Holomisa tackles implications of illegal conversion of Toyota Quantum panel vans to taxis and ambulances: allegations of a scam of major proportions
Mr CM Ramaphosa
President of the Republic of South Africa
Private Bag X1000
Dear Mr President
ILLEGAL CONVERSION OF TOYOTA QUANTUM PANEL VANS TO TAXIS AND AMBULANCES; ALLEGATIONS OF A SCAM OF MAJOR PROPORTIONS
What follows in this letter in detail exposes an alleged scam of major proportions aimed at deceiving the most vulnerable of our population.
1.1. A regulatory failure in regards to South African National Standard on “Homologation of motor vehicle models” (SANS 10267) of the South African Bureau of Standards (SABS), also regulated by the National Regulator for Compulsory Specifications (NRCS), was exploited by the private sector (such as Toyota SA Motors (TSAM)); Toyota dealers and dealer groups; Toyota Financial Services (TFS); used car dealers; manufacturers, importers and builders (MIBs); banks and private money lenders (such as SA Taxi Finance (SATF)) at the expense of trusting, unsophisticated taxi buyers for great financial gain.
1.2. Prospective new taxi owners, as well as successful established taxi owners, were lured in a deceptive manner by elements within the private sector to purchase, unbeknown to them, illegally converted, non-homologised structurally defect “fake” Toyota Quantum taxis.
1.3. Many of these taxi owners participated in the new Taxi Recapitalisation Programme (TRP) whereby they have, since 2005, voluntarily scrapped their old paid-up skorokoro (worn and ragged) Toyota HiAce taxis to adhere to the Department of Transport’s (DoT) request to promote the safety of their passengers and other road users by buying and financing new recapitalised taxis.
1.4. Taxi owners utilised the R50,000 scrapping allowance (awarded by DoT`s scrapping agency) as deposits to purchase, amongst others, the newly built and safer, but more expensive recapitalised, DoT-approved Toyota Quantum taxis to replace their old and obsolete Toyota HiAce models. The first of the new and stronger generation Toyota Quantum passenger carriers was introduced during 2005 by TSAM. The old, but trusty, Toyota HiAce taxis came to the end of their lifespan and production cycle.
1.5. The VIN prefix number “JTFP” represents the 3-seater long wheelbase Toyota Quantum panel van and the “JTFH” prefix, the 3-seater short wheelbase panel van. Both vehicles were homologated by SABS/NRCS as 3-seater panel vans only suitable to carry goods and not people.
1.6. Homologation approval was also granted to the manufacturer Toyota Motor Corporation Japan (TMCJ) for their two purpose-built passenger carriers, namely the 10-seater short wheelbase with the VIN prefix “JTFR” and long wheelbase 14-seat purpose-built passenger carrier with the VIN prefix “JTFS”.
The chassis or VIN number prefix is of importance as it is the manufacturer’s permanent model identification mark stamped on a vehicle’s chassis that cannot be altered by the authorities such as NRCS and Road Traffic Management Corporation (RTMC).
1.7. Unbeknown to prospective taxi buyers, during 2005, TSAM became aware that their branded product, of high international safety repute, was compromised with a “fake”, structurally defective 3-seater panel van conversion to taxi with the VIN prefix of “JTFP” and “JTFH”.
1.8. TSAM immediately issued a letter, dated 19 October 2005 (see paragraph 2), warning its entire dealer network to not participate in this illegal practice.
2. An analysis of TSAM’s 19 October 2005 letter of warning
2.1. In 2005, TSAM warned (in head office instruction, reference GEN 10/2005/29 (Annexure A1)) its dealer principals and sales managers at all Toyota dealer franchises that the practice of converting Toyota Quantum panel vans to taxis was not only illegal, but dangerous.
2.2. Paragraph 1: TSAM clearly stated that this practice is in contravention of homologation regulations which are comprehensively described in SANS 10267 (Annexure B1)
2.2.1. The most important aspect of homologation is captured in Paragraph 2.2 of SANS 10267. The manufacturer (TMCJ) has to approve of any modification to their patented/branded product i.e. “non-transferable confirmation by the inspectorate authority [SABS/NRCS] that the manufacturer [TMCJ] has provided the inspection authority [SABS/NRCS] with the following specific [TMCJ] evidence in respect of a motor vehicle model:”
188.8.131.52. Paragraph 2.2 (a) states that the manufacturer (TMCJ) must provide “a summary of evidence showing that all relevant tests of the motor vehicle model have been conducted with successful results under appropriate controls in respect of the motor vehicle model and its variants”.
