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[2019] ZAECBHC 4
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Mbina-Mthembu v Public Protector (208/2018) [2019] ZAECBHC 4; [2019] 3 All SA 241 (ECB); 2019 (6) SA 534 (ECB) (7 March 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION, BHISHO
Case
no. 208/2018
Date
heard: 14/2/19
Date
delivered: 7/3/19
Reportable
In
the matter between:
Nomdakazana
Tibelo Marion Mbina-Mthembu
Applicant
and
The
Public Protector
Respondent
JUDGMENT
Plasket
J:
[1]
When the founding father of South Africa’s democracy, Mr Nelson
Rolihlahla Mandela,
died on 5 December 2013 at the age of 94 years,
hasty arrangements were made for his State funeral scheduled for ten
days after
his death. He was to be buried at his home in Qunu near
Mthatha in the Eastern Cape province. Planning for and the
implementation
of the planning of the funeral involved the national,
provincial and local spheres of government. On the provincial level,
the
Eastern Cape provincial government (the provincial government)
was centrally involved, while on the local level, the King Sabata
Dalindyebo Local Municipality (the KSD Municipality) and the O R
Tambo District Municipality (the ORT Municipality) had roles to
play.
Little prior planning of any significance was undertaken, even though
Mr Mandela had been ill for some time.
[2]
In order to meet the exigencies of the situation, the provincial
government decided
to make available R300 million to fund the
funeral. This amount had been allocated to the Eastern Cape
Development Corporation
(the ECDC)
[1]
and ring-fenced for the ECDC to use for social infrastructure
development. The ECDC was given the function of paymaster and by
the
time the funeral had been concluded and suppliers of goods and
services had been paid, it had disbursed R35 963 889.
The
provincial government’s thinking when it embarked on this
arrangement was that it would re-imburse the ECDC in due course.
[3]
A number of complaints were made to the Public Protector that
maladministration had
occurred during the process. She investigated
the complaints and produced a report entitled ‘Report of the
Public Protector
on an Investigation into Allegations of
Misappropriation of Public Funds, Improper Conduct and
Maladministration by the Eastern
Cape Provincial Government and Other
Organs of State in Connection with the Expenditure Incurred in
Preparation for the Funeral
of the Late Former President Nelson
Rolihlahla Mandela, “
Aah! Dalibhunga”
’.
[4]
The report contained four adverse findings against the applicant, Ms
Nomdakazana Mbina-Mthembu,
who was, at the time, the head of the
provincial treasury in the provincial government. The remedial action
of relevance to this
matter that was directed by the Public Protector
was that the ‘Provincial Treasury of the Eastern Cape conduct
an investigation
into the financial misconduct of Ms Mbina-Mthembu
referred to in this report, in terms of Treasury Regulation 4.1.3,
and to take
the appropriate action’.
[5]
Ms Mbina-Mthembu has applied for an order in the following terms:
‘
reviewing
and setting aside Report No 29 of 2017/2018 titled: “MANDELA
FUNERAL: REPORT OF THE PUBLIC PROTECTOR ON AN INVESTIGATION
INTO
ALLEGATIONS OF MISAPPROPRIATION OF PUBLIC FUNDS, IMPROPER CONDUCT AND
MALADMINISTRATION BY THE EASTERN CAPE PROVINCIAL GOVERNMENT
AND OTHER
ORGANS OF STATE IN CONNECTION WITH EXPENDITURE INCURRED IN
PREPARATION FOR THE FUNERAL OF PRESIDENT NELSON ROLIHLAHLA
MANDELA”
which was released by the respondent on or about 4 December 2017,
either in whole or to the extent that such report
makes certain
findings against or concerning the applicant and/or the Eastern Cape
Provincial Planning and Treasury and setting
aside certain remedial
action taken by the respondent against the applicant as contained in
the said report.’
[6]
It was accepted by Mr Ntsaluba who, together with Mr Mapoma, appeared
for Ms Mbina-Mthembu,
that if the application was to succeed, Ms
Mbina-Mthembu was not entitled to the setting aside of the whole
report: she would only
be entitled to the setting aside of the
adverse findings made in respect of her and the remedial action
ordered against her.
Review
of decisions of the Public Protector
[7]
Our Constitution is based, inter alia, on the values of
constitutional supremacy and
the rule of law.
[2]
Any conduct that is inconsistent with the Constitution is invalid.
[3]
All public power is subject to review by the courts.
[4]
[8]
Different ‘pathways’
[5]
to review are recognised by the law. In this case, reliance was
initially placed on s 6 of the Promotion of Administrative Justice
Act 3 of 2000 (the PAJA) as the pathway to the review of the Public
Protector’s decisions in respect of Ms Mbina-Mthembu.
[6]
In the alternative, the principle of legality that flows from the
founding value of the rule of law was relied upon.
[9]
After the application had been launched, however, the issue as to
which pathway to
review applies to the investigative, reporting and
remedial powers of the Public Protector was determined by the Supreme
Court
of Appeal. In
Minister
of Home Affairs & another v Public Protector
[7]
it was held that the PAJA did not apply ‘to the review of
exercises of power by the Public Protector in terms of s 182 of
the
Constitution and s 6 of the Public Protector Act [23 of 1994]’
but that the principle of legality applies to the review
of these
exercises of power.
