Eskom’s ‘deeply concerning’ debt problem

[Nat Quinn]

The debt municipalities owe Eskom has grown by R4.7 billion in 2023, bringing the total owed to R63.2 billion.

Electricity Minister Kgosientsho Ramokgopa revealed this in his weekly update on the implementation of South Africa’s Energy Action Plan.

Ramokgopa said he is deeply concerned about the financial health of many municipalities that owe Eskom billions.

“The finances of municipalities are very illiquid. Some are insolvent and are not raising sufficient revenue to meet their operational activities.”

Municipalities owe Eskom R63.2 billion, with the top 20 owing R48.9 billion of that amount or 77% of the total.

Ramokgopa lamented the impact this has on Eskom’s operations as municipalities’ failure to pay inhibits the utility’s ability to invest in the maintenance of its plants and expanding the grid.

The City of Tshwane and the City of Ekurhuleni owe Eskom R3.1 billion alone. Both metros made partial payments in July.

Ramokgopa added that if the debt owed by municipalities remains unaddressed, it will increase exponentially and place an unsustainable burden on Eskom.

The utility has entered into 28 debt repayment arrangements with municipalities. However, only 11 have been honoured, and 7 have been partially honoured.

The minister admitted that load-shedding and infrastructure failures severely impact the ability of municipalities to raise revenue through electricity tariffs.

Professor Mark Swilling. Source: World Economic Forum/Walter Duerst

News24 reported that National Treasury had introduced a debt relief initiative for municipalities that owe money to Eskom.

Municipalities that want to qualify for debt relief must apply and meet certain conditions, such as staying on track with their current account payments and rolling out smart meters.

The government is also working on options to fund the refurbishment of distribution infrastructure, which could support municipalities needing help paying their debts.

Conditions for debt relief from the Treasury also include:

• They must stay on track with their current account payments for the next 12 months.

• They must roll out smart meters to improve the efficiency of their electricity distribution networks.

• They must remove illegal connections to their electricity networks.

Professor Mark Swilling from Stellenbosch University’s Centre for Sustainability Transitions told Newzroom Afrika that the government would ultimately have to write off the debt of municipalities.

“I certainly do not agree with this, but I do think there is a certain inevitability that a grand write-off is going to take place,” Swilling said.

Ideally, municipalities would be forced to generate revenue to pay off debt. However, this is very unlikely in reality.

Swilling expects the national government to use a potential debt write-off to force municipalities to implement the government’s new electricity policies in the Electricity Regulation Act Amendment Bill.

“I cannot actually see another way” than for the government to say that in exchange for implementing its new policies, municipalities’ debt owed to Eskom will gradually be written off.

 

source:Eskom’s ‘deeply concerning’ debt problem – Daily Investor

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