Court orders Nama Khoi municipality to pay Rural Maintenance

The High Court in Kimberley has ordered the Nama Khoi Municipality, based in Springbok in the Northern Cape, to pay its development partner, the family-owned Rural Maintenance, the almost R12 million it is due for revenue advancement services rendered since February.

According to Mayor Rodney Kritzinger, the payment was authorised on 18 December.

This had to be paid from the R76 million in additional funds that Rural Maintenance generated for the municipality between February and the end of September, through cost savings and increased revenue. Rural Maintenance is entitled to a percentage of this amount.

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In addition, the balance of the R76 million that the municipality transferred from the special account opened for this purpose into its main account must be paid back, and the municipality may only use it for the purposes agreed to in the contract with Rural Maintenance.

Kritzinger says the full amount is not immediately available, but that this will be discussed with Rural Maintenance.

Counterapplication

This order will remain in force until a counterapplication, brought at the eleventh hour by Nama Khoi to set aside the contract with Rural Maintenance concluded in November last year, has been heard and finalised by the court.

Kritzinger however says the executive committee has resolved to abandon further litigation in the matter and to proceed with the contract.

Moneyweb has previously reported on Rural Maintenance’s work in the Nama Khoi Municipality and National Treasury’s opposition to the agreement.

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The company has already invested about R50 million of its own money in Nama Khoi to improve infrastructure and is doing far more than its contractual mandate requires.

Kritzinger indicated that the council is highly satisfied with Rural Maintenance’s performance, but withheld payment to the company because National Treasury considered any payments in terms of the contract as irregular expenditure. Treasury had earlier threatened to withhold the municipality’s state grants and to lay criminal charges against officials and councillors involved unless the contract was cancelled.

Special account rules

The court ordered the municipality to deposit all income from the sale of water and electricity into the special account, as stipulated in the contract.

After calculating the “additional funds”, or positive delta, realised thanks to Rural Maintenance’s work, the remainder of the income may be transferred to the municipality’s main account for general use.

The municipality has also been prohibited from withdrawing or transferring funds from the positive delta in the special account for any purpose other than paying Rural Maintenance what it is owed, which takes first priority.

Thereafter, the money may be used to improve water and electricity infrastructure, followed by enhancements to the municipality’s operational capacity. This sequence is a contractual requirement.

The court specifically prohibited the municipality from using the positive delta to settle old debt or to pay other service providers that have nothing to do with the contract.

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The municipality was further ordered to provide Rural Maintenance with a full accounting of all income from water and electricity sales since February (when the contract was implemented) that was not deposited into the special account, as well as all details of all payments and transfers from that account during the period.

According to the court order, this must be properly substantiated with bank statements and supporting documentation.

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The municipality must, without delay, resolve all disputes with Rural Maintenance regarding the status of the account and implement the automatic payment mechanism envisaged in the contract.

In addition, the municipality was ordered to pay Rural Maintenance’s legal costs in the matter.

Council and DA response

Kritzinger, who as DA mayor leads the governing coalition with the Namakwa Civic Movement and the Freedom Front Plus, said in response to the ruling that the council is grateful for the court’s guidance and will comply with the order.

He earlier indicated that the Auditor-General gave the municipality an unqualified audit report after thoroughly investigating the contract.

DA national spokesperson Jan de Villiers said the party takes note of the ruling and of the municipality’s plans to proceed with its implementation and with the contract with Rural Maintenance. He said the DA will support its mayor where necessary.

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