Response to the Carte Blanche episode aired on Sunday 27 November 2016

On 27 November 2016, an insert on the REDISA Plan was aired on Carte Blanche.
REDISA was not made aware of the broadcast as it was not made public across the platforms utilised by the broadcaster, namely: Twitter, Facebook and the Carte Blanche website. Every other insert broadcast on the night was.
No attempt at all was made to obtain comment from REDISA prior to the broadcast. This is in contradiction to the basic principles of fair and responsible journalism, as well as the Code of the Broadcasting Complaints Commission (BCCSA) to which Carte Blanche subscribes. The right to reply was mentioned on air, but to date no formal correspondence has been received from Carte Blanche requesting a reply.
The Broadcast was, as a result of the deliberate failure to obtain REDISA's comments in advance, profoundly inaccurate and/or defamatory on a range of issues.
The way in which this has been dealt with by Carte Blanche is disappointing and surprising as we have, on three previous occasions, communicated in an open and transparent manner with the broadcaster.
It is our opinion that the insert aired was factually incorrect, and severely misrepresented the REDISA brand and all that has been achieved in less than three years.
REDISA will be taking the necessary steps to right the wrongs that have been caused by this broadcast.
We assure the public and stakeholders that the funds which it receives, as a matter of audit fact, are fully accounted for and properly applied.
As a matter of audit fact the Plan has met its waste tyre diversion targets. To date the equivalent of over 26 million tyres have been safely collected and have been or are in the process of being converted to useful product.
 

RESPONSE TO DIRECT STATEMENTS

 

REDISA has claimed to have created 3254 "employment opportunities" as at May 2016, of which waste pickers are included, whereas the Plan specifically excludes the informal collectors from the job creation estimates.

The employment opportunity figures are independently audited, and are correct.
Employment estimates in the Plan were based on best available information at the time as provided by the Department. Initial estimates were based on the Departments' own 2011 waste tyre volume figures, but these figures themselves were only best estimates at that time. There was no historic data to use as a benchmark, since the Plan model was a ‘first’ in South Africa. The initial Plan estimates could therefore not be exact since the Plan itself was something entirely new in the industry, both locally and globally, with no available comparative credible data as regards its job creation capability.
As the employment creation potential of the Plan became clearer as it was rolled out, a revised SMME and job creation target estimate was provided to the Department on 18 December 2014.
As the Plan develops and expands, more employment opportunities will be created as we move towards 100% of the waste tyres being diverted into the REDISA network. Diversion of waste is followed by building processing capacity and then demand for processed products – all of this expands jobs over time. As products become desirable and the industry expands, employment will increase.
REDISA’s current, realistic estimate - now based on practical experience after the implementation of the Plan - is that approximately 30 jobs will be created by the Plan for every 1000 tons of waste tyres collected. On current estimates, about 5500 jobs will be created at the end of year 5.
The principle reasons – as we now know through practical experience - for not achieving the original estimates, are that the currently produced volumes of waste, whilst large, are less than anticipated as per the Department's original figures, and that the South African market cannot yet absorb the full volume of waste material that can be generated.
By way of clarification, in terms of the Plan, it is not envisaged that REDISA itself becomes an employer, or the creator of direct employment. REDISA's aim is to boost employment through SMME development as far as possible.
The Plan does in fact not exclude the informal sector. It specifically refers, in clause 10, to "Unregistered Tyre Transporters" – these are the waste pickers. No forecasts of employment opportunities could be made at the time of Plan implementation since the potential of this sector was unknown. It has been extremely gratifying that the pilot project conducted by REDISA to create job opportunities in this sector conducted in Gauteng has been successful – so much so that it is now being rolled out in other provinces.
The fact that a large and growing number of persons have taken up this opportunity does achieve a Plan objective, which is to enable, in this case, the poorest of the poor in the informal sector to generate income for their families.
 

