Elec­tric­ity cut-off will be a last resort ‒ Eskom What is an eq­ui­table share al­lo­ca­tion and how is it sup­posed to be used?


Eskom this week con­firmed its in­ten­tion to in­ter­rupt bulk elec­tric­ity sup­ply to Makana fol­low­ing the mu­nic­i­pal­ity’s fail­ure to pay its bills to the power util­ity.

This fol­lows the pub­li­ca­tion of a no­tice in a re­gional news­pa­per on 12 October warn­ing of sched­uled in­ter­rup­tions to Makana’s sup­ply from 8 De­cem­ber.

“Makana Lo­cal Mu­nic­i­pal­ity (Gra­ham­stown Town) [sic] is cur­rently in­debted to Eskom in the amount of R52 366 886.70… for the bulk sup­ply of elec­tric­ity, part of which has been out­stand­ing and in es­ca­la­tion from 3 Novem­ber 2016,” the no­tice reads.

Eskom says in terms of the Elec­tric­ity Reg­u­la­tion Act 4 of 2006 and its sup­ply agree­ment with Makana it is en­ti­tle to in­ter­rupt the sup­ply “in or­der to pro­tect the na­tional in­ter­est in the sus­tain­abil­ity of elec­tric­ity sup­ply”.

Ac­cord­ing to Eskom dis­tri­bu­tion ex­ec­u­tive Ayanda Noah, Makana is one of 10 mu­nic­i­pal­i­ties that owe Eskom R7.5bil­lion in over­due debt. Quoted in fin24, Noah said in­ter­ven­tion by Na­tional Trea­sury and other na­tional de­part­ments was re­quired to “stop the bleed­ing”.

In its re­ply this week to ques­tions from Gro­cott’s Mail, Eskom said the throt­tling would con­tinue in­def­i­nitely “un­less a new agree­ment re­gard­ing pay­ment is reached by both par­ties”.

“The fail­ure to rem­edy the breach in pay­ment re­sults in Eskom in­ter­rupt­ing bulk sup­ply to any mu­nic­i­pal­ity, as a last resort.

“How­ever, Eskom will con­tinue to en­gage Makana Lo­cal Mu­nic­i­pal­ity with the view that pay­ment for bulk elec­tric­ity de­liv­ered is es­sen­tial for the sus­tain­abil­ity of Eskom and the elec­tric­ity sup­ply of South Africa.”

In re­sponse to Gro­cott’s Mail’s question about what pay­ments had been made, and when, the util­ity said it did not share cus­tomer ac­count de­tails with third par­ties.

“How­ever, such in­for­ma­tion on de­fault­ing mu­nic­i­pal­i­ties is di­vulged when the Pro­mo­tion of Ad­min­is­tra­tive Jus­tice Act, (Act 3 of 2000) process is be­ing fol­lowed, prior to the ac­tual in­ter­rup­tion of sup­ply.”

Eskom warned of sim­i­lar out­ages in re­sponse to non­pay­ment in De­cem­ber last year.

In a state­ment re­spond­ing to the throt­tling threat, the DA said the Mu­nic­i­pal­ity had con­tin­u­ously failed to hold up its end of the deal on an agreed- upon pay­ment plan be­tween Eskom and the Makana Coun­cil.

“Makana Mu­nic­i­pal­ity has failed to dis­charge most, if not all, of its con­sti­tu­tional obli­ga­tions in­clud­ing ser­vic­ing its debts, with an amount of R52 mil­lion owed to Eskom,” said Coun­cil­lor Mlindi Nhanha, DA Cau­cus Leader for Makana Mu­nic­i­pal­ity.

“Un­der the ANC govern­ment, ser­vice de­liv­ery in Makana Mu­nic­i­pal­ity has ground to a halt, with the eq­ui­table share grant be­ing used to pay an ex­or­bi­tant over­due Eskom debt.

“An over­whelm­ing ma­jor­ity of Gra­ham­stown res­i­dents pay for their elec­tric­ity con­sump­tion. How­ever rev­enue gen­er­ated from elec­tric­ity sales is redi­rected to pay­ing R13 mil­lion monthly in salaries of a bloated and in­ef­fi­cient work­force.”

