Eskom says 87% of municipalities not complying with arrangement

Eskom says 87% of municipalities approved for National Treasury’s municipal debt relief are not complying with the conditions of the arrangement.

And that municipal debt currently stands at R94.6 billion.

The power utility was briefing Parliament’s Standing Committee on Appropriations, on its finances. It says despite interventions by the National Treasury, municipal debt remains its biggest challenge which is also a concern for MPs.

Eskom says municipality payment levels have been declining. The entity says the culture of non-payment of electricity is due to structural and systematic challenges within municipalities.

“Municipal debt is a key risk to Eskom business and our liquidity. As you know that distribution collects the money but then pays that onto transmission and generation, so the problem is not just a distribution problem but an Eskom problem on the whole. So, in terms of municipalities what we are saying in terms issues that they are struggling which obviously results in their inability to service current bills and reduce their debt, municipalities are also plagued with high energy losses in the sense that energy is either being stolen through illegal connections, meter tampering or inaccurate billing,” Eskom’s Rajen Naidoo.

While revenue has increased, Eskom says relieving municipal debt will strengthen its balance sheet.

“The point I will highlight around the intention of this bill and where do we see it taking Eskom, we wanted to get Eskom in a position correctly so where we don’t come back and ask to our shareholder National Treasury and this committee for further bailouts. As members have indicated, you know just short of R400 billion over the last number of years, it’s just unsustainable, that money can be spent in many other programmes that government needs to invest in. But our one concern around financial sustainability of Eskom is the municipal debt, as my colleague presented and as many members have asked, we can’t solve that alone as Eskom, we need the support of other government departments,” says Eskom CFO Calib Cassim.

The top five contributors to the debt together owe 40 % of the total amount. Eskom says it is exploring interventions like disconnections, pre-paid accounts and litigation.

MPs across parties however say Eskom is failing itself in its own debt collection programmes, saying this has been an on-going conversation before the committee for years.