissioned by the City) whether, and if so how, the City had benefited from the services.

20.7. Although the City Manager informed the MEC of this query to GFA, he nevertheless stated to the MEC that he had no reason to believe that the City had not benefited from the said services, but that remedial action might include recovery from GFA of any amounts found not to be owing.

20.8. The explanation which the MEC would have received shortly after 29 November 2007 (had the proclamation not been promulgated on that date) was that GFA had initially been approached by the DA for a quote, and that a meeting had been held in that regard with the DA on 21 May 2007. GFA then began immediately to do certain work, but the DA did not accept the quote. The work was nevertheless of value and use in respect of the investigation subsequently commissioned by the Speaker.

21.  This aspect raises no issue of serious concern in respect of maladministration or malpractice. Even if the City had knowingly paid R3 500 for a service which had not been authorised and which was not of benefit to the City (which is not the case), the incident does not have the requisite severity for a s106(1)(b) investigation, especially if one looks at all the other instances of maladministration and/or fraud in this province by ANC-led municipalities, that the MEC has been happy to ignore.

22.  However, on the facts known to the MEC the discrepancy had been detected by the City Manager and an explanation had been sought from GFA. The MEC had no reason to reject the City Manager's statement that if the City had not authorised or benefited from the work, the overpayment would be reclaimed.

23.  The above concern was mentioned by the MEC as an example of a more general concern as to supposed "discrepancies" in GFA's invoices:

23.1. The only other "discrepancy" was in the second invoice dated 13 August 2007, where the five items of that invoice were billed against the dates 21, 22, 28 and 31 May 2007 and 1 June 2007.

23.2. Even without explanation, it is obvious that the work in  question could not have been done on those dates, that the dates duplicated those on the first invoice (in respect of which the description of the work had been different), and that some clerical error must have occurred.

24.  In the City Manager's letter of 21 November 2007 a full explanation was given, based on GFA's letter to the City dated 28 October 2007 (a copy of which the City Manager supplied to the MEC). The work in question related to the period 15 June-13 August 2007, and this was borne out by GFA's report of 20 August 2007. Due to a clerical error the dates on the first invoice (which had been used as a template to create the second invoice) were not altered.

25.  The MEC had no basis for doubting this explanation, which was inherently plausible.

26.  The next concern was that the GFA quotes supposedly referred to the client as a "party" rather than as the City. The MEC's implication seems to have been that in truth the DA was the client but that the City was paying:

26.1. Both the City Manager and the Speaker confirmed in letters to the MEC that the City had indeed engaged GFA.

26.2. The MEC did not suggest in the correspondence that the conduct of Chaaban was not a serious and proper matter for investigation by the City.  Accordingly, an assertion by the City that the City had decided to investigate Chaaban's behaviour ought not to have evoked surprise in the MEC.  He would or should have appreciated that the Speaker had a statutory duty to launch an investigation.

26.3. GFA's first quote was in response to a request for same from the City under reference 101/2007.

26.4. The said quote (dated 1 June 2007) was addressed by GFA to Mr Barnie Botha in his capacity as advisor to the Speaker.

26.5. The body of the quote repeatedly referred to "your office" as the client (i.e. the Speaker).

26.6. The reference which the MEC had in mind was apparently to be found in paragraph 2.1 of the quote, which I cited earlier.

26.7. The quoted statement (drafted by GFA) conveys nothing more than the Speaker had been approached by several members of the council with information which corroborated the concerns about Chaaban's behaviour (which is clearly wrong).

26.8. There is nothing remotely sinister in the quoted paragraph.  The quotation affords no basis for a rational belief that the City was being made to pay for an investigation in truth commissioned by a political party.

26.9. I do not know what "party" GFA had in mind in the quoted passage. The councillors who had given information about Chaaban's approaches belonged to the DA and the ID.  If it be assumed that GFA intended the "party" to be a reference to the DA and/or the ID, the paragraph cannot bear the weight which the MEC apparently wishes to ascribe to it. GFA could have been referring loosely to members of the parties in the coalition by which the City is headed and by virtue of which I as Executive Mayor hold office, or there could have been some other explanation (including error or inaccuracy on GFA's part).

26.10. On 29 November 2007 (the same date as the proclamation) the Acting City Manager wrote to the MEC suggesting that paragraph 2.1 of the quote may have been copied electronically from the earlier quote given by GFA to the DA and that the word "party" may have remained through inadvertence. It is possible that this letter did not reach the MEC before the proclamation was published, but it reflects the sort of innocent explanation which might have been forthcoming had the MEC bothered to ask the City about this wording instead of precipitously proceeding with a s106(1)(b) investigation.

27. The MEC's 27 November 2007 press statement refers to references to the "party" in GFA's "quotations" (plural). It is incorrect that the second and third quotes contain any similar reference to the DA. The later quotes, like the first one, made it clear that such quotes were directed to the City.

