A poultry factory. Picture: REUTERS
A poultry factory. Picture: REUTERS

SA’s largest poultry producer, Astral Foods, has won an interdict against Eskom to prevent it from cutting the electricity supply to the defaulting Rand West local municipality, dealing a blow to the cash-strapped utility that is owed R26.4bn by local authorities.

This raises questions about Eskom’s ability to reduce municipal debt that has worsened the utility’s financial woes. Eskom, which supplies about 95% of SA’s electricity, has total debt of R450bn.  

Astral said on Wednesday it had taken the action because a cut in electricity would have a “catastrophic” effect on its Meadow Feeds operation and other businesses in the Rand West area.

We are satisfied with the order preventing Eskom from interrupting the electricity supply to our animal feed mill in Randfontein
Chris Schutte, Astral CEO

The company said it had applied for the interdict barring the interruption of bulk supply of electricity to the municipality, pending the outcome of a review application that will be launched by Astral in 2020.

Eskom, which reported a R21bn loss in the year ended March 2019, said on Thursday it has not received reasons for the order.

“Eskom will be able to take a decision once it has studied these reasons. It is the first time that Eskom has been taken to court where a court order was granted before Eskom made a final decision in terms of [the Promotion of Administrative Justice Act] as to whether the municipality electricity will be interrupted or not, hence Eskom is waiting for reasons from the judge,” Eskom said.

Michael Schmitz, MD of Astral’s feed division, said the company’s previous attempts to fend off the power cuts had failed.

“Even though Astral had submitted written representations to Eskom setting out the reasons why the proposed disconnection of electricity would cause catastrophic damage, not only to Astral’s Meadow Feeds business but other businesses that operate in the Rand West local municipality, Eskom persisted with its intention to consider a disconnection. In the circumstances, Astral was left with no alternative but to approach the court for relief,” Schmitz said.

Astral said it decided to apply for the interdict after Eskom said on October 15 it would exercise its right to disconnect the supply of electricity to the municipality. The Johannesburg high court ruled in the company’s favour.

The company, which has a market capitalisation of R8.65bn, said Eskom was supposed to have commenced with the disconnection on November 27.

“We are satisfied with the order preventing Eskom from interrupting the electricity supply to our animal feed mill in Randfontein and remain of the opinion that we, the paid-up consumers of electricity, should not be penalised for the inefficiencies and corruption prevalent within the local municipalities,” said Astral CEO Chris Schutte.

Schutte said the dependency on Eskom for power supply is “unhealthy” and the repeated threats to interrupt supply affect Astral negatively.

“The lack of business confidence in general is also negatively impacting both investment and growth opportunities. It is unacceptable that big businesses have to take over the responsibility of protecting the interests of all paying customers, as Eskom persists with the irrational idea of terminating the electricity supply to the manufacturing sector,” he said.

The owner of consumer brands Goldi, County Fair and Festive has also been facing severe water shortages in Standerton, saying in November the crisis was so severe it had to source its own water to keep its processing plant there operational.

At the time Business Day reported  the deteriorating infrastructure and the Lekwa municipality’s inability to provide water added a cost burden to the company, which is already on the back foot due to a combination of high raw material prices and chicken imports.

njobenis@businesslive.co.za