Business Day

Chronic defaulters on switch-off list

• Some of the municipali­ties in arrears were on a 2015 list of the Treasury

- Moyagabo Maake Financial Services Writer maakem@bdfm.co.za

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

 ?? /Freddy Mavunda ?? Power struggle: Eskom interim CEO Matshela Koko said the utility had tried to obtain payment from the Treasury to cover the municipali­ties’ arrears, but the request was turned down.
/Freddy Mavunda Power struggle: Eskom interim CEO Matshela Koko said the utility had tried to obtain payment from the Treasury to cover the municipali­ties’ arrears, but the request was turned down.

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