Sonae Arauco (SA) Pty Ltd v Mbombela Local Municipality and others
| Jurisdiction | http://justis.com/jurisdiction/166,South Africa |
| Judge | Roelofse AJ |
| Judgment Date | 16 August 2023 |
| Citation | 2023 JDR 3129 (MN) |
| Hearing Date | 02 August 2023 |
| Docket Number | 3151/2023 |
| Court | Mpumalanga Division (Main Seat) |
Roelofse AJ:
Introduction
Load shedding – a term all South Africans are painfully familiar with. It costs lives and lively hoods. It is a necessary evil to protect all South Africans from a total collapse of the national electricity grid, more often referred to as a total blackout. Load shedding is implemented as a result of Eskom, who is South Africa’s national electricity generator and distributor, and Government who is Eskom’s only shareholder’s failure to properly and diligently execute their Legislative and Constitutional obligations. [1] This judgment shows but one example to the disastrous effect of load shedding upon business, our economy and all the people of South Africa.
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Roelofse AJ
The applicant (Sonae) is a subsidiary of Sonae Arauco International. Sonae Arauco International has an international footprint. Sonae specialises in the manufacturing of wood based panels which is an essential input in the building and construction industries. Sonae’s factory (the factory) is situated in the Rockey Drift area between Mbombela and White River. Rocky Drift falls under the Mbombela Local Municipality [2] (the municipality)’s jurisdiction.
Sonae is the single largest contributor to the municipality’s electricity revenue. Sonae spends more than R 100 million annually on electricity which it purchases from the municipality. [3]
Sonae employs 250 people and spends in excess of R 600 million per year in the local economy. Sonae is therefore a major contributor not only to the municipality’s revenue but is also a major contributor to the local economy.
The factory operates continuous production lines, running 24 hours per day. The factory is dependent on a steady electricity supply to safety conduct its operations and to be sustainable.
The equipment that is installed in the factory operates at high temperatures and his tremendous tremendously sensitive to electricity supply interruptions, specially load, shedding, as it causes severe damage to the production Lines, the
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Roelofse AJ
electrical and electronic control equipment, which in turn and creates a major fire risk and jeopardizes the eventual output of the entire factory.
Sonae alleges that if it is subjected to continuous load shedding it will have to let go of its employees and close its operations. In addition, Sonae alleges that load shedding creates a real and substantial risk of fire at the factory. This causes a health and safety risk for all persons at the factory which includes employees, contractors, suppliers and the general public.
Sonae alleges that it has no alternative energy source and that an alternative electrical supply plant will require a capital expenditure of approximately R 600 million and it would take at least 12 to 18 months to commission. Sonae is not in a position to install or implement such a massive power plant.
In order to address the load shedding problem, Sonae approached the municipality during the beginning of 2020 and proposed the conclusion of a controlled curtailment agreement [4] (the agreement). The agreement would entail: that the municipality refrains from implementing load shedding to the factory; in turn Sonae will control its electricity usage at the factory and limit the same to approximately 70% or less of its usual electricity usage; the curtailment is achieved by shutting down that the operations at the factory during periods of load shedding; the electricity supply to the factory would remain uninterrupted. Sonae alleges that the agreement was entered into between it and the municipality orally.
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Roelofse AJ
The effect of the agreement was that Sonae could continue with its operations albeit at a diminished scale, avoid damage to equipment and continue with production, therefore remaining commercially viable. Sonae alleges that it and the municipality complied with the terms of the agreement form its conclusion until December 2022.
During December 2022, and for reasons then unknown to Sonae, the municipality implemented load shedding at the factory. Sonae alleges that the municipality therefore breached the agreement and the load shedding was done in conflict with the municipality’s obligations in terms of the agreement. Furthermore, the municipality implemented load shedding without any prior notification or warning to Sonae.
On 28 December 2022, Sonae wrote to the municipality and requested that the municipality comply with its obligations in terms of the agreement. No response was received from the municipality to this communication.
