File image: Executive Mayor of Tshwane, Solly Msimanga.

A FULL bench of judges at the Gauteng High Court,Pretoria on Friday declared unlawful a controversial smart prepaid electricity meters contract between the City of Tshwane and PEU Capital Partners.

The court ruled that the contract awarded to PEU in October 2012 to install smart electricity meters was "constitutionally invalid".

In May 2015, the city terminated the contract with cancellation terms stipulating that PEU would reduce its management fee from 19.5 cents to 9.5 cents 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 12 900 meters already installed. 

The court was told the city continued to pay an amount of R4 million a day to PEU despite the contract termination. 

The account was created as part of the agreement to hold the reduced fees for the benefit of the city and subject to fulfillment of the terms and conditions of the termination agreement.

In terms of the termination agreement, Tshwane would pay R950 million as a “termination fee” to the PEU subsidiary TUMS.

Tshwane mayor Solly Msimanga explains why the smart prepaid electricity meters contract between the City and Peu Capital Partners was illegal.

On the eve of the 2016 municipal polls, Afrisake made an urgent application after it learnt the City was on the brink of payment of R950 million to PEU. 

The court then ruled the amount ought to be kept in 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 R950 million to be released from the dedicated account and be paid to the City.

The ruling ordered the money to be released to the City with immediate effect.

Afrisake attorney Willies Spies said: "It is absolutely good news. We started with this process four years ago and we started off on difficult terms being opposed by the then City administration and the contractor.  What it shows to us is never to lose heart if things get too difficult. And never to lose faith in the justice system and in the fact that justice would run its course." 

Tshwane mayor Solly Msimanga said: "This judgment holds all deals between Tshwane and PEU and its subsidiary TUMS as unlawful, and lays the basis for the City to untangle itself from a relationship which has cost our people dearly. We also hope the judgment sends the right message to every negligent city manager, every dishonest mayor, and every unscrupulous service provider doing business with government."