Time to see the light over Eskom debt

Co-operative governance and traditional affairs minister Zweli Mkhize told the nation this week that in the past six months municipal debt to Eskom has increased from R14bn to R17bn.

This is now bordering on a national disaster for Eskom, which has major problems of its own.

Eskom is the one state-owned enterprise that we simply cannot live without, and, if allowed to fail, would bring down with it the entire South African economy and its people.

According to reports, the stand-off on the ballooning debt is a consequence of disagreements between Eskom and the municipalities on what is the right solution to the problem. Well, obviously the best solution is for the municipalities to pay up. However, they claim to have capacity challenges in collection, and, as a result, are unable to pass on the cash to Eskom.

Businesses operating in many of the defaulting municipalities are contesting this and going to court arguing that they are paying the municipalities but the municipalities are not on-paying Eskom, and, as a result, the businesses end up bearing the brunt when Eskom decides to cut off the lights.

On the other hand, when Eskom tries to reticulate the electricity directly to the businesses or even households in certain municipalities, the councils argue that, by law, they are the only ones allowed to do that within their municipal boundaries, and if Eskom wants to do anything on their turf they must come and kneel at the throne.

Eskom says this is not true, as the National Energy Regulator of SA is able to issue electricity distribution licences without any reference to municipal legislation.

And then there’s the government. It seems to agree with the municipalities’ interpretation, as articulated by the chair of the minister’s advisory committee, Daniel Plaatjies, who said “the powers, functions and competencies to reticulate electricity within municipal areas fall exclusively, and in terms of the constitution, on municipalities”.

OK, if that is correct, then change the law. We have enough evidence, over the past two decades, and certainly the past six months, to prove that municipalities are not efficient collection agencies for Eskom.

In addition to the astronomical rise in the electricity debt, billions are reported every year by auditor-general Kimi Makwetu as irregular as well as fruitless and wasteful expenditure by the municipalities.

A lot of this money is cash that actually belongs to Eskom, and which Eskom desperately needs to keep the lights on.

In the many years I have had to collect debt from customers, there is one principle that rings true. The first step in containing debt is to stop the bleeding.

In other words, six months ago someone should’ve told the minister that if we do nothing, things will get much worse. We shouldn’t all be acting surprised now that the number is R17bn. What did we think was going to happen?

There is no other way to fix this than to allow Eskom to sell electricity directly to anyone who wants to buy it, whether they are businesses or households.

Furthermore, why does Eskom still sell electricity on credit in this day and age of a wonderful innovation called “prepaid”?

If every single household in SA had a prepaid meter, that would remove the moral and political debate around cutting off electricity to residents.

We would not have Soweto residents who buy electricity on credit, directly from Eskom, owing the utility another R17bn.

Only businesses that have been vetted should have access to buying electricity on credit, given their high usage. This would also allow Eskom to simply shut down the feed to those businesses that don’t pay, without anyone feeling hard done by — it’s just business!

The truth about any credit situation, especially one that has been created by rendering a service, is that someone out there is paying.

In the case of this electricity debt, someone has funded this R17bn. It’s Eskom.

So whatever the law says or doesn’t say, can we please just focus on solving the actual problem of getting users to pay Eskom for the electricity they get?

We need to focus on the best way to achieve that for each segment of the market, understanding that the government has a sociopolitical interest in the matter and business has a commercial interest, too.

Simply allow businesses to buy their electricity directly from Eskom, and make it compulsory for every household to be on prepaid.

Then maybe we will have a chance at saving what is arguably the single most important company in SA.

Allow this crucial company to sell directly to customers