The Tshwane metro will not be paying any further commission to PEU, the contractor for the controversial smart prepaid meters.
This is according to Brandon Topham who released a press statement yesterday, saying that the DA welcomes the announcement by Executive Mayor Ramokgopa and confirmed by MMC Subesh Pillay, that the metro will not no longer be paying any further commission to PEU, alleging the contractor did not comply with its obligations.
Topham said this came about after a discussion in council concerning the over expenditure on budget for the first six months of this financial year of R230.6 million in commission to PEU.
Lex Middleberg who spearheaded the opposition against the PEU contract 22 months ago said none of the benefits which should have come out of the contract has been realised and this was regarded as breach of contract. He said that the Mayor did not make allowance in the budget for a possible R1 billion which has to be forked out to pay PEU.
“The problem now is what PEU is going to do about it. The Mayor alleges that PEU is not complying on its obligations, but in terms of contract law you cannot withhold your obligations just by such an allegation because that party will then say now you are in breach of contract. In April 22 months ago, we contested the legality of it. I then showed that the contract was extremely one-sided; that as it was written it was about impossible for PEU to be in breach of contract. I don’t believe that the Mayor is now in the position to uphold a claim of PEU being in breach of contract. He is finding himself in an extremely difficult position.” Middleberg said.
Speculating on possible grounds of how the metro can come out of the mess they find itself in Middleberg said that the only possible grounds to put forward as a breach of contract will be to show that there is a failure of sale to roll out the installation of the metres at the required rate as what was promised in the duration of the contract.
“Since the PEU contract has not reached the final date of rollout the Mayor cannot claim that PEU has failed to reach its target, because the first measuring date is after two years. So, we have until next year when they reach that date before we may be in the position to claim breach of contract. So simply withholding money might in actual fact place the city in default, and entitle PEU to cancel the contract and claim payment in full of all that they would have earned over the period of eight years. That means that the city will be in default and will have to pay PEU R27 billion as a penalty for withholding payment,” Middelberg said.
He said that in complying with the contract PEO must role out approximately 2 700 meters per day seven days a week 12 months a year if they wanted to roll out the complete complement of 800,000 meters in in the prescribed time. “But, according to the Mayor they have managed to roll out only 12,000 meters installed in a period of 18 months,” he said.
Subesh Pillay confirmed to Rekord that in essence the metro would prefer to get out of the contract since die metro is not earning money but in fact losing money.
‘’There was a court action against the company which meant that they could not rollout meters as promised and as a result of that we are not collecting revenue at the pace in which we thought and planned for. So what the Mayor asked, is that the city manager must see how we can get out of the contract, because so long as what this is caught up in court action, which can last anything from two to three years, we will not be able to move and we are going to continue to lose revenue. The idea however is to find some sort of settlement with the company and find a way where we cannot lose money. The two-year period of the contract ends within seven months,” Pillay said.
Topham said in his press release that despite the fact that there has been no advantage received by the city from this contract, an additional R300 million debit impairment was required in order to cover bad debt for the first six month period.
“The Mayor expressed unhappiness with the performance to date of the PEU contractor and used this as a basis for saying that no additional payments will be made to them for the rest of the year, hence no reason to adjust the budget for the last six months of the financial year.”
“As we have been opposed to this contract we are pleased to hear that our concerns are eventually been shared by the ruling party. We trust that the executive will resolve the dispute in a manner which will ensure that the City cannot be accused of being in breach as the penalties included in the contract are extremely onerous.”
Topham emphasised that the need for Smart prepaid meters is great and urged the metro to find an economically viable method to roll smart meters out to all residents of the City and specifically to residents who have difficulty complying with managing their financial commitments to the City.
“If this is done effectively and efficiently, the finances of the city and our residents will improve and many problems facing the city and our residents will be resolved, allowing our residents to live happier lives with less bureaucratic obstacles,” he said.
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