The Emfuleni Local Municipality (ELM) recently presented an information session to tell members of the Golden Triangle Chamber of Commerce more regarding the Emfuleni smart meter roll-out project. Johan Sipho Coetzee, an independent ICT & Management consultant and member of the Golden Triangle Chamber, attended the session and here shares his interpretation and opinion.
Some of the facts regarding the project that came out in several presentations and associated discussions during the session, included the following:
1. The Emfuleni electricity- and water meter fleet is old, inaccurate and in urgent need of replacement.
2. The contract for the supply and roll-out of smart meters was awarded to BXC (A subsidiary of Xiaocheng Electronic Technology Stock Co. Ltd, a Chinese company. (It was not clear whether the correct commercial process was followed by ELM in awarding this contract.) Xiaocheng Electronic Technology Stock Co. Ltd is a large company running similar projects in China, Ghana and Mozambique. (None in South Africa – Emfuleni is their first client here.)
3. The BXC contract is for 10 years and neither ELM nor Emfuleni residents would supposedly pay for the smart meters or the roll-out project while BXC would recoup their investment and profit by getting a percentage of the savings realised by Emfuleni with the project. BXC would supposedly transfer ownership of the infrastructure to ELM after the roll-out project. (The %, the period during which BXC would be entitled to the percentage or the way how savings are calculated were never revealed. The period after which ELM would receive ownership of the infrastructure was also not revealed).
4. The BXC smart meter contract and the MBD (Munnik Basson Dagama Inc.) ELM debt collection contract was not aligned with each other by ELM but done in isolation from each other. (I foresee potential clashes).
5. The roll-out project has been active for four years with only 5 600 electricity smart meters rolled out in Emfuleni to date. (I estimate there are 240 000 households in Emfuleni.)
6. This phase of the project is electricity meters only. Smart water meters are due later on. (When is unclear, no project plan was presented).
7. It was evident from the questions (and ELM denials) that the communication on the project is sub-standard and that all the operational and error-reporting procedures once a meter is installed is not 100% in place.
8. ELM claimed increased collections was not the prime driver for the project. I wonder where the BXC savings percentage would then come from.
9. BXC has not recovered any money from ELM at this stage. (In my conservative estimation BXC already invested more than R243 million from their side in the project. 5 600 meters x R4,000 each = R22,4 million capital cost, R5 million central IT infrastructure capital cost plus R54 million x 4 years = R216 million project & operational costs).
My personal conclusions on the project after the information session were:
* Smart meters for electricity- and water consumption seem to be a good idea to get rid of the aging and inaccurate Emfuleni electricity- and water meter fleet.
* Smart meters could help ELM to increase its dismally low collection rate for water and electricity consumption.
* Smart meters would give ELM the capability to remotely switch off the electricity- or water supply to a portion of the network or a property for maintenance purposes.
* The Emfuleni smart meter roll-out project is seriously running behind schedule due to political interference to cater for members (wards) who protest because they are disgruntled with the roll-out of the meters. (Maybe worried because they will now have to pay for electricity and water consumed?)
* The commercial terms of the contract between ELM and BXC is suspect and might lead to Chinese control of the ELM electricity- and water infrastructure. Questions that have to be asked include: Have we given the ELM crown jewels to the Chinese for free? Would the Chinese in future have the capability to remotely switch off the electricity and water to a company like Arcelor Mittal?
* My money is on this project failing in the next year or two when BXC runs out of money or gets fed up with ELM’s political interference. Unless there is a hidden Chinese agenda. Depending on the fine print in the contract BXC / China might have ELM at the proverbial “short and curlies” with a potential capital debt of R1 780 000 000 and an operational debt of R852 000 000 whilst ensuring ownership of the infrastructure is not transferred to ELM and stays with BXC. If that is the case, welcome to ELM, a South African municipality owned by China!
* I would love to see the BXC proposal to the ELM tender for this project as well as ELM’s selection criteria used to select BXC. I am sure the business case tabled in the BXC proposal did not realise.
And you thought state capture by the Guptas is our biggest concern in Emfuleni?!