Tshwane meter case back in court
AfriBusiness and AfriForum in bid to block handover of system
THE City of Tshwane is not yet free of the disastrous smart meter contract it signed with Peu Capital Partners in 2013 and will be back in court tomorrow for a new round of litigation that, if it loses, could see it face revenue losses of R500m.
Only 12,900 meters were installed at a cost of more than R830m before the contract was cancelled. The city is liable to pay more than R1bn in ratepayer money to cancel the contract.
In the latest round of litigation, which began in 2013, nongovernmental organisation AfriBusiness and lobby group AfriForum are asking the High Court in Pretoria for an order to prevent the City of Tshwane from handing over the smart meter infrastructure to a new service provider. They also want to stop the city from paying Peu, pending a review of the contract, which they want set aside.
The metering system would have to be switched off if the application succeeds.
This would result in the metro losing about 55% of its electricity revenue, Peu Capital Partners director Christina Tshili said in court documents.
Tshwane would lose up to R550m over several months.
“These are losses on a scale that would completely cripple the city’s finances and lead to, among other things, the city defaulting on its financial obligations,” she said.
The city cancelled its contract with Peu in May 2015, saying it could not afford to continue with it. Because the contract was cancelled, a new service provider would have to buy the meter infrastructure from Peu for R950m, Tshili said, while it had been valued at R3.7bn by auditing firm SizweNtsalubaGobodo.
AfriBusiness said in court documents it wanted to stop the city from paying Peu for the infrastructure.
Tshwane spokesman Blessing Manale said the R950m was for a new service provider to take over the contract. There had been no talk about a penalty payment and the City and Peu had agreed that the R950m would be for a new service provider to buy the infrastructure.
Manale said the residents could have had smart meters already and the municipality could have improved its revenue collection.
Instead, they have had to put everything related to the meters on hold as the litigation continues. “We regret that the matter is dragging on,” he said.
AfriForum’s legal spokesman, Willie Spies, said the contract between Peu Capital Partners and the city was a “robbery of taxpayers”, who have already paid more than R2bn since the city signed the contract.
“It (the contract) is so blatantly flawed and blatantly corrupt,” he said. The city was plunged into a financial crisis as a result of the smart meter contract, he added.
In June, the auditor-general reported that Tshwane had spent R1.10bn irregularly.
In March, ratings agency Moody’s warned that Tshwane's credit rating could be downgraded, flagging the metro’s high debt levels and the smart meter contract as credit risks.
Tshwane has been the centre of allegations of corruption and violent infighting in the ANC.
The city’s attorney, Mandla Nyalungu, refused to comment on the court case, saying its processes were still unfolding.
These are losses on a scale that would cripple the city’s finances and lead to defaults
THE City of Tshwane has been closely contested by the ANC and the DA since the first democratic local government election in 2000. This year is no different. In the first democratic municipal poll, the ANC’s support in the capital city in percentage terms was in the mid-50s, with the DA in the mid-30s. In 2006 the ANC’s support remained steady at 56.3%, while the DA’s dropped to 30.6%.
In 2011, however, the DA grew its share of the vote substantially to 38.6%, while the ANC’s support dropped slightly to 55.3%.
The merger of Tshwane with Metsweding, creating SA’s largest metro, was heavily criticised by the opposition as gerrymandering to ensure an ANC majority.
In 2011 the ANC obtained 118 seats in the Tshwane council, the DA 82, the Freedom Front Plus four, and the Congress of the People two, while the Pan Africanist Congress, the African People’s Convention, and the Azanian People’s Organisation have one seat each.
To understand the bitter anger that erupted in the capital two weeks ago after MP Thoko Didiza was pronounced the ANC’s mayoral candidate, it is worth returning to the events of 2011.
In that year Kgosientso “Sputla” Ramokgopa emerged as the ANC’s regional chairman at a hotly contested conference and was appointed mayor of Tshwane.
The anger that boiled over after his recent sidelining by the ANC created perceptions that a powerful and capable individual was being removed against the will of the people. But a closer look paints an entirely different picture.
Insiders — metro staff, members of opposition parties and ANC alliance sources — say the metro is run with little regard for the difference between party and state.
Staff say Ramokgopa’s office is heavily overpopulated — with posts such as “strategic executive directors” and “deputy strategic directors” for each portfolio. Who fills those positions is critical in understanding the anger following his removal.
Insiders confirmed that people in these non-functionary positions are largely ANC branch chairmen, secretaries, and members. This is reflected in the metro’s salary bill.
After the 2011 merger, the metro inherited massive service delivery backlogs, but did not receive substantial additional resources from the fiscus. This created a huge challenge to deliver on its mandate and caused cash flow problems.