Nhanha said the cau­cus had sub­mit­ted a mo­tion in this re­gard to be de­bated in the next coun­cil meet­ing. “Our mo­tion calls on the mu­nic­i­pal­ity to ring-fence all rev­enue gen­er­ated from elec­tric­ity sales to be used to set­tle the out­stand­ing debt to Eskom.

In ad­di­tion, we will con­tinue to make rep­re­sen­ta­tions to the provin­cial and na­tional de­part­ments of Co­op­er­a­tive Gov­er­nance and Tra­di­tional Af­fairs to step up to the plate and play a greater role in re­solv­ing the cri­sis in Makana.”

Nhanha said the fi­nan­cial cri­sis of Makana Mu­nic­i­pal­ity had reached its worst lev­els ever.

“We will do ev­ery­thing in our power to en­sure that res­i­dents of Gra­ham­stown are not ad­versely af­fected by the loom­ing in­ter­rup­tion of bulk elec­tric­ity sup­ply set to com­mence on 8 De­cem­ber 2017.”

At­tempts by Gro­cott’s Mail to ob­tain comment from Makana Mu­nic­i­pal­ity since Fri­day 13 October have been un­suc­cess­ful. We asked whether there was a plan to pay Eskom and pre­vent the cut-offs, among other ques­tions.

In their weekly update pub­lished in the ‘Gro­cott’s gives you Gra­ham­stown’ email news­let­ter, and re­pub­lished in this edi­tion, the Gra­ham­stown Res­i­dents As­so­ci­a­tion said they be­lieved the Eskom threat was a tac­tic to en­sure that next month, Makana pays over all of its Eq­ui­table Share grant, about R30 mil­lion, straight to the power util­ity.

“In other words, we do not be­lieve there is a sig­nif­i­cant risk that Makana will be sub­ject to elec­tric­ity in­ter­rup­tions,” the GRA said. How­ever, it would be mak­ing a sub­mis­sion to the util­ity (read their full re­port on Page 9). The eq­ui­table share is a fi­nan­cial al­lo­ca­tion in the form of an un­con­di­tional grant that en­ables mu­nic­i­pal­i­ties to pro­vide ba­sic ser­vices to poor house­holds, and to en­able mu­nic­i­pal­i­ties with lim­ited own re­sources to af­ford ba­sic ad­min­is­tra­tive and gov­er­nance ca­pac­ity and per­form core mu­nic­i­pal func­tions.

Be­cause the eq­ui­table share is not a con­di­tional grant, mu­nic­i­pal­i­ties can spend the money on other things that are ad­min­is­tra­tive or gov­er­nance ca­pac­ity re­lated rather than ba­sic ser­vices, even though it should be pri­mar­ily used for im­prov­ing ba­sic ser­vices.

An eq­ui­table share is rev­enue raised na­tion­ally to en­able mu­nic­i­pal­i­ties and prov­inces to pro­vide ba­sic ser­vices and per­form the func­tions al­lo­cated to it as stip­u­lated in Sec­tion 227 (1) (a) of the South African Con­sti­tu­tion. The amount of eq­ui­table share a mu­nic­i­pal­ity re­ceives de­pends on a num­ber of fac­tors such as the size of its low-in­come pop­u­la­tion, the cost of ba­sic ser­vices and its ca­pac­ity to raise its own rev­enue. This al­lo­ca­tion is meant to be used for ba­sic ser­vices and op­er­a­tional costs, since the eq­ui­table share falls un­der the op­er­at­ing bud­get of a mu­nic­i­pal­ity.

In the 2017/18 fi­nan­cial year, Makana Mu­nic­i­pal­ity re­ceived op­er­at­ing grants and trans­fers to­talling R98, 8 mil­lion, and an al­lo­ca­tion cater­ing for the Eq­ui­table Share, Fi­nan­cial Man­age­ment Grant (FMG), Ex­tended Pub­lic Works Pro­gramme (EPWP) and a sub­sidy from the Sarah Baart­man Dis­trict Mu­nic­i­pal­ity. •LungilePenx­aisaLo­calGovern­men­tRe­searcher­with­the


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