The Democratic Alliance insists that crucial state-owned enterprises such as Eskom should report to related ministries. (Waldo Swiegers/Bloomberg via Getty Images)
The deadline to apply for the Eskom municipal debt relief programme has been extended by a month to 31 October 2023.
The treasury announced the extension on Tuesday morning. The programme — which forms part of the government’s plan to write off historic debt owed by municipalities to Eskom — was unveiled at the end of March 2023.
According to the treasury, of South Africa’s 257 municipalities, 136 owed the beleaguered utility R58.5 billion in arrears debt as of 31 March 2023. However, only 37 had applied to be part of the debt relief programme by 22 September, 28 of which have been approved to participate so far.
There are 25 additional applications resting with their respective provincial treasury departments for submission.
The municipal debt relief programme was announced shortly after the treasury proposed that the government take over R254 billion of Eskom’s staggering R423 billion debt Restoring Eskom’s financial stability would go a long way towards addressing the energy crisis — but without tackling the mounting municipal debt to the utility, this all could be for nought.
The treasury previously noted that the municipal debt spiral posed a material risk to Eskom.
Under the debt relief programme, municipalities will have to adhere to certain strict conditions, including demonstrating their efforts to get their finances in order by improving revenue collection and budgeting.
Municipalities that apply to be included in the debt relief programme are signing up to comply with the 14 conditions set out by the treasury.
Eskom cannot write off any debt unless the treasury is satisfied that the municipality has met all 14 conditions for 12 consecutive months, after which the utility will clear a third of its debt. The programme will run for three years.
If a municipality fails to comply with the conditions, the benefits of the relief cease. The municipality will have to immediately start repaying its Eskom arrears, interest and penalties and the power utility can resume any legal proceedings relating to the recovery of the debt.
Among other things, municipalities will have to demonstrate that they have paid their Eskom current accounts each month, aligning spending to realistic revenue projections and having cost-reflective tariffs.
Municipalities must also show that they are cutting off or restricting services to customers who fail to pay their water or electricity bills, unless the defaulter is already registered as an indigent consumer.
Municipalities will also have to maintain a minimum average quarterly collection, collecting 80% of their revenue during the first year of the programme, 85% during the second year and 95% during the third. Where they are not able to immediately achieve these averages, municipalities will have to demonstrate why they are not able to do so.
Provincial treasuries will have to closely monitor municipalities to ensure they comply with the conditions, certifying their compliance each month.
A municipality that benefits from the relief is not allowed to borrow during the three-year period.
The municipality will also have to ring-fence all electricity, water and sanitation revenue in a separate account to its primary bank account. That revenue must be used to pay its Eskom current account first and then its bulk water account. Only then can the money be used for other purposes.