Public Protector Weighs Investigation Into Nelson Mandela Bay’s R250,000-a-Month Transformer Lease

The office of the Public Protector is assessing a formal complaint linked to a controversial decision by Nelson Mandela Bay to lease a high-value municipal electricity transformer to a private steel manufacturer for R250,000 a month.

At the centre of the dispute is a one-year lease agreement involving a municipal transformer worth an estimated R25 million, which was transferred to Coega Steels in the Coega Industrial Development Zone.

The agreement has drawn claims that key approval processes were bypassed before the asset was removed from municipal control.

How the Transformer Deal Unfolded

According to the complaint, Coega Steels approached the municipality on August 21 after one of its own transformers allegedly failed, threatening to halt production.

The following day, then acting city manager Ted Pillay allegedly decided to make a municipal transformer available, despite the absence of a council resolution, completed due diligence or a technical report authorising the move at that time.

Several days later, a request for a technical assessment was made, and on August 26 the municipality indicated its intention to assist and draft a memorandum of agreement.

However, the complaint states that the transformer was relocated before any agreement received council approval. The lease agreement was ultimately signed on September 11.

The asset in question — a 132/22kV, 63MVA transformer — was originally installed at the Sonop substation and forms part of Nelson Mandela Bay’s electricity infrastructure.

Council Backlash and Legal Review Plans

The transaction became public in October when councillors objected during a council meeting after being asked to retrospectively approve the lease. City manager Lonwabo Ngoqo later confirmed that the metro intended to subject the already-concluded agreement to judicial review in the High Court.

The issue resurfaced earlier this month when Siyanda Mayana, a former GOOD party regional chair in the city, opened a case of unlawful removal of state property at the Humewood police station in Gqeberha.

Public Protector Complaint Under Assessment

A formal complaint has since been submitted to the Public Protector, prompting an initial assessment process. Spokesperson Ndili Moski confirmed receipt, saying: “The Public Protector SA confirms receipt of the complaint.

“In accordance with [our] investigation procedures, once a complaint has been lodged with the PPSA, it is screened and assessed. That is to determine jurisdiction and whether there is sufficient information, and substantive reasons as to why the matter should be accepted for investigation, among other things.”

Moski said the complaint remains in the assessment phase and has not yet been allocated to an investigator.

“Should the assessment reveal there is sufficient information to proceed with an investigation, and it is determined the Public Protector has jurisdiction to investigate the matter, the complaint will be allocated to [one of our] investigators who then commences the investigation process.”

Alleged MFMA Breaches and Approval Failures

Mayana’s complaint calls for an investigation into whether the leasing of the transformer complied with the Municipal Finance Management Act (MFMA) and Municipal Asset Transfer Regulations.

These require council approval and public participation when high-value municipal assets are leased or disposed of.

The complaint further alleges that National Treasury was informed a due diligence process had been completed — a claim it disputes.

It also raises concerns over who authorised the physical relocation of the transformer, who paid for its transport and insurance, who was responsible for maintenance, and how long the asset would remain in Coega Steels’ possession.

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Confirming the submission of the complaint, Mayana said: “I have submitted the complaint due to the unlawful and unauthorised removal of a municipal transformer to a private company. The mayor approved the decision and instructed the city manager to sign.”

He argued that the mayor’s alleged involvement breached the separation between political and administrative functions: “Firstly, the mayor is a politician, so she has no business getting involved in administrative matters, particularly procurement matters, because it is against the MFMA. It is unlawful for her to get involved.”

Mayana added that even without political interference, the process had allegedly been flawed: This is how the process goes: if any municipal asset is going to be leased to anyone, there needs to be public participation first, followed by a council resolution.

“None of that happened. The company wrote to the municipality. Within two days, they facilitated the move and did it without any council approval … no process took place.”

Coega Steels Defends Its Position

Coega Steels has previously said it had no reason to believe the lease was irregular. A company spokesperson explained: “The industrial-scale transformer in question is not a standard, off-the-shelf item and given its cost, is not held in stock by industry.

“These units are custom-built and typically held as spares only by a few municipalities or Eskom.”

As a municipal customer, the company said it approached the metro after discovering no suitable replacement transformer was commercially available in South Africa: “Given the urgency of the situation — with production halted and hundreds of jobs at stake — Coega Steels submitted a formal request to the municipality outlining the potential economic impact.”

The spokesperson said the company was told the transformer was a municipal spare unused since 2018 and stressed it was not involved in municipal compliance processes: “It is important to emphasise that Coega Steels was not, and is not, privy to the municipality’s internal administrative or legal vetting processes.

“Our engagement has been strictly in accordance with the guidance and procedures communicated to Coega Steels by municipal officials.”

Eskom, the company added, had indicated a willingness to assist, but available units were technically incompatible with Coega Steels’ infrastructure.

Political Pressure and Separate Allegations

Mayor Babalwa Lobishe has previously claimed she was being targeted by “smaller parties” ahead of local government elections. The ANC has also raised concerns, with Eastern Cape secretary Lulama Ngcukayitobi stating in a widely circulated letter:

“If proven true, it raises concerns regarding governance, accountability, and the protection of public assets …[we] formally request you [Lobishe to] submit a detailed report on the matter.”