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Tshwane backtracks on administration risk

Filing supplementary papers ‘to clarify’ line in affidavit.

The City of Tshwane on Thursday backtracked from a statement under oath by its accounting officer that it “is facing the very real risk of being placed under administration”.

It might file a supplementary affidavit “to clarify the City’s position to the court”.

This follows after Moneyweb reported on an affidavit deposed by acting city manager Lindiwe Kwele in support of the City’s changed position in the Afriforum/AfriSake application to have the City’s controversial smart meter contract with PEU Capital Management reviewed and set aside.

The previous ANC administration, in which Kwele served as deputy city manager, opposed the application. After getting legal opinion the DA-led administration that assumed power after the August municipal elections, changed its stance and conceded that the contract was entered into unlawfully.

In her affidavit Kwele is asking the court to set the contract aside and give a just and equitable ruling to deal with the consequences of such an order. This, she states, should serve to prevent any interruption to the electricity supply to the almost 13 000 Tshwane customers served through the PEU system.

She states that the City is paying PEU about R4 million per day in terms of the Interim Services and Termination Agreement (ISTA), which the application also seeks to nullify.

Kwele states that these payments “are a serious drain on the finances of the City of Tshwane and, because of such payments, it is cash-strapped and is facing the very real risk of being placed under administration”.

The auditor general earlier classified the payments as irregular, which means they were made in contravention of applicable legislation.

In its subsequent statement the city says this line “has caused undue confusion and speculation in the media”.

It says: “To add fuel to the fire, the Gauteng Provincial government is ANC controlled, which has heightened suspicion that it may have a political motive to regain power in Tshwane by the backdoor.”

The legislative grounds for a city to be placed under administration is very clear and none of those grounds are currently present, the City states.

“The previous City government did leave Tshwane with a legacy of financial mismanagement. One example of this is the unlawful PEU/TUMS smart meter contract. But the City is able to meet its financial obligations as and when they become due. And we are confident that sound financial management, including seeking redress in the PEU/TUMS matter, will further improve the City’s financial position.”

Moneyweb earlier reported that the litigants will meet with the deputy judge president in February to obtain a preferential court date for the hearing. 

In Kwele’s affidavit Tshwane proposes that any order to set the contract aside be suspended for up to six months. During this period parties should make submissions about a just and equitable way to undo the agreement without interrupting services to power users.

In terms of this timeline the city would be obliged to maintain is R4 million per day payments for the biggest part of another year.

In its statement the City however states that it would seek interim relief from the court “to adjust the terms of the previous court order which practically compels the city to pay PEU/TUMS for services on the 13 000 meters which it installed”.

It says the line referring to the risk of administration “could have been more precisely and carefully worded” and expresses the City’s regret “that this caused alarmism”.

The City states: “The risk of administration will only arise if the City does not take corrective financial steps. Tshwane, whose finances the Msimanga (DA) administration is working to fix, is by no means the most delinquent municipality in Gauteng and the City will therefore not be placed under administration.

“In the interest of clarity, we will consider filing a supplementary affidavit to clarify the City’s position to the Court.”

The Gauteng Department of Housing and Cooperative Governance has failed to respond to Moneyweb’s enquiry about the possibility of Tshwane being placed under administration.

 * The City of Tshwane in November held a special council meeting to appoint a city manager. The name of the successful candidate was kept strictly confidential before the meeting, even from the DA caucus. It was nevertheless widely rumoured that Kwele would be appointed. In a surprising turn of events no appointment was made and Kwele’s contract to act in the position was merely extended.

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Yes, get everyone who is fighting against the PEU system on the same side. With some saying carry on paying and others saying the opposite, confusion will reign. I still say stop paying and see what crawls out of the woodwork. PEU have over-profited from this shambles to such a degree they will be hiding behind a smart lawyer or two. I also see they still have that poster boy with the smirk on his face (Parks Tau?) doing the adverts for power and water.

Is this correct? R 4 mil per day for 130000 customers?? R397 per day per customer???????????????

It’s 13000 customers, but you have used the correct numbers in your calculation. The problem is your result, which should be R307 per day, which is still ridiculously high.

Sorra – typo = R307.6923 but where is it going and what do they pay for??

@casper1 – no idea but it’s a factor of 10 too much or possibly even 100 times. It’s the result of uncontrolled corruption.

The new DA mayor should get the forensics involved and get to the bottom of it and find out who all were involved and how did the city award such a flawed tender. I am surprised that no one has the will power to dig deep into the rot the City finds itself in. The previous comment makes sense, stop the payments and see what comes out. Someone needs to follow all the paper trail to see who are all the shareholders of PEU and how is the payments from PEU shared.

A common thread to all these corrupt contracts is the tendency to do single entry budgeting. They work out what they are going to spend the income on, including their own backhanders, but fail to budget for the income. Their attitude is “oh well, if we don’t get sufficient income, we’ll simply ask the rate / tax payers to sough up more”. This tendency spills over into the accounting systems where again they spend quite freely on whatever takes their fancy, and look at Joe Public to foot the bill. A commercial enterprise would never survive an audit if they handled things this way, but it is second nature to Government departments, municipalities and SOE’s.

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