28.  The final concern was that the documents supposedly suggested that the investigation was "for intelligence purposes" rather than assessing compliance with the Code of Conduct:

28.1. I do not know what the MEC intended to convey by the phrase "for intelligence purposes".

28.2. What is clear from the documents is that GFA was engaged by the City to investigate whether Chaaban was guilty of misconduct.  In the event, GFA's investigation resulted in Chaaban being charged, found guilty and his expulsion recommended.

29.  From the above, it is clear that the MEC could not, on 27 November 2007, have had a reasonable belief that maladministration, fraud, corruption or any other serious malpractice had occurred in the City of Cape Town regarding its appointment of GFA with respect to Councillor Chaaban.  The only conclusion to be drawn is that the MEC utilized the mechanism of s 106 unlawfully, in the hope of gaining some political mileage from it.

30.  In any event, I point out that the terms of reference by which the Commission was established, go far beyond the alleged "concerns" of the MEC and some of the additional matters now being dealt with by the Commission do not even relate to suspected maladministration or malpractice.  For example, (a) whether the City engaged any service providers other than GFA in connection with the Chaaban investigation and if so what the scope of their services was and what the cost to the City was (b) whether the City or its officials reported their suspicions of Chaaban's criminal activity to the police. 

31.  I am also advised that the appointment of an investigation is only lawful if the MEC considers it necessary.  In the present case, none of the matters, which the MEC wished to have investigated were so serious as to render a s 106(1)(b) investigation necessary; and in this regard I point out;

32.  As regards the supposed date discrepancies in the two GFA invoices:

32.1. The MEC had already received a full and satisfactory explanation in respect of the second invoice.

32.2. In respect of the first invoice (where only R3 500 was involved), the MEC knew that further enquiries were being made by the City Manager, who had given the MEC the assurance that any amount not properly paid would be recovered.  The MEC also knew that the mayor had appointed a respected and very experienced senior counsel (of 35 years standing at the Cape Bar and who has acted on several occasions as a Judge) to investigate the matter.

32.3. The MEC took no steps to interview the Speaker or me or the City Manager.

32.4. The outcome of the steps initiated by the City would almost certainly have rendered further investigation at provincial level unnecessary, but at any rate a proper assessment in that regard could not have been made by the MEC prior to the completion of those steps.

33.  As to the quotes supposedly showing that the client was a political party:

33.1. The MEC had been given all contractual documents and these showed clearly what the true position was.

33.2. Since the City had responded fully to the MEC's s106(1)(a) queries, he had no reason not to raise this aspect by way of a further s106(1)(a) query.  He did not do so.

33.3. The MEC took no steps to interview me or the mayor or the City Manager.

33.4. Again, the MEC knew that the Jordaan investigation was dealing with this aspect.  The MEC could thus not properly have regarded a s106(1)(b) investigation as necessary prior to the completion of the Jordaan investigation.

34.  As to the supposed concern that the investigation into Chaaban had been "for intelligence purposes":

34.1. To the extent that this concern is intelligible, it was never raised with the City by way of a s106(1)(a) query.

34.2. The MEC took no steps to interview me or the mayor or the City Manager.

34.3. Moreover, it was again likely to be covered by the Jordaan investigation.

35.  As regards the other matters contained in the Erasmus Commission's terms of reference, the MEC could hardly have thought that they necessitated a s106(1)(b) investigation, since he did not mention them in his press statement of 27 November 2007 when explaining to the public why he was appointing the investigation.

36.  In any event, and as to the engagement of service providers other than GFA:

36.1. The MEC had received no documents suggesting anything improper in respect of other service providers.

36.2. The MEC could have asked queries on this score in terms of s106(1)(a).

36.3. He could also have asked to speak with the City Manager or other relevant officials.

37.  As to possible transgressions of Council policies and structures or of the MFMA (to the extent that this relates to matters other than the GFA invoices, with which I have already dealt):

37.1. The MEC had received no documents suggesting any other supposed financial transgressions.

37.2. The MEC could have asked queries on this score in terms of s106(1)(a)

37.3. The MEC could also have asked to speak with the City Manager or other relevant officials.

38.  As to surveillance and intelligence-gathering methods:

38.1. The Speaker had informed the MEC that the City had not authorised anything unlawful, and the contractual documentation did not suggest otherwise.

38.2. If the MEC, from other (as yet undisclosed) sources, had information to the contrary, he could and should have posed further questions to the City in terms of s 106(1)(a) or simply picked up the phone.

39.  Accordingly, on the facts, the MEC could not genuinely have considered that a s106(1)(b) investigation was "necessary", and the only conclusion to be drawn is that once it became clear that no criminal charges could be laid against any person, the provincial government was unable to resist interfering further in the City ' s administration and has utilised the pretext of an investigation in terms of s 106 of the Act to do so.  This unlawful intrusion into the sphere of local government by the Provincial Government as seen in the context as set out above, is unlawful and cannot be tolerated in a democratic dispensation where the Constitution clearly defines the different roles of local and provincial government.

