Mike Muller: Director-General, Department of Water Affairs

Mike Muller: Director-General, Department of Water Affairs

Regarding Umgeni

By: Bruce Whitfield

MONEYWEB: Fascinating developments today in the ongoing Umgeni Water saga. We follow the intrigue particularly closely because of the massive interest in Specialised Outsourcing, which became associated with Umgeni in the late 90s and ran its treasury outsourcing function. A quick synopsis of events. Dave King is the man who founded Specialised Outsourcing with Umgeni as its first client and, according to various enquiries that have happened subsequently, it’s been established that contracts should really have been more foolproof between the parties, that the board of Umgeni Water wasn’t really au fait with the service that Outsourcing was providing and it should really have understood the whole process better. Controversy has erupted, Dave King resigned from Specialised Outsourcing several years ago and a man by the name of David MacLean was brought in to run the company. What follows is years of acrimony, the relationship with Umgeni deteriorated, and eventually it collapsed. Now there’ve been threats of legal action on both sides and it’s become very, very messy indeed. Today a fuller report than the brief document that was published in June last year ended up on our desks at Moneyweb, and it makes fascinating reading, this special report which has actually ended up on our desks now, and the Director-General of the Department of Water Affairs, Mike Muller, is with us. Mike, have you seen this latest report?

MIKE MULLER: I’ve seen, let’s put it, an unofficial copy of the report, because I need to emphasise this report hasn’t been released by Umgeni, it hasn’t been released by the Department of Water Affairs and Forestry or the Minister. It’s really now a bit of a freelance exercise by people who had connections with Umgeni, but no longer do so.
MONEYWEB: Now I’m fascinated by that point that you make, because I did speak to the man concerned, Manie Meyer, who was appointed via Cromet Molepo, the one-time chief executive of Umgeni Water on behalf of, I suppose, the Department of Water Affairs. He says he still has a mandate to continue investigating what went wrong at Umgeni Water, despite the fact that Umgeni, and it would seem yourselves, think that his mandate has gone.
MIKE MULLER: Well, we never gave him any mandate. He was originally appointed by Cromet Molepo. We were aware of that appointment, but I think the key thing to know is that the hearing into the dismissal of Cromet Molepo at CCMA is about to reach a conclusion, and really Manie Meyer’s entire position in this whole matter depends on demonstrating that he still has a status - and he only has a status if Cromet Molepo is reinstated. We don’t think it’s likely. I don’t want to pre-judge what the CCMA is going to say, but I think one should link the sudden release of this report, as I say, informally on a freelance basis, with the fact that the CCMA hearing is coming to an end. I think that actually is the story and the subplot in this very long running story. We don’t think it’s particularly relevant because it’s grinding a lot of personal axes, rather than addressing the issues in many cases.
MONEYWEB: Elaborate on what you mean by “grinding personal axes” and “not addressing the issues”.
MIKE MULLER: Well, as you’re aware I think, because we’ve talked about this before, we’ve been concerned about what Minister Kasrils has described as the feeding frenzy that erupted around Umgeni. There seemed to be an impression in some sectors of the financial services market that there was a huge amount of money to be made, and it was necessary to draw a line and say this business is now going to be taken out of the feeding frenzy and given into a pair of safe hands with the Trans-Caledon Tunnel Authority. The TCTA has been managing the treasury operations ever since, and they’ve had very good success and I’m very pleased with those relationships between Umgeni and TCTA.
MONEYWEB: You did say that there’re axes to grind. Could you be more specific on what axes you believe are being ground, if that’s correct?
MIKE MULLER: Well, if you were to go into the detail of what mandate was originally given to Meyer, what was disclosed to everyone else, you will find there was a major discrepancy between what was disclosed and what was given. The key element is that there was an attempt to take over the process of running the treasury, and in particular of outsourcing the treasury once again, and that was being placed very squarely in the hands of Meyer and Molepo. I think at that stage we got a fright. We did not want to go back into the same disastrous cycle that Umgeni had been taken through in the previous outsourcing, and it was at that stage that the Minister intervened and said no, this treasury operation is not going to be outsourced once again. It’s going to be put into safe hands and brought back to health and, when everything is stable and once the feeding frenzy has abated, we will consider what will happen next. And that’s really how it’s been run since the middle of last year.
