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Tyre wars intensify as Redisa takes on Molewa

Johannesburg - South Africa’s recycling tyre warfare escalated on Wednesday when the Recycling and Economic Development Initiative of South Africa (Redisa) said it would fight an order to liquidate it.

Redisa, the only approved waste tyre plan for the country, said its lawyers were drafting a scathing reply to Environment Minister Edna Molewa's “shocking” liquidation order.

“This is absolutely unheard of,” executive director Stacey Davidson told Fin24 on Wednesday. “The minister is not a shareholder, because this is a private company. She is not a creditor and she is not a shareholder. So what power does she have to liquidate us?”

She said Redisa had no problem with Molewa exercising her authority, but she needed to act in a lawful manner. “If following a lawful process is upsetting her, we have our constitutional rights too.”

Molewa won an urgent application in the Western Cape High Court at the beginning of the month. The minister said she lodged the application after becoming aware of Redisa's intention to cease collection of waste tyres, but also questioned where millions of rand of Redisa’s funds had been channeled.

READ: Tyre wars: Was tyre recycling scheme a money making racket?

Davidson contended that some of Molewa’s statements in her 200-page affidavit were defamatory. She said financial statements accounted for every cent that went through Redisa, and that the company received clean audits from independent audit companies.

Broken relationship

“I can't understand where the minister’s aggression has come from,” said Davidson.

Redisa was the poster child for the department not long ago, she quipped. “She put us on a pedestal of what could be achieved if the private sector and public sector worked together.”

But that changed early last year when the act was amended. In future the tyre levy of R2.30 that manufacturers originally paid to Redisa, would now go directly to Treasury.

“We've been racking our brains trying to figure out where this relationship started taking a turn and the change in the funding model, was probably it,” said Davidson. “Yes, we objected to the change. And we felt the industry should have been engaged more.”

Davidson cites the plastic bag model as an example of how funds disappear into the fiscus, never to be used for the original intention. “Our model worked.”

The levy was postponed till April, but on November 30, 2016, Molewa issued an interim directive to take control of Redisa.

“This directive was an attempt to usurp the powers of the board and give government the powers to run Redisa,” Davidson said. But Redisa successfully opposed the takeover in court with Judge Dennis Davis awarding costs against the department.

New funding

Treasury allocated an amount of R210m to the Waste Management Bureau, but without an acceptable and substantiated business plan, these or any other funds cannot be allocated to Redisa, the minister said in her application.

“We submitted a business plan,” said Davidson. “But we never heard anything back. The next moment we're liquidated.”

Once the organisation burned through its operational reserves, it would need to go into a wind down to avoid reckless trading, Davidson explained.

“We were left without any funds and we told the minister so in our meeting in April. We go through R36.6m a month to collect tyres and recycle it. If we are not collecting the levy, we are without revenue.

Liquidation application

Molewa said she had made the urgent application “to safeguard the operations and assets associated with the programme”. She said her department had had enough of Redisa’s refusal to cooperate with it.

But Davidson hit back saying that it was the department who ignored Redisa. “We made submissions right through the crisis, but didn’t get any engagement from them. Even now we just get accusations flung at us.”

Nothing untoward

In her affidavit Molewa accused Redisa of channeling at least R30m to overseas accounts. Davidson said the R30m offshore payment was marked foreign entities in their financial statements, in order to meet South Africa’s black economic empowerment (BEE) code. 

“Foreign companies do not have a BEE level, that is why it is marked as ‘foreign’, these payments are linked to foreign suppliers. We paid them to procure special equipment, not available in South Africa, which we needed to execute our mandate.”

The court ordered the appointment of a liquidator to take immediate control of Redisa, including its waste tyre management plan. Davidson said despite this staff was still going to work and Redisa was trying to continue operations as best possible.

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