Company allegedly pays “bags of cash” for illegal electricity

A Vereeniging-based metal castings producer allegedly paid Emfuleni Municipality staff bribes amounting to R14 million a year to help hook up an illegal connection and tamper with its meter readings, Sunday Times reports.

The company, Yellow Star Manufacturing (YSM), effectively cut its power bill in half through the arrangement, which was struck in 2014 after it couldn’t settle a R2-million debt with the municipality.

The scheme was so bold that a transformer was allegedly stolen from an Eskom depot and installed on YSM’s property.

YSM owner Hanno van Dyk and former CEO Andries Marx have had a major fallout, with each accusing the other of masterminding the arrangement.

In a statement to police in 2023, Marx claimed that Van Dyk had brokered a deal with municipal officials.

He also accused Van Dyk of laundering money, evading taxes, fronting using black employees for BEE scores, and engaging in other forms of fraud.

He explained that despite consuming a substantial amount of electricity, YSM never paid more than R100,000 a month to Emfuleni.

Marx said municipal employees would deliver fraudulent municipal bills and invoices, for which they were paid with bags of cash or through EFTs.

However, Van Dyk denied these allegations and claimed that Marx carried out the scheme undetected as he was trusted as CEO.

Marx is facing fraud charges for allegedly stealing over R30 million from YSM, and Van Dyk claims he only became aware of the illegal electricity arrangement after he fired Marx in 2022.

This was when the municipality sent YSM a R10-million bill for accrued arrears from 2014.

Emfuleni spokesperson Makgosonke Sangweni told the Sunday Times that no municipal employees were bribed and that those involved were employed by a company contracted by the municipality, which he refused to name.

The municipality has struggled to pay what it owes state-owned power utility Eskom, with its debt to the power producer accumulating to R8 billion — roughly 10% of the total municipal debt owed to Eskom.

The debt forced Eskom to attach the Emfuleni municipality’s bank accounts in an attempt to recover the money owed to it in September 2024.

The news came after a notice was given to the National Treasury and Emfuleni municipality in July 2024, removing Emfuleni as a beneficiary of the Municipal Finance Management Act 124 Debt Relief programme due to its multiple breaches.

“Consequently, the Sheriff of the Court has successfully attached Emfuleni’s four bank accounts to ensure that the money collected for electricity is paid directly to Eskom,” said Eskom.

The power utility said the municipality failed to comply with the debt relief programme’s requirement.

Attaching its accounts allows Eskom to collect payment for its electricity, ensuring that the municipality’s customers enjoy continued service.

The utility said it had exhausted all legal and mediation avenues to secure payment for services rendered since 2018.

“Eskom cannot financially sustain the electricity debt of the municipality without severely impacting its own operations and the citizens of the country,” it said.

“The municipality’s failure to pay for bulk electricity compromises Eskom’s financial stability and its ability to provide affordable electricity.”

As of 31 August 2024, the municipality owed Eskom nearly R8.1 billion, placing it among the top three municipalities in debt to Eskom.

Eskom’s smart meter plan

Eskom board chairman Mteto Nyati has said the utility wants to reach agreements with municipalities that owe it money, through which it will implement smart meter technology to improve revenue collection.

The board chair made the proposal before the Standing Committee on Public Accounts on Thursday, 27 February 2024.

“Our proposal says all of the key municipalities that are owing Eskom need to ringfence their electricity business,” he said.

Nyati explained that the money collected gets lost when it gets in municipal accounts, and ringfencing the funds will enable municipalities to pay Eskom before putting the rest into the municipality.

“We need to make sure that municipalities are working,” he said.

“One of the first areas that we want to focus on is to make sure that the electricity part works. We are going to be working with them and help them collect.”

He said some municipalities can only collect around 60% of what they should collect.

“Why? Because they don’t have the funds to invest in implementing smart meters that can help them to collect more,” he said.

“Through this arrangement with municipalities, part of that will be helping them to go and implement these smart meters in households, and that will help with the revenue collection.”