184.108.40.206. At a meeting in 2016, TSAM confirmed to the Public Protector that the development costs of a single model amount to in excess of 200 million US dollars. Most of these costs are allocated for product safety testing that upholds Toyota’s good name of high international safety repute. (Recording available)
220.127.116.11. The SABS does not possess the equipment to do comprehensive tests due to monetary constraints and therefore rely heavily on the “summary of evidence” submitted by the manufacturer that the necessary tests have successfully been completed. This was confirmed in 2017 by the SABS chief executive officer during a meeting with the Public Protector. (Recording available)
2.3. Paragraph 2 bullets 1 to 3: TSAM noted that dealers had been illegally converting 3-seater panel vans to taxis and deceivingly registering them as purpose-built 16-seater taxis prior to sale.
2.3.1. TSAM was specific that a 3-seater Quantum panel van must not be registered as a 16-seater passenger-carrying bus and should only be sold as a panel van.
2.3.2. TSAM was specific that even their purpose-built homologated 14-seater Quantum busses may not have any extra seats installed as it was not tested and approved by the manufacturer to be modified as such.
2.4. Paragraph 3:
2.4.1. TSAM stated that these conversions have not been tested and passed by the SABS saying that “You could be placing passengers at risk of injury or death should critical safety points [e.g. seat floor mountings and seatbelt anchoring points] not withstand the impact in case of an accident.” TSAM foresaw and warned their dealer network that passengers/fare-paying commuters on these “fake taxis” could be injured or die as a result in their branded “fake taxis”.
2.4.2. TSAM also warned that it and its dealer network may be sued by the client for illegal practices and endangering the lives of passengers if they were exposed.
2.4.3. TSAM also warned that they as dealers would also be in contravention of the South Africa road ordinance laws (namely the National Road Traffic Act (NRTA)). The NRTA, in clause 250, specifically states that no person shall be transported in the goods compartment of a vehicle (such as a 3-seater panel van) for reward.
2.5. Up to this point in the letter TSAM can be perceived to be acting with integrity, good intent and duty of care. What follows in paragraphs 4 speaks of deception and intent approved at the highest corporate level.
2.6. Paragraph 4:
2.6.1. TSAM made the following recommendation to their dealer network of approximately 190 franchised dealers: “If a client [taxi buyer] requires such a conversion we [TSAM] suggest that you [the Toyota dealer] explain the situation and consequences to the client and the client must agree to the following:”. It is important to note that one cannot deceivingly commit clients to illegal activities that may injure or kill someone to secure a sales transaction.
2.6.2. Through this “suggestion” TSAM acted with intent lacking any duty of care.
2.6.3. Toyota dealers perceived this statement as silent approval from TSAM and the go-ahead for them to continue in deceiving unsuspecting prospective taxi owners.
2.6.4. No unsophisticated taxi owner in his/her right frame of mind will enter into a “fake taxi” transaction when spelt out the consequences as “suggested” by TSAM. It can therefore be deducted that no prospective taxi owner was ever warned of this, by any Toyota sales staff.
2.7. Paragraph 4, bullet 1 states that “The vehicle [panel van] must be licensed and registered before the conversion is done”. TSAM hereby suggests or recommends that the dealer may go ahead with the Illegal conversion provided that they first register the vehicle as a panel van, to indemnify Toyota from any illegal practice such as the conversion to taxi.
2.7.1. Toyota dealers went ahead and invoiced these panel vans prior to the second registration as a taxi. Enclosed are samples of TFS finance agreements (two of many), where “fake” converted panel van taxis with seats already fitted, were sold and financed deceivingly as purpose-built taxis to bona fide taxi owners by a Toyota dealership from their new car floor as “suggested” by TSAM.
Kindly note the excessive pricing of respectively R254,905 and R278,297 on both agreements. Long wheelbase Quantum panel vans only retailed for R197,500 VAT inclusive during 2007. (Annexures C1 and C2)
2.7.2. TFS financed these panel vans for bona-fide taxi owners. To do what with? TFS may have acted with intent, knowing that a panel van with three seats cannot generate enough income to pay off their loan. They were well aware that the dealer and/or the taxi owner would have to illegally convert the panel van to a taxi to generate enough income to repay his/her debt. This conversion was done at the same time as the finance was granted to ensure a timeous instalment payment to TFS within thirty days. In almost all of the cases investigated by the Public Protector, the dealer assisted with the second registration as well.
2.7.3. TFS, which is situated on the dealer floor, inspects the goods prior to finance to ensure that the vehicle could be used for its intended purpose, namely a taxi. It can only be deducted that TFS may have been in syndication with the Toyota dealership to deceive the prospective buyer into buying a “fake” Quantum taxi. It is obvious from the excessively priced dealer extras, recorded on both agreements, that the monies were used for the conversions.
