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Mayor and municipal manager given suspended jail terms over failure to pay Eskom debt

The mayor of the Enoch Mgijima Municipality and the municipal manager are facing jail sentences if they fail to pay Eskom on time again, the Makhanda High Court has ordered. (Photo: gale.com / Wikipedia)

The mayor of the Enoch Mgijima Municipality and the municipal manager have been convicted of contempt of court and given suspended prison sentences after they failed to abide by a court order that compelled them to pay off the municipal debt to Eskom at R30-million a month and keep the electricity bills current.

The mayor and municipal manager of the Enoch Mgijima Municipality based in Komani, formerly known as Queenstown, have been found guilty of contempt of court and will face a year in prison if they fail to pay Eskom on time again.

A year ago, on 12 December 2019, the Makhanda High Court issued an order compelling the Enoch Mgijima Local Municipality to honour a payment agreement with Eskom.

Eskom, in turn, undertook not to cut the electricity to the municipality, with the exception of load shedding.

The municipality was also compelled to report back to Eskom and the court that they had complied with the monthly payments.

Four of the businesses which brought the original application, cooldrink manufacturer Twizza, Crickley Dairy, Farmhouse Frozen Foods and Kingfisher Industries, approached the high court earlier in December, complaining that the municipality was not abiding by the order.

According to papers before court, the municipality made an initial payment of R90-million immediately and a further payment of R23-million on 20 December 2019. The agreement was that the municipality should then pay a monthly R30-million as well as all current accounts until the debt had been settled.

The Enoch Mgijima Municipality is the local government that owes Eskom the most in the province, with an outstanding debt of R309-million.

The municipality paid and reported until February 2020 and then stopped.

The four businesses approached the court to request that Mayor Luleka Gubhula-Mqingwana and municipal manager Nokuthula Mgijima be convicted of contempt of court for failing to comply with the order.

The municipality is under administration after the court ordered earlier in 2020 that a municipal rescue plan be implemented.

Gubhula-Mqingwana and Mgijima, however, claimed that this had prevented them from paying Eskom. They said that the Covid-19 pandemic had a devastating effect on the municipality’s financial position because they were “required to spend enormous resources in this regard. Something that was wholly not expected.”

But in papers before the court, the business applicants state that the first missed payment due to Eskom was due on or before 31 March 2020.

The Enoch Mgijima Municipality was placed under administration by agreement after the Eastern Cape government was taken to court by Let’s Talk Komani to have the council dissolved for its unconstitutional failure to deliver services. 

In her ruling, Judge Thamie Beshe states:

“The state of disaster was declared on 26 March 2020. On 26 March 2020, the municipality’s attorney addressed a letter to the business applicants and stated that ‘as matters stand, the municipality will have to report to the court that it is unable to comply with its obligations and to seek appropriate relief from the court’.

“In this letter, the [municipality, the mayor and the city manager] complain that payments made to Eskom have had a debilitating effect on the municipality’s ability to pay its normal operational expenses. The letter also makes reference to the outbreak of Covid-19 and the government-legislated response to the outbreak and two Government Gazettes that are said to be dated 25 March 2020. Further that ‘this will place a consider[able] further strain on the municipality’s fragile financial position’.

“There are no details of what resources and to what extent were utilized towards the Covid-19 pandemic, if any, at that stage – the letter having been penned the same day that the state of disaster was announced by the president. Clearly, as the letter suggests, a need to take urgent measures to deal with the outbreak of the pandemic was at that stage still expected.

“This defence too cannot absolve the [municipality, municipal manager and the mayor] from complying with the order,” she said. “It begs the question: Why then did the municipality agree to the terms of the order and the confirmation of the payment plan knowing that it could not keep up with the payment plan[?] Can it not be said that this is an indication that even at that stage there was no intention to comply with the order[?] As counsel for the [businesses] suggests – they agreed only to relieve [the] pinch of the shoe at that stage or for the time being,” she said.

“Their defences do not seem to have been raised in good faith. In my view, both are implausible for reasons that I have already stated. The credibility of the [municipality, mayor and municipal manager] is further impacted on by the undisputed evidence that came to the attention of the [businesses that brought the application] a few days before this application was to be heard. Namely, that the municipality was paid its equitable share by National Treasury in July 2020, an amount of R89-million,” Beshe continued. 

“If the [municipality, mayor and municipal manager] were intent on complying with the court’s order but for reasons they cited, why do they not disclose that the municipality’s financial position has improved? And [why have they not] expressed their preparedness to comply with the court’s order? This in my view shows beyond reasonable doubt that the non-compliance with the order was wilful and in bad faith,” she concluded.

The court sentenced the mayor and the municipal manager to a year in prison, suspended on condition that they keep on paying the Eskom debt, and will then be responsible for a punitive cost order if they fail to pay.

Ken Clark, a local businessman and chairperson of Let’s Talk Komani, an umbrella organisation for civil society organisations in the Komani area, said their legal advice was that it would not be possible for the municipality to appeal against this order.

“There has been a court order and they reneged on it. They tried to use Covid-19 as an excuse, but a court order is a court order,” he said. He said they would have to pay more than R130-million to Eskom to avoid going to jail. “So, unless the province bails them out, someone is going to prison,” he said.

“This is a serious matter and it is about time that someone realises this,” he said, complaining that not much was being done to assist the struggling taxpayers in the community.

“The municipality has a bloated payroll of note. They were instructed by Treasury to cut R89-million from their payroll.”

He said he believed rates collections remain low, at probably around 40%. 

“The taxpayer is getting nothing in return for rates. I believe what they collect probably only covers their payroll. Refuse is collected now and then, the roads are in an absolute state and don’t get repaired. We can’t even renew our vehicle and driver’s licences,” he said.

The Enoch Mgijima Municipality was placed under administration by agreement after the Eastern Cape government was taken to court by Let’s Talk Komani to have the council dissolved for its unconstitutional failure to deliver services. 

Last week, Eastern Cape Premier Oscar Mabuyane said in a statement issued after a provincial cabinet meeting that they had received and noted a report about the status of its intervention in the Enoch Mgijima Municipality. 

“The provincial government will continue monitoring the situation at the municipality on a month to month basis with a special focus on the financial recovery plan of the municipality. Residents of the municipality and businesses trading in the municipality are encouraged to pay for municipal services to resource the municipality and to improve its service provision.”

The statement said that several committees had been created, infrastructure projects were being planned and a report about unauthorised, irregular, fruitless and wasteful expenditure had been submitted to council. Its implementation was being closely monitored. DM/MC

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  • In most cases of municipalities, it’s a question of closing the stable after the horse has bolted. I mean the money has been either stolen (very likely) and what has come in has not been enough because of an inability by the people to pay or refusal to pay as everything connected to the ANC is left till it is too late to do anything. Apart from that, the municipal salaries are way above the value of the workers’ abilities. So where can you go from there?
    This is like trying to squeeze blood from a stone. As far as I can see, any solution to this problem right across the country has also left the stable. I would love to hear any sensible solution anyone can come up with.

    • Any sensible solution would simply be ignored by those in a position to implement it. The bloated salaries of the over staffed municipalities will remain, the unions will see to that. As for unauthorised, irregular, fruitless and wasteful expenditure, well, we all know that is here to stay.