/ 4 September 2020

Eskom caught in debt trap

Safrica Economy Power
Pay up: Eskom’s power station looms over Hendrina in Mpumalanga. The state-owned entity is in a precarious financial position and is trying to recover money from municipalities. (Marco Longari/AFP)

Eskom is continuing its fight to shut off electricity to municipalities that will not pay up the billions of rands they owe the state-owned power utility. 

Last week, before the Supreme Court of Appeal in Bloemfontein, Eskom argued that it should not be interdicted from interrupting the electricity to eMalahleni and Thaba Chweu local municipalities in Mpumalanga. 

eMalahleni municipality owes the utility more than R3.9-billion.

In 2018, businesses in the municipality, such as Resilient Properties, which owns and manages malls, told the high court in Pretoria that it was unreasonable for Eskom to cut their electricity supply because they had paid the municipality for it. 

Eskom’s current appeal stems from this case last year. Judge Wendy Hughes found that Eskom, as an organ of the state, was not allowed to interrupt electricity supply to a delinquent municipality until it had exhausted all remedies in section 42 of the Intergovernmental Relations Framework Act. 

The Act establishes a framework for national, provincial and local governments to facilitate the settlement of intergovernmental disputes.

Eskom appealed the ruling, arguing that it is entitled to interrupt the power supply to defaulting municipalities as a way to collect outstanding debt. 

Eskom spokesperson Sikonathi Mantshantsha told the Mail & Guardian that municipal debt, as at July 31, stood at R31-billion. This was up from the R19.9-billion owed to it last year. 

In May this year, Eskom’s chief executive, André de Ruyter, told the standing committee on appropriations that just 20 municipalities make up 81.25% of the debt. 

He said that Eskom had active payments agreements with 48 municipalities that owed it money, but only 19 were being honoured. And out of the top 20 municipal defaulters, only one was repaying its debt under this agreement. 

De Ruyter said Eskom did not have the same levers at its disposal to collect debt from municipalities (such as cutting off electricity) as they did with private clients . 

But business watchdog Sakeliga said Eskom’s power interruption to indebted municipalities affected customers who paid the municipality for electricity. It argued that cutting off the electricity supply was unconstitutional and unlawful. Sekaliga said the power utility had not explored all avenues of relief available before instituting power interruptions. 

The organisation’s chief executive, Piet le Roux, said: “Eskom is prejudicing the end-users and customers who are not the culprits in the nonpayment of the owing and outstanding debt to it.” 

But Eskom’s spokesperson, Sikhonathi Mantshantsha, said it was difficult to monitor exactly who was paying for electricity and who was not. 

“Unfortunately Eskom does not have a direct supply to the end consumers supplied by municipalities. Eskom is thus effecting credit control upon the municipality that is its customer,” he said.

He added that its direct customers were not affected when Eskom interrupts supply to the municipality. 

Karen Heese, an economist at Municipal IQ, an organisation that monitors and assesses South Africa’s 257 municipalities, said Eskom could recover its money by dealing with illegal connections and by installing prepaid meters. She added that free basic electricity could be provided for those without an income. 

Tshegofatso Mathe is an Adamela Trust business reporter at the Mail & Guardian