Mkhwebane finds improper conduct by George Municipality in R350m Old Mutual investment

This after GOOD Party leader Patricia de Lille laid a complaint with the Office of Public Protector in 2019 - claiming corruption at the municipality.

Officials were allegedly in the know about an irregular investment of public funds to the tune of R350 million with Old Mutual.

It's understood the former municipal manager Trevor Botha had reported the allegations of financial misconduct against the Portfolio Councillor for Financial Services, Stag Cronjé and the municipality's former Chief Financial Officer Keith Jordaan to the Hawks, the provincial government, and National Treasury.

The investment was made with Old Mutual in 2017, where Cronjé's son was employed as an agent for the institution's Broker Distribution.

Cronjé admitted guilt and was fined the equivalent of one month's salary and ordered to issue a written apology to the Speaker of the Council.

Following an internal investigation, Jordaan was later axed in July 2019.

Mkhwebane released findings into the investigation in Pretoria on Monday.

The Public Protector's investigation focused on the alleged contravention of the Municipal Finance Management Act, the Municipal Investment Regulations and the Cash and Investment Policy of the municipality caused by the investment transactions the municipality concluded with Old Mutual.

"The conduct of the municipality accordingly constitutes improper conduct as envisaged in the Constitution and maladministration in terms of the Public Protector Act. The conduct of the officials and councillor involved were also not in accordance with the standard of ethics and diligence contemplated in section 195 of the Constitution," said Mkhwebane.

"We further found that the municipality’s systems, processes, internal control measures and checks and balances governing its investment of public funds were not entirely efficient and provided inadequate checks and balances to prevent the improper investment of municipal funds.

"The internal control mechanisms and checks and balances provided for by the Local Government: Municipal Systems Act, 2000 (MSA), the MFMA, the relevant Regulations and the Investment Policy were either deficient or if available, were not effectively applied by the municipality to safeguard it from the irregular investments made with Old Mutual."

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Mkhwebane ordered the municipality to take remedial action.

"To remedy this maladministration and improper conduct, the Municipal Manager must evaluate and identify what were the main deficiencies in regard to the municipality's investment policy and procedure, its internal financial controls and risk management policies and procedures, which made the irregular investment possible and then take steps to address these deficiencies in order to prevent a recurrence of a similar incident within 90 working days from the date of the report, take disciplinary action against the municipal officials who were implicated in non-compliance with the municipality’s policies and procedures that resulted in the irregular investments of municipal funds with Old Mutual within 60 working days from the date of the report.

"Engage with the Financial Sector Conduct Authority (FSCA) to assist with the identification of the deficiencies and assist with training of the relevant municipal officials and councillors responsible for oversight regarding municipal investments, on the relevant provisions of the MFMA and the Regulations, within 90 working days from the date of this report.

"The Executive Mayor, on the other hand, must take the appropriate steps to ensure that the Audit Committee of the Municipality is properly constituted as contemplated by section 166 of the MFMA with members that are competent and that they have the necessary skills, qualifications and experience to perform their statutory responsibilities," Mkhwebane added.

Mkhwebane further lamented the apparent trend in irregular 'VBS-style' investments by municipalities.

"The issue of how and where municipal funds are invested became a big talking point at the height of the VBS scandal. The next case is different but falls within the broader question of irregularities when it comes to investing public funds, especially at the local sphere of government," she said.

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