[10]
This case concerns an application for the review of the exercise of
power by the Public Protector,
and not an appeal. This distinction is
of importance. Wade and Forsyth
[8]
explain the difference between the two as follows:
‘
The system of
judicial review is radically different from the system of appeals.
When hearing an appeal the court is concerned with
the merits of a
decision: is it correct? When subjecting some administrative act or
order to judicial review, the court is concerned
with its legality:
is it within the limits of the powers granted? On an appeal the
question is “right or wrong”? On
review, the question is
“lawful or unlawful”?
The
authors describe judicial review as a ‘fundamental mechanism
for keeping public authorities within due bounds and for
upholding
the rule of law’.
[11]
Maintaining the distinction between review and appeal is of great
importance because, as Baxter
has said, ‘[w]ithout statutory
authority, the court may not venture to question the
merits
or wisdom of any administrative decision that may be in dispute’,
that if it was to do so, ‘it would be usurping the
authority
that has been entrusted to the administrative body by the empowering
legislation’ and, what is more, it ‘would
be moving
beyond its special area of expertise’.
[9]
These ideas were captured pithily by Lord Hailsham LC in
Chief
Constable of the North Wales Police v Evans
[10]
when he said that the ‘function of the court is to see that
lawful authority is not abused by unfair treatment and not to
attempt
itself the task entrusted to that authority by law’
[12]
At common law, the justification for the power of courts to
judicially review exercises of public
power stems from the rule of
law.
[11]
The grounds of review
that were developed over the centuries fell within three broad
categories – unlawfulness, unreasonableness
and procedural
impropriety.
[12]
It is from
this source that the fundamental right to just administrative action
arose – the right to administrative action
that is lawful,
reasonable and procedurally fair.
[13]
[13]
The grounds of review that are set out in s 6(2) of the PAJA are, in
essence, a codified form
of the common law grounds of review (with
one or two having been developed, to an extent, and others having
been omitted, by mistake)
that are applicable to all exercises of
public power.
[14]
(Prior to
1994, no distinction was drawn between administrative action as it is
now defined and other forms of public power, such
as executive
action.) As a result, and generally speaking, the same grounds of
review that apply to reviews in terms of s 6 of
the PAJA now apply to
reviews in terms of the principle of legality.
[15]
The common law grounds of review that apply in reviews in terms of
the principle legality have, however, now been ‘subsumed
under
the Constitution’ and ‘gain their force from the
Constitution’.
[16]
The
factual background
[14]
The material facts are, by and large, common cause. Where there are
disputes of fact, on the
basis of the
Plascon-Evans
rule,
[17]
the Public
Protector’s averments will prevail over those of Ms
Mbina-Mthembu.
[15]
When Mr Mandela died, the provincial government was expected to
coordinate the arrangements for
the funeral. A meeting of the
province’s top management, attended by seven heads of
department, was held on the morning of
6 December 2013 to discuss
planning for the funeral. Ms Mbina-Mthembu’s role in the
meeting, according to her founding affidavit,
was to ‘advise
how funds would be made available for the final Eastern Cape leg of
the State Funeral as well as the Provincial
memorial services as per
the 10-day programme of the mourning period culminating in the
funeral’.
[16]
She told the meeting that there were two options available. The first
option was to obtain emergency
funding in terms of s 25 of the Public
Finance Management Act 1 of 1999 (the PFMA). Section 25(1) provides:
‘
The
MEC for finance in a province may authorise the use of funds from
that province's Provincial Revenue Fund to defray expenditure
of an
exceptional nature which is currently not provided for and which
cannot, without serious prejudice to the public interest
in the
province, be postponed to a future appropriation by the provincial
legislature.’
[17]
The second option was to use funds that had already been appropriated
to a public entity or department,
and to re-imburse it later from the
Provincial Revenue Fund. She favoured this option.
[18]
Ms Mbina-Mthembu then drafted a memorandum which was to be placed
before the executive council
of the provincial government (the EXCO).
It was dated 6 December 2013, was entitled ‘Co-ordination and
Variation of Use of
Funds for an Emergency’ and was signed by
her. Its purpose, according to paragraph 1, was to advise the EXCO
‘on the
proposed variation of use of funds to incur any
expenditure to support the funeral arrangements of the late State
President’
and to identify ‘controls to be implemented to
ensure the three spheres of government work in a co-ordinated way in
the delivery
of this project’.
[19]
In her discussion of the problem facing the provincial government, Ms
Mbina-Mthembu pointed out
that there was no provincial auxiliary
services budget for the province to be used in a case such as this,
with the result that
‘it is necessary that funds be identified
to support this initiative’. She then said that R300 million
for social infrastructure
development had been voted to the
Department of Economic Development, Environmental Affairs and Tourism
(DEDEAT) for transfer to
the ECDC, and that it ‘will be
necessary to utilise some of these funds for any costs related to the
funeral preparations
and related logistical arrangements’. She
continued to say that the ECDC ‘has been appointed by the
province as the
project host’ and it ‘is to requisition
these funds from DEDEAT timeously’.
[20]
Before the funds were committed, however, an ‘endorsement must
be received from the HOD
of Provincial Treasury in terms of S
6.3.1(c) of Treasury regulations as “allocations earmarked by
the relevant treasury
for a specific purpose may not be used for
other purposes, except with its approval”’. She undertook
that the provincial
treasury would support the ECDC in this regard.
