The debt owed by municipalities to Eskom was over R90 billion in December last year. File Picture: Independent Newspapers Archives
As load shedding kicked in on Saturday, an energy expert has sounded the alarm over the debt owed by municipalities to Eskom, stating that it poses a serious threat to both the state-owned entity and the public.
Chris Yelland, an energy expert, said that the power utility is owed almost R100 billion by municipalities, with the debt growing by R1.8 bn each month.
The South African Local Government Association (SALGA) confirmed that as of December last year, municipalities owed Eskom R94 billion.
In 2023, the government invited municipalities to apply for debt relief for arrears owed to Eskom.
The plan was to write off the debt over a three-year period provided that the municipalities complied with set conditions that included enforcing credit control and collecting revenue to pay bulk expenses such as electricity and water, and up-to-date payment of Eskom monthly current account.
Speaking to The Mercury recently, Yelland highlighted that this debt posed a serious challenge for both the country and Eskom, especially as it continued to escalate monthly.
Yelland warned that this situation threatens the company's finances, emphasising that the outstanding debt must be covered in some way, either through higher tariffs or taxation.
He mentioned that Eskom is facing challenges in collecting the money.
“Eskom recently attempted to disconnect a metro in Gauteng, which would shut down many services in the city and affect numerous residents,” he said.
He stressed that a political solution is essential to address this issue, adding that the current trajectory cannot continue without jeopardising the survival of the company, which is central to the country's economic activity and growth.
Nhlanhla Ngidi, SALGA head of Energy, said that SALGA, Eskom, and other relevant government departments and institutions are in constant talks about how to deal with the increase in debt and resolve it.
“The debt crisis stems from various systemic and structural challenges. If these issues are not addressed, the debt will continue to escalate. Reforms are needed in the sector, including a review of the operational model of municipalities and the electricity distribution industry as a whole,” he said.
Last week National Treasury director-general Duncan Pieterse said municipalities that fail to meet the requirements of the debt relief scheme for arrears owed to Eskom will be removed from the programme.
Speaking during a pre-Budget briefing, Pieterse said they were concerned about the defaulting municipalities.
“Should they not meet the conditions, they will be exited from the programme. Once exited, Eskom’s processes will kick in like the attachment of municipal banks and legal action,” he said, adding that they will not receive protection from the debt relief programme.
A Budget Review document said many of the 71 municipalities in the municipal debt-relief programme are failing to meet the required conditions for national government to write off their arrears debt to Eskom in equal tranches over three years.
It cited persistent non-payment of monthly electricity accounts and an inability to collect the mandated 85% of revenue as the reasons for the failure.
Once kicked out of the Eskom debt-relief programme, municipalities will be required to repay their debt and accumulated arrears in full while facing credit control measures from Eskom, such as legal proceedings and the introduction of prepaid bulk electricity systems.
Eskom was contacted for comment but twice asked to speak at a later stage, saying it was still gathering information.
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