PEU: Victory for Msimanga Administration as High Court sets aside R2-billion smart meter contract

13 October 2017

Today a full bench of the North Gauteng High Court delivered in favour of the City of Tshwane in the PEU smart meter scam perpetrated by the former ANC administration.

When the Msimanga administration assumed office in August last year, we inherited a R2 billion budget deficit of which R1.5 billion constituted irregular expenditure.

The biggest of these irregularities was a tender for the supply of “smart” pre-paid electricity meters and services by a company called PEU Capital Partners.

Ironically PEU was initially appointed on a tender to give advice to Tshwane on how to save money, but the deal soon transmogrified into something completely different, by-passing competitive bidding processes.

From the outset the DA had pointed out that the tender and the deal was irregular, and would punch a hole in Tshwane’s coffers.

We later discovered that National Treasury and the finance minister agreed with our view.

But this information was deliberately withheld from the public, even as the ANC majority voted to approve the deal in the municipal council.

Initially Tshwane paid PEU 19.5c for every rand of electricity which ran through its about 13 000 meters (it was meant to install many more of these meters).

But when legal action threatened to expose the rigged tender, Tshwane’s previous administration concluded a sham “termination agreement” to allow the service provider a quick getaway.

In terms of the termination agreement, Tshwane would pay R950 million as a “termination fee” to the PEU subsidiary TUMS.

The 19.5c fee was reduced to 9.5c, but still constituted bad value for money. The plan was for TUMS to handover its business with Tshwane to a new service provider that was hurriedly appointed.

The R950 million pay-out was interdicted pending the challenge to the original rigged tender. The money has been kept in trust ever since, pending the finalisation of the case now before Court. 

This money must now be released to the city.

This judgment holds all deals between Tshwane and PEU and its subsidiary TUMS as unlawful, and lays the basis for the City to untangle itself from a relationship which has cost our people dearly.

We also hope the judgment sends the right message to every negligent city manager, every dishonest mayor, and every unscrupulous service provider doing business with government.

Statement issued by Solly Msimanga, Executive Mayor of Tshwane, 13 October 2017