She made the point that the costs involved were unknown at that stage
but
once the amount was established, ‘the MEC for Planning and
Finance will defray these costs from the [Provincial Revenue Fund]
if
necessary (ie the funds voted to ECDC have been depleted, etc) –
this will be done in line with section 25 of the PFMA’.
[21]
Having identified the financial implications as involving the
variation of the use of funds from
‘Social infrastructure to
infrastructure relating to funeral support’ she made the
following recommendations:
’
It is recommended
that EXCO:
12.1
Supports that ECDC will be the Project host/paymaster;
12.2
Support that some of the funds earmarked for Social Infrastructure in
ECDC will be utilised to defer
(sic) the cost of funeral
arrangements.
12.3
Supports the control that all expenditure must be endorsed by a
Provincial Treasury official after
consultation with project
coordinators and that any expenditure incurred by both the Provincial
Government and National Government
must first be communicated to
Provincial Treasury to limit duplication of costs.
12.4
As the project costs are unknown at this stage, the MEC for Planning
and Finance may defray these costs
from the PRF if necessary (ie the
funds voted to ECDC have been depleted, etc) – in line with
section 25 of the PFMA.’
[22]
On the same day, the EXCO passed a resolution that:
‘
1)
The Eastern Cape Development Corporation be the project
host/paymaster;
2)
The funeral arrangement costs be defrayed from some of the funds
earmarked for
social infrastructure in ECDC.
3)
The control measures proposed by Provincial Planning and Treasury be
endorsed;
4)
The MEC for Provincial Planning and Finance is mandated to defray the
funeral
costs from the Provincial Revenue Fund in line with Section
25 of the Provincial Finance Management Act 1 of 1999.’ (sic)
The
premier at the time, Ms N Kiviet, told the Public Protector that the
EXCO had, in passing the resolution, relied on the advice
it had
received from the provincial treasury, and Ms Mbina-Mthembu in
particular.
[23]
The first issue that the Public Protector dealt with in relation to
Ms Mbina-Mthembu concerned
the advice she had given the EXCO in the
memorandum. That issue was whether the provincial government had
‘improperly diverted
public funds amounting to R300 000 000
placed in the custody of the ECDC, which were appropriated for
purposes of accelerating
social infrastructure delivery in the
province, to use them for the memorial service and funeral of
President Mandela and if so;
whether such conduct was improper and
constituted maladministration’.
[24]
The provincial treasury continued to play an active role in the
procurement process leading up
to the funeral. This was the focus of
the second aspect of the Public Protector’s investigation in
relation to Ms Mbina-Mthembu.
She enquired into whether ‘the
procurement process followed by the Eastern Cape Provincial
Government was in accordance with
a system that is fair, equitable,
transparent, competitive and cost effective’.
[25]
The third aspect of the investigation that was relevant to Ms
Mbina-Mthembu concerned a specific
incident in which public funds
were transferred by the treasury into the personal bank account of
the MEC for Provincial Planning
and Finance, Mr P Masualle. The
question that the Public Protector asked in this respect was whether
this transfer was irregular.
[26]
The fourth enquiry was whether ‘the ECDC acting in its official
capacity as Project Host
and Paymaster caused the ECPG to incur
irregular, fruitless and wasteful expenditure of public funds for the
memorial services
and funeral of President Mandela and if so; whether
such conduct was improper and constituted maladministration’.
The
Public Protector’s findings
Finding
1: The funding of the funeral
[27]
It is not in dispute that Ms Mbina-Mthembu drafted the memorandum for
the EXCO in which she proposed
that the funeral be funded with the
funds already allocated to the ECDC for the purpose of providing
social infrastructure, and
that the ECDC would act as paymaster in
respect of the procurement of goods and services. It is also common
cause that the EXCO
accepted the advice given to it by Ms
Mbina-Mthembu by passing a resolution that reflected that advice.
[28]
The key finding made by the Public Protector was that the provincial
government’s diversion
of the ECDC’s funds from social
infrastructure development to paying for the funeral was improper.
She found that Ms Mbina-Mthembu
recommended the arrangement and
believed that Treasury Regulation 6.1.3(c) allowed for it. The Public
Protector concluded, however,
that Ms Mbina-Mthembu was wrong in her
view of the law. She held that Ms Mbina-Mthembu had thus
‘misdirected’ the EXCO,
that her proposal was ‘irrational
and unlawful’, that it resulted in an irrational decision by
the EXCO that ‘culminated
in expenditure by the ECDC that was
unauthorised as contemplated by the PFMA’ and that Ms
Mbina-Mthembu’s ‘conduct
was improper and constituted
maladministration’.
[29]
In her founding affidavit, Ms Mbina-Mthembu said that the EXCO acted
constitutionally and lawfully
when it passed its resolution and that
the diversion of the funds was not improper. She expressed the view
that that the conclusion
reached by the Public Protector was
influenced by an error of law and was not rationally connected to the
information before her.
[30]
Ms Mbina-Mthembu argued that the Public Protector misconstrued the
applicable statutory provisions,
with the result that her conclusions
were materially influenced by an error of law and were also ‘not
rationally connected
to the information that served before her’.