MONEYWEB: Because what you’re suggesting then is that Manie Meyer and by extension Cromet Molepo have a very clear interest in the outcome of this report being in their favour, because they’re really wanting to make a lot of money out of Umgeni.
MIKE MULLER: Well, you’re putting a few words into my mouth, but let’s just say that the people who have read the report or the reports certainly don’t believe that they’re simply an objective reflection of facts. There’s clearly an agenda being driven, and it was on that basis that, although the Minister in mid last year accepted many of the recommendations of the first report, he drew a line very clearly through proposals to give an ongoing role to those people in managing treasury function, and took a different decision. That was actually acknowledged by Cromet Molepo at the time, when he said it’s a perfectly reasonable thing for the Minister to accept some recommendations and not others. But we do believe, and I think it’s clear to any outside observer, that there are a few axes being ground here.
MONEYWEB: Manie Meyer seems to suggest that he does have a mandate, but that is another issue which we’ll have to take up with him. You do yourself come in for personal criticism in this report. It suggests that, for some reason, you didn’t keep the Minister fully informed about events around the relationship between Umgeni and Specialised Outsourcing. Could you comment on that?
MIKE MULLER: Well you know, if the Minister wasn’t informed - I was just looking through the record - he made comment on it on the 14th February 2001, on 3rd April, on 18th June. He was engaged on the 9th July and he made further comments on the 28th November. Now, if the Minister wasn’t informed, he was certainly saying a lot. If Manie Meyer is suggesting that somehow the Minister is acting as a puppet, he must be serious, he must say that and he’ll be laughed off, as he should be. The Minister has obviously received advice from me, but I know that he takes advice from other people, including his colleagues. And I think the handling of the whole Umgeni treasury business has been widely reviewed, and I think people agree we’ve got it right. If I’m being criticised personally, I’ve got very broad shoulders. I certainly think that in this case we’ve acted in the best interests of the water users in KwaZulu-Natal and I think we’ve protected their interests, and if I’m insulted for doing so, so be it.
MONEYWEB: Just to quote from the report, without labouring the point at all, “The legal investigation team was concerned that the Director-General may have allowed extraneous factors to influence his advice to the Minister adversely”. He’s suggesting that you may have been led up the garden path by one or more of the players in this entire saga?
MIKE MULLER: I think I’ve spotted the garden path very clearly, and I think we’ve been able to show which path who is leading who up, and I don’t believe I’ve led the minister up the garden path. I think there were some attempts to lead rather a large number of people up the garden path of a rather similar outsourcing adventure to the one that happened before. I’m very glad that no-one went down that path. I think it’s been very good for the water users of Durban, it’s saved them a lot of money.
MONEYWEB: What’s the state of play now? Because Enterprise Risk Management, as Specialised Outsourcing is now known, has got a legal claim against Umgeni for unpaid invoices. Umgeni’s refusing to pay, and is counter-suing Enterprise Risk Management, as well. What is the position right now between them?
MIKE MULLER: That really is Umgeni’s business. The chief executive, Gugu Moloi, I’m sure would be happy to update you on it. This is a matter that’s in the courts and we always knew it was going to end up in that direction. Obviously, we hope it could be settled amicably without spending too much money on lawyers, but really I think that’s a matter you should deal with Gugu Moloi about.
MONEYWEB: Is the first report - I know the second report is unlikely to find its way to the Attorney-General, certainly the first report is with the Attorney-General still - is there any sort of insight as to whether or not there might be prosecutions coming from Manie Meyer’s first investigation into Umgeni?
MIKE MULLER: Look, many reports have gone to many agencies, starting I think with SARS, and I think we’ve seen some action in that regard. Certainly Dave King has had an awful lot to do with SARS since that little exchange happened. The Financial Services Board thought there wasn’t anything they could do, Auditor-General and Public Prosecutor, Scorpions, I think all had a look at different aspects of it and then there may yet still be actions to come. Again, I can’t speak for them, but we certainly think there’s enough in the sorry history of that period of Umgeni’s financial management to justify careful attention. But in the end, the problem is can one bring successful prosecutions, and that’s obviously for the prosecutors and the other authorities to decide.
MONEYWEB: Mike Muller is the Director-General of the Department of Water Affairs.