Debtors keeping Eskom on a string
THE financial sustainability of Eskom would remain difficult for as long as the power utility was unable to secure its debts, the utility’s board’s chairman, Jabu Mabuza, said yesterday.
Briefing the standing committee on public accounts (Scopa), Mabuza said municipal debt remained a pressing challenge for Eskom, which faced serious financial challenges.
“The amount owed by municipalities continues to grow, with notable increases from R9.5 billion to R13.5bn, a 42% escalation between 2017 and 2018. This is of serious concern as it challenges the sustainability of Eskom,” he said.
Mabuza made the comments when he appeared before Scopa along with his colleagues from the SA Local Government Association (Salga), the National Treasury and the Department of Co-operative Governance and Traditional Affairs.
The committee wanted answers from the authorities on what was being done to solve the growing debt owed by municipalities, with Free State municipalities owing R6.5bn and Mpumalanga R3.2bn alone.
Mabuza said investors were concerned that the increasing municipal debt would make it difficult for Eskom to service its own debt.
He said the question was being asked, if Eskom could not collect its debt, how would it pay its creditors?
“This reduces appetite for Eskom bonds,” Mabuza said.
He told MPs that the debt stood at R13.8bn with interest at the end of last month.
“The collection of municipal debt requires an urgent shift in approach,” Mabuza said. “We need to face the harsh reality that the financial sustainability of Eskom will remain difficult for as long as we are unable to secure our debt. We have compromised our credit strategy thus far, and continuing to do so will have serious consequences,” he said.
Ayanda Noah, Eskom’s group executive for customer services, admitted that municipal debt had spiralled from last year.
“In one year we had an increase of R4.1bn,” Noah said. She added that the situation was not improving as the debt increased R320m in March.
Eskom was being slapped with court actions by organised business and communities, and some municipalities were not paying altogether despite making arrangements, Noah said.
Salga deputy president Sebenzile Ngangelizwe said they had advised in the dispute between Salga and Eskom that the latter sign a service delivery agreement with councils.
He said Eskom’s business model disadvantaged municipalities with abnormal rates, abnormal notice for demand on penalties and billing cycles.
However, Treasury director-general Dondo Mogajane took a swipe at Salga for raising policy-related issues instead of plans for municipalities to pay up.
“I’m equally concerned about Eskom sustainability. If municipalities don’t pay, the National Treasury has a bigger problem. Eskom’s sustainability and exposure becomes a challenge,” Mogajane said.