Money being squandered and REDISA directors are profiting from funds

All funds, including travel and entertainment, are audited and accounted for as per the unqualified audits received from independent external auditors, KPMG.
Furthermore, all executive’s salaries are determined by a remuneration committee. In line with good governance practices, salary benchmark recommendations were made by internal auditors PWC upon implementation of the Plan.
For example, a specific allegation (with reference to confidential financial records leaked to Carte Blanche in support of an allegation that REDISA is squandering money), is made in the broadcast that REDISA is spending money on "haircuts" for its executives. This is with reference to a line item of expense for an entity called "Snipcuts". Snipcuts is in fact not a hairdresser, as Carte Blanche assumed in deliberate ignorance, but a gardening service that was engaged to carry out necessary work at REDISA's Gauteng office. A simple inquiry from REDISA would have elicited the correct information and prevented this slander. The same consideration applies to the other false allegations made in the broadcast about REDISA.
 

REDISA did not cooperate with the DEA and iSolveit during the performance audit

There is no factual basis for the allegation of lack of cooperation by REDISA during the performance audit. REDISA has cooperated fully with this process. All requested information has been furnished to iSolveit and the Department. REDISA has raised concerns about the independence and credentials of iSolveit to conduct this audit. It is not clear to REDISA how iSolveit was appointed. No response has been given on the bid information for the audit appointment. iSolveit is not a registered auditor, and its apparent lack of experience in audit processes became clear through the engagement. The “audit” process followed by iSolveit does not appear to be in accordance with accepted standards of auditing practice.
 

The relationship between Kusaga Taka and REDISA directors

Kusaga Taka Consulting (Pty) is the management company appointed by REDISA to manage its operations as detailed in Section 28 of the REDISA IIWTMP. The REDISA Plan was developed and submitted for approval to the Minister with the understanding that Kusaga Taka would implement the Plan itself – included as part of the REDISA proposal and outlined in it.
The management company is independent of REDISA and the relationship is regulated by a contract.
The directors of REDISA who have an interest in the shareholding of Kusaga Taka have declared this interest to the company as is required of them by the Companies Act, 2008, and it has always been fully disclosed to the Department
REDISA has no shareholders. The fact that a few of its directors are shareholders of the KT company does not of itself create conflict of interest. No directors of REDISA are directors of KT and vice versa.
Companies are by law managed by their directors and executives, not their shareholders. Conflict only arises where decision making is compromised through improper corporate governance. The decision making processes of REDISA and KT ensure that this never happens. The directors are mindful of and comply with their obligations in terms of section 75(5) of the Companies Act – in instances where they have a personal interest in the outcome of company decisions the necessary steps are taken to ensure no conflict of interest arises.
There is an independent and unequivocal audit confirmation by KPMG that, in circumstances where decisions may be made by KT in regard to matters affecting its relationship with REDISA, the REDISA appointed shareholders of KT recuse themselves.
REDISA appointed directors therefore do not participate in, and cannot influence, REDISA decisions about KT. This is accepted, sound and correct company practice which is built into REDISA's governance system to ensure that decisions are not compromised by any conflict of interest.
REDISA and KT therefore comply with all recognized requirements of corporate governance as contained in company law and the guidelines in this regard of KING III.
 

Despite several requests to REDISA, it has not been forthcoming with information related to KT

This is not correct.
All information which REDISA was able to provide iSolveit regarding KT was provided as requested.
During the site visit to REDISA’s premises on 17 March 2016, the information related to the appointment of KT was provided to iSolveit’s representative. Subsequent request for information have all been complied with.
 

A breakdown of the management fee that is paid to KT, which is in excess of R100 million per annum.

KT is tasked with the operational management of the Plan under REDISA's supervision.
Details of the management fee paid to KT, and the purpose for which it is being applied, are set out in the Plan. The Plan was approved on this basis. Funds expended are fully accounted for and audited.
All information regarding operational performance has been made available to the Department in monthly management meetings held with Department representatives. To date, since its inception in 2013, REDISA has submitted 46 such reports to the Department setting out its operational and financial performance.
 

REDISA executives concerned about the change in the funding model purely because they are fighting for their jobs

Since inception, REDISA has created over 200 SMMEs and the REDISA executives are fighting for the jobs of the SMMEs that rely on the mentorship, support and assistance made possible by the REDISA Plan, and the 3 500 direct jobs established so far that rely on the network that has been created. The Plan has been successfully implemented. Experience in South Africa and elsewhere shows that governments are not be able to implement successful waste diversion plans through tax based models. The failure of the plastic bag tax is a case in point. The REDISA Plan, based as it is on Extended Producer Responsibility (ie the producer of waste takes responsibility of its management under supervision of an independent body under ultimate governmental oversight), follows current stated South African government policy.  By changing the model back to what has been proven to be unsuccessful, all the progress that has been made will be undone. Waste tyres will not be diverted in an environmentally responsible manner, and South Africa and its citizens will suffer. The potential loss of executive jobs is the least of REDISA's concerns.
 

