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Redisa’s alleged missing millions

Business Report
Environmental affairs minister Edna Molewa suspects that the Recycling and Economic Development Initiative of South Africa (Redisa) has succeeded in transferring almost R30million of public funds that were intended for the implementation of the Redisa waste tyre plan out of the country.

This was one of a litany of damning allegations made by Molewa in an almost 200-page affidavit in support of the successful application to the Cape High Court last week to place Redisa, the only approved waste tyre plan for the country, in provisional liquidation.

Molewa added that a document provided to her department anonymously by a Redisa employee, if confirmed as correct, confirmed that “the funding from the privately collected Redisa contributions are siphoned off to other companies and/or entities and/or even to foreign shores for the benefit of the individuals behind this grand scheme”.

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Recycling and Economic Development Initiative of SA . Photo: Simphiwe Mbokazi

About R2billion has been collected to date by Redisa from the tyre industry.

Misappropriation

Molewa said Redisa was not properly managed and was the target “of at least an attempt, if not actual misappropriation”.

The urgent liquidation court application was made “to safeguard the operations and assets” associated with the Redisa plan.

Consumers ultimately pay the waste tyre levy through increased retail tyre prices.

ALSO READ: REDISA to go into liquidation

In her affidavit, Molewa said the payment of “staggering amounts” were channelled as management fees to a host of companies in which the executive directors of Redisa had a financial interest.

She claimed Redisa unilaterally and without authorisation channelled public fund to various other entities in which Redisa chief executive Hermann Erdmann, his direct family members and/or directors and/or stakeholders in Redisa personally stood to benefit.

Redisa had paid an amount of R108.347m as “management fees”, presumably to Kusaga Taka Consulting, of which Erdmann was a director, for the management of the Redisa plan.

Molewa questioned why, if this management company was compensated for implementing and administering the Redisa plan and had taken over the operational responsibilities of Redisa, it was necessary to employ four executives and three non executive directors and a number of employees “to the tune of a further R107.076m” or to provide them with motor vehicles valued at R4.14m or to refurbish offices for R6.486m when Redisa had contacted its operational responsibilities out to another profit company.

24 companies

Companies and Intellectual Property Commission records showed that Erdmann was a director or shareholder of 24 other companies and in every instance accompanied by at least one or more of the following directors of Redisa: Stacey-Inger Davidson, Christopher Crozier, Reza Daniels, Charline Kirk, Alexander Erdmann, the son of Hermann Erdmann.

Most of the private profit companies in which Erdmann had an interest as a director had exactly the same registered physical address as Redisa.

A review team report submitted to Molewa’s department in February this year found that the remuneration packages of the non executive directors of Redisa was in excess of R160000 a month, excluding their fringe benefits.

The combined expenditure by Redisa on the fees of executive directors and staff of Redisa, comprising about seven people, was a total of R1.7m a month.

Over and above the fees earned for services rendered by the non executive directors of Redisa, which amount to about R2m, these directors were also paid an amount of R1.297m as fees for the mere acceptance of a directorship in Redisa.

Molewa said Redisa had also:

nPurchased a freehold property for R18.7m, which falls completely outside the mandate of Redisa as set out in its plan.

nOwns motor vehicles to the depreciated value of R4.14m.

nDone “office refurbishment” for the depreciated amount of R6.486m.

nEmployed a security company to secure the private residences of the directors at R63933 a month.

nSpent a total of R17.056m since inception until end-February last year on marketing and advertising.

* See page 18 on how Redisa failed to meet its targets.

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BUSINESS REPORT

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