State and Eskom seek ways to cut municipal debt
The government is looking to introduce measures to reduce the large amounts of money municipalities owe Eskom, including increasing from 15 to 30 the number of days upon which an overdue amount may attract interest.
Another proposal is to change the model of penalising municipalities for exceeding their allocated bulk electricity.
This emerged at a briefing to Parliament’s standing committee on public accounts (Scopa) by Co-operative Governance and Traditional Affairs Minister Zweli Mkhize, who is also the chairman of the interministerial task team on the issue.
Mkhize said the government was talking to Eskom about its credit control policy, with a view to curbing the further escalation of debt. This comes amid concerns from municipalities over the interest the utility charges on overdue amounts.
Cash-strapped Eskom is owed just more than R13bn by municipalities, with the top 10 nonpayers owing R10bn. In turn, municipalities are owed R139bn by residents for services.
Some residents have attributed their failure to pay for electricity to high levels of unemployment and poverty.
Eskom found itself in a severe financial crisis in late 2017 after lenders turned off the taps due to state capture and corruption allegations. The company has a debt burden of R350bn‚ increasing by about R70bn a year.
The Reserve Bank has warned that the rising contingent liabilities of state-owned entities remain a concern and could lead to further credit ratings downgrades.
Eskom had previously threatened to cut off supply to the municipalities.
“All the parties are determined to find lasting solutions and municipalities have indicated that they are keen to support all the efforts and implement the decisions deriving from the process [to address the Eskom debt],” said Mkhize.
He said the government wanted to improve governance in municipalities to ensure there were qualified officials to manage financial functions such as revenue collection.
Scopa chairman Themba Godi said the committee was satisfied that the government was proactively trying to address the escalating municipal debt crisis.
“Scopa is looking forward to a report back from the [ministerial task team] in September,” said Godi.
The committee has emphasised that the task team needs to convince Eskom not to go ahead with the interruptions since the matter is now being given priority attention.
“This is so that ordinary South Africans can have peace of mind with the knowledge that Parliament and government are on top of this matter.
“Scopa also wants to emphasise that municipalities must honour their debt and their payment arrangements.
“The fact that both Parliament and the government are intervening does not mean that they should relax.
“Municipalities should also jack up their financial management processes and systems and cut off [the] waste of public money,” Godi said.
ALL THE PARTIES ARE DETERMINED TO FIND SOLUTIONS AND MUNICIPALITIES ARE KEEN TO SUPPORT