Had she interpreted the law correctly, she would have concluded that
the diversion
of the funds was lawful, with the result that Ms
Mbina-Mthembu could not be found to have been guilty of
maladministration.
[31]
In
President
of the Republic of South Africa & others v South African Rugby
Football Union & others
[18]
the Constitutional Court identified one of the aspects of the
principle of legality as being that, in exercising public power,
functionaries may not misconstrue their powers. In
Hira
& another v Booysen & another
,
[19]
in strikingly similar terms, Corbett CJ had, in posing the question
whether errors of law were reviewable, described an error of
law as
being constituted by a decision-maker misconstruing the statutory
provisions in terms of which his or her decision had to
be made.
[20]
He answered the question he had posed affirmatively: unless the
legislature has clearly left the interpretation of the law entirely
in the hands of the functionary, errors of law, as long as they are
material, are reviewable.
[21]
At common law, therefore, a material error of law is a ground of
review.
[22]
It is, therefore,
also a ground of review in terms of the principle of legality.
[32]
In order to determine whether the Public Protector committed an error
of law, it is necessary
to consider the process that regulates
virements – the ‘process of transferring items (esp.
public funds) from one
financial account to another’.
[23]
(I have no doubt that if the Public Protector did indeed commit an
error of law, that error would be material, given the important
effect it had on her findings.)
[33]
Ms Mbina-Mthembu argued that Treasury Regulation 6.3.1(c) applied and
that it authorised the
diversion of the funds. This regulation
provides:
‘
For
purposes of section 43(1) of the Act –
. . .
(c) allocations earmarked
by the relevant treasury for a specific purpose (excluding
compensation of employees) may not be used
for other purposes, except
with its approval.’
[34]
The Public Protector argued, however, that one has to begin the
enquiry with s 43 of the PFMA
as the Treasury Regulations are
subordinate legislation made in terms of the PFMA, and are thus
subject to it. Section 43 provides:
‘
(1) An accounting
officer for a department may utilise a saving in the amount
appropriated under a main division within a vote towards
the
defrayment of excess expenditure under another main division within
the same vote, unless the relevant treasury directs otherwise.
(2) The amount of a
saving under a main division of a vote that may be utilised in terms
of subsection (1), may not exceed eight
per cent of the amount
appropriated under that main division.
(3) An accounting officer
must within seven days submit a report containing the prescribed
particulars concerning the utilisation
of a saving in terms of
subsection (1), to the executive authority responsible for the
department and to the relevant treasury.
(4) This section does not
authorise the utilisation of a saving in-
(a)
an amount specifically and exclusively appropriated for a purpose
mentioned under
a main division within a vote;
(b)
an amount appropriated for transfer to another institution; and
(c)
an amount appropriated for capital expenditure in order to defray
current expenditure.
(5) A utilisation of a
saving in terms of subsection (1) is a direct charge against the
relevant Revenue Fund provided that, in
the case of a province, that
province enacts such utilisation as a direct charge.
(6) The National Treasury
may by regulation or instruction in terms of section 76 regulate the
application of this section.’
[35]
What is clear from s 43(1) of the PFMA is that a lawful virement can
only occur in respect of
a saving, on the one hand, and excess
expenditure, on the other, ‘within the same vote’.
Furthermore, it is initiated
by the accounting officer of the
department concerned. It is not clear how the funds that were
diverted can be regarded as a ‘saving’
and how the
expenditure that it was meant to cover could be regarded as ‘excess
expenditure’, particularly as it had
not been incurred when the
diversion of the funds occurred.
[36]
Treasury Regulation 6.3.1(c) could not extend the scope of s 43(1) as
it is subordinate to s
43(1). In other words, it could not have
authorised Ms Mbina-Mthembu to do something that s 43(1) did not
permit. In my view, Treasury
Regulation 6.3.1(c) did not authorise
the diversion of funds appropriated for purposes of social
infrastructure development to
the funding of the funeral. The
transfer was in conflict with s 43(1) of the PFMA.
[37]
In the result, the Public Protector was correct in arriving at the
conclusion that Ms Mbina-Mthembu’s
advice to the EXCO was
erroneous and that the diversion of the funds, in reliance on that
advice, was unlawful. The Public Protector
concluded that Ms
Mbina-Mthembu ‘misdirected’ the EXCO; that this resulted
in an irrational decision being taken by
the EXCO ‘that
culminated in expenditure by the ECDC that was unauthorised as
contemplated by the PFMA’; and that Ms
Mbina-Mthembu’s
conduct ‘was improper and constituted maladministration’.
[38]
The Public Protector’s key finding – that the scheme for
the diversion of the funds
was unlawful – was legally correct.
The contention that she committed an error of law is thus untenable.
Once it is established
that no error of law was committed, the Public
Protector’s findings cannot be said to be irrational: there is
a rational
connection between her finding, on the one hand, and the
evidence before her, the law and her reasons.
[24]
The review of the first finding must fail.
Finding
2: The regularity of the procurement process
[39]
The Public Protector found that the allegation had been established
that the procurement process
followed by the provincial government
was not fair, equitable, transparent, competitive and cost effective.
[40]
It was common cause that Ms Mbina-Mthembu had been involved, since
2011, in a limited number
of meetings concerning planning for Mr
Mandela’s funeral. This was a project titled Project X. Despite
this, by the time
Mr Mandela died, there was no budgetary provision
made for funding the funeral that everyone knew would take place in
the Eastern
Cape. There was also no costed plan in place for the
procurement of goods and services necessary for the funeral.
