Eskom's balance sheet was poor and affected its ability to secure long term bonds from the market, according to Eskom CEO Phakamani Hadebe. (Paul Botes/M&G)
The top 10 defaulting municipalities owe Eskom R9.73-billion, and a parliamentary committee has resolved to meet with them to find out why they are not paying their debts.
The standing committee on public accounts (Scopa) on Wednesday was briefed by Eskom, the Department of Cooperative Governance and Traditional Affairs, the South African Local Government Association and National Treasury to find out what efforts are being made to address escalating municipal debt owed to Eskom.
Eskom chairperson Jabu Mabuza told Scopa that since the last meeting with the committee in March, debt had risen to R13.88-billion. Eskom previously told the committee on public enterprises in April that debt stood at R13.5-billion.
Over 12 months during the year 2017/18, municipal debt swelled by 40% or R4.16-billion, said Eskom’s group executive of customer services Ayanda Noah.
The Free State, Mpumalanga and North West were among the worst offenders, while Gauteng and the Northern Cape also raised concern, according to Eskom’s submission to Parliament. The submission also revealed the top 10 defaulting municipalities.
Scopa resolved to meet with these to find out why they are not paying their debt.
Top ten defaulters
The top ten defaulting municipalities are:
Maluti-A-Phofung in the Free State:
This municipality owes Eskom R2.8-billion. It has over 11 000 Eskom customers and no payment arrangements have been made with the power utility. A court process is still under way and until it has been concluded, applicants have to pay Eskom directly.
Matjhabeng in the Free State:
This municipality owes Eskom R1.8-billion. It has over 49 000 Eskom customers and there is a draft payment arrangement.
eMalahleni in Mpumalanga:
This municipality owes Eskom R1.6-billion and has over 117 000 Eskom customers. There is a payment arrangement but it is not being adhered to. A court interdict is currently stopping Eskom from interrupting power.
Ngwathe in the Free State:
This municipality owes Eskom R936-million and does not have Eskom customers. There is a payment arrangement with the municipality which is being adhered to.
Emfuleni in Gauteng:
This municipality owes Eskom R606-million and has over 29 000 Eskom customers. There is a payment arrangement which is being adhered to.
Govan Mbeki in Mpumalanga:
This municipality owes Eskom R517-million and has over 6 600 Eskom customers. There is a payment arrangement but it is not being adhered to. The court will hear the matter on May 21 2018.
Lekwa in Mpumalanga:
This municipality owes Eskom R491-million and has over 6 400 Eskom customers. There is a payment arrangement but it is not being adhered to. There is a court interdict and customers have to pay Eskom directly.
Thaba Chweu in Mpumalanga:
This municipality owes Eskom R431-million and has over 61 300 Eskom customers. There is a payment arrangement but it is not being adhered to. There is currently a court interdict to prevent Eskom from interrupting power supply.
Ditsobotla in the North West:
This municipality owes Eskom R293-million and has over 43 000 Eskom customers. There is a payment arrangement but it is not being adhered to. There is a court interdict, ordering customers to pay Eskom directly.
Naledi in the North West:
This municipality owes Eskom R280-million and has over 17 500 Eskom customers. There is a payment arrangement but it is not being adhered to. The matter was set to go before the courts on May 16.
The top 20 municipalities owe Eskom R11.4-billion.
Noah explained that interdicts were not brought by municipalities but by businesses, organised communities and individuals asking for Eskom not to interrupt power supply as it affects their businesses and livelihoods.
The customers prefer to pay Eskom directly and want it to take over the supply of power from municipalities.
Noah said that when there is a court interdict, some municipalities have a “holiday” from paying.
Unfunded budgets
One of the issues raised by National Treasury is poor financial management by municipalities due to weakness in political and administrative leadership.
According to Treasury, 60 of the 62 defaulting municipalities in 2017/18 tabled unfunded budgets. This means they committed to spending more than they could generate as revenue, or government’s allocation to them.
Eskom board member Sindi Mabaso-Koyana said it is negligent for Eskom to continue trade if it does not have the capacity to meet its obligations, and the same should be true for municipalities.
The councillors and municipalities are trading illegally when they trade knowing that they cannot meet obligations, she explained.
Scopa will also meet with the inter-ministerial task team to find a resolution. It is looking at systemic challenges such as Eskom’s credit control mechanisms for municipal bulk accounts, which are not aligned with the Local Government Municipal Financial Management Act and the Public Finance Management Act.
The task team is also looking into the need to rationalise municipal tariffs, reconciliation of municipal debt to Eskom, historical debt owed by municipalities and the unsustainability of current payment agreements with Eskom, among other issues. — Fin24