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Shareholding in REDs questioned

15 October 2007 – A decision to award majority shareholding in the six REDs to government has been questioned by municipalities.

The cabinet decision of October 2006 awards 51% of the shares to government, with the remainder being divided between municipalities and Eskom.

Amos Masondo, head of the South African Local Government Association, and executive mayor of Johannesburg, plans to ask for access to the formula used in the share allocation.

Assets will be provided by municipalities and Eskom, while government is charged with ensuing communities received electricity.

This was among the issues raised at the Salga consultative workshop in Sandton on Thursday. The workshop was attended by delegates from 207 municipalities.

Salga specifically seeks clarity on the following issues before the Electricity Restructuring Bill is enacted at the end of 2007:
"what valuation methodology is to be used for the valuation of municipal electricity assets; who "owns" key industrial clients; will they will also be transferred to the Reds?; the effect the establishment of Reds will have on municipal revenue schemes and their credit rating; and how service delivery agreements will be constructed".

In August, the RED Establishment Bill was rejected by cabinet and the minister of minerals and energy was asked to consult further with stakeholders.

According to Lance Joel, Salga executive director for municipal finance "We have not seen any regulations yet and it is hard to apply our minds and get a full picture. In (their) absence we feel the bill must at least contain the underlying principles informing the regulations, to have a sense of what we can expect."