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Danny Jordaan’s R100m electricity ‘gift’ to business

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Danny Jordaan
Danny Jordaan

Nelson Mandela Bay Mayor Danny Jordaan handed a R100m “gift” to 13 high-energy-user companies operating in his metro by agreeing to slash two-thirds of their electricity debts. This was in a bid to smooth relations with the business sector and save nearly 3 800 jobs that the companies said would be shed if they were forced to cough up.

In its motivation to support the writing off of the debt, the metro maintains that it will recoup the money in the long run from the 3 800 people whose jobs were saved, as well as from the other ratepayers.

The move comes after the 13 companies took the metro to court in 2011, seeking to have the 2011/12 budget declared unlawful after the municipality introduced electricity-tariff increases that were deemed expensive and illegal by a high-energy-user group of companies.

Following years of litigation and failed attempts to write off R149m worth of debt by the companies – resulting in them withholding payment in protest at the tariff hikes imposed in the 2011/12 financial year – Jordaan managed to negotiate a settlement resulting in R100m of that amount being written off.

In his speech to council, Jordaan acknowledged that the city had used electricity tariffs in the past to augment its budget. “Our city is run inefficiently. We have been charging consumers progressively higher service charges and rates without a concomitant improvement in service quality. We have been using income from electricity to cross-subsidise budget expenditure, and this can no longer continue,” Jordaan said then.

The council meeting, held at the Old Wood Exchange building in Port Elizabeth, approved the settlement deal following confidential talks between the parties, including the Nelson Mandela Bay Business Chamber, which supported the 13 companies against the metro.

City Press is in possession of the out-of-court settlement agreement between the group of companies and the metro. Recommendations in the agreement include that the metro approve a writing off of all interests on overdue accounts, that new electricity tariffs be in compliance with the law and that the 2015/16 financial year tariff structure for high-energy users be formulated according to their categories.

Many of the companies are component suppliers to the automotive industry, the lifeblood of the city.

This week Jordaan expressed relief that this long and difficult chapter had finally come to a close. His spokesperson, Mlungisi Ncame, said: “One of the priorities of [Jordaan’s] first month in office was to identify priority projects that needed to be unblocked through political intervention. In this regard, we are pleased that council approved the deal with the 13 biggest energy users to write off R100m of R149m owed to the municipality. This matter has strained relations with business for far too long, and it was also threatening to affect jobs,” he said.

The deal further states that “the metro will recover millions in unquantifiable annual revenue from the directly affected 3 799 ratepayers whose jobs would be retained as a result of the settlement”.

Kobus Gerber, chairperson of the Nelson Mandela Bay Metro Ratepayers’ Association, said the metro had been forced to make concessions to business.

“The companies would have had to retrench more than 3 000 people. The metro had no choice but to settle the matter because they had created this mess in the first place by increasing tariffs illegally. We also understand that some of these companies were threatening to close shop and take their business to other provinces or countries such as Mozambique. You must remember these factories create lots of jobs. A conducive environment is needed to retain them and make sure more investors are attracted,” he said.

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