[41]
The result was the decision taken by the EXCO, on Ms Mbina-Mthembu’s
advice, to appoint
the ECDC as paymaster for the funeral. This also
resulted, the Public Protector found, in Ms Mbina-Mthembu ‘addressing
an
instruction
to the Heads of Provincial Departments and the
Municipal Managers of the KSD and OR Tambo and the Nelson Mandela Bay
Metropolitan
Municipalities on the procurement process that had to be
followed’. She decided that all procurement would have to be
made
in terms of a deviation from the normal process (as a result of
urgency) ‘to be approved by the respective accounting officers
and that all invoices had to be submitted to the Provincial Treasury
for approval, upon which it would be presented to the ECDC
for
payment’. She thus remained centrally involved in the process.
[42]
A number of additional requirements were stipulated by Ms
Mbina-Mthembu. These included that
‘[w]here possible three (3)
written quotations must be solicited from suppliers or services
providers registered on the supplier
database of the department or
institution’; that the ‘appointment of the successful
service providers must be approved
by the Accounting
Officer/Authority or delegated official or institution’; that
the ‘selection process must be clearly
documented for audit
purposes; that the ‘appointed service provider must have a
valid Tax Clearance Certificate issued by
SARS’; and that
‘[a]ll relevant documentation but not limited to as indicated
in the attached checklist must be properly
filed and safely stored’
and that ‘[
n
]
o payment will be effected without the
minimum documents indicated in the checklist
’. The
checklist contains six items. They are; ‘[a]pproved request for
deviation’; quotations; ‘[v]alid
SARS Tax Clearance
Certificate’; a memorandum that approves the appointment of a
service provider; proof of delivery (of
goods, I assume); and
invoices.
[43]
The Public Protector found that this system was not adhered to but
despite this, Ms Mbina-Mthembu
instructed the ECDC to make payments.
Two examples and a general observation will suffice to illustrate the
point.
[44]
The first example concerns the provision of food for marshals. On 6
December 2013, the head of
the Department of Safety and Liaison wrote
to Ms Mbina-Mthembu for ‘approval for the deviation in the
normal procurement
processes’. The request related to the
provision of food for 3 000 safety marshals. It was said that
due to the urgency
of the matter, it was not possible to either
obtain quotations or engage in a bidding process. Instead, two
suppliers were identified
as the entities that would provide the
meals at a total cost of R775 950. The letter stated that ‘the
food outlets were
selected as the best alternative to provide the
massive number of meals within a short period of time instead of
selecting the
suppliers that are registered into the provincial
database’.
[45]
On 9 December 2013, R334 350 was paid by the ECDC to McDonalds
in Mthatha. On 10 December
2013, R441 600 was paid by the ECDC
to UBM Company, which appears to run the Kentucky Fried Chicken
franchise in Mthatha.
While the letter does not bear the signature of
Ms Mbina-Mthembu to signify her ‘approval’ of the
deviation, that can
be inferred from the fact of payment. Not only
were these service providers not on the database of service providers
but payments
were made despite the absence of tax clearance
certificates and proof of delivery.
[46]
Much the same process was followed in respect of the procurement of
5 130 safety reflective
bibs for the 3 000 marshals
(R263 169), food for 25 000 people (R183 900),
utensils related thereto (R48 500)
and branding for the KSD
Municipality (R6 365 470.60). In each instance, payments
were approved and payments were made
on request with little or no
compliance with Ms Mbina-Mthembu’s requirements.
[47]
The second example concerns the funding of a memorial service held in
Port Elizabeth. It would
appear that the MEC for Human Settlement
wanted a memorial service to be held in Port Elizabeth. This led Ms
Mbina-Mthembu to write
a letter, dated 11 December 2013, to the chief
executive officer (CEO) and chief financial officer (CFO) of the ECDC
with instructions
concerning its funding. In stark contrast to her
earlier instructions concerning procurement, she wrote:
‘
Please effect
payments for the following today not later than 11 am
1
For the provincial event –
Transportation and
mobilization truck is approximately R10million. Details will come
from MEC August and I have forwarded your email
addresses.
2
Apparel for the day approximately R2.5 to R3.0M –
Balance payable by
Saturday
3
Stage and sound approximately R1.7million
All
paperwork will be officially signed on Tuesday and Wednesday as it is
impossible now to be in PE and Mthatha all operational
venues.
I
will be signing off infrastructure memo and other things for KSD
today. It is imperative that after the event we get a team to
check
the actual infrastructure work and verify the prices linked to these
things. Even if we cannot reverse some of these payments
where govt
is taken for a ride we do need to raise but backed by facts and
evidence. I get the sense that some people are taking
chances but we
are in trouble as a province. It does not look like we were prepared.
The
number for MEC Sauls-August is [deleted] – she will be
forwarding email.
Kindly
forward the ECDC team all you have for them to effect payment for the
stage.
Let
us stand together now, this will pass too.’
