Ladies and gentleman,
The City of Tshwane and PEU Capital Partners, the firm appointed to install the city’s prepaid electricity “smart-meters” infrastructure, have agreed to call it a day after the city has lost about R 1 billion in service fees or commission to this ill-fated contract in the past financial year alone.
Before the agreement was entered into, the DA forewarned that the provisions of the contract would effectively lock the city in with this single service provider ad infinitum as the costs of terminating the business relationship with PEU would be prohibitive.
Despite this, the City of Tshwane went ahead with signing the contract and it was then subsequently compelled to terminate the agreement.
City of Tshwane has to pay over R1.3 billion just to get out of the contract
The result is that the city is now forced to pay the agreed contract exit penalty, in the form of continued “service fees”, which will amount to a minimum of R 600 million payable over six months. Additionally, the city will have to pay PEU the market value and acquire the prepaid electricity smart metering infrastructure that has already been installed. PEU have valued the market value of a complete rollout of all smart meters at R 7 billion. An estimated 10% of the smart meters have already been rolled out, which means the city owes another R700 million.
This means that the City of Tshwane has to pay over R1.3 billion just to get out of the contract.
If this R 1.3 billion is added to the original service fee or commission of R 1 billion it in effect means that the ratepayers of Tshwane have had to pay, R2.3 billion – the price of nine Nkandla’s – to extricate itself from the contract.
Over and above the DA’s warning to the municipality, former Minister of Finance, Pravin Gordhan and his National Treasury department addressed a letter to Tshwane Executive Mayor, Kgosientso Ramokgopa and City Manager, Jason Ngobeni, instructing them not to enter into this contract.
These letters are in the possession of my colleague, DA Shadow Minister of Co-operative Governance and Traditional Affairs, Kevin Mileham.
Executive Mayor Ramokgopa and Mr Ngobeni chose to ignore this instruction
It is clear that Executive Mayor Ramokgopa and Mr Ngobeni chose to ignore this instruction from a national minister and department. Further, a National Minister and the officials of his department failed to take action in keeping with his oath of office to protect the Constitution and uphold the laws of the country despite the fact that he and his department had identified several breaches thereof.
The DA will therefore be writing to Minister Gordhan, in his current capacity as Minister of COGTA, and in his previous capacity as Minister of Finance, together with current Minister of Finance, Nhlanhla Nene, to request that they institute an inter-departmental forensic investigation into this matter. Further that they investigate the decision taken by the leadership in the Tshwane municipality to ignore these instructions and to enter into a contract with PEU.
When the contract was initially tabled in Council, Executive Mayor Ramokgopa justified its approval on the basis that the contract was entirely “off-balance-sheet” and that the city would not incur any cost on account thereof as it was “self-funding” from the cash flows of an agreed 19.5% service fee on electricity revenue actually collected. This service fee was held up to be 8% below the actual “cost of collection” that the city incurred to collect its electricity revenue under the existing post-paid regime.
Corruption takes away opportunities from the poor
The DA has long advocated that corruption, wasteful expenditure and cronyism kills service delivery and job creation. Corruption takes away opportunities from the poor, in order to benefit a few people who are politically connected to the ANC.
For example, the R2.3 billion that will be spent on this terminated contract could have delivered 28 750 RDP houses, 209 000 flush toilets or 1 150 000 stand pipes in poor communities.
At the time of entering into the contract, Executive Mayor Ramokgopa claimed that it would be the solution to the city’s ailing finances. He claimed it would improve the city’s cash flow, improve revenue collection, reduce debt impairment, completely obviate non-technical electricity losses (i.e. electricity theft) and above all, save the city 8% of the value of its electricity sales, which could be spent on delivering additional services to residents.
But in reality the city’s cash flow has deteriorated substantially. As at the end of the 2014/15 financial year the city had failed to collect approximately R 1 billion of its budgeted revenue, had to spend R 1 billion on irregular expenditure on the PEU contract and had otherwise overspent on several votes to the value of approximately R 500 million. This has caused a budgeted surplus of R 1.1 billion to become a deficit of R 1.4 billion for a total variance of R2,5 bn.
Considering this massive adverse variance from its original budget, the city also had to cut service delivery expenditure by R 2,5 billion over the period.
To make matters worse debt impairment has also gone up from 54% to 67%.
It is evident that not a single one of Executive Mayor Ramakgopa’s claimed benefits of the PEU contract have materialised.
Wasting R 2.5 billion of public money is unacceptable
The DA believes that wasting R 2.5 billion of public money is unacceptable and inexcusable under any circumstance.
It is also not the first time the Executive Mayor Ramakgopa has squandered public money. Last year he cost the city R 48 million on the failed Dinokeng Music Festival.
Neither him nor Mr Ngobeni are worthy of the public’s trust after this fiasco, particularly when it comes to managing municipal finances.
This is why it is critical that Minister Gordhan and Minister Nene institute the inter-departmental forensic investigation as a matter of urgency.
All those officials who were behind the failed PEU contract must be held accountable for their actions.
This is why we are also currently seeking legal advice on laying criminal charges against those implicated in this matter.
The scourge of corruption and maladministration under the ANC’s watch is the single biggest enemy to creating job opportunities in Tshwane. Instead of opening up opportunity to all residents, the ANC Tshwane municipality is more focused on providing fat handouts to the politically connected few.
The result is that investors have been scared off from Tshwane and job creation in the city has stalled with unemployment standing at 29.6%.
This is in stark contrast to the DA’s values
This is in stark contrast to the DA’s values of Freedom, Fairness and Opportunity. The DA will continue to ensure that every cent of public money is spent on improving the lives and creating opportunities for all residents of Tshwane, and that job-killing corruption is eradicated, once and for all.
The DA will bring much needed change to this great City in 2016. Change that stops the cancer of corruption, grows the economy, creates jobs and ensures that all citizens have access to services and opportunities.
DA Tshwane Mayoral Candidate
083 612 0492