{"id":799349,"date":"2024-11-13T12:00:00","date_gmt":"2024-11-13T10:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=799349"},"modified":"2024-11-13T11:15:17","modified_gmt":"2024-11-13T09:15:17","slug":"from-r2-6-billion-to-r90-billion-in-10-years","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/energy\/799349\/from-r2-6-billion-to-r90-billion-in-10-years\/","title":{"rendered":"From R2.6 billion to R90 billion in 10 years"},"content":{"rendered":"\n

Eskom\u2019s municipal debt has exploded over the last decade and now poses an existential threat to the power utility.<\/p>\n\n\n\n

On 31 March 2014, Eskom reported that the total municipal arrear debt was R2.6 billion, up from R1.2 billion a year earlier.<\/p>\n\n\n\n

At that stage, it was so concerning that Eskom held numerous meetings with the Department of Public Enterprises (DPE) and National Treasury about the issue.<\/p>\n\n\n\n

Eskom wanted to work with these departments to find sustainable ways to address municipal debt and implement longer-term interventions.<\/p>\n\n\n\n

However, these discussions did not solve the problem. Municipal arrear debt increased from R2.6 billion on 31 March 2014 to R5 billion on 31 March 2015 – and kept going.<\/p>\n\n\n\n

By 31 March 2020, total municipal arrear debt amounted to R28 billion, up from R19.9 billion a year earlier.<\/p>\n\n\n\n

Despite numerous discussions and interventions, Eskom and the government could not stem the tide.<\/p>\n\n\n\n

Municipal debt continued to escalate to unsustainably high levels, amounting to R58.5 billion on 31 March 2023, up from R44.8 billion a year earlier.<\/p>\n\n\n\n

Eskom CFO Calib Cassim recently revealed that municipal debt has ballooned to R85 billion since March 2023, and is now almost at R90 billion<\/strong>, threatening the company\u2019s financial sustainability.<\/p>\n\n\n\n

He said the growing municipal debt burden may force the utility to turn to the government for another bailout.<\/p>\n\n\n\n

Eskom\u2019s debt burden is growing by an average of nearly R2 billion a month and is expected to grow by R20 billion each financial year.<\/p>\n\n\n\n

If this continues, it will result in debt owed to Eskom reaching R100 billion by March 2025 and R130 billion by March 2026.<\/p>\n\n\n\n

Municipalities will owe Eskom R200 billion by the 2028 financial year. The company will not be able to service this debt.<\/p>\n\n\n\n

\u201cMore concerning from Eskom\u2019s perspective is the growth not just from small municipalities. Half of the R11 billion growth came from metros,\u201d Cassim said.<\/p>\n\n\n\n

\u201cIf the growth of municipal debt is not addressed, the R254 billion debt relief from the government will effectively be null and void.\u201d<\/p>\n\n\n\n

\u201cThis does not help Eskom\u2019s financial sustainability going forward. After this debt relief plan, we no longer want to rely on the fiscus.\u201d<\/p>\n\n\n\n

The government has created financial incentives for municipalities to pay their debt. However, despite potential debt write-offs, it had little effect.<\/p>\n\n\n\n

Only 14 of the 72 municipalities that have applied for debt relief from the government have complied with the conditions outlined by the National Treasury.<\/p>\n\n\n\n

Even more concerning is that many of these municipalities cannot even pay Eskom for their current electricity usage.<\/p>\n\n\n\n

This means that expecting these municipalities to pay their debt is unrealistic. They have become too comfortable with non-payment and a lack of consequences.<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

Eskom is trying to crack down on non-payment. It has recently threatened the City of Johannesburg and City Power with power cuts unless they pay.<\/p>\n\n\n\n

Eskom said it intends to interrupt the power supply at pre-determined times of day per the Provision of Promotion of Administrative Justice Act (PAJA).<\/p>\n\n\n\n

The City of Johannesburg and City Power currently owe Eskom R4.9 billion, excluding the current account of a further R1.4 billion.<\/p>\n\n\n\n

The power utility said it explored all avenues to accommodate the City of Johannesburg, but it did not resolve the problem of non-payment.<\/p>\n\n\n\n

\u201cThe matter has reached a point where Eskom can no longer afford to accommodate the CoJ without putting further financial strain on and harming its own business,\u201d it said.<\/p>\n\n\n\n

Eskom said the City of Johannesburg has acknowledged its indebtedness to Eskom, but it refuses to pay the full amount of its monthly bill.<\/p>\n\n\n\n

\u201cThe CoJ alleged, without substantiating their claim, that Eskom is overbilling it on some of its supply points,\u201d Eskom said.<\/p>\n\n\n\n

For this reason, the CoJ is applying set-off against the monthly bills raised by Eskom, which is contrary to the electricity supply agreement.<\/p>\n\n\n\n

It is also contrary to the agreements reached with its CFO, Rendani Sadiki, the CEO of City Power, Tshifularo Mashava, and the City of Johannesburg Management.<\/p>\n\n\n\n

However, the City of Johannesburg and City Power are digging in their heels, calling Eskom\u2019s plan \u201cunjust, counterproductive, and potentially harmful\u201d.<\/p>\n\n\n\n

City Power CFO Tebogo Moraka urged Eskom to retract its public notice and engage in good-faith negotiations to resolve the issue.<\/p>\n\n\n\n

\u201cWe urge Eskom to reassess its stance and engage with the city in finding a mutually beneficial resolution,\u201d Moraka said.<\/p>\n\n\n\n

\u201cIn the meantime, the city has formally requested that Eskom retract is public notice within five days.\u201d<\/p>\n\n\n\n

The situation has become so tenuous that Electricity and Energy Minister Kgosientsho Ramokgopa had to intervene.<\/p>\n\n\n\n

After this intervention, Eskom withdrew its threat to cut the electricity supply to the City of Johannesburg.<\/p>\n\n\n\n

However, it still showed the extent of Eskom\u2019s challenges with municipal debt and the unwillingness of municipalities to pay for the electricity they use.<\/p>\n\n\n\n

\n\n\n\n

Read: South Africans are dumping DStv<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Eskom\u2019s municipal debt has exploded over the last decade and now poses an existential threat to the power utility.<\/p>\n","protected":false},"author":10,"featured_media":739001,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9874],"tags":[20110,2016,7376,1164,19928,19021,20965],"class_list":["post-799349","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-energy","tag-calib-cassim","tag-city-of-johannesburg","tag-city-power","tag-eskom","tag-kgosientsho-ramokgopa","tag-municipal-debt","tag-tebogo-moraka"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/799349","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=799349"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/799349\/revisions"}],"predecessor-version":[{"id":799612,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/799349\/revisions\/799612"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/739001"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=799349"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=799349"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=799349"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}