Energy

Municipalities now owe Eskom R50 billion – these are the biggest culprits

Staff Writer

 ·14 Oct 2022

Municipal debt to Eskom stands at almost R50 billion nationwide, with the Free State province topping the list of defaulters.

Earlier this year, deputy president David Mabuza warned municipalities that total debt to Eskom surged by almost R5 billion in four months up to July 2022, which needs to be urgently addressed.

This debt adds to the reasons cited for the power utility’s struggle to meet South Africa’s electricity demand, on top of the ailing infrastructure, poor management, and corruption.

According to EskomsePush, South Africa has had 2104 hours (88 days) of load shedding this year alone. Independent analysis shows that individual households have been left in the dark for well over 450 hours – the worst on record by some margin.

Eskom has around R400 billion of debt that it cannot service, relying on annual bailouts from the National Treasury to say afloat, reported SABC News.

The power utility has also applied to the National Energy Regulator of South Africa (Nersa) to hike tariffs by 32% on 1 April 2023, and municipal debt isn’t making the job any easier for Eskom.

According to Daily Maverick, as of 31 July 2022, 96 out of 278 municipalities in South Africa were indebted to Eskom:

Together, these 96 municipalities owed R49,762,411,689 to the power utility.

Of the 16 municipalities in the Free State owing Eskom about R17 billion, the financially embattled Maluti-A-Phofung is the biggest culprit within the province, accounting for almost half of the debt at R6.7 billion.

Maluti-A-Phofung has been struggling to manage its electricity grid for years and is now signing the power supply back to Eskom, SABC News said.

“We are in the process of signing the distribution agency agreement with the government, and we’re waiting for the date and place of signing from the deputy presidency,” said Maluti-A-Phofung mayor Gilbert Mokotso.

However, municipalities – including Bloemfontein’s Mangaung metro – say that the inability to service its debts is partly due to metros being forced to spend money that isn’t in their budgets to repair infrastructure that has been damaged by load shedding.

“Load-shedding is damaging municipal infrastructure, which is costly to repair, and this is something Eskom has to consider,” said Mangaung spokesperson Qondile Khedama.

Organisation Undoing Tax Abuse (OUTA) CEO Wayne Duvenhage says that the Free State’s debt purely comes down to poor management.

“The Free State authorities say that they can’t pay the debt, but they continue to pay themselves handsome salaries,” said Duvenhage.

“The Free States salary costs, including counsellors and consultants, have increased by 146% in the last five years. Inflation, in contrast, was only increased by 55% over the same period,” he added.

In regards to Khedama’s maintenance budget argument, Duvenhage said that what’s happening is they are throwing unqualified people at the problem.

“This results in consultants having to come in to fix the issue, and after both parties are paid, there’s nothing left to settle on maintenance, and therefore, their creditors start to pile up,” he said.

“This is a vicious cycle, and unless they fix the competence in these municipalities and get good fiscal hygiene in place, we will continue to see these municipalities spiral downwards,” he added.

Eskom noted that Metsimaholo municipality is the only authority in the Free State that maintains a zero balance, while Setsoto municipality has honoured its current account, SABC News said.

Eskom said that municipal debt burdens the power utility’s revenue streams, ultimately affecting service delivery.

Read: Staggering challenge ahead for South Africa