[48]
In general, it may be concluded that even the unlawful system put in
place by Ms Mbina-Mthembu
was not followed in a procurement process
that appears to have become a free for all – a fact that Ms
Mbina-Mthembu appeared
to recognise in her letter. In particular,
even the requirement of obtaining three quotations appears to have
been routinely abandoned
in favour of simply identifying a preferred
service provider, who may or may not have been on the relevant
database of service
providers; and the requirement that valid tax
clearance certificates be provided by service providers also appears
to have been
routinely ignored. Yet payments were authorised by Ms
Mbina-Mthembu and payments were effected by the ECDC. She also
purported
to authorise officials in both the local and provincial
spheres of government (other than her department) to deviate from
their
normal procurement processes. She had no lawful authority to do
so.
[49]
Ms Mbina-Mthembu’s conduct in approving and authorising the
procurement of goods and services
was found by the Public Protector
to have violated s 217 of the Constitution,
[25]
s 38 of the PFMA
[26]
and
Treasury Regulations 8.1, 16A3.2 and 16A6.4.
[27]
The Public Protector concluded:
‘
There is no
provision in any of the said legislation and other prescripts that
allows for a situation where procurement of goods
and services
becomes the responsibility of the Provincial Treasury (except its
own) and that it would be paid for by a Public Entity
from funds that
were appropriated for a different purpose.’
[50]
Once again, Ms Mbina-Mthembu alleged that the Public Protector, in
making this particular finding
against her, had committed a material
error of law. She added, however, that the Public Protector’s
conclusions ‘leave
a bad taste in my mouth and ground my
suspicion that the Public Protector was biased against me or that her
conclusions are just
outright capricious’. I shall first
consider the bias point, then the argument that the Public Protector
committed an error
of law and finally the submission that the finding
was capricious
[51]
In order for an exercise of public power to be set aside on account
of the bias or perceived
bias of the decision-maker, the person
attacking the decision is required to establish either actual bias –
for instance,
a prejudice against him or her,
[28]
or a disqualifying interest of some sort
[29]
– or a reasonable apprehension that the decision-maker is
biased.
[30]
No allegation is
made of actual bias on the part of the Public Protector. No facts
that I can find in the papers justify a conclusion
that a reasonable,
objective and informed person in the position of Ms Mbina-Mthembu,
who is apprised of the correct facts, would
reasonably apprehend that
the Public Protector was biased.
[31]
The mere fact that she made findings against Ms Mbina-Mthembu does
not lead to an inference of bias.
[32]
In order to succeed with such an attack, Ms Mbina-Mthembu would first
have to established that the factual findings were wrong
and then
that they were material facts and that the errors were so
unreasonable that they are inexplicable except on the basis
of bias,
a formidable onus indeed.
[33]
She has come nowhere close to discharging this onus.
[52]
The crux of the Public Protector’s finding is that Ms
Mbina-Mthembu was a central figure
in an unlawful procurement
process. From the examples I have cited, it is clear that the
procurement process did not meet the requirements
of being fair,
equitable, transparent, competitive and cost-effective.
[53]
The Public Protector’s conclusion that the procurement process
did not comply with, inter
alia, s 217 of the Constitution cannot be
faulted. The facts establish a lack of fairness, a lack of
transparency and a lack of
competitiveness, at the very least. On the
basis of the letter that Ms Mbina-Mthembu wrote to the ECDC on 11
December 2013, it
is clear that she had doubts as to the
cost-effectiveness of the payments she had authorised, because the
provincial government
was being ‘taken for a ride’ and
because some people were ‘taking chances’.
[54]
As a result, Ms Mbina-Mthembu has not established the grounds of
review that she relied upon:
it cannot be said that the Public
Protector’s decision-making has been distorted by an error of
law as the facts establish
a violation of s 217 of the Constitution;
furthermore that there is a rational connection between the facts,
the law and the conclusion
of maladministration on the part of Ms
Mbina-Mthembu; and the rationality of the finding puts paid to the
bald allegation of caprice
on the part of the Public Protector. The
review of the second finding must fail.
Finding
3: The transfer of public funds to a private account
[55]
It is common cause that, on 7 December 2013, R250 000 was
transferred by provincial treasury
officials into the private bank
account of the MEC for Provincial Planning and Finance, Mr Masualle.
The funds were intended for
‘unforeseen expenses’ related
to the funeral. When it was realised that the transfer was irregular,
it was reversed.
But, on 10 December 2013, R250 000 was
transferred into a special cheque account and a debit card was issued
to Mr Masualle
with which to access the funds.
[56]
It is also common cause that no loss was occasioned by the initial
transfer of money. Ms Mbina-Mthembu
as head of the provincial
treasury took ‘full responsibility for the error’.
[57]
The Public Protector found that the transfer of the funds by the
provincial treasury was irregular;
that Ms Mbina-Mthembu, who was the
provincial treasury’s accounting officer, ‘approved an
irregular payment of public
funds into the personal bank account of
the MEC and subsequently the opening of a special departmental
account with a debit pay
card issued to him, which gave him access to
public funds’; that neither of these transactions were allowed
in terms of the
PFMA, the Treasury Regulations and the Ministerial
Handbook; and that Ms Mbina-Mthembu’s conduct was in
violation of
these instruments and resulted in irregular expenditure.
The Public Protector concluded that Ms Mbina-Mthembu’s conduct
was
‘improper and constitutes maladministration’.
