{"id":842939,"date":"2025-11-12T14:10:00","date_gmt":"2025-11-12T12:10:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=842939"},"modified":"2025-11-12T14:20:25","modified_gmt":"2025-11-12T12:20:25","slug":"new-plan-announced-to-cut-eskoms-mountain-of-municipal-debt","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/budget-speech\/842939\/new-plan-announced-to-cut-eskoms-mountain-of-municipal-debt\/","title":{"rendered":"New plan announced to cut Eskom’s mountain of municipal debt"},"content":{"rendered":"\n

Despite the introduction of the municipal Eskom debt relief programme in 2023, municipalities are still battling to address ballooning debt to the power utility.<\/p>\n\n\n\n

According to the department\u2019s Medium Term Budget Policy Statement (MTBPS), the debt has grown to some R94 billion as of the end of March this year – up from some R55 billion.<\/p>\n\n\n\n

\u201cWhile 24 municipalities have qualified for the first one-third write-off after 12 consecutive months of payments and 21 have generally maintained payments, as of 7 May 2025, 47 municipalities remain in default.<\/p>\n\n\n\n

\u201cThis is the combined result of weak collections, excessive electricity and water losses due primarily to a lack of maintenance, and inadequate credit control. Measures are being taken to assist municipalities in raising revenue, including expanding smart prepaid metering,\u201d Treasury said.<\/p>\n\n\n\n

As an interim measure, struggling municipalities will \u201ctransition, where appropriate, to distribution agency agreements (DAAs)\u201d.<\/p>\n\n\n\n

\u201cUnder these agreements, Eskom will operate municipal electricity services for a defined period, support cost-reflective tariff setting and loss reduction, and assist with collections.<\/strong><\/p>\n\n\n\n

\u201cDuring this period, municipalities will be required to select the most appropriate service delivery mechanism, phase in cost-reflective tariffs and limit rebates,\u201d the department said.<\/p>\n\n\n\n

Municipalities are urged to direct funding from grants like the Municipal Infrastructure Grant (MIG) to rehabilitating existing water and electricity infrastructure, which are conduits for revenue generation.<\/p>\n\n\n\n

\u201cAdditional conditions include strict adherence to pro-poor policies to ensure that local governments are providing the required amounts, doing so within national limits and ring-fencing electricity revenues.<\/p>\n\n\n\n

\u201cThe DAA pathway is intended to stabilise cash flows, improve payment discipline and create a bridge to longer-term structural reforms in the local government fiscal framework.<\/p>\n\n\n\n

\u201cThe interim measure does not rule out stronger interventions where failures persist,\u201d National Treasury said.<\/p>\n\n\n\n

Municipal Infrastructure Grant<\/h2>\n\n\n\n
\"\"<\/a>
Finance Minister Enoch Godongwana <\/figcaption><\/figure>\n\n\n\n

At the same time, National Treasury has announced reforms to the Municipal Infrastructure Grant in a bid to cut out underspending, misuse of funds and capacity constraints.<\/p>\n\n\n\n

The reforms include a split delivery model aimed at assisting municipalities to accelerate service delivery infrastructure delivery.<\/p>\n\n\n\n

\u201cWhere municipalities demonstrate proven capacity, funding will continue to be allocated directly. However, in cases of persistent capacity and governance failures, delivery will shift to an indirect model through institutions such as the Municipal Infrastructure Support Agent and the DBSA [Development Bank of South Africa].<\/p>\n\n\n\n

\u201cThis will be accompanied by time-bound capability plans aimed at restoring municipalities to direct funding. The shift to a split-delivery model balances the urgent need to accelerate service delivery with building resilient, capable local government that can sustainably meet the infrastructure needs of their communities,\u201d Treasury noted.<\/p>\n\n\n\n

Added to that, a performance-linked incentive is also being introduced to \u201creward municipalities that deliver fit for purpose infrastructure on time and budget, at reasonable cost, with funded maintenance plans and climate-resilience measures\u201d.<\/p>\n\n\n\n

\u201cThe reform will be supported by clearer criteria for determining funding modalities, stronger oversight through annual delivery compacts and embedded technical support to build municipal planning, procurement and asset management capability.<\/p>\n\n\n\n

\u201cThe necessary conditional grant framework amendments will be tabled in the 2026 Division of Revenue Bill, with pilot implementation commencing in 2026\/27,\u201d the department added.<\/p>\n\n\n\n

Furthermore, a municipal utility reform programme will also be piloted at the Mbombela, Govan Mbeki, Lekwa and eMalahleni municipalities later this year.<\/p>\n\n\n\n

\u201cThe National Treasury, working with the African Development Bank [AfDB] and donor partners, is implementing a pilot Municipal Utility Reform Programme, under a results-based AfDB concessional loan of up to US$400 million.<\/p>\n\n\n\n

\u201cIt aims to stabilise and professionalise core municipal utilities [water and electricity] by reducing losses, introducing cost-reflective tariffs with protections for poor households, ringfencing revenues, improving asset care, and enhancing governance and reporting,\u201d Treasury said.<\/p>\n\n\n\n

Lessons drawn from the pilot will be used to expand the programme to \u201cmunicipalities in other provinces facing severe delivery challenges\u201d.<\/p>\n\n\n\n

\u201cThe scale-up will align with conditional grant reforms and, where appropriate, will disburse grants linked to independently verified milestones to safeguard delivery and fiscal sustainability,\u201d Treasury said.<\/p>\n","protected":false},"excerpt":{"rendered":"

Finance minister Enoch Godongwana has announced an interim plan to cut Eskom’s mounting municipal debt, that will see the utility take over distribution in problematic areas.<\/p>\n","protected":false},"author":33,"featured_media":824206,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[13716],"tags":[4771,1164,9194],"class_list":["post-842939","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budget-speech","tag-debt","tag-eskom","tag-mtbps"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/842939","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\/33"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=842939"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/842939\/revisions"}],"predecessor-version":[{"id":842942,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/842939\/revisions\/842942"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/824206"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=842939"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=842939"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=842939"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}