The Tshwane metro will not be paying any further commission to PEU, the contractor for the controversial smart prepaid meters.
This comes after the mayor of Tshwane, Kgosientso Ramokgopa expressed unhappiness with the performance of PEU in executing the roll-out of prepaid meters to residents of the city.
According to Brandon Topham, who released a press statement, the Democratic Alliance (DA) welcomed the announcement by Executive Mayor Ramokgopa and confirmed by MMC Subesh Pillay, that the metro will no longer be paying any further commission to PEU, alleging the contractor did not comply with its obligations.
Topham said this came 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 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 with its obligations, but in terms of contract law you cannot withhold your obligations just by such an allegation because that party can claim you are in breach of contract. In April 23 months ago, we contested the legality of it. I then pointed out the contract was extremely one-sided; as it was written it was about impossible for PEU to be in breach of contract. I don’t believe 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 it finds itself in, Middleberg said the only possible grounds to put forward as breach of contract, will be to prove there is a failure of sale to roll-out the installation of the metres at the required rate as was promised in the contract.
“Since the PEU contract has not reached the final date of roll-out, 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 before we may be in the position to claim breach of contract. 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 they would have earned over the period of eight years. That means the city will be in default and will have to pay PEU R27 billion as a penalty for withholding payment,” Middelberg said.
He said in complying with the contract, PEU must role out approximately 2 700 meters per day, seven days a week, 12 months a year if they wanted to roll out the complement of 800,000 meters in the prescribed time. “But, according to the mayor, they have only managed to install 12,000 meters over a period of 18 months,” he said.
Subesh Pillay confirmed to Rekord, in essence the metro would prefer to get out of the contract since the metro is not earning but in fact losing money.
“There was a court action against the company which meant they could not roll out meters as promised and as a result, we are not collecting revenue at the pace in which we thought and planned for. So what the mayor asked, is for the city manager to see how we can get out of the contract, because as long as it 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 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, despite the fact that no advantage had been 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 of PEU to date and used this as basis for saying 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 our concerns are eventually being shared by the ruling party. We trust the executive will resolve the dispute in a manner which will ensure the city cannot be accused of being in breach as the penalties included in the contract are extremely onerous.”
Topham emphasised 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 residents will be resolved, allowing residents to live happier lives with less bureaucratic obstacles,” he said.
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