Councils owe Eskom R17bn

Municipalities unable to shed huge debt to power supplier

Municipal debt to electricity provider Eskom is skyrocketing.

The total overdue debt by municipalities to Eskom has dramatically escalated to R17.01bn as at the end of September, an increase of about R2.7bn in only four months since the end of May. At the centre of the debt crisis are 10 defaulting municipalities, most of which are embroiled in allegations of corruption, fraud and maladministration. At the end of September, the 10 municipalities owed R11.7bn of the total municipal debt. Five of these municipalities are in Mpumalanga.

The Thaba Chweu local municipality is one of the defaulters, owing almost R500m to Eskom. And according to reports, which cite the findings of a forensic investigation into the municipality, officials allegedly plundered about R350m from the public purse – money which could have been used to pay its Eskom debt.

Now government is scrambling to avert a second financial year of losses at the embattled electricity provider, with plans to r eview the constitutional and legislative mandate for electricity distribution between Eskom and municipalities and restructure Eskom debt to municipalities. Responding to questions, Eskom said based on the trend of the past six months, it is clear that its targets for debt collection from municipalities will not be achieved unless there is a “drastic improvement in payment levels” in the second part of the financial year.

“Eskom is continuously engaging with the individual municipalities, provincial and national government. Eskom implemented a number of concessions to make it easier for municipalities to pay their monthly current account and the outstanding debt. “Where required, Eskom enters into payment arrangements with defaulting municipalities. As a last resort, Eskom implements electricity supply interruptions to municipalities,” the parastatal said. Minister for cooperative governance and traditional affairs Zweli Mkhize said that in recent years, there has been a decline in municipal profit margins due to higher costs of bulk electricity. In addition to this, municipal debt has been increasing at “an alarming rate” over the past few years. “A major financial problem is ensuing in many municipalities in the country due to inadequate collection of revenue as a result of the runaway nonpayment for municipal services. The level of municipal debt is growing on a monthly basis from all the categories, namely organs of state, business and households,” he said. “Municipalities are also experiencing cash-flow problems that have resulted in them defaulting on their bulk electricity account with Eskom... Some of the causes include the widespread culture of nonpayment by consumers.”

‘ ‘ The level of municipal debt is growing on a monthly basis