2.8. Paragraph 4, bullet 2 states: “Ensure that the client knows and acknowledges that the dealer in question and Toyota SA Motors will not be held liable or accountable for any failures regarding the unit, be it mechanical or otherwise.”
2.8.1. For TSAM to “suggest” in writing that its franchised dealer network participate in an illegal activity is unheard of and unjust. It is illegal to try and indemnify/distance one, as Toyota head office and your associated franchises, from foreseen deaths and severe injuries of unsuspecting commuters. TSAM’s executive management may have opened themselves to “dolus eventualis mens rea” in the event of any fatal accident recorded, with an illegally converted Quantum panel van, from date of this letter. The same principle may apply to a 3-seater panel van sold as is and financed to a bona fide taxi owner forced to convert it to an illegal 16-seater taxi.
2.9. In Paragraph 4, bullet 3, TSAM went ahead and informed their franchised dealers that the factory warranty of three years/100,000kms on converted panel vans will be cancelled. Dealers did not regard this as a major problem; they perceived it as being another silent approval from TSAM. They merely went ahead and sold their own expensive used car dealer warranties. Motor dealers indeed welcomed this opportunity as it generated additional profits at the expense of the unsuspecting taxi owner. The claims on these warranties were minimal as very few taxi owners have their taxis regularly serviced by registered mechanics and therefore repudiations of these claims were in general much higher than the norm. The dealer in turn benefitted from the low warranty claims ratio.
2.10. Paragraph 5 reads: “Please ensure that all sales people understand the procedure as explained above.”
2.10.1. The procedure spelt out by TSAM is, to say the least, colluding, deceptive, with criminal intent and lacks duty of care.
2.10.2. It is recommended that the president and owner of TMCJ, Mr Toyoda, should come and explain to the National Assembly whether or not this practice of TSAM is acceptable at an international level.
2.10.3. Mr Toyoda should confirm whether TSAM made him aware that his brand name of high international safety repute was compromised with these defective “fake taxis”. If so, when was he informed and why did he not immediately recall these vehicles to be scrapped and saved the countless lives and livelihoods of predominantly black South Africans?
2.10.4. Since 2005, TMCJ is still protected by the bilateral Berne, TRIPS and Paris conventions to uphold their esteemed brand name and patent rights against any breach thereof.
2.10.5. Mr Toyoda, as brand owner, should be asked to explain who should be financially accountable for this mess imposed on unsuspecting taxi owners since 2005, with records dating of vehicles financed as late as 2016 and cash sales recorded as late as 2018.
2.10.6. TSAM should be made to explain to the National Assembly why it has waited for four years before any attempt was made to warn the DoT, SABS and NRCS on or before 20 May 2009 of a regulatory failure it and the private sector have been exploiting.
2.11. Paragraphs 4 and 5 do not make this letter sound as one of warning, but indeed one of collusion.
2.12. TSAM appointed 44 independent used car dealers and intermediaries (Annexure D1). to deceivingly assist with their new Quantum panel van sales These used car dealers and intermediaries were all supplied with Toyota head office new car buyer numbers limited to bulk Quantum panel van purchases only. The name list was supplied following a hint and formal request to TSAM by the previous Public Protector, Advocate Thuli Madonsela.
2.12.1. All of these non-franchised used car dealers are on record to have purchased new Toyota Quantum panel vans in bulk numbers from selected Toyota dealers to be converted to “fake” Quantum taxis.
2.12.2. Why were taxi owners deceived in these transactions, subjected to double VAT payments and excessive pricing, on “fake” Quantum taxis sold by non-franchised dealers with the knowledge of TSAM?
2.12.3. A few deductions can be made, with reference to paragraph 4, bullet 1 of the “warning letter” i.e. “The vehicle must be licenced and registered before the conversion is done”.
18.104.22.168. TSAM wanted to indemnify itself from any foreseen culpability relating to “fake” Quantum taxis.
22.214.171.124. No record exists, during investigations by both Public Protectors, that non-franchised dealers were ever warned in the same manner as Toyota franchised dealers. Why?
126.96.36.199. From 2005 to 2008 Toyota recorded well-publicised record sales of Quantum panel vans that were verified by NAAMSA sales. (NAAMSA records for the period 2005 to 2012 are available)
2.12.4. During mid-2008 TSAM (Wessels family) sold the remainder of shares of 24% to TMCJ at an undisclosed amount estimated to be at around R1.7bn. Was the “fake” Quantum taxis recorded by TSAM since 2005 indeed declared as a contingent liability to TMCJ in their sales agreement? It is proposed that Mr Toyoda should be brought to testify at the National Assembly to confirm whether or not he was made aware of this.
3. Exploitation by banks
3.1. Banks eagerly participated in the finance of illegal