Carol Paton Writer at Large
Picture: iSTOCK
Picture: iSTOCK

The establishment of an independent revenue collection agency and early interventions against defaulters by national and provincial government are some of the proposals co-operative governance and traditional affairs minister Zweli Mkhize will put before the cabinet to resolve the problem of municipalities defaulting on Eskom payments.

Eskom has said that overdue debt from municipalities reached R17bn at the end of September, rising 25% in the past six months. It has resorted to cutting off entire towns to induce payment, forcing local business groups to go to court to keep the lights on.

In an interview on Thursday, Mkhize said that the proposals were based on five principles: the implementation of pre-payment systems; improved collection; swift reaction by his department and the Treasury as soon as a default occurs; dealing with the broader problem of dysfunctional municipalities; and a campaign to encourage responsible payment by consumers.

As well as the debt owed by municipalities to Eskom, the company is also owed billions by consumers in township areas, where it supplies households directly. Soweto’s debt to Eskom alone is R16.8bn, Eskom said on Wednesday.

Mkhize, whose ministry is in charge of local governments, said it was premature to go into detail about the proposals because they are still under discussion by the cabinet, but that an independent revenue collection agency in circumstances where municipalities proved unable to collect revenue owing to Eskom is on the table.

The biggest defaulter to Eskom is Maluti-A-Phofung municipality — which includes Harrismith and Phuthaditjhaba — which owes Eskom in excess of R3bn. Revenue collection has collapsed and local businesses recently went to court to stop Eskom from disrupting the electricity supply. The municipality was placed under administration in February.

An out-of-court settlement led to the establishment of an oversight committee, on which business as well government is represented. The committee held its first meeting in Pretoria on Thursday.

“This is a municipality that is dysfunctional. There is an intervention in terms of the constitution that is under way and the province has appointed an administrator. There is a revenue collection and recovery plan in place. While that work goes on, there is a committee made up largely of government but also the private sector to oversee the recovery,” Mkhize said.

The settlement agreement for Maluti-A-Phofung allows business to return to court should the recovery not succeed, he said.

The interim arrangement facilitated by various court agreements has seen businesses paying Eskom directly for electricity, by-passing the municipality.

This is not the “normal way” things should be done, said Mkhize. However, Eskom and the government are still in negotiations over whether this will be allowed as a permanent arrangement. A panel advising Mkhize has suggested that, under the constitution, it is the sole right of municipalities to reticulate electricity in municipal areas and that where Eskom wishes to do so it must conclude a service delivery agreement with the municipality.  

patonc@businesslive.co.za