Municipalities rack up more Eskom debt as government looks to force a solution
South Africa’s municipalities owed state power utility Eskom R56.3 billion by the end of last year, a debt that’s continued to rise, Deputy President Paul Mashatile said.
“It is clear that we need a debt relief strategy that will acknowledge the inherent risk of unviable municipalities,” he told lawmakers in Cape Town on Thursday.
“Eskom will provide incentivized relief to municipalities whose debt is unaffordable. However, the relief will come with conditions that will ensure there is no repeat of debt buildup over time.”
Municipalities will be required to install additional prepaid electricity meters and use their budgetary allocations more effectively and efficiently to qualify for assistance, according to the deputy president.
Blackouts have reduced the potential size of South Africa’s economy by almost a fifth since they started being imposed around 2008, according to Lungile Mashele, sector specialist for energy and infrastructure at the Public Investment Corp., Africa’s biggest fund manager.
Outages can be expected every week this year and if the inadequate electricity generation situation isn’t addressed, the prospects for economic growth will be dismal, she told a conference in Johannesburg.
Consumer confidence plunged in the first quarter as intense power outages hamstrung economic activity and stoked food-price inflation.
A quarterly index measuring sentiment fell to -23 in the three months through March from -8 in the previous quarter, FirstRand Ltd.’s First National Bank said.
That’s the lowest level since the second quarter of 2022, when deadly floods wrought havoc in the eastern KwaZulu-Natal province and the impact of the war in Ukraine started to manifest.
The International Monetary Fund urged South Africa to implement reforms to boost private-sector investment, promote good governance and improve the efficiency of public spending to shore up the energy-starved economy.
The rolling blackouts, known locally as load shedding, coupled with softer commodity prices mean Africa’s most industrialized economy will probably only grow 0.1% in 2023, the Washington-based lender said Wednesday after a staff visit to South Africa.
That compares with its January estimate of 1.2% and the National Treasury’s projection of 0.9%.
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