Eskom vs Tshwane showdown coming this month
The City of Tshwane says that it is gearing up for a court battle with power utility Eskom in the middle of July over the city’s mounting electricity bills that continue to go unpaid.
Eskom has flagged the city’s non-payment several times in the past, with the latest, in the middle of June, showing the city owes close to R2 billion to the entity.
At the time, Eskom said that it would use all avenues available to it to get the money from Tshwane, including approaching the courts.
The city has now confirmed that Eskom went the legal route, filing a founding affidavit before the North Gauteng High Court seeking to immediately recover R1.6 billion in outstanding debt.
The city said it has filed its responding affidavit and will defend the matter in a full hearing expected in the middle of July.
“We are not in denial about our difficult financial situation, nor do we deny that we have an obligation to pay Eskom and other creditors such as Rand Water,” it said.
“We are continuously providing Eskom with payment plans, which we are doing our utmost to stick to. However, we are facing significant revenue pressures in the city.”
The city said that same is true for Rand Water, which it is continuously engaging with to ensure that the current account is serviced.
It said that the water shortages currently faced by the city are not related to the account or any restrictions being imposed by Rand Water, but rather relate to infrastructure challenged on the side of the water utility.
Regarding the Eskom issue, the city said that it is also serious about decreasing its dependency on Eskom and will publish a request for proposals on procuring alternative energy before the end of September.
“We will also look to facilitate proposals on using the land around the city’s power stations for energy generation,” it said.
Update on finances
The city provided a detailed update on its financial situation, showing how deeply in trouble it is.
While it said it was working with the Auditor-General’s office to address the over 100 findings against it in the latest review – with 97% having “action plans” in motion – it still had serious financial issues to deal with.
The most significant of which is the R4.7 billion hole in the fiscus as a result of a botched smart meter contract initiated by previous administrations.
According to the city, in June 2013, it entered into an unlawful contract for the provision and management of smart meters, which it said was “forced through” by the ANC administration.
“For the entire duration of this contract, these payments were processed while no VAT was being paid on them. In 2015, after a review of the contract, it was decided that it would be terminated,” it said.
However, the termination of the contract would only be implemented via court order in 2019. The DA-led coalition took power in the city in 2016.
The city said that city officials did not inform the new administration of the unpaid VAT liability – and it was only in 2021 when SARS made a claim for R2.9 billion that the implications of this non-disclosure became apparent.
“Along with penalties and interest to the value of R1.8 billion…SARS effectively slammed the city with a R4.7 billion liability,” it said.
“It has been increasingly apparent that this liability has never reflected correctly in the financial statements for years.
“While the city effectively collected the R2.9 billion in tax, this was never paid over, but rather was spent as part of the city’s day-to-day operations.
“Thus, when SARS made their demands, the city did not have this money in its coffers and entered into a payment arrangement of R91 million per month,” it said.
As of today, approximately R2.2 billion has been paid to SARS, it said.
The city said it is conducting a full forensic investigation into what it calls “grave financial misconduct and misrepresentation” over the contract, which it said will use to try and negotiate a lower penalty with the revenue service.
In the meantime it will continue to work with the Auditor-General and ramp up revenue collection from customers who are in arrears. This will include increased disconnections for defaulting customers and coming down hard on corrupt officials.
“As our new budget kicks in from 1 July, we have also significantly reduced expenditure in line with our projected revenue, which we hope will stabilise operations in the city,” it said.
“This will be critical if we are to achieve any significant financial sustainability for the future.”
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