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Scandal Rocks Tshwane as R4.7bn Tax Bill Looms Over Old Contract
The City of Tshwane faces a R4.7bn tax bill for a contract awarded over a decade ago. The agreement, which was for the installation of smart meters, was deemed invalid and unlawful by the North Gauteng High Court in 2017. However, according to Mayor Cilliers Brink, during a media briefing on Monday, the city was paying R91m a month in fines for the contract, with the SA Revenue Service (Sars) demanding more, as per SowetanLIVE.
Brink said the ANC administration 2012 entered into an irregular contract with PEU Capital Partners and Total Utility Management Systems, against the advice of the National Treasury, withholding the information from the council at the time. This agreement has resulted in the city owing Sars R4.7bn for payments made to the companies in the form of interest and penalties on the contract.
PEU Capital Partners accessed the municipality’s bank account between 2012 and 2015 to pay itself. Brink stated that in the past year, the city learned it owed Sars outstanding VAT payments on this unlawful contract from 2012 to 2016. In the meantime, penalties and interests have accrued on this account. Brink added that R2bn of undisclosed payments had already been made on the account, forming part of the city’s unauthorised, fruitless, and wasteful expenditure detected by the auditor-general in the previous financial year.
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The City of Tshwane is paying R91m monthly on this bill, significantly impacting its cash flow. Sars is now demanding an even larger payment, and the city is undergoing a forensic investigation to determine how payments were made by city officials and then hidden from the city’s political leadership.
In addition to this financial crisis, the City of Tshwane has proposed a 12% tariff increase on water, electricity, refuse collection, and sanitation. The municipality also proposed a 9.2% hike for water and sanitation and a 6% increase for refuse collection, a decrease from the 18% increase proposed in the municipality’s draft budget tabled during Friday’s council meeting.
Mayor Brink has called for rigorous oversight of the work of the city administration. The city will obtain all documents detailing the nature and extent of this liability and when the relevant parties agreed that the city would foot it. The city will dispute this liability if needed, even if it means entering into an intergovernmental dispute.
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