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Setting the record straight: The facts on ELM’s contract with BXC SA

20 August 2019 - Emfuleni Local Municipality (ELM) has noted with concern recent reports about smart meters, the termination of the BXC SA contract with ELM, and the measures intended to deal with interim transitional arrangements. The reports have been characterized by some misinformation which necessitated that ELM provides this statement to provide facts.

The smart meters were procured by ELM from BXC SA in terms of a Public Private Partnership Agreement (PPPA) that was signed by both parties on or around 02 December 2013. In terms of the PPPA, BXC SA was to install 66 000 electricity single phase meters, 5 100 electricity three phase meters and 83 123 water meters. To date, approximately 7 000 electricity meters have been installed, but no water meters have been installed by BXC SA.
Subsequent to the conclusion of the PPPA and early on in its implementation, concerns were raised by the Auditor General (AG) regarding the process followed by ELM to procure BXC SA and the conclusion of the PPPA between BXC SA and ELM. The AG’s concerns had a bearing on the audited financial years ending. Furthermore, the issues raised by the AG signaled a warning of irregular expenditure on the part of ELM, should they spend money on the PPPA.

ELM, through the Mayoral Committee considered it appropriate to direct the Municipal Manager (MM, Mr Oupa Nkoane), to seek independent legal advice on the process followed by ELM in procuring BXC SA and concluding the PPPA. To this end, the services of an independent law firm specializing in PPP procurement and transaction were sought to advise ELM accordingly. Based on the independent advice obtained by ELM, the municipality decided to have the PPPA set aside on grounds of irregularities relating to its conclusion between ELM and BXC SA.

BXC SA were duly advised of the concerns that ELM had with the PPPA, and on their own decided, ahead of the conclusion of the investigation carried out by the independent law firm, to institute legal action to recover monies alleged to be owed to it by ELM flowing from the said PPPA.
The action brought by BXC SA was opposed by ELM. In the course of the pending action brought by ELM, ELM realized the need to procure meters for the municipality and initiated a tender process for the procurement of supplier(s) to supply new meters on an ‘as and when’ required basis. The intention of the procurement was to have procured such a supplier before the end of the year 2018, at which point ELM would have been ready with supply of electricity meters as and when required. ELM’s initiatives were halted by BXC SA who brought an urgent court action to stop ELM from proceeding with the tender pending the finalization of the court action brought by BXCSA.

On 29 March 2019, BXC SA decided to withdraw the court action that it had instituted to enforce the PPPA. ELM thus instituted proceedings in the High Court of South Africa (Gauteng Division, Pretoria) to review and set aside the PPPA on grounds of several irregularities relating to its procurement and conclusion. It is ELM’s view that the issue with the procurement and conclusion of the PPPA should be a matter for a court to decide on, which is now pending before court. BXC SA decided while the action brought by ELM is still pending, to terminate the PPPA.
The decision by BXC SA to terminate the PPPA resulted in a need for transitional arrangements to be concluded between the ELM and BXC SA. ELM made efforts to reach agreement with BXC SA on the required transitional arrangements. The efforts to reach agreement on the transitional arrangements did not yield the desired outcome, largely due to price at which BXC SA wanted to be paid by ELM for providing the required transitional arrangements and inability to reach agreement on the terms of the transitional arrangements.

Following the failure to reach agreement with BXC SA on the transitional arrangements ELM had to find alternative measures pertaining to the provision of electricity to the affected properties, which arrangements included the current by-passing of the meters in the interim, and resorting to billing based on the recorded consumption profile of the user concerned. ELM is not able to operate the smart meters in the absence of information which sits with BXC SA and has not been shared with ELM. ELM is committed to again initiate a process to have meters procured for purposes of delivery of electricity services by the municipality.

Issued by the Communication Department