The Johannesburg skyline. Picture: Matthews Baloyi

Johannesburg - Some of Joburg’s major shopping malls, top hotels, leading real estate and high-end car dealers have been colluding to defraud the City of Joburg of more than R200 million.

On Thursday, Co-operative Governance and Traditional Affairs Minister Pravin Gordhan raised the alarm in his budget vote speech over acts of collusion and corruption that had defrauded the council out of millions of rand in rates and taxes.

He said city officials were colluding with members of the public in a scheme to avoid paying water and electricity bills. This, he added, resulted in other customers getting inflated bills, as meters were being manipulated.

“A concerning phenomenon has been noted in Johannesburg which may also be occurring in other municipalities and metros,” Gordhan said.

“The City of Joburg continues to ensure that service delivery reaches all members of the community despite instances of fraud perpetrated by members of the community and the city.”

The Saturday Star can reveal that investigations into council staff involved in fraudulent activities such as meter tampering and illegal connections of water and electricity have led to the arrests of 18, resulting from 48 cases opened with police.

The probe has also implicated a number of city big businesses and high-profile people who cannot be named until probes have been concluded and arrests made.

A detailed report on the continuing investigations into what one city official described as “a massive cartel involving big business” will be released in a month’s time, the city has said.

During his state of the province address, Gauteng premier David Makhura said: “There was a lot of fraud being committed by big companies in Joburg stealing from the poor. The details will be revealed by the mayor, but they will shock you when you see the businesses involved.”

The city has been plagued by a billing and revenue collection crisis for years, but officials believe they may have found a major fault in the misalignment between consumption of services and revenue.

In its 2012/2013 financial report, the city indicated that it had lost R1.3bn worth of electricity in its distribution network, mostly owing to electricity theft. Of the 442 155 customers in Joburg’s database, 154 327 domestic residents use conventional meters and 248 454 prepaid ones.

The modus operandi used in the fraud scheme is said to have included changing the database to reflect properties – both business and residential – as using prepaid meters while they were on conventional meters.

Thus, the city failed to bill such properties for services rendered for years, despite high consumption levels.

According to council spokesman Nthatisi Modingoane, the latest arrests of 18 people, including officials from government departments such as development planning, health, JMPD, revenue, City Power and Joburg Water, show that interventions put in place by the city are starting to pay off.

“The City of Joburg, in collaboration with law enforcement agencies, implemented a successful operation which has thus far led to 18 arrests,” he said.

“The arrests relate to fraudulent activities like manipulation of property valuations and rates, tampering with meters and illegal connections of water and electricity.”

Modingoane said the interventions had led to the city receiving an unqualified audit report in the 2012/2013 financial year, and improving its billing and cash position.

He said analysis indicated an improvement in controls and systems, but that continuing losses were attributable to individuals committing theft and corruption in the council.

“The city is committed to continue collaborating with law-enforcement authorities to ensure that those who defraud residents of Joburg are prosecuted.”

Modingoane said the R200m loss as result of the fraud committed by individuals and businesses was only for the 2013/2014 financial year. In the past three years, officials who were bust were suspended and faced disciplinary process, he said.

“Those who resigned while facing charges are being pursued through legal action,” he said.

Gordhan said his department would support the the city in improving the governance and revenue-value-chain processes.

Saturday Star