- The City of Ekurhuleni has announced that it has entered into a payment arrangement with power utility Eskom over its R3.8 billion debt.
- The City of Ekurhuleni Metropolitan Municipality is a metropolitan municipality that forms the local government of the East Rand region of Gauteng, a large suburban region east of Johannesburg.
- Ekurhuleni is one of the five districts of Gauteng.
- No details on the payment agreement were provided.
This follows a meeting the previous week which was convened by the MMC for Finance and acting Executive Mayor Ald Jongizizwe Dlabathi – who led the Ekurhuleni team. The Eskom team was led by the Gauteng General Manager Bandile Jack.
The Ekurhuleni Metropolitan Municipality currently owes Eskom over R2.3 billion, excluding its current account of a further R1.5 billion, which will become due on 7 March 2025. Eskom said that it has tried all avenues to accommodate the city, but it has now reached the point where it can no longer do so without suffering further financial strain and harming its own business.
“Eskom cannot operate and remain financially viable without timeous payment from the City of Ekurhuleni,” it said.
Ballooning municipal debt is now an existential threat to Eskom which is expected to reach R120 billion by March 2025.
Eskom Group Executive for Distribution, Monde Bala, explained that metro’s have now joined municipalities in a culture of short paying or not paying Eskom at all after collecting money from the end user. A staggering 75 municipalities are in debt to Eskom.
Eskom Group chief executive officer Dan Marokane explained that the intention is not to make them (municipalities) ashamed, the intention is to show the scale of the challenge that we are dealing with. It consumes resources from management time, and it does place fundamental risk insofar as the financial sustainability of the business is concerned.” Read more
Related news: Tax payers money is already nearing R495 billion in Eskom bailouts
“Fundamentally, something’s not working in the way the municipal financing structures are set up, and it requires solutions beyond us. We don’t have the leeway of typical credit management tactics that we can use here. We cannot switch off the whole country because there’s no payment coming, but at some point, we will have to switch off ourselves because there’s no money coming in from the municipalities,” said Marokane.
Municipal debt relief programme failure
The South African government under Deputy President, Paul Mashatile, introduced a R56.8 billion debt relief programme last year to assist ailing municipalities who are struggling to pay their electricity bills.
“The debt-relief arrangement for Eskom outlined in the 2023 Budget noted that a large proportion of outstanding municipal debt is owed to Eskom. National government has introduced support to relieve municipalities of debt to Eskom. The debt…will be written off over a three-year period, in equal annual tranches. This is provided the municipality complies with set conditions. These conditions include enforcing strict credit controls, enhanced revenue collection [and]up-to-date payment of Eskom monthly current account,” said South Africa’s Finance Minister Enoch Godongwana at the time.
But municipalities have failed to comply with the terms. South Africa’s National Treasury has warned that municipalities’ slow compliance with conditions of the debt relief programme on arrears to Eskom risk delaying debt write-offs. Read more
Cosmetic solutions and false promises
Last month, a high-level engagement convened by the Minister of Electricity and Energy, Dr Kgosientsho Ramokgopa, and City of Johannesburg Mayor Dada Morero with Eskom executives and City Power over R4.9 billion outstanding to Eskom. The urgent engagement followed announcing that Eskom had served the city and City Power with a notice of intention to interrupt power supply at certain pre-determined times of the day due to non-payment of debt. According to Eskom, the City of Johannesburg and City Power owe nearly R5 billion in unpaid bulk electricity supply, plus a further R1.4 billion, which Eskom said is due at the end of each month.
In response, the City of Johannesburg subsequently called the move by Eskom “unjust, counterproductive, and potentially harmful to… residents and businesses”. The two parties came to a settlement, but City Power has subsequently breached the deal with another short payment. Read more
Similarly, the City of Tshwane Metro recently has signed a payment arrangement plan to settle its R6,7 billion debt owed to the power utility. In terms of the payment arrangement plan, the City of Tshwane has committed to make the initial payment of R400 million in December 2024, with the last payment scheduled for March 2029. However, this is unlikely to happen because the metro is technically bankrupt with R11 billion in debt. Read more
Tokologo Local Municipality prime example of major problem
Eskom explained that following the notice published in November, Minister of Electricity and Energy, Dr Kgosientsho Ramokgopa, brought all the parties together to discuss a way forward over the municipal debt crisis.
“The objective was to address the critical issue of municipal debt and establish a framework for cooperation between Eskom and municipalities within the processes of intergovernmental relations. Eskom has confirmed that these processes are still ongoing, and no final decision has been made regarding the potential disconnection. “If a decision is made to disconnect bulk electricity supply to Tokologo Local Municipality, affecting Boshof, Seretse, Dealesville, and Hertzogville areas, Eskom will issue a revised disconnection date, which will be published with a notice period of at least 14 days,” Eskom explained.
The electricity supplier assured members of the public that it will address the issue with “fairness”.
“Eskom appreciates the input from members of the public who submitted written representations regarding this matter. These submissions have been thoroughly reviewed as part of the decision-making process. Eskom remains committed to addressing this issue with fairness and transparency, all while ensuring its financial sustainability and the sustainable provision of electricity nationwide,” Eskom said.
Author: Bryan Groenendaal
