- Eskom delivered 300 consecutive days without loadshedding at midnight, a milestone last reached in June 2018.
- Eskom attributes the outcome to the implementing the Generation Recovery Plan since March 2023, which has delivered sustained and ongoing structural improvement in the Generation fleet.
- However, debt remains a massive problem.
“Credit goes to all our 40 000 dedicated and skilled Eskom employees who are committed to serving South Africa. Our sights are now firmly focussed on delivering one year without loadshedding at midnight on 26 March 2025,” stated Bheki Nxumalo, Group Executive for Generation.
“These 300 days without loadshedding have been characterised by a significant reduction in unplanned outages, which have long been one of the biggest challenges, a notable improvement in the energy availability factor of approximately 7%, and savings in diesel expenditure of R16.42 billion,” concluded Nxumalo.
“This concrete and ongoing delivery of the action plan has boosted business confidence with credit rating agencies and banks stating Eskom’s performance recovery is a key contributor towards positive sentiments as far as South Africa’s GDP growth prospects of up to 2% are concerned,” said Dan Marokane, Group Chief Executive of Eskom.
“Public sentiment is shifting, business leaders who once had to invest precious capex in self-generation have enquired whether they should revert to investing in Eskom for their power needs. The savings we are making in diesel spend are invested in the business to drive efficiencies further and place Eskom on a path to profitability and long-term operational and financial sustainability,” concluded Marokane.
Eskom expresses gratitude to all stakeholders, including the Minister of Electricity and Energy, the Eskom Board, the government and the National Energy Crisis Committee (NECOM), for the collaborative effort in addressing the country’s electricity challenges.
Eskom debt remains a massive problem
Eskom has unsustainable debt of over R420 billion. Over a three year period, government is in the process of providing Eskom with debt relief amounting to R254 billion. This will take the form of advances of R78 billion in 2023/24, R66 billion in 2024/25 and R40 billion in 2025/26. These amounts represent Eskom’s full debt settlement requirement over the next three years. They will be financed through the R66 billion medium- term expenditure framework (MTEF) baseline provision announced in the 2019 Budget, and R118billion in additional borrowing over the MTEF period. Additionally, in 2025/26, government will directly take over up to R70 billion of Eskom’s loan portfolio.
Eskom effectively pays interest on interest. In FY23/24 it repaid R90bn principal+interest with net earnings of only R10bn, supplemented by a R76bn bailout. The state owned power utility reported a record loss of R55 billion in its latest annual financial statement for 2023/24.
Existential threat
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
Author: Bryan Groenendaal
