Chronic defaulters on switch-off list
• Some of the municipalities in arrears were on a 2015 list of the Treasury
Some of the municipalities facing Eskom power cuts are among chronic defaulters the Treasury previously attempted to knock into shape. In March 2015, the Treasury invoked a section of the Constitution to withhold “unconditional” funding to 59 municipalities unless they presented plans to pay a cumulative R12.6bn owed to Eskom and various water boards.
Some of the municipalities facing Eskom power cuts are among chronic defaulters that the Treasury previously attempted to knock into shape.
In March 2015, the Treasury invoked a section of the Constitution to withhold “unconditional” funding to 59 municipalities unless they presented plans to pay a cumulative R12.6bn owed to Eskom and various water boards.
Overlooking the South African Local Government Association’s protests that withholding the equitable share was unconstitutional, the Treasury convinced 32 municipalities to comply with its demand and paid out their equitable share. But by November that year, 27 municipalities had breached their payment obligations.
“There is a relatively large correlation between the list of 27 municipalities [who breached repayment plans] and those on Eskom’s list,” said Treasury spokeswoman Yolisa Tyantsi.
On Sunday, Eskom said it had suspended plans to cut the supply of five municipalities after receiving payment from them and agreeing to payment plans. The municipalities are Nketoana, Nala, Tokologo and Mantsopa in the Free State, and Walter Sisulu municipality in the Eastern Cape.
For the rest, supply interruptions would begin this week. The power utility recently won a court bid to cut bulk electricity supply to municipalities in the Free State that collectively owed it R700m by December.
It also planned to cut off defaulting municipalities in North West, a move it put on hold after a court case brought by lobby group AfriForum.
The High Court in Pretoria dismissed AfriForum’s bid to interdict the utility from implementing the cuts, which would affect residents who were up to date with their municipal bills, the proceeds of which municipalities expended elsewhere. Municipalities in the province have subsequently submitted rescheduled payment plans.
Eskom said it still needed to recover up to R10.2bn, up from R6bn in just eight months.
Interim CEO Matshela Koko has said Eskom had attempted to obtain payment from the “municipal equitable share”, but the Treasury did not acquiesce to the request.
Tyantsi said doing so would have been unconstitutional.
“Each sphere of government is entitled to their share of national-raised revenue, as articulated in the annual Division of Revenue Act,” she said.
“This implies that what Eskom is requesting will be unconstitutional and cannot be done. The Eskom debt cannot be offset against the allocation due to municipalities, as the equitable share is mainly set aside to supplement free basic services to the poorest of the poor.”
The Treasury believes municipalities’ inability to pay creditors within 30 days showed they adopted unfunded budgets, had cash flow challenges owing to economic circumstances, mismanaged funds or failed to implement credit control policies effectively.
“The National Treasury still maintains that the process undertaken during 2015 is the most effective with regard to not penalising the paying consumer, but rather to place pressure on the municipality to manage their financial affairs more efficiently,” Tyantsi said.
“National Treasury appreciates the challenges Eskom encounters [with] payment by municipalities and other departments. It is continuously committed to engage on finding solutions that will minimise the impact on Eskom.”
‘THERE IS A … LARGE CORRELATION BETWEEN THE LIST OF 27 MUNICIPALITIES AND THOSE ON ESKOM’S LIST