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PEU: Tshwane hopes to stop multi-million rand daily payments

Looking for way out of legal web.

The new DA administration in the City of Tshwane might ask the court to amend an interim court order, that binds it to keep paying controversial smart metering contractor PEU Capital Partners hundreds of millions of rands that could have been spent on service delivery.

The new city leaders earlier told Moneyweb they paid PEU R66.9 million in August, with a further R82 million being paid into a special account in terms of the cancellation agreement. The ownership of the money in the special account – R924 million by October 21 – would be decided by court, as part of the application by business grouping AfriSake to have the contract and cancellation agreement reviewed and set aside.

The combined amount of R147 million paid out in August represents an average payment of R4.9 million per day (calendar days).

On Thursday, Tshwane MMC for finance Mare-Lise Fourie told a media briefing total payments to PEU since November 2013 to date amount to R1.67 billion, with another billion rand in the special account. That is for not even 13 000 electricity meters.

When in opposition, the DA was very critical of the contract and cancellation agreement and supported the AfriSake litigation. It was one of its main campaign tickets, but the new administration has been fairly quiet about the matter since coming to power in August.

DA mayor Solly Msimanga however on Thursday gave the assurance that his administration is as determined as ever to get out of the contract.

MMC for legal and corporate affairs, Cilliers Brink, said the city would amend its submissions to the court. The city would change the stance of the previous ANC administration by withdrawing its opposition to the AfriSake application and conceding that the agreement was unlawful from the start.

He was careful of giving too much detail, for fear of prejudicing the case, but did say that the city would give further information about the deal and probably ask the court for clarity regarding the interim order granted to AfriSake in early July this year.

That order, which was supported by the DA, prevented the ANC administration from making a payment of R950 million to purchase the PEU infrastructure at the end of the transitional period, provided for in the cancellation agreement. The payment was due to be made at the end of June this year.

The court ordered that the status quo be maintained for six months until the substantive review application could be heard. That meant that PEU would stop the further rollout of electricity meters, but continue to service the almost 13 000 meters it had installed. The city is obliged to continue paying the service provider accordingly.

After the election in August, the DA assumed office and asked for the legal proceedings to be stayed for a period of four weeks to reassess the city’s legal position.

AfriSake attorney Willie Spies told Moneyweb that at a meeting with the deputy judge president on November 8, aimed at getting an early court date for the review application to be heard, the new city administration asked for further grace.

It was agreed that the city would indicate its position by the end of the month and AfriSake would file supplementary affidavits by the same date. The city would then file its new papers by December 13.

A further meeting with the deputy judge president to get a court date would only follow in February, which means the case might only be heard late in 2017.

If payments in terms of the contract continue at the current pace, it might put hundreds of millions of more rands in PEU’s pocket.

Asked whether the DA administration is acting with due haste, in light of the cost of the contract, Brink said: “We may not be acting as fast as we would like, but we also do not want to act in haste and end up prejudicing the City’s interests. If we make our next move, it has to be certain. It was easy for our predecessors to get us into the PEU mess; our job, getting Tshwane out of the mess, will be much harder.”

Msimanga said the Auditor General (AG) has again raised the expenditure in terms of the contract with reference to the previous financial year. The AG did rule it irregular in 2014/15 and Fourie said the city had to take steps to resolve such expenditure in terms of legislation. If not, the city’s audit outcomes would be negatively affected.

Msimanga said the AG also classified the city’s broadband contract as irregular. His administration is investigating that contract as well as the Tshwane House public-private partnership and various other contracts it considers to be unlawful.

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Lot of money at stake here that can potentially be spent on much needed service delivery. And if businesses were overcharged through incorrect or invalid of calculations, they should sue to get their money back.

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