Municipalities return millions to the fiscus, while drowning in Eskom debt

Half of the top ten defaulting municipalities that owe Eskom billions have had to return millions to the Department of Cooperative Governance and Traditional Affairs between 2013 and 2017.

Municipalities that owe Eskom money are under increasing pressure as Eskom has begun threatening or, in isolated cases, imposing scheduled cut-offs as penalties for non-payment.

In a meeting with Parliament’s Standing Committee on Public Accounts (Scopa), councils blamed the growing debt on ineffective revenue collection systems and residents’ non-payment.

This was according to a response by Minister of Cooperative Governance and Traditional Affairs Zweli Mkhize to a question from Parliament. Freedom Front Plus MP Pieter Groenewald had asked Mkhize which municipalities failed to spend their full allocation for infrastructure.

The issue underscores some of the complexities of local government finances. Conditions placed on municipal infrastructure grants and other allocations are put in place to prevent money being spent on what it was not intended for.

However, councils may find themselves returning money for infrastructure, for example, while battling to find funds to pay for electricity.

Mkhize told Groenewald the Department of Cooperative Governance administers the Municipal Infrastructure Grant, the Municipal Disaster Relief Grant and the Municipal Disaster Recovery Grant, meant for the repair and maintenance of infrastructure.

“These and other grants are allocated through relevant administrative departments, which are also required to report expenditure figures as at the end of the municipal financial year to National Treasury in terms of the provisions set by the Division of Revenue Act,” said Mkhize.

READ MORE: Irregular spending by municipalities up 75%

Mkhize said National Treasury would, in terms of Section 22(2) of the Division of Revenue Act, consider and approve roll-over applications from municipalities on registered projects, committed and unspent funds.

Maluti-a-Phofung Local Municipality in the Free State province returned R18.7-million which it failed to spend in the 2014/15 financial year. In February of this year, it owed Eskom R2.8-billion.

eMalahleni Local Municipality in Mpumalanga owes Eskom about R1.6-billion, but returned R33.4-million in allocations.

Emfuleni Local Municipality in Gauteng returned R2.2-million in 2013/14 and R30.7-million in 2016/17. The municipality was said to owe Eskom R606-million in February.

Ditsobotla Local Municipality in the North West returned R15.2-million in the 2013/14 financial year. The municipality owes Eskom R293-million.

Naledi Local Municipality in the North West Province returned R4.1-million in unspent allocations in 2013/14, before roll-over approval; and R2.3-million after roll-over approval.

The council returned R25-million in unspent allocations in 2016/17 and R8-million in 2015/16. Naledi owes Eskom R280-million.

Eskom spokesperson Khulu Phasiwe told Fin24 that the utility was at varying stages of resolving the debt issue with municipalities, but it was apparent that when the “last resort” measure of cutting power off arose, councils started coming forward to repay their debts.

The top-20 defaulting municipalities are estimated to owe Eskom a total of over R10-billion. — Fin 24

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Khulekani Magubane
Khulekani Magubane

Khulekani Magubane is a senior financial reporter for Fin24. 

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