Another Bloody Nose for Mafube: High Court Dismisses Municipality's Challenge to Electricity Contract

The Bloemfontein High Court has dealt another significant legal setback to the Mafube Local Municipality (MLM), dismissing its application to have its 25-year electricity management agreement with Rural Free State (RFS) declared invalid. The Court also criticised the municipality's conduct and ordered it to pay punitive legal costs.

A Challenge 13 Years Too Late

The electricity management agreement between Mafube and Rural Free State has been in operation since 2012. However, the municipality only sought to challenge the validity of the contract in 2024—thirteen years after it was signed and after benefiting from its implementation throughout that period.

The application follows the implementation of the Municipal Financial Recovery Plan (MFRP) by National Treasury, a process that remains incomplete. The Mafube Business Forum (MBF) has previously highlighted concerns regarding the shortcomings and practicality of the recovery plan through formal correspondence with National Treasury and submissions to Parliament's Committee on Local Government.

The Court was not persuaded by the municipality's explanation for the extraordinary delay.

In its judgment, the Court stated:

«"The thirteen-year delay, coupled with the absence of any satisfactory explanation, cannot therefore be excused by merely attributing the blame to an alleged, yet unsubstantiated, 'corrupt' former municipal manager and a dysfunctional municipality."»

As a result, the municipality's application for condonation was also dismissed.

Significant Investment in Mafube's Electricity Network

The Court recognised the substantial investment made by Rural Free State over the past decade.

According to the judgment, RFS has invested approximately R120 million in upgrading Mafube's electricity infrastructure. The Court observed that the municipality sought to escape its contractual obligations while continuing to benefit from those investments.

The judgment further notes that:

• Mafube accepted RFS's services without objection for more than a decade.

• By early 2025, RFS had generated nearly R2 billion in revenue for Mafube.

• Approximately R1.1 billion was paid to Eskom on the municipality's behalf.

• Mafube remains one of the few municipalities with no outstanding Eskom debt.

• More than R7 million was recovered from Eskom due to overbilling.

• Immovable property worth R3.2 million was added to Mafube's asset register.

• Nearly R30 million in royalties was paid to the municipality.

Service Delivery and Community Impact

The Court also considered the broader public interest and found that terminating the agreement would prejudice the community.

Under Rural Free State's management:

• Electricity service delivery has improved.

• Tariff increases have remained among the lowest in South Africa.

• Prepaid electricity payment points increased from four to twenty.

• Online electricity purchasing services were introduced.

Importantly, the Court found that Mafube currently lacks the capacity, technical expertise and operational resources required to manage and maintain the electricity network independently. The judgment warns that terminating the agreement could have "disastrous consequences" for electricity supply across the municipality.

Allegations Rejected

The Court found that documentation presented by Rural Free State contradicted the municipality's allegations of widespread procurement irregularities.

Furthermore, the Court accepted that Mafube's attempt to gain direct access to the electricity revenue amounted to an abuse of legal process. This finding ultimately justified the Court's decision to award punitive costs against the municipality.

Conclusion

The judgment represents another significant legal defeat for Mafube Local Municipality. Beyond dismissing the municipality's application, the Court reaffirmed the value of long-term infrastructure investment, highlighted the importance of continuity in essential service delivery, and criticised the municipality's attempt to repudiate an agreement after benefiting from it for more than a decade.

For the residents of Mafube, the judgment provides certainty that the existing electricity management arrangement remains in place and underscores the Court's concern that disrupting the current system would have serious consequences for reliable electricity supply.