Power cuts a very dim idea
Scores of companies, from large ones listed on the JSE to small- and medium-sized businesses, in six towns across SA face the untenable situation of being cut off from their electricity supply, despite having paid their accounts.
This is due to the municipality in which they are located defaulting on its payment to Eskom, sometimes for many successive years, with debts running into billions.
One of the top defaulters, for instance, is Maluti-A-Phofung, in which the Free State town of Harrismith is located. This municipality hasn’t paid Eskom since 2011 and now owes a staggering R2.7bn. In total, municipalities owe R13.6bn and households in Soweto, which pay Eskom directly, owe a further R12bn.
Debt owed by municipalities is climbing rapidly. In the past year, it grew by 30%. There are several causes of the problem. The first is an old one the government has shown zero commitment to tackling. People in townships don’t like to pay for electricity, mostly because they are used to getting it free. Electrification of township areas is one of the great success stories of democracy. Ninety percent of households now have access to electricity. Only a small percentage are paying. This is unsustainable for both Eskom and municipalities and needs to change. The second problem is structural and systemic. Many municipalities are financially precarious, and have been from their inception. Minister of co-operative governance & traditional affairs Zweli Mkhize says 87 out of the country’s 284 municipalities “are dysfunctional”.
Try as successive ministers of co-operative governance might, these are never likely to be viable as the population is too poor to provide a tax base from which to raise sufficient revenue. As the local government model assumes that municipalities do raise their own revenue, most municipalities don’t get big enough grants from central government to fund the services residents need.
Third, there is the problem of corruption, mismanagement and abuse of power. Corruption took hold in the municipalities very early on. Municipalities were quickly identified as sources of money to be tapped into for both party and personal benefit.
During the Zuma years, when rule of law was substantially eroded, entire municipalities took payment holidays. Although they collected money from paying customers, they then neglected to pay this amount over to Eskom. Debts mounted and nothing was done.
Belatedly in the past two years or so, Eskom has tried to collect the debt by cutting off municipalities for prolonged periods. The effect has not been to make municipalities pay. The effect has been to endanger the viability of businesses in the very areas of the country where jobs are most scarce.
That businesses, run by people who are creating livelihoods for themselves and others, should be placed at risk by cutting the power supply has got to be one of the most profound acts of selfsabotage by a country.
A clearer set of circumstances could hardly exist to justify an intervention from the very top echelons of government. A government task team was set up in February 2017 when the perversity of the situation began to dawn.
Eighteen months later, that task team now has a technical advisory team. The work of the technical advisory team is “ongoing”, according to an explanation of what steps the government has taken, outlined by the director-general in the presidency, Cassius Lubisi, in a recent set of court papers.
As the government fiddles, it seems that the only avenue left open to a company is to go to court and ask for an order to pay Eskom directly. In those circumstances, Eskom has tended to stop its cut-offs.
It is an expensive and wasteful exercise and an enormous burden on the small-town companies that do not have the margins and profits to waste money. It is also a crying shame that a government that sends investment envoys across the globe to seek investment is killing the investment that we do have.
ESKOM TRIED TO COLLECT THE DEBT BY CUTTING OFF MUNICIPALITIES FOR PROLONGED PERIODS