Concerns that tyres are being exported

REDISA aims to process all waste tyres locally.
Unfortunately, as information delivered to the Department during the monthly reporting meetings demonstrates, the current ability of the South African market to absorb tyre product to be recycled is less than the volume of waste tyres delivered to waste tyre depots.
To illustrate the problem, there is no local capacity to crumb all passenger tyres (the largest portion of waste tyres) to acceptable by –product raw material standards at this time. Some of these tyres have to be processed as tyre derived fuel (tdf).
Therefore, and to avoid an undesirable accumulation of waste tyre stockpiles whilst the local processing capacity and market for end products develops, and to achieve the reduction of waste in South Africa, REDISA has sought and obtained offshore markets for waste tyres surplus to current local absorption capacity. These tyres are cut and baled locally (i.e. partly processed) before being exported. These offshore processors are audited to ensure that they too deal with the tyres in an environmentally responsible manner - this process ensures that our waste tyre problem does not become someone else's waste tyre problem.
In summary, the Plan does not prohibit the export of tyres. Export is not a breach of the Plan, but a practical interim arrangement to meet Plan objectives. The overarching objective of the Plan is to divert waste tyres in South Africa into a viable and sustainable industry. The demand side of the South African industry is still at an early stage of its development, and supply exceeds demand.
 

Development of the Product Testing Institute is not within the Plan’s mandate, and is set up as a ‘nest egg’ for REDISA executives

The development of the Product Testing Institute was known by the Department since 6 December 2013. REDISA was requested to investigate whether there was any alternative capacity at SANEDI or the CSIR to undertake tyre testing. REDISA established that there was no such alternative capacity, and communicated same to the Department, together with its intention to develop a tyre testing facility.
The establishment of this testing facility is in line with approved Plan objectives. Clause 25.12 of the Plan expressly provides for research and development for the purpose of "developing recycling technologies".
By way of further context, the REDISA Plan is already regarded internationally as best practice. The development of the tyre testing facility, in collaboration with Nelson Mandela Bay University and others (in the heartland of the SA tyre industry), of a "state of the art" research facility to further recycling technologies will advance the objectives of the Plan to reduce waste (by improving the quality, durability and recyclability of tyres), and will also promote local capacity to absorb and process waste tyres, and hence also address the employment shortfall by attracting local and foreign investment.
This will ultimately lead to a significant reduction in waste production, ensure that local supply does not exceed processing capacity - supply and demand will be balanced. This should also have the benefit of reducing the levy since over time the industry will become self-sustaining – which has always been the ultimate REDISA's aim of creating truly circular ‘green’ economy. This will be world – leading facility.
The Institute will not be profit generating and is not, and cannot, be used as a ‘nest egg’ for REDISA executives. They do not and will not receive any income from it.
 

REDISA is collecting fees from the industry, but circumvents any scrutiny of how these funds are used by re-directing them as a management fee, which is paid to a private entity. When called upon to account for such funds, REDISA proceeds to hide behind the confidentiality of the private entity, namely KT, that received the "management fee".

The allegation that funds are unaccounted for, both as to receipt and expenditure, is baseless and defamatory. A detailed accounting report has been given, on a regular basis to the Department, as to how the management fee has been spent. REDISA has always received unqualified audits from their independent auditors.
 

The significant change in the relationship with the DEA in the past year

REDISA’s relationship is governed by way of the conditions of approval which requires for us to report to the Department.  Since approval in November 2012, REDISA has submitted 46 monthly reports as well as Quarterly reports.  These reports are engaged on through minuted monthly meetings held with the department.
REDISA is aware that the incorrect provisional findings of iSolveit, as well as defamatory reports such as those of Carte Blanche may have negatively and unjustifiably affected REDISA's relationship with certain individuals within the Department.
REDISA wishes to have a close and constructive relationship with the Department, and aims to achieve this at all times.