City’s R184m debt write-off for big businesses
Council approves agreement with about 14 Bay high-energy users to settle longstanding dispute
A whopping R184m in unpaid electricity bills owed to the municipality by some of Nelson Mandela Bay’s biggest employers will be written off.
The council on Monday approved a settlement agreement which would see about 14 high-energy users in the Bay pay just 27.5% of the debt accumulated (excluding interest) between 2015 and 2017, when some paid only 79.23% of their electricity bills.
For the two-year period, they racked up a combined R213m in capital debt and an additional R103m in interest.
Capital debt refers to the actual amount owed and excludes interest accumulated over the years for nonpayment.
A confidential council document — seen by The Herald — states that the 14 companies are: Tenneco, S&N Rubber CC, Natsan Wire, Coca-Cola, Borbet, Shatterprufe, Wier HBF trading as Xmeco Foundry, Crown Chickens, Handsworthy Estates, Agni Steel, MW Wheels SA trading as Guestro, Air Products SA and Alkatraz Industrial Properties.
The municipality also entered into settlement negotiations with tyre manufacturer Goodyear in Kariega, which did not form part of the initial high-energy user group, and agreed to write off R24.3m of the R34.3m capital debt it owes the city.
Goodyear will only have to pay a settlement amount of R10m.
The report, which was tabled behind closed doors, states that the Bay council resolved in February that city manager Noxolo Nqwazi enter into settlement negotiations with the high-energy users and provide a report to the council for consideration.
After negotiations between the metro and representatives of the businesses, a settlement was reached and the council approved the following:
● An across-the-board 27.5% settlement, which amounts to R58.6m, will be paid by the high-energy users;
● A final settlement offer of R10m to be paid over by Goodyear;
● That R159.9m of the capital debt owed by the original highenergy users group will be written off;
● An amount of R24.3m owed by Goodyear will be written off;
● All interest arrear debt owed by the high-energy user group
and Goodyear will be reversed;
● Each high-energy user group entity will be given an option to pay the related arrears over a period not exceeding 12 months in line with the credit control policy of the city; and
● That a full and final settlement agreement be entered into with each high-energy user entity as well as a separate settlement agreement be signed between the city and Goodyear.
This is the second time that the city will write off millions of rand owed to it by the highenergy users group.
In 2015, the council wrote off about R245m.
At the time, the companies complained that they would have no choice but to shed jobs, or even close their doors, if they were forced to fork out that money.
The agreement between the city and the companies, which was approved by the council at the time, was, however, so poorly constructed that it failed to ensure that the businesses paid their future bills in full.
At the start of the 2015/2016 financial year, some of the companies proceeded to pay only 79.23% of their bills as they believed the tariff was high for that financial year and the one that followed.
From 2017, they began paying their current accounts in full, but they locked horns with the metro over the outstanding debt of R213m.
A legal battle ensued in 2018 and has dragged on for years.
The city’s political head for energy and electricity, Lance Grootboom, said though the businesses had a problem with the tariff hikes, the city always sought to have costreflective tariffs so it did not run at a loss.
“I don’t believe we are setting the wrong precedent by allowing the write-off because this is an old issue based on historical debt and will not happen again because the high-energy users are servicing their current accounts.”
ANC councillor Wandisile Jikeka disagreed, saying he wished the same courtesy given to the big businesses could be offered to ordinary residents when they faced similar predicaments.
“We acknowledge that the high-energy users employ many people and generate a lot of revenue for the metro but our issue is the inconsistency in the application of the credit control policy,” Jikeka said.
“Whatever applies to ordinary citizens should be the same for the businesses because the justification [in the meeting]’was the fact that the city didn t want to antagonise them, which could lead to them taking their businesses elsewhere.”
He said the ANC caucus would push for electricity supply for businesses to be cut off and for them to pay a reconnection fee when they defaulted on payments, as was done to other consumers.
David Mertens, who speaks on behalf of the high-energy users and formed part of the group that negotiated with the city, said they had not yet been informed about the council decision.
“I can’t comment on something that hasn’t been formally communicated to us, but I can say we made peace with the municipality about the tariffs since 2017 and have been paying our monthly bills ever since.”
Mertens said their intention was never to fight with the city, which was why they had always offered to settle but there had been no-one to talk to at the municipality.
“For a long time, we had noone we could talk to in the municipality, which is why we continued with the court case,” Mertens said.
Bay business chamber chief executive Denise van Huyssteen said it was important that all businesses operated according to the laws of the country and that they paid municipalities for their electricity usage.
“It is our understanding that the matter related to a dispute dating back to 2015 between the high-energy users group and Nersa around the unlawfulness of electricity tariffs.
“During the course of the dispute the group, which ended up winning the case, paid the municipality in terms of what was regarded as a fair tariff.”
She said the chamber was collaborating with the city and other key stakeholders with the objective of ensuring the sustainability of electricity supply.
‘I don’t believe we are setting the wrong precedent by allowing the write-off because this is an old issue based on historical debt and will not happen again because the high-energy users are servicing their current accounts’