‘Municipalities will owe Eskom R3.1 trillion by 2050 at current rate’

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Municipal debt owed to Eskom has come under the spotlight. This follows the recent admission by the Electricity and Energy Minister Kgosientsho Ramokgopa that the power utility may not be able to recover all the monies owed. To date, municipalities owe Eskom R78 billion.

According to the minister, the debt owed to Eskom must be urgently addressed to protect the power utility’s ability to fulfil its mandate. The minister has maintained that the debt cannot be scrapped as Eskom needs the money.

Money owed to Eskom by municipalities has been ballooning over the past 20 years with little action from government. The main source of this debt is the growing culture of non-payment of municipal services. As a result, many local authorities are failing to achieve their revenue targets. Eskom is the bulk supplier of electricity to the country’s municipalities.

Ramokgopa says there is no quick solution, “It is not about the Minister, who is sitting with a solution to everything, so I don’t have a panacea. It is important that we have engagement with municipalities. They are owing Eskom over R78 billion. If the current trend line continues, the collections and payments we are seeing now, if you extrapolate that to 2050, it will come to R3.1 trillion. This is huge.”

Energy experts agree that the Minister cannot solve this problem alone as it is a symptom of a much larger problem at local government level. That’s with a number of municipalities unable to finance their budgets. Governance expert Miyelani Holeni of Ntiyiso Consulting suggests that most of the debt recovery will likely come from the Metros due to their larger size.

“Most of the municipalities are in areas where industry is low. You don’t have economic activity that is able to support the kind of people that you know are able to reside in that area. The companies that are able to set up in that area and some of the have unfortunately packed up and left for other areas which are perhaps more optimal or more lucrative for them. So, the recovery of that debt is still in question. And I think the Minister is correct and of course he has significant experience in local government. Having been a mayor of a city so he understands, you know, the challenges within the municipalities.”

Compounding the situation is the steep increases in electricity tariffs approved by the power regulator Nersa. Unfortunately, those who pay are being squeezed.

While many others continue to use electricity for free. With little punishment meted against people with illegal connections, several businesses and households have been found to be accessing the grid illegally. This is often accompanied by high usage. And all authorities can do for now is to implement load reductions by cutting off areas for extended periods to protect the network against overloading. For some local businesses, the unpredictability of these power cuts has been devastating.

This Soweto business owner says it’s difficult to cope:

“The money we must pay to get the electricity… if you still remember, Eskom reduced the units. We buy electricity and it is very expensive now. And many people are not working now and the main impact was COVID-19. Until today many businesses have not recovered.”

Some people want a flat rate to be implemented to have certainty on electricity prices.

“For example, if we say R100 then we can cover that amount. Now we are saying pre-paid the only thing it does is monitor and control supply. Meaning if you don’t pay it gets cut off or there is no continuity. We are not necessarily helping the situation. And that will lead to people trying to bypass and so forth. The key, I think the purpose, is for the municipality to have an inflow. So once we have a rate people are able to keep on paying it.”

Eskom says it cannot afford a debt write-off for municipalities that owe it R78bn. The ministry says a sustainable solution for municipal debt will be a key focus over the next few years.

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