City of Tshwane Mayor Kgosientso Ramokgopa strongly denied that the termination of its controversial prepaid metering contract with PEU Capital Partners is going to cost the city a further R1.2 billion.
Moneyweb reported on Wednesday that the city seemingly accepted a proposal by PEU to continue paying it 19.5c of every rand generated by the 12 920 prepaid smart electricity meters installed by PEU for another two months and thereafter 13.8c until July 1 2017. That would amount to a total of more than R1.2 billion.
This followed the city announcing the immediate termination of the contract on Tuesday and admitting that it had spent R830 million on it since October 2013.
In terms of the contract PEU was supposed to install a vending system and an initial 437 000 smart meters in two years. This and the balance of the total of 800 000 meters would have been supplied at PEU’s cost, but the city would have paid the 19.5% service fee over eight years on all electricity generated through the meters.
With only a few months to go before the two-year installation deadline, only 12 920 meters have however been installed.
At a posh ‘media face-off’ following his State of the City Address on Thursday, Ramokgopa said the city could account for the R830 million paid to PEU. It was a matter of a “service delivered and paid for – and it is all right”, he said.
He said the project will be “on hold” until after AfriSake’s court challenge to the procurement process – which followed in awarding the contract to PEU – has been settled. It is unclear how long that will take, he said. Tshwane and PEU have blamed the pending court case for the slow roll-out, but AfriSake attorney Willie Spies has strongly denied this.
In the meantime the meters will stay in place and PEU will continue to manage it, Ramokgopa said. “The ownership (of the meters and vending system) has to be negotiated”, he said, but gave the assurance that “the transition will be smooth”.
Ramokgopa said the suggestion that the termination “will cost money, is not true”.
Those allegations are “based on a manufactured document”. He said the Speaker of Council has been requested to act against DA councillor Lex Middelberg who has distributed a copy of a presentation PEU made to the city proposing four different termination options, to the media. On the presentation one [option] was indicated as the one preferred by the city.
Middelberg earlier said the DA had confirmation that it was indeed accepted and on that basis the termination cost was calculated to be in excess of R1.2 billion.
Ramokgopa did not give any details on the termination terms it did agree on with PEU. He said following an announcement in Council in February that the contract will be terminated, City Manager Jason Ngobeni was instructed only a week ago on May 8. He said Ngobeni “has not come back” with regard to the terms of the termination. When he does, it will serve before Council, he said.
Council Spokesperson Selby Bokaba told Moneyweb after the function the four termination options were all rejected by Tshwane and negotiations about the terms have not yet been concluded. Asked why the city did not respond to direct questions from Moneyweb on Monday about the chosen option, he said: “I didn’t know it then”.
According to Ramokgopa there is a problem because legislation does not provide for “unique ideas”.
He said three years ago the city asked for unique ideas to solve the lack of funds for infrastructure projects and debtors book that stood at R5.5 billion at that stage. It has since increased to R6.5 billion, he said.
PEU came forward with a proposal to fund the smart prepaid metering project off-balance sheet, “using its own money and funding form outside”. They were vetted and the project proceeded, Ramokgopa said.
The next thing, AfriSake lodged a court challenge to the procurement process, because the project was not put out on tender, he said, adding: “But it is a unique idea!”
He said nobody questioned the technology and whether smart meters will work. “Everybody accepted the idea of smart meters”.
Ramokgopa said five years ago everybody would have been asking questions about basic services like water and housing. The fact that they are now asking about the funding of smart meters, shows that basic services are being delivered and are not an issue anymore.
Facing questions about the PEU contract is therefore “a nice place to be”, he said.
The Municipal Finance Management Act has specific provisions to deal with unsolicited bids, including testing whether the solution is unique. These measures were not followed in the award of the contract to PEU.