[58]
Ms Mbina-Mthembu argued, however, that the finding of
maladministration was ‘exceedingly
harsh and disproportional
and the respondent’s exercise of her power in this regard is so
unreasonable that no reasonable
person could have so exercised the
power’.
[59]
The attack on the Public Protector’s finding is misconceived.
Ms Mbina-Mthembu admitted
that she was responsible for what she
accepted was an irregularity. On these common cause facts, the Public
Protector concluded
that she was responsible for maladministration.
That finding appears to me to be justified. It is true that, in the
greater scheme
of things, this was not a very serious instance of
maladministration but no basis has been set out upon which it can be
concluded
that the finding is unreasonable on account of
disproportionality.
[34]
The
gravity of the maladministration will no doubt be a factor to be
taken into account when the remedial action ordered by the
Public
Protector is implemented.
[60]
I conclude that it has not been established by Ms Mbina-Mthembu that
the Public Protector’s
finding of maladministration is
unreasonable, whether on account of irrationality or on account of
disproportionality. The review
of the third finding must fail.
Finding
4: The incurring of irregular, fruitless and wasteful expenditure
[61]
The Public Protector found that the allegation had been established
that the ECDC in its role
of paymaster caused the provincial
government to incur irregular, fruitless and wasteful expenditure of
public funds.
[62]
She found that both Ms Mbina-Mthembu and the ECDC’s acting CEO
and CFO ‘held the
view that the strict provisions of the
Constitution, the PFMA and the Treasury Regulations pertaining to
competitive procurement
and expenditure management could be overruled
by a Resolution of a Provincial Executive Committee’. This had
resulted in
a process in terms of which the ECDC ‘paid for
procurement of goods and services that it had no control over, had
not verified
delivery of and had not approved’. Instead it
relied on the provincial treasury that, in some instances, was ‘not
even
involved in the procurement’.
[63]
The Public Protector also found that expenditure incurred by the ECDC
was not authorised and,
even if it had been, payments would have
constituted irregular, expenditure because they would not have been
in compliance with
the PFMA and the Treasury Regulations.
Furthermore, the ECDC board was not informed of the payments made
under the authority of
the acting CEO and CFO and at the request of
Ms Mbina-Mthembu.
[64]
There was, furthermore, no indication that the ECDC had received
value in respect of R5 million
paid to a particular service provider,
and that it ‘lost more than R22 million that was originally
appropriated . . . to
accelerate social infrastructure development’.
[65]
In effect, therefore, the finding of the Public Protector was this:
the payments that were made
by the ECDC were made on the basis of an
unlawful scheme proposed by Ms Mbina-Mthembu, and in terms of an
unlawful procurement
process that had been put in place and overseen
by her. As a result, payments were made unlawfully and constituted
irregular, fruitless
and wasteful expenditure.
[66]
The Public Protector’s finding in this respect flows from her
earlier findings 1 and 2.
Ms Mbina-Mthembu did not deal expressly
with this last finding, probably because she had dealt with the
findings upon which it
was based. Once it is concluded, however, that
no grounds of review were established in respect of findings 1 and 2,
then it follows
that no basis exists for the setting aside of finding
4: if the system was unlawful and the procurement process was
unlawful, it
follows logically that the making of payments will also
be irregular. The review of the fourth finding must fail.
Conclusion
[67]
I have found that Ms Mbina-Mthembu has failed to establish any ground
of review in respect of
any of the four findings made against her by
the Public Protector. That being so, her application must fail.
[68]
The application is dismissed with costs.
_________________________
C
Plasket
Judge
of the High Court
I
agree.
__________________________
V
Nqumse
Acting
Judge of the High Court
APPEARANCES
For
the applicant:
T M Ntsaluba SC and S X Mapoma
Instructed
by:
F
J Ngxola Attorneys, Mthatha
Luvoyo
Solvern Attorneys, King William’s Town
For
the respondent:
S Rorke SC
Instructed
by:
Goldberg
& De Villiers Inc, Port Elizabeth
Hutton
and Cook, King William’s Town
[1]
The ECDC is a corporation created by the Eastern Cape Development
Corporation Act 2 of 1997 (EC). Its principle objects are to
‘plan,
finance, co-ordinate, market, promote and implement the development
of the Province and all its people in the fields
of industry,
commerce, agriculture, transport and finance’ (s 3).
[2]
Section 1(c).
[3]
Section 2.
[4]
Section 172.
[5]
The term is used by Hoexter
Administrative
Law in South Africa
(2 ed) at 114-115 to describe the various mechanisms by which
exercises of public power are taken on review.
[6]
Section 6(1) of the PAJA provides that ‘[a]ny person may
institute proceedings in a court or a tribunal for the judicial
review of an administrative action’. Section 6(2) codifies the
grounds upon which administrative action may be reviewed.
See
Joubert
Galpin Searle Inc & others v Road Accident Fund & others
2014 (4) SA 148
(ECP) para 58.
[7]
Minister
of Home Affairs & another v Public Protector
2018 (3) SA 380
(SCA) para 37.
[8]
Wade and Forsyth
Administrative
Law
(10 ed) at 28-29. See too Hoexter (note 5) at 113.
[9]
Baxter
Administrative
Law
at
305.
