Pretoria - A high court ruling has set the scene for the City of Tshwane to recover close to a billion rand kept in a special account and rescue the municipality from a bad deal.
This was the view of MMC for corporate and shared services Cilliers Brink who said the ruling would give the City an opportunity to get out of the bad deal and the recovery of R950million kept in a dedicated account.
“The recovery of the amount is going to look good on the City’s finances. And to the ratepayers it means that the City that is on a sound financial footing can keep municipal tariff increases at reasonable rates,” Brink said.
A full bench of judges in the Gauteng High Court, Pretoria, yesterday declared unlawful a controversial smart prepaid electricity metres contract between the City of Tshwane and PEU Capital Partners.
Executive mayor Solly Msimanga hailed the ruling as a victory for the City, saying it vindicated the people of Tshwane. “Finally the people of Tshwane will stop the bleeding that has for a number of years seen them paying for something that they haven’t been receiving. Billions of rand have gone into an irregular contract and the judges have seen things that way today,” he said.
The court ruled that the contract awarded to PEU in October 2012 to install smart electricity metres was “constitutionally invalid”.
Msimanga said the contract shouldn’t have happened in the first place, expressing gratitude that judges had listened. He said the DA-led administration inherited a R2bn budget deficit of which R1.5bn constituted irregular expenditure when it assumed office in August last year. “The biggest of these irregularities was a tender for the supply of ‘smart' pre-paid electricity meters and services by a company called PEU Capital Partners,” he said.
He said it was ironic PEU was initially appointed on a tender to give advice to Tshwane on how to save money. “The deal soon transmogrified into something completely different, by-passing competitive bidding processes”, Msimanga said.
The DA had vociferously opposed the contract, saying it was irregularly awarded and that it punched a hole in the municipality’s coffers.
In May 2015, the City terminated the contract with cancellation terms, stipulating that PEU would reduce its management fee from 19.5c to 9.5c for every R1 vended.
At the time, the City said the cancellation was largely based on the negative financial and economic impact of the project on the
municipality.
Despite its cancellation, the City continued to pay the contractor, although at a reduced rate, for the 12900 meters already installed.
The court was told the City continued to pay an amount of R4m a day to PEU despite the contract termination. The escrow account was created as part of the agreement to hold the reduced fees for the benefit of the city and subject to fulfilment of the terms and conditions of the termination agreement.
In terms of the termination agreement, Tshwane would pay R950m as a “termination fee” to the PEU subsidiary TUMS. On the eve of last year's municipal polls, Afrisake made an urgent application after it learnt the City was on the brink of payment of R950m to PEU.
The court then ruled the amount ought to be kept into a dedicated account pending the finalisation of the case.
According to Afrisake, the City’s payment to PEU would have been irregular because it emanated from an unlawful contract.
Additionally, the civil rights organisation sought for the review of the original contract between the two parties and its subsequent cancellation in May 2015.
It wanted an amount of R950m to be released from the dedicated account and be paid to the City.
The ruling ordered the money to be released to the City immediately.
Afrisake attorney Willies Spies said: “It is absolutely good news What it shows is never to lose heart if things go too difficult.
"And never to lose faith in the justice system.”