Salga calls for Eskom debt relief for municipalities

The SA Local Government Association wants the state to match the percentage of Xxxxxx. – XXXCREDIT

Eskom debt it takes over with an equal percentage to alleviate the debt owed to the utility by municipalities in distress.

Treasury has indicated that it will take over a third to two-thirds of Eskom’s debt of about R400bn, with details expected in the February 2023 budget.

Salga’s call, made in parliament on Friday, follows President Cyril Ramaphosa’s recent suggestion to scrap Soweto’s R5bn debt to Eskom.

Municipalities owe Eskom more than R50bn and residents owe municipalities more than R140bn. In July, finance minister Enoch Godongwana reported that more than half the country’s 257 municipalities are bankrupt or insolvent.

Critics say a write-off of municipal debt will create a “moral hazard” and deepen the culture of nonpayment. W:22.841mm

Salga CFO Nceba Mqoqi told MPS that it would be appropriate if the Eskom debt takeover by the government includes the alleviation of some of the municipal debt to Eskom. “Debt can be written off, but there needs to be conditions ... discussions need to be entered into to [find a] balanced approach,” Ramaphosa said recently in parliament.

In 2020, Eskom wrote off about R8bn in overdue debt for Soweto residents.

But Cosatu’s Matthew Parks disagreed with Salga’s suggestion to provide debt relief to municipalities. “Eskom has been doing that. Municipalities have had constant debt agreements with Eskom and have continuously failed to honour those agreements.

“It can’t be correct that half of the country pays their electricity bills and the other half just simply choose to ignore it. Eskom’s debt level from municipalities is continually rising and it is forcing Eskom into a crisis where it now has to go for a 32% tariff hike because municipalities choose to play fast and loose with money that is often paid to it by consumers.”

Parks said the solution to this crisis was for the entire country to move to prepaid electricity. “That is the only way we are going to close this chapter on the debt issue,” he said.