Sonae alleges that during January 2023, “. . . .the Municipality came to its senses and made a commitment to Sonae that it will continue to comply and adhere to its obligations in terms of the controlled curtailment agreement, the same as since its inception in 2022.”
Sonae expressed its gratitude to the municipality and requested that municipality inform Sonae immediately if any future non-compliance with the agreement is anticipated so that continuous electricity supply is not interrupted
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Roelofse AJ
without notification or warning systems it causes a major fire risk at the factory and put people’s lives at stake.
Sonae alleges that on 9 June 2023 and without any communication or prior warning or notification, the municipality applied full load shedding on the factory. [5] Sonae alleges that the municipality is in breach of the agreement and that Sonae would approach the court for relief.
Relief sought by Sonae
Sonae approached this court on notice of motion on an urgent basis. Sonae’s notice of motion consists of two parts, being a Part A and a Part B. Part A of Sonae’s notice of motion (excluding prayer 1 which is the urgency prayer) reads:
That a mandatory interim interdict, with immediate effect, be granted against the first respondent (“the Municipality”) to comply with its obligations in terms of the Controlled Curtailment Agreement concluded between the applicant (“Sonae”) and the municipality by refraining from implementing load shedding and to grant a continuous electricity supply in the area where the grid of Sonae’s factory is located, pending the finalisation of Part B of the notice of motion.
In the alternative to prayer 2 supra, that a prohibitively interdict, with immediate effect, be granted against the Municipality from implementing load shedding in the area where the relevant grid of the Sonae factory is located, pending the finalization of Part B of the Notice of Motion.
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Roelofse AJ
That the second respondent (“Eskom”) be interdicted and restrained from implementing load shedding in the area where the relevant grid of the Sonae factory is located, pending the finalization of Part B of the Notice of Motion.’
Sonae seeks costs against the municipality and Eskom and any other party who opposes the application.
In Part B of the notice of motion Sonae seeks far-ranging relief including judicial review and mandamuses. The mandamuses include orders that the municipality and Eskom’s decisions not to supply electricity and its failure to do so be set aside, be declared unlawful and averse to the municipality and Eskom constitutional obligations. [6]
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Roelofse AJ
I am only seized with Part A of the notice of Motion.
Only the municipality and Eskom opposed Part A of the application and only they filed papers.
URGENCY
Sonae alleges that it instituted the application on a semi-urgent basis in order to afford the municipality and Eskom a fair and reasonable opportunity to respond. The application was issued on 17 July 2023 and served on 18 July 2023. The respondents were given until 21 of July 2023 to file and deliver their notice of intention to oppose the application and given until 25 July 2023 to deliver their
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Roelofse AJ
answering affidavits. The time periods afforded to the respondents to respond to the application demonstrates that the application was not brought on a semi-urgent basis.
The municipality delivered its answering affidavit on 25 July 2023. Eskom delivered its answering affidavit on 31 July 2023 and is seeking condonation in this regard. Sonae filed its “short” replying affidavit on 1 August 2023, i.e. on the date of the hearing of the application. This court first had sight of Eskom’s answering affidavit on the morning of initial set down and Sonae’s replying affidavit the day after the hearing was first set down. The court heard the application on 2 August 2023.
Sonae advances as grounds for urgency: The unilateral and illegal deprivation of a continuous electricity supply to the factory without due process; the fire risks at the factory (and surrounds) associated with load shedding; load shedding poses a continuous risk for the operations of the factory; the municipality stands to lose the substantial income it receives from Sonae, and that the economy of Mbombela stands to suffer great harm if load shedding to the factory continues; Sonae will not be afforded substantial redress at hearing in due course because the inevitable will occur namely Sonae’s demise with the resultant harm to Sonae’s employees, contractors, suppliers and the public; Sonae will not be able to recover from continuous load shedding; and, Sonae did not unduly delay the bringing of this application as it has made various pleas to the municipality to resolve the impasse which was ignored by the municipality and Eskom, the latest attempt being on 5 July 2023.
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Roelofse AJ
Both the municipality and Eskom take issue with urgency. The municipality is of the view that Sonae has failed to set out explicitly the circumstances which...
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