40.  What makes this even more distasteful is the fact that I have no doubt that the MEC cannot dispute that if precisely the same information had come to his attention in respect of an ANC-led municipality, he would not have appointed a s 106(1)(b) investigation.  You, he and the South African public have been made well-aware of the widespread fraud, corruption and incompetence in many ANC-led municipalities, a number of which are, if the media are to be believed, virtually paralysed.  As far as I am aware, there have only been four previous s 106(1)(b) investigations by your MEC in this province, none of which have resulted in a commission.

41.  In addition, a brief comparison between the information which the MEC has no doubt read in the media regarding maladministration at the City of Cape Town, under the previous ANC controlled Council; and on which he took no action whatsoever, and the current "serious concerns" he purports to have regarding this matter illustrates the extent of his political motivation.  For the sake of brevity, I raise only two matters to illustrate this point.

B.   Big Bay Land Tender

42.  The weekend Argus of January 22, 2005, published a report in terms of which it was stated that the City of Cape Town had sold "chunks of prime land worth millions of Rand at Big Bay , Bloubergstrand, at substantially discounted prices, to a select group of 17 ' black empowerment companies ' , without following a tender process".  The report went on further to stipulate that the companies had then immediately put the properties back on the market at nearly double the price and stood to make "huge profits" by reselling them. 

43.  The extent of the irregularity in that matter ran into millions of Rand, and then Cape Town Mayor , Nomaindia Mfeketo commissioned her own investigation into the matter only after being approached by Weekend Argus for comment. 

44.  Subsequent reports on the issue in the Cape Argus, including one dated January 25, 2005, indicated that as a result of the process that involved the City, the people of the City of Cape Town stood to lose "some R15 million to R20 million on the sale"

45.  Subsequently, on the 29th of January 2005, the Weekend Argus published a newspaper report, which indicated that there had been a preferential list of empowerment companies designated as beneficiaries of the properties in question one of which had been the main sponsor of a huge ANC victory bash in the City in the wake of the 2004 elections.

46.  One would assume that the aforesaid information may well have occasioned the Minister to, at the very least, enquire of the City regarding the factual circumstances surrounding that matter, but no such enquiry ever took place and no investigation under section 106(1)(b) ever took place.

C.   Full Swing / SCOPA Report

47.  The appointment of a company known as Full Swing Trading, by the City Manager at the time, Wallace Mgoqi, for R3.36 million for "social facilitation" in the run up to the last local government elections was, to the City ' s best knowledge, unlawful, and did not follow procurement processes.  In its last meeting, SCOPA found that "there was no evidence of the calling for tenders or council approval" and referred the matter to a full forensic investigation.  I point out that SCOPA is not DA controlled, and indeed the apparent gross fraud / maladministration by the previous administration controlled by the ANC is so blatant, that the Chairperson of SCOPA notwithstanding that he is an ANC member, has referred the matter for further investigation.

48.  Minister Dyantyi has not made one enquiry of the City into this matter.

49.  All of the above; and the enormous cost, in money and personnel that this Commission will occasion must be balanced against the fact that the alleged irregularities being probed by the Commission - which was established ostensibly as a result of the City's appointment of Messers George Fivaz and Associates to investigate Mr Badih Chaaban - cannot plausibly be said to have totalled no more than R3 500.00.

50.  On a weighing of all of the above, it is clear to me that, not only are the Commission and the s 106(1)(b) investigation unlawful, but there is no rational basis for the Commission to have been established. The Commission appears to be nothing more than a convenient vehicle for the ANC to interfere unduly in the running of the City of Cape Town, the only major urban municipality not currently under its control. The irony of this is that the taxpayer is footing the bill for this intrusion, being the very allegation that was first used by the ANC in the accusations it levelled against the City regarding the Chaaban investigation. The City and I cannot stand by and allow that to happen.

51.  I have now met with you in order to convey my concerns in this matter as set out above, bearing in mind our Constitutional obligations to attempt to resolve intergovernmental disputes amicably prior to resorting to litigation. I am adopting this approach notwithstanding the fact that Minister Dyantyi and yourself did not see fit to comply with that obligation prior to interfering in the operations of the City. I urge you to give this matter your immediate attention and indeed reconsider the wisdom of proceeding with the Erasmus Commission at all. However, given that the Erasmus Commission is due to commence with oral hearings on 25 February 2008, and I do not want to be the cause for any further unnecessary cost in the Commission's preparations, I am now compelled to request, as I hereby do, that you formally agree to suspend the further conduct of the Erasmus Commission, pending the resolution of this dispute by whatever means are available to us in terms of the applicable legislation. At the very least, you should, in any new proclamation dealing with the mandate of the Commission, fix a date by which the Commission has to report which is sufficiently far in the future to allow the Commission to postpone its hearings in order for us to discuss the kinds of issues raised in this letter.

52.  In the event of you failing to heed my request, the City of Cape Town reserves it rights in this matter. I truly hope further action will not be necessary and request that you let me have a response to this letter by no later than 08:30 on Monday, 11 February 2008.

Yours faithfully