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