- South Africa’s Minister of Electricity and Energy, Dr Kgosientsho Ramokgopa, will lead an intergovernmental engagement with all municipalities in the North West province do discuss electricity challenges and introduce effective interventions. Ballooning municipal debt nearing R120 billion is now an existential threat to Eskom. Read more
He will be joined by Premier of the North West, Lazarus Kagiso Mokgosi, during Monday’s meeting. This initiative follows the Minister’s recent engagements with municipalities in Limpopo and the Free State, where similar discussions were held to address municipal electricity issues.
“This effort is in line with the seventh administration’s commitment to fostering a functional local government capable of fulfilling its obligations through a coordinated effort involving all three spheres of government.
“Several municipalities are currently under Section 139 intervention, necessitating oversight from the Provincial Executive. This situation stems from longstanding municipal debts, including both arrears and current accounts owed to Eskom for electricity distribution.
“An integrated approach is essential for developing a sustainable intervention plan that focuses on medium to long-term solutions. Some strategies may require financial reconfiguration, particularly in light of the country’s ongoing fiscal consolidation efforts,” a joint statement by the Ministry of Electricity and Energy and the North West provincial government 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 in January 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
Author: Bryan Groenendaal