[10]
Chief
Constable of the North Wales Police v Evans
[1982] UKHL 10
;
[1982] 3 All ER 141
(HL) at 143h-i. See too
Sinovich
v Hercules Municipal Council
1946 AD 783
at 802-803. Endicott
Administrative
Law
para 9.1.6 says: ‘All public authorities ought to make the
best possible decisions (and Parliament can be presumed to intend
that they should do so). But that does not mean that the judges have
jurisdiction to hold that a decision was
ultra
vires
on the ground that it was not the best decision that could have been
made.’
[11]
Woolf, Jowell, Donnelly and Hare
De
Smith’s Judicial Review
(8 ed) paras1-019-1-025.
[12]
Council
of Civil Service Unions & others v Minister for the Civil
Service
[1983] UKHL 6
;
[1984] 3 All ER 935
(HL) at 950h-951a.
[13]
Constitution, s 33(1).
[14]
Hoexter (note 5) at 118-119;
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs &
others
[2004] ZACC 15
;
2004 (4) SA 490
(CC) para 25;
Minister
of Health & another NO v New Clicks South Africa (Pty) Ltd &
others (Treatment Action Campaign and another as
amici curiae)
2006 (2) SA 311
(CC) para 95.
[15]
Minister
of Home Affairs & another v Public Protector
(note 7) para 38.
[16]
Pharmaceutical
Manufacturers Association of SA & another: In re ex parte
President of the Republic of South Africa & others
[2000] ZACC 1
;
2000 (2) SA 674
(CC) para 33.
[17]
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634E-I.
[18]
President
of the Republic of South Africa & others v South African Rugby
Football Union & others
2000 (1) SA 1
(CC) para 148. See too
President
of the Republic of South Africa & another v Hugo
1997(4) SA 1 (CC) para 29.
[19]
Hira &
another v Booysen & another
1992 (4) SA 69 (A).
[20]
At 85A-B.
[21]
At 93C-I.
[22]
Section 6(2)(d) of the PAJA codified Corbett CJ’s formulation
of error of law as a ground of review. It provides that
administrative action may be set aside on review if ‘the
action was materially influenced by an error of law’.
[23]
The New
Shorter Oxford English Dictionary
.
[24]
Carephone
(Pty) Ltd v Marcus NO & others
1999 (3) SA 304
(LAC);
Trinity
Broadcasting (Ciskei) v Independent Communications Authority of
South Africa
2004 (3) SA 346
(SCA).
[25]
Section 217(1) of the Constitution provides: ‘When an organ of
state in the national, provincial or local sphere of government,
or
any other institution identified in national legislation, contracts
for goods or services, it must do so in accordance with
a system
which is fair, equitable, transparent, competitive and
cost-effective.’
[26]
Section 38(1) of the PFMA imposes obligations on accounting officers
of departments, trading entities and constitutional institutions.
These obligations include ensuring that the body concerned has and
maintains:
‘
(i)
effective, efficient and transparent systems of financial and risk
management
and internal control;
(ii)
a system of internal audit under the control and direction of an
audit committee
complying with and operating in accordance with
regulations and instructions prescribed in terms of sections 76 and
77;
(iii)
an appropriate procurement and provisioning system which is fair,
equitable, transparent,
competitive and cost-effective;
(iv)
a system for properly evaluating all major capital projects prior to
a final decision
on the project.’
[27]
Treasury Regulations 8.1 places an obligation on an accounting
officer to ‘ensure that internal procedures and internal
control measures are in place for payment approval and processing’;
Treasury Regulation 16A3.2 requires that a supply chain
management
system must, inter alia, be ‘fair, equitable, transparent,
competitive and cost effective’; and Treasury
Regulation
16A6.4 provides that if it is ‘impractical to invite
competitive bids, the accounting officer or accounting
authority may
procure the required goods or services by other means, provided that
the reasons for deviating from inviting competitive
bids must be
recorded and approved by the accounting officer or accounting
authority’.
[28]
See for instance,
Patel
v Witbank Town Council
1931 TPD 284.
[29]
See for instance,
Rose
v Johannesburg Local Road Transportation Board
1947 (4) SA 272
(W);
Liebenberg
& others v Brakpan Liquor Licensing Board & another
1944 WLD 52.
[30]
BTR
Industries South Africa (Pty) Ltd & others v Metal and Allied
Workers’ Union & another
[1992] ZASCA 85
;
1992 (3) SA 673
(A) at 693I-J;
President
of the Republic of South Africa & others v South African Rugby
Football Union & others
[1999] ZACC 9
;
1999
(4) SA 147
(CC) paras 37-38.
[31]
President
of the Republic of South Africa & others v South African Rugby
Football Union & others
(note
30) para 48;
South
African Commercial Catering and Allied Workers Union & others v
Irwin and Johnson Ltd (Seafoods Division Fish Processing)
[2000] ZACC 10
;
2000 (3) SA 705
(CC) para 11;
S
v Shackell
2001 (4) SA 1
(SCA) para 19.
[32]
Commissioner,
Competition Commission v General Council of the Bar of South Africa
& others
2002
(6) SA 606
(SCA) para 16
;
Sizani v Mpofu & another
[2017] ZAECGHC 127 para 45.
[33]
De Lacy
& another v SA Post Office
2011 (9) BCLR 905
(CC) para 72.
[34]
Compare
Medirite
(Pty) Ltd v South African Pharmacy Council & another
[2015] ZASCA 27.