Pay your electricity debt or we’re taking your land, Eskom tells municipality

 ·15 Sep 2020

Power utility Eskom has secured R2.5 billion worth of farmland in the Free State, the latest move in its fight against a municipality owing it billions in unpaid debt.

The Matjhabeng municipality in Welkom has agreed to hand over the title deeds of 139 farms to the value of R2.5 billion in the province as security on its R3.4 billion Eskom debt, until the dispute is finalised.

This agreement has been made by the order of the High Court in the Free State.

As part of the agreement, the municipality has withdrawn its court application to uplift the attachment of its bank account by Eskom, which was granted on 4 September. Eskom has agreed to uplift the attachment of the account, and it has been handed back to the municipality.

However, the funds in the account, which amount to some R2.7 million, will remain attached and in the care of the Sheriff of the Court, Eskom said.

“This step on the part of Eskom is a result of the repeated failures by the municipality to adhere to its payment obligations to Eskom for the bulk supply of electricity,” it said.

Eskom has been engaged in a long term battle with municipalities over unpaid debt. As at the end of June 2020, the total owed to utility by municipalities was recorded at R31 billion.

This outstanding amount continues to threaten Eskom’s sustainability, it said.

At the end of June 2020, 239 municipalities owed Eskom R43.9 billion, of which R30.9 billion is overdue debt. The total debt of R43.9 billion, is made up of the capital amounts of R32.4 billion, interest of R6.7 billion and VAT of R4.8 billion.

Split across the provinces, the totals are as follows:

  • Free State: R8.56 billion
  • Gauteng: R6.96 billion
  • Mpumalanga: R6.79 billion
  • KwaZulu Natal: R2.34 billion
  • North-West: R1.99 billion
  • Western Cape: R1.71 billion
  • Eastern Cape: R1.66 billion
  • Northern Cape: R1.43 billion
  • Limpopo: R0.98 billion

Eskom’s debt issues have been consistently flagged by ratings agencies as one of the key factors leading to financial instability at the power utility. Coupled with load shedding, this has made the state owned entity one of the biggest liabilities threatening the country’s credit rating.

Price hikes

Eskom is currently in a financial black hole, thanks to rising debt obligations and lower revenue from load shedding.

Aside from chasing down municipalities which owe it money, the group is also looking to increase tariffs, placing the burden of its financial distress on consumers.

In its latest application to energy regulator Nersa, the power utility has requested permission to hike tariffs to raise a further R4.1 billion through its Regulatory Clearing Account (RCA), as well as R1.3 billion in interest.

According to Moneyweb, this application would translate to a 15% hike in prices, when factoring in the R27 billion it had applied for earlier in the year.

Nersa previously rejected the application, truncating it to R13 billion – however, this was declared unlawful and irrational by the courts. The regulator has applied for leave to appeal the ruling.

Read: Eskom talks up emergency power progress to ease load shedding in South Africa

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