‘Municipalities must charge for electricity to stay afloat’

CO-OPERATIVE Governance Minister Zweli Mkhize has warned against stripping municipalities of their powers to directly charge for electricity as this would lead to their total collapse.

Municipalities generate more than 63% of their revenue from electricity supply to households and businesses across the country.

Eskom and municipalities supply electricity in different parts of the country. However, Eskom has in recent times had the problem of billions owed to it by several municipalities. It is owed more than R27 billion and the overdue amount is R14bn.

This week some MPs urged Mkhize to get Eskom to supply electricity directly to households and businesses and collect the money. This would lead to the reduction of the debt due to Eskom by municipalities.

But Mkhize said this idea would leave the municipalities battling to stay afloat.

“The real issue is that municipalities use electricity as revenue. If you look at the revenue of municipalities it is 63%.

“If you say Eskom must collect directly and not involve municipalities, it will shut down municipalities,” said Mkhize.

“Collection in prepaid meters by municipalities is 99%.

“But in conventional meters by Eskom, it is between 38% and 40%,” said Mkhize.

A few years ago, former Eskom boss Brian Molefe proposed in Parliament that the power utility charge households and businesses directly to reduce the municipal debt. He argued that it did not make sense to have municipalities supplying electricity to households and businesses when Eskom could do that function and increase its collection rate.

At the time, Molefe said the idea had not been fully discussed at Eskom or raised with the government.

When Pravin Gordhan was Co-operative Governance Minister, between 2014 and 2015, he warned that most of the municipalities were not financially viable because they did not have a revenue base. They were struggling to generate their own revenue, leading to the merger of some municipalities.

Mkhize has also called for municipalities to generate revenue to stay financially sound.