These 10 municipalities and Soweto owe Eskom billions

President Cyril Ramaphosa recently called out municipalities and large settlements like Soweto for not paying their electricity bills, saying it is time for South Africans to change their attitudes and get rid of the culture of not paying for services.

The president said that while he understood that boycotting payment for services has always been an effective tool to fight against unjust systems, that culture has no place in modern-day South Africa.

“Boycotting payment for services had a place in apartheid, South Africa. It was an effective tool to mobilise communities against an unjust system,” he said.

“But it has no place in present-day South Africa. If public utilities like Eskom are to survive, then all users need to pay for the services they receive.”

This was again reflected in the newly published roadmap for Eskom, presented by Public Enterprises minister Pravin Gordhan on Tuesday (29 October).

According to the the document, a culture of non‐payment, particularly among municipalities, has become a systemic problem, and is gravely affecting Eskom’s finances – in a context where the power utility is already under severe strain.

Municipalities and individual users owed Eskom over R36.5 billion as at 30 June 2019.

Eskom’s long‐term debt is currently at R441 billion (as at March 2019), up from R255 billion in 2014. Over the next five years, the Department of Public Enterprises anticipates interest payments of approximately R148 billion and debt repayments of R180 billion.

“The financial ratios illustrate the gravity of Eskom’s financial challenge: in 2019, the debt service cover ratio was at an unsustainably low 0.5 and interest coverage ratio at 0.9.

“Furthermore, Eskom’s increasing borrowing costs will increase its debt servicing obligations, placing it in an unsustainable position,” the department said.

For the 2019 financial year, Eskom reported a net loss after tax of R20.7 billion, with municipal debt rising to about R17.6 billion.  A lower‐than‐expected 5.23% tariff increase, a 1.82% decline in sales volumes and cost pressures also contributed to these losses.

Worst offenders

Eskom has identified the worst offenders when it comes to non-payment – singling out Soweto as the worst of them all. The township boasts a population of 1.3 million, in a city with an overall population of around 5.6 million.

As of 30 June 2019, Soweto owes Eskom R18.9 billion in unpaid bills – accounting for more than half of total arrear debt (plus interest).

Total municipal debt comes to R17.62 billion. Municipalities also owe R3.58 billion in interest.

Maluti‐A‐Phofung Municipality in the Free State ranks as the worst offender, owing R4.02 billion in debt, and R1 billion in interest.

The table below outlines the municipalities that owe the most debt to Eskom. It also includes Soweto, which is not in a single municipal area, but is by some distance the worst offender when it comes to money owed to the state power utility.

Read: It’s time for Soweto and other municipalities to pay Eskom its due: Ramaphosa

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These 10 municipalities and Soweto owe Eskom billions