eThekwini's billing system shock: Residents slapped with inflated bills

By Lyse Comins Time of article published Mar 12, 2020

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Durban - A damning report into the eThekwini Municipality’s controversial Revenue Management System (RMS) has recommended that a senior city official be charged for financial misconduct, after the project ballooned from an estimated R150million to a staggering R1.1billion - 666% over budget.

The RMS, which became operational in 2016, has left many ratepayers fuming over the years, after they were slapped with inflated utility bills.

A report leaked to The Mercury, which is addressed to the eThekwini Municipality’s executive committee and dated February 15, 2020, called for the official to be charged with financial misconduct and for consequence management to be implemented in terms of the Municipal Finance Management Act (MFMA) for his role in acquiring the RMS system from Indian-based company Ramco.

The firm partnered in a joint venture, City Works, together with an unnamed South African company.

The case against the official is one of more than 300 pending disciplinary cases against city staff members, including senior managers, who are facing charges ranging from negligence to financial misconduct.

Graphic: Timoth Alexander / ANA

The report claimed that in 2004, when the project was initiated, the official “misled” the council that SmartXchange would be the “delivering vehicle” for the project and it would cost between R90million and R150million.

However, SmartXchange was not involved in the project and by 2015 the cost of the project had risen to R1.1bn.

The report claimed the costs were still mounting as additional changes were required to the system, as it was “incomplete” and needed to meet legislative requirements.

An estimated 118 outstanding changes needed to be made to the system in 2016, of which 24 had been prioritised at a cost of R20m and a further R62m was needed to make it legally compliant.

The auditors’ report, which was leaked to The Mercury, also outlined the findings of an investigation by the City Integrity and Investigation Unit, which called for the official to be disciplined.

“The appointment of City Works was irregular, considering it was never party to the transaction, but it was Ramco who ought to have been appointed. City Works was never presented to exco nor approved by council. Only Ramco was presented and approved,” the report read.

It concluded that the appointment of Ramco, City Works, and associated firms was “irregular”.

“The municipality did not follow any transparent supply chain management process,” the report read.

According to the report, between April 2004 and March 2006, the project’s budget grew to R250.8m, and then to R650m in April 2015.

By September 28, 2015, according to the city’s undated project assurance report, the actual cost of the project was R1.1bn. In addition, the city pays licence fees of about R18m a year.

The city official declined to comment on the report or its recommendations.

However, former city manager Mike Sutcliffe, who was part of the development of the RMS, has rubbished the report, saying the municipality should be “lauded” for developing its own billing system.

A source close to the investigation alleged that the cases against more than 300 staff, including the RMS matter, was an attempt by city manager Sipho Nzuza to “deflect attention” from himself and to “destabilise” the city.

Nzuza was arrested on Tuesday and is facing charges of fraud, corruption, conspiracy to commit fraud and corruption, and contravening the MFMA.

Nzuza said it would not be fair for him to comment on the charge against the official and that the disciplinary process should be allowed to run its course.

On the allegation that he was using the case to “deflect” attention from himself, Nzuza said the decision to proceed with the disciplinary process had long pre-dated his arrest on Tuesday, which had come as a surprise - as he had been working with the police on the investigation.

He said RMS had faced some development challenges, which was normal when implementing a new system, but the city had only received a few complaints about high bills.

A second source said the official had been cleared of any wrongdoing by the city’s Financial Misconduct Disciplinary Board in September last year with regard to the RMS tender.

It found that some R743m had been paid to service providers, contrary to the R1.2bn estimate that had been claimed by investigators.

The board concluded that all appointments were approved by council through exco and that Sutcliffe, the municipal manager at the time, had been involved in the RMS process and had not been misled.

The source said the board had found no basis for disciplinary action against the official.

According to an October 2019 report on RMS to the council’s Finance, Safety and Emergency Services Committee, it was noted that there “was no unauthorised or irregular expenditure” and that development had begun before the enactment of supply chain management regulations.

It also outlined reasons for the delays with the system as being related to the “newly introduced Municipal Property Rates Act, the new refuse tariff, new sewerage tariff” and changes related to the city’s revised debt collection policy.

Sutcliffe this week confirmed the board had cleared the official, saying that in the long term the city would save millions of rand in licensing fees, which other municipalities were paying for the SAP system that eThekwini had rejected.

He claimed that the Cape Town and Johannesburg municipalities were paying much more for the development of their SAP system, licensing fees and maintenance.

“RMS is something the city should be lauding.

“EThekwini is the only municipality in the country that has developed its own system, which is far cheaper operationally, and we can give it for free to other municipalities,” Sutcliffe said.

He said the correct tender processes had been followed and the additional expenditure was justifiable, and the changes required to the system were “huge” as a result of the legislative changes.

DA councillor Nicole Graham described RMS as “a complete disaster”, saying that then DA councillor John Steenhuisen had made it clear at the time that the costs would “balloon”.

However, she questioned the timing of the leaking of the reports to the media.

“Why are we having reports surfacing now, that go back to 2004? There are factional battles that are being fought in the city through the disciplinary process. We want people to be brought to book. We don’t want a situation where city managers are fighting each other on matters going back 15 to 16 years,” Graham said.

IFP councillor Mdu Nkosi said the system was a waste of taxpayers’ money.

“The concern that I have raised is why do we fix something that is not broken? Because the COIN system (the previous billing system) did not have a problem. Ugu Municipality tried it (RMS) and dismissed it because it didn’t work. People just wanted to enrich themselves and it’s a burden to taxpayers, and will continue to be a burden, and it affects us people on the ground,” Nkosi said.

The Mercury

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