Despite having a hydroelectricity plant that could lessen its electricity bill, Mpumalanga’s Thaba Chweu Local Municipality’s debt to Eskom is almost R1 billion.
The plant, which was run by a private company, has the capacity to add 2.3 megavolts (MV) to the grid, but it has not been operational for about six years due to a contractual dispute that the Mashishing-based municipality has declined to reveal.
Thaba Chweu owes Eskom R827.5 million.
In 2013 the municipality contracted a Chinese company to build a R410 million 40MV substation to supplement its electricity supply, but residents have been up in arms because it has introduced a fixed monthly service fee of R184 and increased the tariff by 10% to repay China Sinogy Electric Engineering Company (CSEEC) SA.
Municipal spokesperson Themba Sibiya said the hydroelectric plant was able to supplement Eskom’s electricity supply during peak hours, but its capacity was not enough to supply the entire town.
“The plant has not been operational for a while due to legal disputes. Not much can be divulged because it is sub judice,” Sibiya said.
City Press understands that the plant, despite being owned by the municipality, supplied electricity to private companies when it was operational.
Sibiya defended the municipality’s decision to contract CSEEC to build the Duma Substation, saying it was necessary to meet the electricity demands as the town was growing.
The construction of the substation was, however, controversial.
When the Thaba Chweu council appointed CSEEC in 2013, it was met with protests from the EFF and DA due to the project’s high cost.
CSEEC brought along another Chinese company, Hexing Electrical South Africa, to install its smart metres in 13 000 households in Mashishing.
The smart metres also became a contentious issue because of concerns that electricity tariffs would increase and that they were not registered with the SA Bureau of Standards.
Thaba Chweu councillors tried to stop the project in 2018 after realising that it was too expensive when its cost increased from R295 million to R388 million and eventually to R410 million.
They, however, withdrew when CSEEC’s managing director, Wu Wensheng, threatened legal action.
The councillors alleged that the transaction did not comply with section 120 of the Municipal Finance Management Act.
They pointed out that there was no contract management plan and that the bill of quantities, which was submitted on May 16 2018, depicted “hallmarks of flagrant misrepresentation of the project as a public-private partnership, while the municipality is portrayed to have agreed, through its officials, to all the irregularities”.
Duma Substation was a turnkey project. CSEEC raised all the money for the project and was to recover it later from electricity sales.
A contract between CSEEC and Hexing stated that a monthly system management fee of “3% of the total municipality electricity and 4% of the electricity sales collected via a third-party vendor” would be charged.
Thaba Chweu Mayor Fridah Nkadimeng said that the main reason for the tariff increase was the inability of the council to bring down the Eskom debt because the council sold electricity to its residents at a loss.