Government

Inside Eskom’s top 20 defaulting municipalities

Staff Writer

 ·11 May 2015

In April 2015, Eskom announced plans to interrupt bulk electricity supply to the top 20 defaulting municipalities across the country.

According to struggling power utility, as at 31 March 2015, the total municipal arrears debt greater than 30 days was R4.6 billion.

The group said it will stop power supply to the 20 identified municipalities, with effect from 5 June 2015.

All under fire districts exhibit deep financial problems, with notable levels of wasteful expenditure and high levels of unemployment.

This is according to the Local Government handbook for 2015, carrying the latest available audited data – for the 2013 financial year.

In total, the municipalities identified by Eskom account for over R3.6 billion in wasteful expenditure, while carrying a R3.4 billion budget deficit.

The total municipal arrears debt greater than 30 days was R4.6 billion as at March 31, 2015 Eskom said recently.

Municipal problems

The Matjhabeng local municipality is the biggest culprit when it comes to unauthorised, irregular or wasteful spend, with R950.3 million.

Had this spending been appropriately dealt with, the municipality could have seen its budget deficit of R505 million turned into a surplus of R445 million.

The Madibeng local municipality, meanwhile, saw a relatively modest R9.4 million spent on wasteful things, which, if recovered, would have had little impact on its budget deficit – at R785 million for the year.

Balancing out budget deficits with wasteful expenditure (ie, presuming what the budget would look like if money wasn’t wasted), more than half Eskom’s trouble municipalities would be able to avoid default.

At least eight would still be in trouble, however.

Six of the 20 defaulting municipalities are in the Free State (FS), with North West Province (NW) and Mpumalanga (MP) accounting for four municipalities each.

Gauteng (GP) and the Eastern Cape (EC) account for two a pop, and the Northern Cape (NC) and Limpopo (LP) one each. No Western Cape (WC) municipalities are included.

Eskom’s 20 defaulting municipalities

Note: Nala local municipality did not provide any data, and thus was not audited.  Nama Khoi municipality had no wasteful expenditure data recorded. Lichtenburg municipality is represented as Ditsobotla municipality, which was established through the amalgamation of the former Lichtenburg and other regional Councils.

Payment agreements

At the end of April, Eskom said it reached payment agreements with 10 out of the 20 defaulting municipalities (italicised in the table above).

However, acting CEO Brian Molefe emphasised that the utility “has reached a point where it can no longer continue to provide power without receiving payment in return.”

On Friday (8 May) Eskom cut off electricity supply to over a million Soweto residents. The cut followed protests by Orlando West residents over the utility’s decision to install prepaid electricity meters.

Soweto falls under the City of Joburg municipality, specifically Region D. According to Stats SA data from the 2011 census, the region has around 1.3 million residents.

Energy expert, Chris Yelland, said that Eskom’s theft and non-payment financial problems in Soweto are bigger than its non-payment problem with all 20 defaulting municipalities combined.

The township owes the electricity supplier as much as R8 billion, he said.

“The decision to leave Soweto residents without electricity for this prolonged period of time is insensitive, inhumane and smacks of unbridled arrogance,” said MMC for Environment and Infrastructure Services, Matshidiso Mfikoe.

“The City of Johannesburg will constructively engage Eskom to find a speedy, lasting and amicable resolution to this impasse.”

More on Eskom

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Soweto owes Eskom more than top 20 defaulting municipalities

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Eskom price hike will drive up theft and non-payment