The cancellation of municipal arrears on homes auctioned in Ekurhuleni is believed to be at the centre of a large-scale internal fraud scheme that has cost the city an estimated R2bn.
The matter is being investigated by the police.
Details of the alleged scam were highlighted in a 2023 report compiled by the municipality’s chief information officer, Moloko Monyepao, after an internal investigation.
According to Monyepao, nothing was done about it at the time. In January this year, he instructed an employee to open a fraud case with the police; in April, he was placed on precautionary suspension.
The metro said this stemmed from “allegations of mismanagement related to financial losses incurred by the city, primarily due to [problems with] inaccurate billing systems, interim meter readings, account manipulations, insufficient administrative oversight and poor management of business systems”. It said the suspension was “to ensure the integrity of the investigation”.
Three weeks ago, Ekurhuleni group divisional head for corporate forensic audits, Mpho Mafole, was gunned down on the R23 in Kempton Park in an assassination allegedly linked to his investigation of the matter.
Monyepao’s investigation uncovered fraudulent activity on 1,600 of the city’s 13,000 electricity smart meters, but found the bulk of the losses came from auctions.
“The city lost about R270m on the smart meters, but the bulk [of the R2bn] was lost in a scam involving property arrears,” he said.
His report, seen by the Sunday Times, details how the scam worked. It involved distressed or repossessed properties with municipal arrears that were auctioned off at discounted prices to offset the outstanding rates the buyer would have to settle. However, instead of the money being paid, the arrears were deleted from the city’s database by officials and the payment never recorded.
According to the report, the investigation “centred on the deliberate deletion of balances from the database, which was done to facilitate property sales at auction and enable prospective buyers to evade their debt payment obligations”.
It said the investigation was in response to the discovery of “significant financial irregularities related to property sales at auction within the City of Ekurhuleni”.
“On July 12 2023, several customer care centres reported issues related to the reversing of debt relief and/or arrangements on debtor accounts,” the report found.
The city had then started an investigation.
“The outcome revealed a surprising and concerning discovery: the old application server was found to be operational and accessible, posing a significant risk to the city due to its unmanaged status and unauthorised availability.
“It was necessary to address specific users who had access to the server and were associated with the incident. Two users ... were identified.”
The report said access was suspended and the server “decommissioned and shut off”.
A series of reports were received from different care centres within the city, each indicating that debtor account balances had been altered without clear audit trails.
“It became apparent that balances were intentionally deleted from the database, raising concerns about the integrity of financial records and the potential for prospective buyers to avoid settling their outstanding debts,” the report said.
“The reports originated from various care centres, suggesting a widespread issue. The altered debtor account balances have caused concerns regarding data integrity, accountability and potential unauthorised activities.”
The investigation also found that a system administrator had “multiple connections” to the database, “which is not in line with best practices for system administration and [they] had no business connecting to”.
This had raised immediate security concerns, prompting a deeper investigation.
“We also discovered the presence of password brute-forcing software on the administrator’s PC. This discovery raised serious concerns regarding potential security breaches and unauthorised access.”
The report recommended the implicated employees be suspended and their work devices seized. It is not clear if this was done.
Gauteng police spokesperson Capt Tintswalo Sibeko confirmed that a case of fraud was opened in January this year, and said investigations were continuing.
Mayoral spokesperson Ramatolo Tlotleng said the city would not comment at this stage.
“To protect the integrity of the investigation and to avoid compromising the process, the office of the executive mayor is unable to provide detailed says or release any documentation at this stage,” Tlotleng said. “This approach is in accordance with legal advice and established protocols governing sensitive and complex matters of this nature.”
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