Municipal debt to Eskom to reach R30bn by first quarter of 2020
Municipalities owed the struggling power utility R26.4bn as at September; the figure was at R1.2bn in 2013
Municipal debt to Eskom continues to escalate by R1bn a month with government officials tasked with addressing the issue seemingly offering little solutions, Eskom acting CEO and chair Jabu Mabuza said on Tuesday.
He suggested that the main issue to be tackled is the culture of non-payment. He said between March and September 2019 the amount municipalities owed to Eskom had gone up by R6bn. “If one looks at this trend-line, by the end of the financial year, this debt will be at R30bn,” Mabuza said.
“We support decisions being taken by the cabinet, but the real issue is not why we are where we are; it’s about how do we get out of where we are. I think we are spending too much time explaining why we are here as opposed to how we are going to get out of [this situation].”
He said Eskom lenders have flagged this issue as a major problem.
“The people who are lending us money are also pointing out that ‘[Eskom] is not able to collect your debt’. The third problem is we actually have to borrow money [then] incur costs to sell electricity [but] we are not being paid. We have to collect our debt or we have to stop supplying people not paying us.”
Municipalities owed the struggling power utility R26.4bn as at September, and the figure is still rising, MPs heard on Tuesday. The debt was at R1.2bn in 2013.
Municipalities have largely blamed their failure to pay on residents who continue to default. SA’s municipalities are owed more than R140bn by residents for services. Some residents have attributed their failure to pay for electricity and other municipal services such as water to high levels of unemployment and poverty. Eskom has previously threatened to cut off supply to the municipalities.
In October, co-operative governance and traditional affairs minister Nkosazana Dlamini-Zuma also revealed that national and provincial government departments owe some of the country’s struggling municipalities just more than R10bn for services. The department of public works was flagged as the biggest culprit.
Many municipalities, in turn, are struggling to service their own mounting debt obligations, notably to Eskom.
Risk to the economy
With a debt of R440bn, which it cannot service from revenue, Eskom, which supplies virtually all SA’s power, is regarded as a major risk to SA’s finances.
Parliament’s public finance watchdog, the standing committee on public accounts (Scopa) was briefed on Tuesday by the department of co-operative governance and traditional affairs on the plans to resolve the impasse between Eskom and defaulting municipalities, together with the SA Local Government Association (Salga) and the National Treasury.
Kevin Naidoo, an executive manager at the department said some 50 payment arrangements were in place between Eskom and municipalities, but only 11 had been fully honoured by October.
An inter-ministerial committee was established in early 2017 to look into the Eskom municipal debt crisis. However, while it made recommendations, its mandate was not renewed following the general elections. Some of the recommendations included the installation of smart, pre-paid electricity and water meters; debt restructuring; and renegotiating the amounts owed and interest payments.
Naidoo said the department is also working on a campaign to tackle the culture of non-payment.
Scopa chair Mkhuleko Hlengwa said the escalating debt is unacceptable.
“The fundamental issue is people must pay. It is all well and good to highlight Eskom’s problems, but the flipside of that is we are saddled with this problem [of escalating debt]. Government departments are also reckless and not paying. This culture needs to [change].”