An update on the Department of Co-operative Governance and Traditional Affairs’ “back to basics” programme presented to the ANC’s national executive committee in January listed Tshwane as one of 96 municipalities that were insolvent or in financial distress.
“Technically, the city is bankrupt … salaries are paid through an overdraft; service providers are wary of doing business here because they are not paid on time,” says a metro employee who wishes to remain anonymous.
Rating agency Moody’s Investors Service placed the city on notice in March, saying it was under review for a possible downgrade.
According to a Moody’s credit opinion report, the city has “high debt levels and cash flow pressure”. It says the implementation of its large-scale capital expenditure programme “will continue to put pressure on the city’s credit profile”.
The city’s total debt stock grew 11% to R10.3bn in 2015. According to Moody’s, the city’s net direct debt increased to 45% of its operating revenue in 2015. Its debt exposure is “higher than the median of other rated metros in the country”.
Its debt exposure is also under pressure from the cancellation of a contract to supply prepaid meters in June 2015. “
If the appointment of a new service provider is delayed further, the city may have to fund the shortfall of up to R300m, which may pose huge financial pressure,” the Moody’s report says.
The smart meter issue is before the courts, and at the centre of allegations of corruption levied at Tshwane’s leadership by opposition parties, the South African Municipal Workers Union, the Congress of South African Trade Unions, and the South African Communist Party (SACP).
Insiders say tender processes are not strictly adhered to, which is alleged in the smart meter contract.
Governance in Tshwane is described as “economic politics” by one source, alleging that patronage is being dished out to the politically connected. The receipt of R75m in contracts from the city by ANC Tshwane secretary Paul Mojapelo was repeatedly cited as an example.
Ramokgopa denies allegations of corruption, or of turning a blind eye to it. In his 2016 budget address he called on civil servants to help prevent fraud and corruption.
“A civil servant cannot simply be an individual who benefits from the gainful employment by government and, in some cases, as a steward of neopatrimonialism,” he said.
“Indeed, it is more than that — civil servants must espouse a true commitment towards the development of a nation, beyond that of mere financial gain, while acknowledging that the latter will always be important towards individual well-being.
“Our current state of affairs has inextricably resulted in an urgent need for radical change to avoid a situation in which our endeavours to create more inclusive economic systems become a mere mirage of wonderful objectivity.
“We wish to assure those civil servants who perceive their role in the state as such that they are to expect a rude awakening over the next term of office.”
But whistleblowers claim to be victimised; five union shop stewards from the metro police have been suspended, after claiming that they sought to reveal corrupt activities.
“There is a lot to hide in that council; even now critical posts are being filled quickly so that those in power now can rule from the grave,” says one councillor, who asks to remain anonymous.
Relations between the ANC and the DA are fractious in the metro council. DA mayoral candidate Solly Msimanga’s election message centres on the negatives of Ramokgopa’s governance record.
He warns that Didiza would continue “building on a record of rising unemployment, endemic corruption, inadequate service delivery, and rampant crime”.
Msimanga often highlights the R1.88bn that has been lost to unauthorised, irregular, fruitless and wasteful expenditure, which he says could have been used to create jobs and deliver better service.
But governance challenges are a pivotal reason Didiza was introduced as a compromise candidate in the metro, say ANC national leaders — aside from seeking to defuse tension between warring ANC factions aligned to Ramokgopa and his deputy, Mapiti Matsena.
DA councillor and finance spokesman Lex Middelberg took the metro to court in 2014 after it held elections for ward committee members without promulgating a by-law legalising the election.
The DA won the case and the 2012 ward committee elections were deemed illegal and unconstitutional. But payments of R1,000 were made monthly to committee members, amounting to R47m, Middelberg says. The city lost its appeals all the way to the Constitutional Court.
Should the ANC win Tshwane — and this is no certainty — Didiza would preside over a council at war. The ANC’s regional executive committee in Tshwane is divided, and the leaders of both Ramokgopa and Matsena’s factions are high on the councillor candidate lists.
The violence and unrest over Didiza’s appointment was, according to sources, co-ordinated and planned by “henchmen” aligned to Ramokgopa and Matsena, but they have faced no consequences yet.
The SACP last Sunday suspended five of its leaders in the region for their involvement in the violence and factionalism — it is understood that four of the five worked in Ramokgopa’s office. SACP sources say they were “co-opted” by the factions to co-ordinate the chaos.
The hotly contested August 3 polls in Tshwane will be smooth sailing compared with the gigantic clean-up task facing the winner.
There is a lot to hide in that council, even now critical posts are being filled quickly so that those in power now can rule from the grave