Saddled with about R260-million in unpaid bills owed by some of the city’s high energy users, the Nelson Mandela Bay municipality has initiated legal action against the firms.
However, in a bid to avoid a drawn-out legal process, some of the Bay’s political principals want to head back to the negotiating table in the hope of ironing out the stalemate and, ultimately, getting these users to cough up the money owed.
The money in question is debt that accumulated between 2015 and June last year when some of the high energy users paid only 79.23% of their electricity bills.
This pushed their arrears accounts to about R200-million which, with interest, has grown to about R260-million.About 13 Bay firms – some of them among the metro’s biggest employers – were locked in a dispute with the municipality for a number of years over the way the electricity tariffs were structured.
From July last year, the companies started paying their bills in full, after negotiating a more “affordable” tariff hike, but they have refused to settle the accounts that are in arrears.
The tariff negotiated last year was for electricity to increase by about 1.8%.
Last week, the council passed power hikes of 5% for big business and about 6% for small to medium businesses.
These will come into effect in the new financial year, starting next month.
The metro’s political head of budget and treasury, Retief Odendaal, said the companies were servicing all their current accounts.
“The dispute is over the arrears and it’s now become a stalemate because we’ve handed them over to the attorneys,” Odendaal said.
“The issue is that they feel the tariff was high that year [2015-16] and they don’t want to pay off that money even though they know they owe us the money.
“It’s a standoff that’s very difficult to resolve.
“Legal action is currently in the process, but we’re trying to find a political solution.”
The money owed by the high energy users makes up about 8% of the metro’s total R3.1-billion debtors’ book.
“It’s a huge amount of money and the city is not willing to write it off – we cannot afford to write it off,” Odendaal said.
In 2015, the council wrote off about R245-million after reaching a deal with the high energy users.
At the time, the companies complained that they would have no choice but to shed jobs, or even close their doors, if they were forced to fork out that money.
The agreement between the city and the companies, which was approved by the council was, however, so poorly constructed that it failed to ensure that the businesses paid their future bills in full.
The impasse with the high energy users is expected to be discussed by the budget and treasury portfolio committee on Friday, when Odendaal hopes to get the mandate to start new negotiations.
He would be working alongside ANC councillor Rory Riordan.
Asked what kind of solutions could be reached which did not involve writing off the money, Odendaal said it was hard to say at this stage.
“A repayment plan maybe? Whatever we do, it must be in the best interest of the city.“We’ve got a huge infrastructure backlog.
“Money like that can be used to deal with some of that.
“The companies previously got a 100% write-off – I don’t think we can do that.
Odendaal said the firms were also in a difficult position as the money owed appeared on their bills every month.
This means that the companies could not buy any new properties as that would require a rates clearance certificate from the municipality.
Odendaal hoped to meet representatives from the firms in the next two weeks.
None of the discussions would be binding as the municipality would need approval from the council before striking any deal with the companies.
Riordan said the municipality was always badly represented when it came to legal advice on how to handle the high energy users saga.
“It’s got us into a lot of trouble,” he said.
“We’ve got to sit down with them [high energy users] and come to a solution.
“It can only be one of three solutions – they pay all their arrears outstanding, they pay none, or they pay a chunk in a negotiated settlement.”
David Mertens, speaking on behalf of the high energy users, said they would be open to discussions with the metro.
“We are always willing to listen to the municipality,” he said.
Mertens is executive director of Autocast SA, one of the high energy users at loggerheads with the municipality.
However, Mertens said that if the metro decided to go the legal route, the group would fight it as the businesses believed the tariffs at the time in question had been unlawful.
“As far as we know, legal action has not been taken yet.
“If we have to, we will fight in court.
“We’ve claimed that the tariffs are not cost-reflective or based on proper financial [information].
“If the municipality thinks we owe it money, they must chase it, but that would be very unfortunate.”
Nelson Mandela Bay Business Chamber chief executive Nomkhita Mona said it was unfortunate that the municipality had not accepted repeated offers from the group of high energy users for mediation.
“The group has engaged the municipality on an ongoing basis to seek a resolution and will continue to do so,” she said.